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Seamless Connections
Rogers Communications Inc.
2010 Annual Report

Table of contents

  • Page 1
    Seamless Connections Rogers Communications Inc. 2010 Annual Report

  • Page 2
    ... which offers Rogers branded wireless and home entertainment services. Rogers Media is Canada's premier group of category-leading broadcast, specialty, print and on-line media assets with businesses in radio and television broadcasting, televised shopping, magazine and trade journal publication and...

  • Page 3
    ...Speed Internet 21% Home Phone 12% Business Solutions 14% Retail 8% 2008 2009 2010 2008 2009 2010 MEDIA Rogers Media is Canada's premier combination of category-leading radio and television broadcasting, publishing, sports entertainment and on-line properties. Its Radio group operates 55 radio...

  • Page 4
    ...company in North America. At the same time, we maintained a solid investment grade balance sheet with approximately $2.4 billion of available liquidity. And we continued to invest in customer retention, network enhancement and product development initiatives. ROGERS COMMUNICATIONS INC. 2010 ANNUAL...

  • Page 5
    ... new revenue streams to drive long-term growth. Evolving our Core Business Last year I wrote about the transformation underway in communications and media. Today, our customers are using smartphones as TVs, laptops as telephones, TVs as time shifted entertainment and gaming stations, and cell phones...

  • Page 6
    ... by E-MAIL PROGRAM yOUR PVR FROM yOUR TAbLET TExT MESSAGES TO yOUR hOME PhONE MAkE VIdEO CALLS ON yOUR SMARTPhONE Rogers was one of the first carriers in the world to offer the communications 'quadruple play' of wireless, television, Internet and telephony services - all over its own networks. Few...

  • Page 7
    ... ON dEMANd NETWORk ThROUGh TExT, ChAT ANd INSTANT MESSAGING kNOW yOUR ChILd'S GPS LOCATION ShARE FILES ANd APPLICATIONS PAUSE, REWINd ANd PROGRAM yOUR TV COLLAbORATE ON CLIENT PROjECTS Rogers provides exceptional convenience and flexibility by enabling Canadians to 'time shift' how they access the...

  • Page 8
    ... well-known consumer magazines and trade publications. And in addition to Rogers' significant sports content rights, we own the Toronto Blue Jays Baseball Club and the Rogers Centre, Canada's largest sports and entertainment facility. bANkING ANd PAyMENTS 8 ROGERS COMMUNICATIONS INC. 2010 ANNUAL...

  • Page 9
    ...customers to access the same personalized information, communications and entertainment experiences at work, at home and away, travelling to any of approximately 200 countries around the world. PAy bILLS FROM ThE GOLF COURSE 10 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 10
    ... events in support of organizations such as the Toronto Hospital for Sick Children, Easter Seals and many more. Our 34 Rogers TV cable stations produce thousands of hours of local programming involving over 29,000 community groups, donating coverage of local charitable events as well as advertising...

  • Page 11
    ...30-year public market track record of long-term indexbeating shareholder value creation For a detailed discussion of our financial and operating metrics and results, please see the accompanying MD&A later in this report. 14 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 12
    ...profit margin Adjusted net income Adjusted basic earnings per share Annualized dividend rate at year-end Total assets Long-term debt (includes current portion) Shareholders' equity Number of employees 2010 Consolidated Revenue and Operating Profit Profile Revenue Adjusted Operating Profit Wireless...

  • Page 13
    ... Commitments Note 24: Contingent Liabilities Note 25: Canadian and United States Accounting Policy Differences Note 26: Subsequent Events 120 CORPORATE GOVERANCE 122 DIRECTORS AND SENIOR CORPORATE OFFICERS 124 CORPORATE AND SHAREHOLDER INFORMATION ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 17

  • Page 14
    ... Interest Rate and Foreign Exchange Management Outstanding Common Share Data Dividends on RCI Equity Securities Commitments and Other Contractual Obligations Off-Balance Sheet Arrangements Our Business Our Strategy Consolidated Financial and Operating Results 2011 Financial and Operating Guidance...

