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ROGERS COMMUNICATIONS INC.
2007 ANNUAL REPORT
CONNECTING
MATTERS
COMMUNICATIONS INFORMATION ENTERTAINMENT

Table of contents

  • Page 1
    CONNECTING MATTERS COMMUNICATIONS INFORMATION ENTERTAINMENT ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 2
    ..., Internet and digital cable subscribers. FINANCIAL HIGHLIGHTS (In millions of dollars, except per share data) 2007 2006 2005 2004 2003 Revenue Adjusted operating profit Adjusted operating profit margin Net income (loss) Basic earnings (loss) per share Annual dividend rate at year-end Total...

  • Page 3
    ...The Shopping Channel, Canada's only nationally televised shopping service. Media's Publishing group produces more than 70 well-known consumer magazines and trade and professional publications in Canada. Media's Sports Entertainment assets include the Toronto Blue Jays Baseball Club and Rogers Centre...

  • Page 4
    ...% Wireless Data 13% Prepaid Voice Equipment sales 5% 6% 2005 2006 2007 2005 2006 2007 REVENUE ($ in billions) ADJUSTED OPER ATING PROFIT ($ in billions) F Y20 07 REVENUE: $3.6 billion 2.5 3.2 3.6 0.8 0.9 1.0 Core Cable 43% High-Speed Internet 17% Business Solutions 16% Home Phone 13...

  • Page 5
    ... CANADIAN COMMUNICATIONS AND MEDIA COMPANY ENGAGED IN THREE PRIMARY LINES OF BUSINESS. ROGERS WIRELESS IS CANADA'S LARGEST WIRELESS VOICE AND DATA COMMUNICATIONS SERVICES PROVIDER AND THE COUNTRY'S ONLY CARRIER OPERATING ON THE WORLD STANDARD GSM TECHNOLOGY PLATFORM. ROGERS CABLE IS CANADA...

  • Page 6
    ... radio-on-demand and access to more than one million downloadable songs. I am pleased with our results in 2007 and most grateful to our • We launched new "triple play" packages that combine digital thousands of employees across the country whose support and cable, high-speed Internet and cable...

  • Page 7
    ...will help assure that such growth continues well into the future. I believe that we will continue to demonstrate how Rogers' innovative array of wireless, cable, high-speed Internet, telephony and media products and services can add great value to our customers' lives and generate solid returns for...

  • Page 8
    ...will get the message to pick up milk before he even leaves his meeting. With the most innovative wireless, cable TV, Internet and home phone services together from one trusted provider, it's easy to understand why more families connect with Rogers. 4 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 9
    ... TELEPHONY WIRELESS DATA INTERNET ELECTRONIC MAIL VIDEO CALLING TEXT MESSAGING It's a mobile and broadband world for today's youth and young adults whose live-in-the-moment lifestyles rely on having anytime access to the people and things that matter to them most. With Rogers they're able to share...

  • Page 10
    6 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 11
    ... experience and share. Rogers led in the World Wide Web revolution a decade ago as the first to offer cable broadband Internet access service. Today, fast and reliable broadband connectivity lets parents better balance their time between the office and home, while making it possible for their kids...

  • Page 12
    ... data networking solutions. But more than anything, businesses need customers. So they connect with Rogers' leading broadcast and print media brands as their one-stop solution for all their local and national radio, television and print advertising needs. 8 ROGERS COMMUNICATIONS INC. 2007 ANNUAL...

  • Page 13
    ... that excellence in customer service is about more than just answering the phone promptly. With call centres staffed by trained professionals in Canada, hundreds of local stores and reliable dealers, and live on-line chat support, we're striving to provide our customers with the help they need when...

  • Page 14
    CONNECTING TO A FUTURE FULL OF INNOVATION CONVERGED WIRELESS/WIRELINE WIRELESS BROADBAND MOBILE TV VIDEO CALLING HIGH-DEFINITION ON-DEMAND Canadians know to expect the fastest, coolest and most innovative technology and services from Rogers first. That's because at the heart of Rogers is a drive ...

