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ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 47
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The credit ratings accorded by the
rating agencies are not recom-
mendations to purchase, hold or
sell the rated securities inasmuch
as such ratings do not comment
as to market price or suitability
for a particular investor. There is
no assurance that any rating will
remain in effect for any given
period of time or that any rating
will not be revised or withdrawn
entirely by a rating agency in the
future if in its judgment circum-
stances so warrant.
Deficiency of Pension Plan Assets Over Accrued Obligations
As disclosed in Note 18 to our 2007 Audited Consolidated Financial
Statements, our pension plans had a deficiency of plan assets over
accrued obligations of $83 million and $67 million at December 31,
2007, 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 fund-
ing requirements, which include both our regular contributions
and these special payments, are expected to increase from $28 mil-
lion in 2007 to $35 million in 2008, subject to annual adjustments
thereafter, due to various market factors and the assumption that
staffing levels at the Company will remain relatively stable year-
over-year. We are contributing to the plans on this basis. As further
discussed in the section of this MD&A entitled “Critical Accounting
Estimates”, changes in factors such as the discount rate, the rate of
compensation increase and the expected return on plan assets can
impact the accrued benefit obligation, pension expense and the
deficiency of plan assets over accrued obligations in the future.
INTEREST RATE AND FOREIGN EXCHANGE MANAGEMENT
Economic Hedge Analysis
For the purposes of our discussion on the hedged portion of long-
term debt, we have used non-GAAP measures in that we include
all cross-currency interest rate exchange agreements (whether or
not they qualify as hedges for accounting purposes) since all such
agreements are used for risk management purposes only and
are designated hedges of specific debt instruments for economic
purposes. As a result, the Canadian dollar equivalent of U.S. dollar-
denominated long-term debt reflects the contracted foreign
exchange rate for all of our cross-currency interest rate exchange
agreements regardless of qualifications for accounting purposes as
a hedge.
During 2007, we redeemed an aggregate US$705 million of our U.S.
dollar-denominated debt and terminated an aggregate notional
principal amount of US$275 million of our cross-currency interest
rate exchange agreements.
As a result of the foregoing debt redemptions and swap termina-
tions, on December 31, 2007, 100% of our U.S. dollar-denominated
debt was hedged on an economic basis and on an accounting basis,
as noted below.
20072006
6.4x4.7x3.2x
RATIO OF ADJUSTED
OPERATING PROFIT
TO INTEREST
200
6
2007
2005
Consolidated Hedged Position
(In millions of dollars, except percentages) December 31, 2007 December 31, 2006
U.S. dollar-denominated long-term debt US $ 4,190 US $ 4,895
Hedged with cross-currency interest rate exchange agreements US $ 4,190 US $ 4,475
Hedged exchange rate 1.3313 1.3229
Percent hedged 100.0% (1) 91.4%
Amount of long-term debt (2) at fixed rates:
Total long-term debt Cdn $ 7,454 Cdn $ 7,658
Total long-term debt at fixed rates Cdn $ 6,214 Cdn $ 6,851
Percent of long-term debt fixed 83.4% 89.5%
Weighted average interest rate on long-term debt 7.53% 7.98%
(1) Pursuant to the requirements for hedge accounting under Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 3865, Hedges, on December 31, 2007, RCI accounted for 100%
(2006 – 93.6%) of its cross-currency interest rate exchange agreements as hedges against designated U.S. dollar-denominated debt.
(2) Long-term debt includes the effect of the cross-currency interest rate exchange agreements.
FIXED VERSUS FLOATING DEBT COMPOSITION
(%)
Fixed 83.4%
Floating 16.6%