  • Page 15
    ... as well as highspeed Internet access , telephony ser vices and retailing of communications and home entertainment products and services. Through Media, we are engaged in radio and television broadcasting, televised shopping, magazines and trade publications, spor ts entertainment and digital media...

  • Page 16
    ... 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...

  • Page 17
    ... developments in 2010 • Generated revenue growth of 5% at Wireless network, 4% at Cable Operations and 7% at Media, with consolidated annual revenue growth of 4%. Adjusted operating profit grew 6% to $4,653 million and adjusted operating profit margins expanded by 80 basis points...

  • Page 18
    ... Rogers Retail stores. For the year ended december 31, 2009, costs incurred relate to i) severances resulting from the targeted restructuring of our employee base to combine the Cable and Wireless businesses into a communications organization and to improve our cost structure in light of the current...

  • Page 19
    ... Corporate. (3) After-tax cash flow is defined as adjusted operating profit less PP&E expenditures, interest expense and cash taxes, and is not a term defined under Canadian GAAP or IFRS. Cash taxes are expected to be approximately $90 million in 2011. ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT...

  • Page 20
    ... with our existing HSPA+ network. WIRELESS REVENUE MIX Data 26% Equipment 6% Prepaid Voice 3% Postpaid Voice 65% Wireless Products and Services Wireless offers wireless voice, data and messaging services including related handset devices and accessories, across Canada. Wireless' services are...

  • Page 21
    ... 5 percentage points of penetration each year for the next several years. As penetration deepens, it requires an increasing focus on customer satisfaction, the promotion of new data and voice services to existing customers, and customer retention. ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 25

  • Page 22
    ... Wireless' customer service groups, websites and telesales, net of subsidies. Wireless' operating expenses are segregated into the following categories for assessing business performance: • Cost of equipment sales, representing costs related to equipment revenue; • S ales and marketing...

  • Page 23
    ... lost, stolen or broken. • W ireless launched Rogers' Extreme Text Messaging service, a North American first, allowing wireless customers to personalize their texting experience with signatures, distribution lists, blocking and forwarding, making the texting experience as easy and feature-rich...

  • Page 24
    ... of e-mail, wireless Internet access, text messaging and other wireless data services. In 2010, data revenue represented approximately 28% of total network revenue, compared to 22% in 2009. During 2010, Wireless activated SMARTPHONES AS A PERCENT and upgraded approximately OF POSTPAID SUBSCRIBERS...

  • Page 25
    ... record level of smartphone activations and upgrades and related level of subsidy spending, partially offset by the increase in network revenue. WIRELESS ADJUSTED OPERATING PROFIT (In millions of dollars) $2,806 $3,042 $3,167 2008 2009 2010 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 29

  • Page 26
    ...residential customers with both voice-over-cable and circuit-switched technologies with over a million subscriber lines at December 31, 2010. The Rogers Business Solutions ("RBS") segment of Cable offers local and long-distance telephone, enhanced voice and data networking services, and IP access to...

  • Page 27
    ... area where the service is available. Cable offers a variety of home phone packages coupled with competitive feature sets and long-distance plans. Cable offers multi-product bundles at discounted rates, which allow customers to choose from among a range of Rogers' cable television, Internet, voice...

  • Page 28
    ...-net data and voice services into the small and medium-sized business segments within and contiguous to its cable footprint. RECENT C AbLE INdUSTRy TRENdS Investment in Improved Cable Television Networks and Expanded Service Offerings In recent years, North American cable television companies have...

  • Page 29
    ...-top terminals; • Internet, which includes monthly and additional use service revenues from residential and small business Internet access service and modem sale and rental fees; • Rogers Home Phone, which includes revenues from residential and small business local telephony service, calling...

  • Page 30
    ... of acquired businesses; and iv) the closure of certain Rogers Retail stores. For the year ended december 31, 2009, costs incurred relate to i) severances resulting from the targeted restructuring of our employee base to combine the Cable and Wireless businesses into a communications organization...

  • Page 31
    ... AbLE OPER ATIONS Summarized Financial Results Years ended December 31, (In millions of dollars, except margin) 2010 (1 ) 2009 % Chg Operating revenue Cable Television Internet Rogers Home Phone Total Cable Operations operating revenue Operating expenses before the undernoted Sales and marketing...