  • Page 15
    ...long-time supporter of local food banks, helping Canada's neediest families during times of hardship, and this holiday season we donated an additional $10 on behalf of each Rogers employee to food banks across the country. As well, we partner with food banks to promote the "Phones for Food" cell...

  • Page 16
    ... section of our rogers.com website you will also find a summary of the differences between the NYSE corporate governance rules applicable to U.S. based companies and our governance practices as a non-U.S. based issuer that is listed on the NYSE. 12 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 17
    ... founded Canadian companies." Peter C. Godsoe, OC Lead Director Rogers Communications Inc. The Audit Committee reviews the Company's accounting policies and practices, the integrity of the Company's financial reporting processes and procedures and the financial statements and other relevant public...

  • Page 18
    ... I. Hull Chairman, Rogers Telecommunications Limited 12 Colin D. Watson President, Rogers Cable Company Director Chairman and Chief Executive Officer, The Hull Group of Companies All director and officer photographs by Peter Bregg, Rogers Media 14 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 19
    ..., Strategy and Development Senior Vice President, Finance and Chief Financial Officer President, Rogers Wireless See rogers.com for an expanded listing and biographical information of Rogers' corporate and operating company management teams. ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 15

  • Page 20
    ... adds 164,494 new high-speed Internet subscribers, reaching 41% of homes passed C ABLE TELEPHONY Rogers Cable announces cable telephony subscribers up 79% to 655,800 PORTABLE INTERNET Rogers expands coverage of fixed wireless portable Internet service to more than 100 urban and rural areas...

  • Page 21
    ... and Operating Guidance Segment Review 27 Wireless 33 Cable 42 Media Consolidated Liquidity and Financing 44 Liquidity and Capital Resources 47 Interest Rate and Foreign Exchange Management 48 Outstanding Common Share Data 48 Dividends and Other Payments on RCI Equity Securities 49 Commitments...

  • Page 22
    ... which owns Rogers Sportsnet, a group of AM and FM Radio stations, OMNI television, The Biography Channel Canada, G4TechTV Canada and The Shopping Channel; Rogers Publishing; and Rogers Sports Entertainment, which owns the Toronto Blue Jays and the Rogers Centre. Media also holds ownership interests...

  • Page 23
    ....sedar.com or on EDGAR at www.sec.gov. 1. CORPORATE OVERVIEW OUR BUSINESS We are a diversified Canadian communications and media company. We are engaged in wireless voice and data communications services through Wireless, Canada's largest wireless provider and the operator of the country's only...

  • Page 24
    ...enhance operating efficiencies by sharing infrastructure, corporate services and sales distribution channels. We continue to develop brand awareness and promote the "Rogers" brand as a symbol of quality, innovation and value and of a diversified Canadian media and communications company. ADDITIONS...

  • Page 25
    ...Wireless holding company subsidiaries, with RCI assuming all the rights and obligations under the outstanding Cable and Wireless public debt indentures and cross-currency interest rate exchange agreements. As part of the amalgamation process, RCI entered into a new unsecured $2.4 billion bank credit...

  • Page 26
    ... of Fido and Call-Net Enterprises Inc. ("Call-Net"), the restructuring of RBS and the closure of 21 Retail stores in the first quarter of 2006. (4) One-time charge resulting from the renegotiation of an Internet-related services agreement. See the section entitled "Cable Operations Operating...

  • Page 27
    ...related to the acquisition of Call-Net of $11 million in 2007. (6) Wireless subscriber net additions exclude adjustments associated with the Time Division Multiple Access ("TDMA") and analog network decommissioning and the revision of certain aspects of subscriber reporting for data-only subscribers...

  • Page 28
    ...expenses Contract renegotiation fee Adjusted operating profit $ 637 $ 249 4 34 47 (54) 579 1,496 1,603 3,099 452 62 38 52 622 56 (10) 4 1 (2) 620 1,291 1,584 2,875 - 49 18 - 2 n/m n/m n/m n/m n/m (7) 16 1 8 n/m 27 111 n/m 26 $ 3,703 $ 2,942 24 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 29
    ... for the year ended December 31, 2006. This increase in net income was primarily due to the growth in operating income, as well as the decrease in interest on long-term debt, offset by the one-time non-cash charge related to the introduction of a cash settlement feature for employee stock options of...

