Rogers 2007 Annual Report Download - page 52

48 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We use derivative financial instruments to manage our risks from
fluctuations in foreign exchange and interest rates. These instru-
ments include interest rate and cross-currency interest rate exchange
agreements, foreign exchange forward contracts and, from time-to-
time, foreign exchange option agreements. All such agreements are
used for risk management purposes only and are designated as a
hedge of specific debt instruments for economic purposes. In order
to minimize the risk of counterparty default under these agree-
ments, we assess the creditworthiness of these counterparties. At
December 31, 2007, all of our counterparties to these agreements
were financial institutions with a Standard & Poor’s rating (or other
equivalent) ranging from A+ to AA.
Because our operating income is almost exclusively denominated in
Canadian dollars, the incurrence of U.S. dollar-denominated debt
has caused significant foreign exchange exposure. We will continue
to monitor our hedged position on an economic basis with respect
to interest rate and foreign exchange fluctuations and, depending
upon market conditions and other factors, may adjust our hedged
position with respect to foreign exchange fluctuations or interest
rates in the future by unwinding certain existing positions and/or
by entering into new cross-currency interest rate exchange agree-
ments or by using other instruments.
As at December 31, 2007, all of our U.S. dollar-denominated long-
term debt instruments were hedged for accounting purposes.
At December 31, 2007 interest expense would have changed by
$12 million per annum if there was a 1% change in the interest rates
on the portion of our long-term debt that is not at fixed interest
rates.
OUTSTANDING COMMON SHARE DATA
Set out below is our outstanding common share data as at
December 31, 2007. For additional detail, refer to Note 19 to the
2007 Audited Consolidated Financial Statements.
Composition of Fair Market Value Liability for Derivative Instruments
(In millions of dollars) December 31, 2007 January 1, 2007 (1)
Foreign exchange related $ 1,719 $ 858
Interest rate related 85 436
Total carrying value $ 1,804 $ 1,294
(1) After the adoption of new financial instrument accounting standards. Refer to Note 2 to the Audited Consolidated Financial Statements for the year ended December 31, 2007.
December 31, 2007
Common Shares (1)
Class A Voting 112,462,014
Class B Non-Voting 527,004,533
Options to purchase Class B Non-Voting shares
Outstanding options 15,586,066
Outstanding options exercisable 11,409,666
(1) Holders of our Class B Non-Voting shares are entitled to receive notice of and to attend meetings of our shareholders, but, except as required by law or as stipulated by stock exchanges, are not entitled
to vote at such meetings. If an offer is made to purchase outstanding Class A Voting shares, there is no requirement under applicable law or RCI’s constating documents that an offer be made for the
outstanding Class B Non-Voting shares and there is no other protection available to shareholders under RCI’s constating documents. If an offer is made to purchase both Class A Voting shares and Class B
Non-Voting shares, the offer for the Class A Voting shares may be made on different terms than the offer to the holders of Class B Non-Voting shares.
DIVIDENDS AND OTHER PAYMENTS ON RCI EQUITY SECURITIES
Our dividend policy is reviewed periodically by the RCI Board of
Directors (“the Board”). The declaration and payment of dividends
are at the sole discretion of the Board and depend on, among other
things, our financial condition, general business conditions, legal
restrictions regarding the payment of dividends by us, some of
which are referred to below, and other factors that the Board may,
from time-to-time, consider to be relevant. As a holding company
with no direct operations, we rely on cash dividends and other pay-
ments from our subsidiaries and our own cash balances and debt
to pay dividends to our shareholders. The ability of our subsidiaries
to pay such amounts to us is subject to the various risks as outlined
in this MD&A. All dividend amounts have been restated to reflect
a two-for-one split of our Class B Non-Voting and Class A Voting
shares in December 2006.
In January 2008, the Board approved an increase in the annual divi-
dend from $0.50 to $1.00 per Class A Voting and Class B Non-Voting
share effective with the next quarterly dividend. The new annual
dividend of $1.00 per share will be paid in quarterly amounts of
$0.25 per each outstanding Class A Voting and Class B Non-Voting
share. Such quarterly dividends are only payable as and when
declared by our Board and there is no entitlement to any dividend
prior thereto.
During 2007, the Board declared dividends aggregating $0.4150
per share on each of the outstanding Class B Non-Voting shares
and Class A Voting shares, $0.125 per share of which were paid on
January 2, 2008 to shareholders of record on December 12, 2007,
$0.125 per share of which were paid on October 1, 2007, to share-
holders of record on September 13, 2007, $0.125 per share of which
were paid on July 3, 2007, to shareholders of record on June 14,
2007, and $0.04 of which were paid on April 2, 2007, to shareholders
of record on March 15, 2007.