  • Page 32
    ...Cable Television revenue for 2010, compared to 2009, reflects the continuing increase in penetration of our digital cable product offerings and pricing changes. The slowdown in the year-overyear growth rate of Cable Television revenue from 2009 to 2010 partially reflects the timing of annual pricing...

  • Page 33
    ...over-year growth in adjusted operating profit was primarily the result of the revenue growth and cost changes described above. As a result, Cable Operations' adjusted operating profit margins increased to 44.7% for 2010, compared to 42.2% for 2009. ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 37

  • Page 34
    ...of the 11% as reported, compared to 2009. Further, excluding internal customers within the Rogers group of companies, revenue for 2010 would have declined by 3%, compared to 2009. For 2010, long-distance revenue increased by $50 million and data and Internet revenue increased by $21 million, which...

  • Page 35
    ... provides cable television and Internet services in Kincardine, Ontario and the surrounding area. The acquisition was accounted for using the acquisition method with the results of operations consolidated with those of ours effective July 30, 2010. ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 39

  • Page 36
    ...Sports Entertainment") owns the Toronto Blue Jays, a Major League Baseball ("MLB") club, and Rogers Centre sports and entertainment venue. MEDIA REVENUE MIX Radio 15% Television 37% Sports Entertainment 12% Publishing 19% The Shopping Channel 17% 40 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 37
    ... of obligations and accruals relating to prior periods. (7) Relates to the termination and release of certain blue jays players from the remaining term of their contracts. (8) Relates to an adjustment for CRTC Part II fees related to prior periods. ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 41

  • Page 38
    ... CONdITION ANd RESULTS OF OPERATIONS Media Revenue The increase in Media's revenue in 2010, compared to 2009, reflects continuous increases in Media's prime time TV ratings, increased subscriber fees and improvements in the advertising market, which together are favourably impacting Television...

  • Page 39
    ...taxes for the following reasons: Our effective income tax rate for the years ended December 31, 2010 and 2009 was 28.5% and 25.4%, respectively. The 2010 effective income tax rate was less than the 2010 statutory income 2008 2009 2010 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 43

  • Page 40
    ... Costs In the fourth quarter of 2010, we determined that the fair value of a radio station licence was lower than its carrying value. This primarily resulted from the weakening of advertising revenues in a local market. As a result, we recorded a non-cash impairment charge of $6 million related...

  • Page 41
    ... The corporate additions to PP&E included $133 million for the year ended December 31, 2010 and $151 million for the year ended December 31, 2009, both of which related to spending on an enterprise-wide billing and business support system initiative. ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT...

  • Page 42
    ... millions of dollars) Cash PP&E expenditures: $1,713 Redemption of long-term debt: $1,499 $5,746 Repurchase of shares: $1,312 Dividends: $734 Acquisitions and other net investments: $318 Additions to program rights: $170 2010 2008 2009 2010 46 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 43
    ...offer of any securities for sale. july 1, 2010 Corporate Reorganization On June 30, 2010, Rogers Wireless Partnership changed its name to Rogers Communications Partnership. On July 1, 2010, the Company completed a reorganization which included the amalgamation of RCI and Rogers Cable Communications...

  • Page 44
    ... August and September 2010, Standard & Poor's Ratings Services affirmed the corporate credit rating for RCI to be BBB and the rating for 48 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT As disclosed in Note 17 to our 2010 Audited Consolidated Financial Statements, our pension plans had a deficiency...

  • Page 45
    ... 31) 2008 Fixed 93% Floating 7% 2009 Fixed 100% Floating 0% 2010 Fixed 100% Floating 0% In accordance with Canadian GAAP, we have recorded our Derivatives using an estimated credit-adjusted mark-to-market valuation which is determined by increasing the treasury-related discount rates used to...

  • Page 46
    ...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. 50 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 47
    ... described in the DRIP Plan Document, with respect to the applicable dividend payment date. CASh RETURNEd TO ShAREhOLdERS (In millions of dollars) Share buybacks: $1,312 $2,104 Dividends: $734 2008 2009 2010 Stock option buybacks: $58 2010 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 51

  • Page 48
    ... Non-Voting shares acquired on the Canadian open market or issued by Rogers, our current intention is that such shares will, for the foreseeable future, be acquired on the Canadian open market by the DRIP Agent. Quarterly dividends are only payable as and when declared by Rogers' Board of Directors...