  • Page 30
    ...reduction in the valuation allowance recorded in 2006 related to future income tax assets acquired as part of business acquisitions in prior periods. The following table outlines our financial and operational guidance for the full year 2008, which was publicly issued on January 7, 2008. Certain of...

  • Page 31
    ... prepaid payment options. In addition, the network provides customers with advanced high-speed wireless data services, including mobile access to the Internet, wireless e-mail, digital picture and video transmission, mobile video, music downloading, video calling and two-way short messaging service...

  • Page 32
    ... information and services, shopping services, photos, music, and streaming video clips, mobile television and other functions. Wireless believes that the introduction of such new applications will drive the growth for data transmission services. 28 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 33
    ...; • Sales and marketing expenses, consisting of costs to acquire new subscribers, such as advertising, commissions paid to third parties for new activations, remuneration and benefits to sales and marketing employees as well as direct overheads related to these activities; and • Operating...

  • Page 34
    ... Fido outranked all six of the other Canadian wireless brands in terms of customer perceptions of billing, call quality, cost of service, customer service and service plan options. Fido also earned the top score in the wireless retailer category. 30 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 35
    ... growth of text and multimedia messaging services, wireless Internet access, BlackBerry devices, downloadable ring tones, music and games, and other wireless data services and applications. In 2007, data revenue represented approximately 13.2% of total network revenue, compared to 10.6% in 2006...

  • Page 36
    ...of retention activity, hardware upgrades and the increased average cost of handsets. The year-over-year increase in sales and marketing expenses was directly related to Wireless' largely successful sales and marketing efforts targeted at acquiring high value postpaid voice and data customers as well...

  • Page 37
    ... in Canada. At December 31, 2007, it provided digital cable services to approximately 1.4 million households and high-speed Internet service to approximately 1.5 million residential subscribers. Through Rogers Home Phone, it offers local telephone and long-distance services to residential customers...

  • Page 38
    ... locations, Cable markets its services and products through a variety of additional channels, including call centres, outbound telemarketing, field agents, direct mail, television advertising, its own direct sales force, exclusive and non-exclusive agents, as well as through business associations...

  • Page 39
    ... advanced cable network to meet the information, entertainment and communications needs of its subscribers, from basic cable television to advanced two-way cable services, including digital cable, PPV, VOD, SVOD, PVR and HDTV, Internet access, voice-over-cable telephony service, as well as...

  • Page 40
    ...the monthly contracted payments for the acquisition of pro gramming paid directly to the programming suppliers as well as to copyright collectives and the Canadian Programming Production Funds; • Internet interconnectivity and usage charges and the cost of operating Cable's Internet service...

  • Page 41
    ...will eliminate monthly per subscriber fees and see both companies work jointly on advertising revenue opportunities leveraging Rogers' high-speed Internet access portal and subscriber base. In connection with this new agreement, we made a one-time payment to Yahoo! in the fourth quarter of 2007 of...

  • Page 42
    ... to cable telephony during 2007 and 2006, respectively. (5) RGUs are comprised of basic cable subscribers, digital cable households, residential high-speed Internet subscribers and residential cable and circuit-switched telephony subscribers. 38 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 43
    ... of $112 million, compared to 2006, were primarily driven by increases in digital cable, Internet and Rogers Home Phone subscriber bases, resulting in higher costs associated with programming content, customer care, technical service and network operations. This increase was partially offset by the...

  • Page 44
    ... acquired from Futureway in June, 2007. These subscribers are not included in net additions for 2007. (3) Broadband data circuits are those customer locations accessed by data networking technologies including DOCSIS, DSL, E10/100/1000, OC 3/12 and DS 1/3. 40 ROGERS COMMUNICATIONS INC. 2007 ANNUAL...

  • Page 45
    ... sales) increased by $1 million compared to 2006. RBS ended the year with 237,000 local line equivalents and 35,000 broadband data circuits in service at December 31, 2007, representing year-over-year growth rates of 16% in both cases. RBS Operating Expenses During 2007, most RBS new customer...

