Rogers 2008 Annual Report Download - page 54

50 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Recent Media Developments
Media announced that the CRTC had approved its application for
a 24-hour news television channel to serve the City of Toronto and
the Greater Toronto Area. The channel will reflect Citytv’s unique
brand of news delivery, will be complemented by content from
Rogers’ ethnically diverse OMNI stations and will also feature news
items contributed from other Rogers Media properties including
The Fan 590, 680News, Sportsnet, Publishing and the Blue Jays.
OMNI was honoured by the Canadian Association of Broadcasters
(“CAB”) with Gold Ribbon Awards in two categories, including
Diversity in News and Information Programming, and in Magazine
Programming. These awards reaffirm OMNI’s excellence in deliv-
ering independent and third language programming to Canada’s
multilingual and multicultural communities.
3. CONSOLIDATED LIQUIDITY AND FINANCING
LIQUIDITY AND CAPITAL RESOURCES
Operations
For 2008, cash generated from operations before changes in non-
cash operating items, which is calculated by removing the effect
of all non-cash items from net income, increased to $3,522 million
from $3,135 million in 2007. The $387 million increase is primarily the
result of a $357 million increase in adjusted operating profit.
Taking into account the changes in non-cash working capital items
for 2008, cash generated from operations was $3,307 million, com-
pared to $2,825 million in 2007. The cash generated from operations
of $3,307 million, together with the following items, resulted in
total net funds of approximately $5,105 million generated or raised
in 2008:
• receiptof$1,794millionaggregategrossproceedsfromtheissu-
ance of US$1.75 billion of public debt;
• receiptof$3millionfrom the issuanceofClassB Non-Voting
shares under the exercise of employee stock options;
• receipt of $1 million in net proceeds from the settlement at
maturity of certain Cross-Currency Swaps and related forward
contracts.
Net funds used during 2008 totalled approximately $5,063 million,
the details of which include the following:
• additionstoPP&Eof$1,981million,netof$40millionofrelated
changes in non-cash working capital;
• paymentofthespectrumauctionpurchasepriceandassociated
costs aggregating $1,008 million;
• net repayments under our bank credit facility aggregating
$655 million;
• thepaymentofquarterlydividendsaggregating$559millionon
our Class A Voting and Class B Non-Voting shares;
• the payment of $375 million on the termination and re-
couponing of three existing Cross-Currency Swaps aggregating
US$575 million notional principal amount;
• the purchasefor cancellation of4,077,400Class BNon-Voting
shares for an aggregate purchase price of $136.7 million;
• additionstoprogramrightsandCRTCcommitmentsaggregating
$150 million; and
• acquisitionsandothernetinvestmentsaggregating$198million,
including the acquisition of Aurora Cable, the two-thirds of OLN
not previously owned, channel m and CIKZ-FM Kitchener.
Taking into account the cash deficiency of $61 million at the begin-
ning of the year and the cash sources and uses described above, the
cash deficiency at December 31, 2008 was $19 million.
Financing
Our long-term debt instruments are described in Note 14 and Note
15 to the 2008 Audited Consolidated Financial Statements. During
2008, the following financing activities took place.
On August 6, 2008 RCI issued US$1.75 billion aggregate principal
amount of public debt securities, comprised of US$1.4 billion of
6.80% Senior Notes due 2018 (the “2018 Notes”) and US$350 mil-
lion of 7.50% Senior Notes due 2038 (the “2038 Notes”). The 2018
Notes were issued at a discount of 99.854% to yield 6.82% and the
2038 Notes were priced at a discount of 99.653% to yield 7.529%.
RCI received aggregate net proceeds of US$1,735 million (Cdn$1,778
million) from the issuance of the 2018 Notes and the 2038 Notes
after deducting the respective issue discounts and underwriting
commissions. The 2018 Notes and the 2038 Notes are unsecured and
are guaranteed on an unsecured basis by each of Rogers Wireless
Partnership and Rogers Cable Communications Inc. and rank pari
passu with all of RCI’s other senior unsecured and unsubordinated
notes and debentures and bank credit facility.
Effective August 6, 2008, RCI entered into an aggregate US$1.75
billion notional principal amount of Cross-Currency Swaps. An
aggregate US$1.4 billion notional principal amount of these Cross-
Currency Swaps hedge the principal and interest obligations for the
2018 Notes through to maturity in 2018 while the remaining US$350
million aggregate notional principal amount of Cross-Currency
Swaps hedge the principal and interest on the 2038 Notes for ten
years to August 2018. These Cross-Currency Swaps have the effect of:
(a) converting the US$1.4 billion aggregate principal amount of 2018
Notes from a fixed coupon rate of 6.80% into Cdn$1,435 million at
a weighted average fixed interest rate of 6.80%; and (b) converting
2008 USE OF CASH
(In millions of dollars)
2008
Acquisitions and other net investments: $198
Additions to program rights & CRTC commitments: $150
Repurchase of shares under NCIB: $137
Dividends: $559
Payments under bank credit facility: $655
Spectrum: $1,008$5,063
Additions to PP&E: $1,981
Re-couponing of cross-currency swaps: $375