  • Page 49
    ... we offer these services. Accordingly, any change in policy, regulations or interpretations could have a material adverse effect on Cable's operations and financial condition and operating results. Copyright board of Canada 1. Increasing the limit for direct foreign investment in broadcasting and...

  • Page 50
    ... Internet sites designed to enable illegal file sharing a violation of copyright. The bill would also legalize forms of copying for time shifting television programs currently used by Cable's customers such as PVRs, and would permit cable operators to offer customers network PVR technology services...

  • Page 51
    ...of 2009 by the Government of Canada Order-in-Council through the Minister of Canadian Heritage and Official Languages on the implications of implementing a compensation regime for the value of ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT The CRTC collects two different types of fees from broadcast...

  • Page 52
    ...regional holdings of AWS spectrum, and several much smaller companies acquired small amounts of spectrum in generally rural locations. Globalive Wireless Management Corp. under the brand name WIND, launched service in December 2009 in Toronto and Calgary with expansion to Vancouver, Ottawa, Edmonton...

  • Page 53
    ... in Canada. On -line information and entertainment websites compete with the Canadian magazine publications for readership and revenue. Rogers' conventional television and specialty services compete principally for viewers and advertisers with other Canadian television stations that broadcast in...

  • Page 54
    ... portion of our future revenue growth will be achieved from new and advanced services. Accordingly, we have invested and continue to invest significant capital resources in the development of our networks in order to offer these services. However, 58 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 55
    ... which may result in customer losses, financial losses and an erosion of public confidence. A portion of our employees and critical elements of the network infrastructure and information technology systems are located at our corporate offices in Toronto, Ontario, and Brampton, Ontario, as well as an...

  • Page 56
    ... business, financial condition and results of operations. Similarly, interruptions in the supply of equipment for our networks could impact the quality of Wireless' service or impede network development and expansion. Long-distance Equal Access Could Increase Competition. The CRTC's three-year Work...

  • Page 57
    ... to wireless Internet, it increasingly becomes a substitute for the traditional high-speed Internet service. Failure to Obtain Access to Support Structures and Municipal Rights of Way Could Increase Cable's Costs and Adversely Affect Our business. It is well established that advertising dollars...

  • Page 58
    ... usage. We report wireless subscribers in two categories: postpaid and prepaid. Postpaid includes voice-only subscribers, data-only subscribers, as well as subscribers with service plans integrating both voice and data, while prepaid includes voice-only subscribers. Internet, Rogers Home Phone...

  • Page 59
    ... fees. New connect installation costs are capitalized to PP&E and amortized over the useful life of the related assets; • Advertising revenue is recorded in the period the advertising airs on our radio or television stations, is featured in our publications, or is displayed on our digital...

  • Page 60
    ... 2005, the acquisitions of Fido, Call-Net, the minority interests in Wireless and Sportsnet, together with the consolidation of the Blue Jays, as well as the acquisitions of Futureway and Citytv in 2007, Aurora Cable and channel m in 2008, K-Rock and Outdoor Life Network in 2009, and Blink, Cityfone...

  • Page 61
    ... CONdITION ANd RESULTS OF OPERATIONS Impact 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 Customer relationships Roaming agreements Marketing...

  • Page 62
    ... the In February 2008, the Accounting Standards Board ("AcSB") confirmed that IFRS will be mandatory in Canada for profit-oriented publicly accountable entities for fiscal periods beginning on or after January 1, 2011. Our first annual IFRS financial statements will be for the year ending December...

  • Page 63
    ... updated and operational for parallel run. • Training on new systems, processes and internal controls completed. Business: • Assessment of impacts on all areas of the business, including contractual arrangements and implement changes as necessary. • Communicate conversion plan and...

  • Page 64
    ... with reference to the market price of the Company's underlying shares. This difference is expected to impact the accounting measurement of our stock-based payments, including our stock options, restricted share units and deferred share units. 68 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 65
    ... loyalty program offered to Fido subscribers. The current policy is to classify the liability for loyalty points as an accrued liability on the balance sheet and to record the net cost of the program in equipment revenue. The liability is initially recorded at the face value of the loyalty awards...