  • Page 46
    ... several Canadian specialty television services, including Viewers Choice Canada. Media's Publishing group ("Publishing") publishes 78 consumer magazines and trade and professional publications and directories in Canada. In addition to its organic growth, Media expanded its business in 2007 through...

  • Page 47
    ... of its Commercial Radio Policy in 1998, the CRTC has licenced numerous new radio stations through competitive processes Years ended December 31, (In millions of dollars, except margin) Effective June, 2006, due to increased ownership, the results of operations of The Biography Channel Canada and...

  • Page 48
    ... for employee stock options and stockbased compensation expense in 2007 compared to 2006, is primarily due to operating costs of Citytv and the five Alberta radio stations, higher Blue Jays payroll costs at Rogers Sports Entertainment, and higher production costs at Rogers Sportsnet resulting...

  • Page 49
    ... secured by such bonds effective as of June 29, 2007. As a result of these actions, the outstanding public debt and cross-currency interest rate exchange agreements and the new $2.4 billion bank credit facility now reside at RCI on an unsecured basis. The RCI public debt originally issued by Cable...

  • Page 50
    ... RCI amalgamation and release of security was implemented as intended, there would be no ratings impact and the current Baa3 ratings would continue to prevail. In April 2007, Standard & Poor's Ratings Services raised its longterm corporate credit ratings for RCI, Wireless and Cable to BBB- (from BB...

  • Page 51
    ..., and December 31, 2006, respectively. In addition to our regular contributions, we are making certain minimum monthly special payments to eliminate this deficiency. In 2007, the special payment totalled approximately $2 million. Our total estimated annual funding requirements, which include both...

  • Page 52
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Composition of Fair Market Value Liability for Derivative Instruments (In millions of dollars) December 31, 2007 January 1, 2007 (1) Foreign exchange related Interest rate related Total carrying value $ $ 1,719...

  • Page 53
    ... addition, the Board modified our dividend distribution policy to make dividend distributions on a quarterly basis instead of semi-annually. The first such distribution was made on January 2, 2007, to shareholders of record on December 20, 2006. In December 2005, the Board declared a 50% increase...

  • Page 54
    ... condition and operating results. Copyright Board of Canada Non-Canadians are permitted to own and control directly or indirectly up to 33.3% of the voting shares and 33.3% of the votes of a holding company that has a subsidiary operating company licenced under the Broadcasting Act. In addition...

  • Page 55
    ...at commercial rates that are reasonably comparable to rates currently charged to others for similar access. Spectrum Licence Issues interested in, and if there were no other parties expressing interest in those blocks, they were the successful party. In this process, Wireless obtained an additional...

  • Page 56
    ... cable operators and pay and specialty services. The CRTC has made a number of proposals designed to move away from detailed regulation and rely more on market forces. On September 12, 2007, the CRTC released the Dunbar/Leblanc report. The report recommended changes to the rules in a number of areas...

  • Page 57
    ... increase in the prices of those services as a result of this proceeding could have a serious and negative effect on Cable's business plan. MEDIA REGUL ATION AND REGUL ATORY DEVELOPMENTS Commercial Radio Policy 2006 On June 16, 2005, the CRTC issued decisions approving three new subscription radio...

  • Page 58
    ... with other DVD and video game sales and rental store chains, as well as individually owned and operated outlets and, more recently, online-based subscription rental services and illegally downloaded movies and television shows. Competition is principally based on location, price and availability of...

  • Page 59
    ...the market in which we operate, or introduce competing services. Any of these factors could reduce our market share or decrease our revenue or increase churn. Wireless anticipates some ongoing re-pricing of the existing subscriber base as lower pricing offered to attract new customers is extended to...

  • Page 60
    ...An inability to enhance information technology systems to accommodate additional customer growth and support new products and services could have an In August 2004, a proceeding under the Class Actions Act (Saskatchewan) was brought against providers of wireless communications in Canada. Since that...

  • Page 61
    ... technology that gains the most widespread acceptance is not compatible with Wireless' networks, competing services based on such alternative technology may be preferable to subscribers and Wireless' business may be materially adversely affected. ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 57

  • Page 62
    ... 2006, the CRTC commenced a proceeding entitled Review of regulatory framework for wholesale services and definition of essential service, in order to review these rules. Changes to these rules could severely affect the cost of operating these businesses. 58 ROGERS COMMUNICATIONS INC. 2007 ANNUAL...

