Rogers 2009 Annual Report Download - page 16

20 ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OUR STRATEGY
Our business objective is to maximize subscribers, revenue,
operating profit and return on invested capital by enhancing our
position as one of Canada’s leading diversified communications
and media companies. Our strategy is to be the preferred provider
of communications, entertainment and information services to
Canadians. We seek to leverage our networks, infrastructure, sales
channels, brands and marketing resources across the Rogers group of
companies by implementing cross-selling and joint sales distribution
initiatives as well as cost-reduction initiatives through infrastructure
sharing, to create value for our customers and shareholders.
We seek to exploit opportunities for Wireless, Cable and Media to
create bundled product and service offerings at attractive prices,
in addition to implementing cross-marketing and cross-promotion
of products and services to increase sales and enhance subscriber
loyalty. We also work to identify and implement areas of opportunity
for our businesses that will 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 and innovation and as representing
Canada’s leading media and communications company.
In September 2009, we announced the further integration of our
Cable and Wireless businesses with the creation of a Communications
Services organization. This more streamlined organizational
structure is intended to facilitate faster time to market and generally
improve the overall effectiveness and efficiency of the Wireless and
Cable businesses. Reporting continues to reflect the foregoing Cable
and Wireless services as separate product segments.
ACQUISITIONS
Acquisition of Outdoor Life Network
During the year ended December 31, 2009, we finalized
the purchase price allocation for the Outdoor Life Network
(“OLN”) acquisition, which was acquired by Media on July 31, 2008.
This resulted in an increase in the valuation of broadcast licences
of $15 million, an increase in future income tax liabilities of
$3 million, and a corresponding decrease in goodwill of $12 million
from the purchase price allocation recorded and disclosed at
December 31, 2008.
Acquisition of K-Rock 1057 Inc.
On May 31, 2009, Media acquired the assets of K-Rock 1057 Inc. for
cash consideration of $11 million. K-Rock 1057 Inc. held the assets
of radio stations K-Rock and KIX Country in Kingston, Ontario.
The acquisition was accounted for using the purchase method and
the related results are included in Media’s results of operations
effective May 31, 2009.
Acquisition of Blink Communications Inc.
On January 29, 2010, the Company announced that it has entered
into an agreement to purchase 100% of the outstanding common
shares of Blink Communications Inc. (“Blink”), a wholly owned
subsidiary of Oakville Hydro Corporation, for cash consideration of
$130 million. Blink is a data focused telecom provider that delivers
next generation and leading edge service, through its end-to-end
owned network, to small and medium sized businesses, including
municipalities, universities, schools and hospitals, in the Oakville
and Mississauga, Ontario areas.
CONSOLIDATED FINANCIAL AND OPERATING RESULTS
See the sections in this MD&A entitled “Critical Accounting Policies”,
“Critical Accounting Estimates” and “New Accounting Standards”
and also the Notes to the 2009 Audited Consolidated Financial
Statements for a discussion of critical and new accounting policies
and estimates as they relate to the discussion of our operating and
financial results below.
We measure the success of our strategies using a number of
key performance indicators as outlined in the section entitled
“Key Performance Indicators and Non-GAAP Measures”. These
key performance indicators are not measurements in accordance
with Canadian or U.S. GAAP and should not be considered as
alternatives to net income or any other measure of performance
under Canadian or U.S. GAAP. The non-GAAP measures presented
in this MD&A include, among other measures, operating profit,
adjusted operating profit, adjusted operating profit margin,
adjusted net income, adjusted basic and diluted net income per
share and free cash flow. We believe that the non-GAAP financial
measures provided, which exclude: (i) stock-based compensation
expense (recovery); (ii) integration and restructuring expenses;
(iii) contract termination fees; (iv) an adjustment for Canadian
Radio-television and Telecommunications Commission (“CRTC”)
Part II fees related to prior periods; (v) pension settlement;
and (vi) in respect of net income and net income per share, debt
issuance costs, loss on repayment of long-term debt, impairment
losses on goodwill, intangible assets and other long-term assets and
the related income tax impacts of the above items, provide for a more
effective analysis of our operating performance. See the sections
entitled “Key Performance Indicators and Non-GAAP Measures”
and “Supplementary Information: Non-GAAP Calculations” for
further details.
An overall economic slowdown in Canada and particularly in
Ontario, which is the largest market for each of our three business
segments, as well as increased levels of competitive intensity
have negatively impacted the results of our Wireless, Cable and
Media segments during 2009. This includes lower subscriber
additions as well as declines of advertising, roaming and other
more discretionary types of revenues. In response to the economic
20092008
2007
200
8
2007
2009
$1,855$2,021$1,796
ADDITIONS TO
CONSOLIDATED PP&E
(In millions of dollars)
20092008
2007
2008
2007
2009
$17,018$17,082$15,325
CONSOLIDATED TOTAL ASSETS
(In millions of dollars)