  • Page 66
    .... The following unaudited consolidated financial statements show the expected impacts of the above noted differences between IFRS and Canadian GAAP as at the date of transition (January 1, 2010) and as at and for the year ended December 31, 2010. 70 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 67
    ... impacts". Consolidated statement of income: Year ended December 31,2010 (In millions of dollars, except per share amounts) Canadian GAAP, as reported Adjustments IFRS Operating revenue(1) Operating expenses before the undernoted(2) Adjusted operating profit(3)(4) Stock-based compensation expense...

  • Page 68
    ... the Board of Directors, we closed an agreement to sell the Company's aircraft to a private Rogers' family 72 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT holding company for cash proceeds of $19 million (US $18 million). The terms of the sale were negotiated by a Special Committee of the Board of...

  • Page 69
    ...FINANCIAL CONdITION ANd RESULTS OF OPERATIONS FIVE-yEAR SUMMARy OF CONSOLIdATEd FINANCIAL RESULTS Years ended December 31, (In millions of dollars, except per share amounts) 2010 2009 2008 2007 2006 Income and Cash Flow: Revenue Wireless Cable Media Corporate and eliminations Operating profit...

  • Page 70
    ..., 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 the scaling and...

  • Page 71
    ... certain information technology functions, acquisition transaction costs incurred and the integration of acquired businesses, and the closure of certain Rogers Retail stores. (4) Relates to the termination and release of certain blue jays players from the remaining term of their contracts. (5) Costs...

  • Page 72
    MANAGEMENT'S dISCUSSION ANd ANALySIS OF FINANCIAL CONdITION ANd RESULTS OF OPERATIONS Adjusted quarterly Consolidated Financial Summary (1) 2010 (In millions of dollars, except per share amounts) 2009 Q1 Q2 Q3 Q4 q1 q2 q3 q4 Operating Revenue Wireless Cable Media Corporate and eliminations ...

  • Page 73
    ... statement preparation and presentation. There have been no changes in our internal controls over financial reporting during 2010 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. ROGERS COMMUNICATIONS INC. 2010 ANNUAL...

  • Page 74
    ... INFORMATION: NON - GA AP C ALCUL ATIONS Operating Profit Margin Calculations Years ended December 31, (In millions of dollars) 2010 2009 RCI: Adjusted operating profit Divided by total revenue RCI adjusted operating profit margin WIRELESS: Adjusted operating profit Divided by network revenue...

  • Page 75
    ... per share $ 1,707 576 $ 1,556 621 $ 2.96 $ 2.51 Wireless Non-GAAP Calculations (1) Years ended December 31, (In millions of dollars, subscribers in thousands, except ARPU figures and adjusted operating profit margin) 2010 2009 Postpaid ARPU (monthly) Postpaid (voice and data) revenue...

  • Page 76
    ...' REPORT OF REGISTEREd PUbLIC ACCOUNTING FIRM TO ThE ShAREhOLdERS OF ROGERS COMMUNIC ATIONS INC .: We have audited the accompanying consolidated financial statements of Rogers Communications Inc. and its subsidiaries, which comprise the consolidated balance sheets as at December 31, 2010 and 2009...

  • Page 77
    ... OF INCOME (IN MILLIONS OF CANADIAN DOLLARS, ExCEPT PER SHARE AMOUNTS) Years ended December 31, 2010 and 2009 2010 $ 12,186 $ 2009 11,731 Operating revenue (note 3(b)) Operating expenses: Cost of sales Sales and marketing Operating, general and administrative Settlement of pension obligations...

  • Page 78
    ... (notes 4, 18 and 26) See accompanying notes to consolidated financial statements. - 2,175 208 1 80 284 2,748 8,463 1,004 133 397 12,745 4,273 17,018 3,959 17,330 $ On behalf of the Board: Alan D. Horn, CA Director Ronald D. Besse Director 82 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 79
    ... 31, 2010 and 2009 Amount Amount Accumulated other comprehensive Total Retained income shareholders' earnings (loss) equity Balances, December 31, 2008 Net income for the year Shares issued on exercise of stock options Dividends declared Repurchase of Class B Non-Voting shares (note 18(c)) Other...