  • Page 63
    ... opportunity to ignore advertising aired on the television networks. The emergence of subscriber-based satellite and digital radio products could change radio audience listening habits and negatively impact the results of Media's radio stations. An Increase in Paper Prices, Printing Costs or Postage...

  • Page 64
    ... levy, Internet and e-mail services and printing and production costs. In the wireless and cable industries in Canada, the demand for services continues to grow and the variable costs, such as commissions paid for subscriber activations, as well as the fixed costs of acquiring new subscribers, are...

  • Page 65
    ... CONDITION AND RESULTS OF OPERATIONS The wireless communications industry in Canada continues to grow and the costs of acquiring new subscribers are significant. Because a substantial portion of subscriber activation costs are variable in nature, such as commissions paid for each new activation...

  • Page 66
    ..., Internet services, rental of equipment, network services and media subscriptions are recorded as revenue on a pro rata basis as the service is provided; • Revenue from airtime, roaming, long-distance and optional services, pay-per-use services, video rentals and other sales of products...

  • Page 67
    ... of Changes in Estimated Useful Lives (In millions of dollars) Amortization Period Increase in Net Income if Life Increased by 1 year Decrease in Net Income if Life Decreased by 1 year Brand names Rogers Fido Subscriber base Rogers Fido Cable Roaming agreements Dealer network Rogers Fido Wholesale...

  • Page 68
    ... of subscriber accounts will in turn increase the reported amount of bad debt expense. Conversely, as circumstances improve and customer accounts are adjusted and brought current, the reported bad debt expense will decline. 64 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT NEW ACCOUNTING STANDARDS...

  • Page 69
    ... flows relating to the hedged asset or liability is recognized in the Consolidated Statements of Income. Any hedge ineffectiveness is recognized in the Consolidated Statements of Income immediately. The impact of remeasuring hedging derivatives (d) ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 65

  • Page 70
    ... accounting relate to: • Gain On Sale and Issuance of Subsidiary Shares to Non-Controlling Interest; • Gain on Sale of Cable Systems; • Pre-Operating Costs Capitalized; • Capitalized Interest; • Acquisition of Cable Atlantic; • Financial Instruments; • Stock-Based Compensation...

  • Page 71
    ... been Directors of our Company and/or its subsidiary companies. Total amounts paid to these related parties, directly or indirectly, are as follows: Years ended December 31, (In millions of dollars) 2007 2006 Legal services and commissions paid on premiums for insurance coverage $ 2 $ 2 We...

  • Page 72
    ... operations before changes in working capital amounts. (4) Prior period shares and per share amounts have been retroactively adjusted to reï¬,ect a two-for-one-split of the Company's Class A Voting and Class B Non-Voting shares on December 29, 2006. 68 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 73
    ... of Canada, as well as strong growth in roaming revenues from visitors to Canada utilizing our GSM network. Cable Operations services revenue and operating profit increased primarily due to price increases, increased penetration of its digital products and incremental programming packages, and...

  • Page 74
    ... the undernoted Wireless Cable and Telecom Media Corporate and eliminations 581 228 19 (14) 814 Stock option plan amendment (2) Stock-based compensation expense (2) Integration and restructuring expenses (3) Adjustment for CRTC Part II fees decision (4) Contract renegotiation fee (5) Operating pro...

  • Page 75
    ... feature for employee stock options, stock-based compensation expense, integration and restructuring costs, an adjustment to CRTC Part II fees related to prior periods, a one-time charge related to the renegotiation of an Internet-related services agreement, losses on repayment of long-term debt...

  • Page 76
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Changes in Internal Control Over Financial Reporting and Disclosure Controls and Procedures During the last fiscal quarter, the Company outsourced its payroll processing, which materially affected the Company's ...

  • Page 77
    ..., number of shares outstanding in millions) 2007 2006 Operating profit Add: Stock option plan amendment Stock-based compensation expense Integration and restructuring expenses Cable Wireless Contract renegotiation fee Adjusted operating profit Net income Add: Stock option plan amendment Stock...

  • Page 78
    ...Prepaid (voice and data) revenue Divided by: average prepaid subscribers Divided by: 12 months $ $ $ $ Cost of acquisition per gross addition Total sales and marketing expenses Equipment margin loss (acquisition related) $ $ Divided by: total gross wireless additions (postpaid, prepaid and one-way...

  • Page 79
    ...performance indicators and non-GAAP measures, see "Key Performance Indicators and Non-GAAP Measures" section. (2) Certain prior year amounts have been reclassified to conform to the current year presentation. $ $ $ $ 12 571 2.1% $ 49 596 8.2% ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 75

  • Page 80
    ... and its cash ï¬,ows for each of the years in the two-year period ended December 31, 2007 in accordance with Canadian generally accepted accounting principles. Chartered Accountants, Licenced Public Accountants Toronto, Canada February 20, 2008 76 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 81
    ...OF INCOME (IN MILLIONS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS) Years ended December 31, 2007 and 2006 2007 2006 Operating revenue (note 3(b)) Operating expenses: Cost of sales Sales and marketing Operating, general and administrative Stock option plan amendment (note 20(a)(i)) Integration...

  • Page 82
    ...CANADIAN DOLLARS) December 31, 2007 and 2006 2 00 7 2006 Assets Current assets: Accounts receivable, net of allowance for doubtful accounts of $151 (2006 - $114) Other current... the Board: Edward "Ted" S. Rogers Director Ronald D. Besse Director 78 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 83
    ... 31, 2006 Change in accounting policy related to financial instruments (note 2(h)(i)) As restated, January 1, 2007 Net income for the year Class A Voting shares converted to Class B Non-Voting shares Stock option plan amendment Shares issued on exercise of stock options Stock-based compensation...

  • Page 84
    ... foreign exchange loss Reclassification to net income of accrued interest Related income taxes $ 637 140 (2) 138 (635) 742 119 (100) 126 264 Comprehensive income for the year See accompanying notes to consolidated financial statements. $ 901 80 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 85
    ...instruments Loss on repayment of long-term debt Stock option plan amendment Stock-based compensation expense Amortization of fair value increment on long-term debt and derivatives Sale of income tax losses to related party Other Change in non-cash operating working capital items (note 21(a)) $ 637...

  • Page 86
    ...) YEARS ENDED DECEMBER 31, 2007 AND 2006 1. NATURE OF THE BUSINESS Rogers Communications Inc. ("RCI") is a diversified Canadian communications and media company, with substantially all of its operations and sales in Canada. RCI is engaged in wireless voice and data communications services through...

  • Page 87
    ... rate for the month in which the transaction was recorded. Exchange gains or losses on translating long-term debt are recognized in the consolidated statements of income. Foreign exchange gains are primarily related to the translation of long-term debt. ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT...

  • Page 88
    ...income taxes of $6 million. The fair value of this embedded derivative at December 31, 2007, was $13 million and the decrease in the fair value of $6 million was recorded in the consolidated statements of income for the year ended December 31, 2007. 84 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 89
    ...of the Company. (K ) DEFERRED CHARGES: (F) (ii) The direct costs paid to lenders to obtain revolving credit facilities are deferred and amortized on a straight-line basis over the life of the debt to which they relate. During the development and pre-operating phases of new products and businesses...

  • Page 90
    ... name - Rogers Brand name - Fido Subscriber bases Baseball player contracts Roaming agreements Dealer networks Wholesale agreements Marketing agreement 20 years 5 years 21/4 to 42 /3 years 5 years 12 years 4 years 38 months 5 years Acquired broadcast program rights are carried at the lower of cost...

  • Page 91
    ... related to recognized and unrecognized financial instruments and how those risks are managed. Disclosures required by these standards will be included in the Company's interim and annual consolidated financial statements commencing January 1, 2008. ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT...

  • Page 92
    ... eliminations totals Wireless Cable Media Corporate items and Consolidated eliminations totals Wireless Cable Operating revenue Operating expenses: Cost of sales Sales and marketing Operating, general and administrative Stock option plan amendment Integration and restructuring Management fees...