  • Page 80
    ... interest rate exchange agreements and forward contracts Repurchase of Class B Non-Voting shares Issuance of capital stock on exercise of stock options Dividends paid 2,935 (2,387) (79) (816) 547 (1,312) 3 (734) (1,843) 2,875 (1,885) (8) (431) 433 (1,347) 3 (704) (1,064) 402 (19) 383 Increase...

  • Page 81
    ..., Rogers Business Solutions ("RBS") and Rogers Retail. Through Cable Operations, the Company provides television, highspeed Internet and telephony products primarily to residential customers; RBS provides local and long-distance telephone, enhanced voice and data networking services, and IP access...

  • Page 82
    ...the settlement date, due to changes in the market value of the underlying Class B Non-Voting shares, are recorded as a charge to income in the period incurred. The payment amount is established as of the exercise date of the award. The employee share accumulation plan allows employees to voluntarily...

  • Page 83
    ... at the lower of cost less accumulated amortization, and net realizable value. Acquired program rights and the related liabilities are recorded on the consolidated balance sheets when the licence period begins and the program is available for use. ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 87

  • Page 84
    ...related to a radio station and a conventional television broadcast licence (note 11(a)). (P) IMPAIRMENT OF LONG - LIVEd ASSETS: The Company reviews long-lived assets, which include PP&E and intangible assets with finite useful lives, for impairment annually, or more frequently, if events or changes...

  • Page 85
    ...2008, the Canadian Accounting Standards Board confirmed that IFRS will be mandatory in Canada for profit-oriented publicly accountable entities for fiscal periods beginning on or after January 1, 2011. The Company's first annual IFRS financial statements will be for the year ending December 31, 2011...

  • Page 86
    ... FINANCIAL STATEMENTS Information by reportable segment is as follows: 2010 Corporate items and Consolidated Media eliminations totals 2009 Corporate items and Consolidated Media eliminations totals Wireless Cable Wireless Cable Operating revenue Cost of sales Sales and marketing Operating...

  • Page 87
    ...eliminations Total Cable Cable Operations Rogers Business Solutions Corporate Rogers items and Retail eliminations 2009 Total Cable Operating revenue Cost of sales Sales and marketing Operating, general and administrative* Settlement of pension obligations Integration and restructuring Stock-based...

  • Page 88
    ...January 29, 2010, the Company closed 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 $131 million. Blink is a facilities-based, data network service provider that...

  • Page 89
    ... was accounted for using the purchase method with the results of operations consolidated with those of the Company effective July 31, 2008. During 2009, the Company finalized the purchase price allocation for the Outdoor Life Network acquisition. This resulted in an increase in broadcast licence of...

  • Page 90
    ... accounts of the Company: 2010 Long-term assets Current liabilities Revenue Expenses Net loss for the year $ 143 $ 50 1 31 (30) 2009 103 16 - 32 (32) In 2009, Inukshuk completed the purchase of spectrum and broadcast licences from Look Communications Inc. ("Look"). Under the agreement, Inukshuk paid...

  • Page 91
    ... expense Increase (decrease) in income taxes resulting from: Change in valuation allowance Effect of tax rate changes Stock-based compensation Other items Income tax expense $ (5) (69) 35 (3) 610 $ $ 30.5% 652 $ 2009 32.3% 640 (64) (58) - (16) 502 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 95

  • Page 92
    ... to operating, general and administrative expenses over the expected performances of the related programs and amounted to $167 million in 2010 (2009 - $131 million). Cost of sales includes $1,466 million (2009 - $1,337 million) of inventory costs. 96 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 93
    ... Accumulated depreciation Net book value Accumulated depreciation 2009 Net book value Cost Cost 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 94
    ... radio licence, valued at $2 million. During 2009, brand names decreased by $3 million to reflect the full amortization and removal of a trademark. During 2009, customer relationships increased by $2 million as a result of Media acquisitions. 98 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 95
    ... Subordinate Voting common shares of Cogeco Inc. for aggregate consideration of $46 million. 13. OThER LONG-TERM ASSETS: 2010 Deferred pension asset (note 17) Long-term receivables Acquired program rights Indefeasible right of use agreements Deferred installation costs Cash surrender value of life...