  • Page 93
    ... and Retail eliminations 2006 Total Cable RBS RBS Operating revenue Operating expenses: Cost of sales Sales and marketing Operating, general and administrative Stock option plan amendment Integration and restructuring Management fees Depreciation and amortization Operating income Additions to PP...

  • Page 94
    ... of the following: 2 00 7 2006 Wireless: Postpaid Prepaid One-way messaging Network revenue Equipment sales Cable: Cable Operations RBS Rogers Retail Intercompany eliminations Media: Advertising Circulation and subscription Retail Blue Jays Other Corporate items and intercompany eliminations...

  • Page 95
    ... 31, 2007, the Company acquired certain real properties and 100% of the shares of the legal entities holding the operations of the Citytv network of five television stations in Canada, from CTVglobemedia Inc. for cash consideration of $405 million, including acquisition costs. The purchase price is...

  • Page 96
    ...recorded within operating expenses. These expenses include various severance, consulting and other incremental restructuring costs directly related to the acquisitions. During 2007, the Company incurred integration expenses of $14 million related to the Call-Net acquisition. During 2006, the Company...

  • Page 97
    ... from the Canada Revenue Agency ("CRA") in respect of the Termination Payment. The Company challenged the Notice of Reassessment and, in 2006, recorded a future income tax charge of $25 million based on the expected resolution of this issue. During the year ended December 31, 2007, the Company was...

  • Page 98
    ...99 $ 0.99 0.97 Employee stock options are not considered dilutive after the May 28, 2007, amendment to stock option plans (note 20(a)(i)). 9. OTHER CURRENT ASSETS: 2 00 7 2006 Inventories Prepaid expenses Acquired program rights Rogers Retail rental inventory Income taxes receivable Deferred...

  • Page 99
    ...00 7 Cost Accumulated depreciation Net book value Cost Accumulated depreciation 2006 Net book value Land and buildings Towers, head-ends and transmitters Distribution cable and subscriber drops Network equipment Wireless network radio base station equipment Computer equipment and software Customer...

  • Page 100
    ...Refer to note 2(h) for the change in accounting policy related to investments in publicly traded companies. 13. DEFERRED CHARGES: 2 00 7 2006 CRTC commitments Deferred installation costs (note 2(b)(iv)) Financing and transaction costs Pre-operating costs Deferred commissions and other $ 72 18...

  • Page 101
    ... Citytv stations across Canada ($61 million over seven years) and five radio stations in Northern Alberta ($2 million over seven years). In prior years, the Company agreed to pay $50 million in public benefits over seven years relating to the CRTC grant of a new television licence in Toronto and...

  • Page 102
    ... 2007. As a result of these actions, the outstanding public debt and cross-currency interest rate exchange agreements and the new $2.4 billion bank credit facility are unsecured obligations of Rogers Communications Inc. The Rogers Communications Inc. public debt originally issued by Rogers Cable Inc...

  • Page 103
    ..., the Company made aggregate net payments on settlement of cross-currency interest rate exchange agreements and forward contracts of $35 million (note 16(a)). During 2006, the Company redeemed or repaid an aggregate $261 million principal amount of Senior Notes and Senior Secured Notes as well as...

  • Page 104
    ... tests as well as restrictions upon additional investments, sales of assets and payment of dividends, all of which are suspended in the event the public debt securities are assigned investment grade ratings by at least two of three specified credit rating agencies. As at December 31, 2007, all of...

  • Page 105
    ... each of the Company's public debt instruments are based on the year-end trading values. The fair value of the bank credit facility approximates its carrying value since the interest rates approximate current market rates. The fair values of the Company's interest exchange agreements, cross-currency...

  • Page 106
    ... require collateral or other security to support the credit risk associated with cross-currency interest rate exchange agreements due to the Company's assessment of the creditworthiness of the counterparties. The obligations under U.S. $4,200 million (2006 - U.S. $4,475 million) aggregate notional...

  • Page 107
    ...obligations, beginning of year Service cost Interest cost Benefits paid Contributions by employees Actuarial loss (gain) Plan amendments Accrued benefit obligations, end of year $ 612 $ 29 34 (24) 18 10 10 689 $ 575 24 32 (22) 15 (12) - 612 $ ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 103

  • Page 108
    ... to the plans to secure the benefits of plan members and invests in permitted investments using the target ranges established by the Pension Committee of the Company. The Pension Committee reviews actuarial assumptions on an annual basis. 104 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 109
    ... benefit payments for funded and unfunded plans for fiscal year ending: $ 334 Certain subsidiaries have defined contribution plans with total pension expense of $2 million in 2007 (2006 - $2 million). 19. SHAREHOLDERS' EQUITY: (A) C APITAL STOCK: (i) Preferred shares: Rights and conditions...

  • Page 110
    ... period in which the related services were rendered, which is usually the vesting period or, as applicable, over the period to the date an employee was eligible to retire, whichever was shorter. The impact of the amendment to the stock option plans at May 28, 2007, was an increase in liabilities of...

  • Page 111
    ... recorded as stock-based compensation expense in 2007 (2006 - $4 million). (ii) Stock option plans: Options to purchase Class B Non-Voting shares of the Company on a one-for-one basis may be granted to employees, directors and officers of the Company and its affiliates by the Board of Directors...

  • Page 112
    ...related to the employee share accumulation plan amounted to $9 million for the year ended December 31, 2007 (2006 - $4 million). The deferred share unit plan enables directors and certain key executives of the Company to elect to receive certain types of 108 ROGERS COMMUNICATIONS INC. 2007 ANNUAL...

  • Page 113
    ... are subject to formal agreements approved by the Audit Committee. Total amounts paid to (received from) these related parties are as follows: 2007 2006 Charges (recoveries) for use of aircraft and other administrative services $ (1) $ 1 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 109

  • Page 114
    ... million. In addition, the Company has commitments to pay access fees over the next year totalling approximately $18 million. (D) Pursuant to CRTC regulation, the Company is required to make contributions to the Canadian Television Fund ("CTF"), which is a cable industry fund designed to foster the...

  • Page 115
    ..., the Company was served with a court order compelling it to produce certain records and other information relevant to an investigation initiated by the Commissioner of Competition under the misleading advertising provisions of the Competition Act with respect to its system access fee. In July 2007...

  • Page 116
    ... derivative instruments, net of income taxes of $100 (f) Change in funded status of pension plans for unrecognized amounts, net of income taxes of $6 (h) Comprehensive income for the year based on United States GAAP $ 901 347 (126) (15) 1,107 $ 112 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 117
    ... gain on sale of the cable television systems in income, net of related income taxes. (C ) PRE- OPER ATING COSTS C APITALIZED: Under Canadian GAAP, the Company defers the incremental costs relating to the development and pre-operating phases of new businesses and amortizes these costs on a straight...

  • Page 118
    ...instruments, reï¬,ecting primarily market changes in foreign exchange rates, interest rates, as well as the level of short-term variable versus long-term fixed interest rates, are recognized in the consolidated statements of income immediately. For the year ended December 31, 2007, the gain of $126...

  • Page 119
    ... a result, for the year ended December 31, 2006, an additional $2 million of compensation expense was recorded under United States GAAP, relative to that recorded under Canadian GAAP, related to retirement-eligible employees. (H) PENSION LIABILIT Y REL ATED TO FUNDED STATUS OF PENSION PL ANS: Under...

  • Page 120
    ... under generally accepted accounting principles and expands disclosures about fair value measurements. This new standard is effective for the Company beginning January 1, 2008. The Company is currently assessing the impact of this new standard. 116 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT

  • Page 121
    ... Cable"). This transaction has not yet closed, pending CRTC approval, which is expected in 2008. Aurora Cable provides cable television, Internet and telephony services in the Town of Aurora and the community of Oak Ridges, in Richmond Hill, Ontario. ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT...

  • Page 122
    ... Board approval Multiple Mailings If you receive duplicate shareholder mailings from Rogers Communications, please contact Computershare at 800-564-6253 or [email protected] to consolidate your holdings. INVESTOR REL ATIONS For details of the public debt securities of the Rogers companies...

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