  • Page 96
    ..., in whole or in part, at the Company's option, at any time, subject to a certain prepayment premium. The net proceeds from the offering were approximately $794 million after deduction of the original issue discount and debt issuance costs. 100 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 97
    ... in December 2009, RCI's U.S.$400 million 8.00% Senior Subordinated Notes were subordinated to its senior debt. July 1, 2010 corporate reorganization: On June 30, 2010, RWP changed its name to Rogers Communications Partnership ("RCP"). On July 1, 2010, the Company completed a reorganization which...

  • Page 98
    ...is considered past due, which is defined as amounts outstanding beyond normal credit terms and conditions for the respective customers. The Company believes that its allowance for doubtful accounts is sufficient to reflect the related credit risk. 102 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 99
    ... in the market prices of the Company's publicly traded investments, the Company's share price, foreign exchange rates and interest rates, will affect the Company's income or the value of its financial instruments. (i) Publicly traded investments: The Company manages its risk related to fluctuations...

  • Page 100
    ..., 93.7% of the Company's U.S. dollar-denominated long-term debt instruments were hedged against fluctuations in foreign exchange rates for accounting purposes. At December 31, 2009, details of the Derivatives net liability position are as follows: 104 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 101
    ... carries on the business. In the normal course of business, the Company has entered into agreements that contain features that meet the definition of a guarantee under GAAP. A description of the major types of such agreements is provided below: ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 105

  • Page 102
    ...that are publicly traded are determined by the quoted market values for each of the investments. (c) The fair values of each of the Company's public debt instruments are based on the year-end trading values. (d) Indemnifications: The Company indemnifies its directors, officers and employees against...

  • Page 103
    ... Supplemental executive retirement plan (note 17) Restricted share units Deferred compensation Program rights liability Deferred gain on contribution of spectrum licences, net of accumulated amortization of $14 million (2009 - $10 million) (note 5) Liabilities related to stock options Other $ The...

  • Page 104
    ... is then applied to estimate equity returns. Differences between expected and actual return are included in actuarial gains and losses. The estimated average remaining service periods for the plans range from 8 to 11 years (2009 - 8 to 11 years). 108 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 105
    ...investments using the target ranges established by the Pension Committee of the Company. The Pension Committee reviews actuarial assumptions on an annual basis. (C) AC TUAL CONTRIbUTIONS TO ThE PL ANS FOR ThE yEARS ENdEd dECEMbER 31, 2010 ANd 20 09 ARE AS FOLLOWS: Employer Employee Total 2010 2009...

  • Page 106
    ... 16, 2010 April 29, 2010 August 18, 2010 October 26, 2010 April 1, 2010 $ July 2, 2010 October 1, 2010 January 4, 2011 $ 1.28 In February 2010, the Board adopted a dividend policy which increased the annualized dividend rate from $1.16 to $1.28 per Class A Voting and Class B Non-Voting share...

  • Page 107
    ... to the fair market value of the Class B Non-Voting shares determined as the five-day average before the grant date as quoted on the TSx. At December 31, 2010, a summary of the stock option plans is as follows: During the year ended December 31, 2010, the Company granted 759,200 (2009 - 1,156,200...

  • Page 108
    ... to purchase additional shares of the Company on behalf of the employee, as outlined above. Compensation expense related to the employee share accumulation plan amounted to $20 million (2009 - $17 million) for the year ended December 31, 2010. 112 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 109
    ... target leverage range in 2010. The Company is not subject to externally imposed capital requirements and, except as noted above, its overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2009. ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 113

  • Page 110
    ...of current market value. 23. COMMITMENTS: (A) The Company is committed, under the terms of its licences issued by Industry Canada, to spend 2% of certain wireless revenues earned in each year on research and development activities over the license period. (b) The Company enters into agreements with...

  • Page 111
    ... in Ontario pursuant to that province's Class Proceedings Act, 1992 against Cable and other providers of communications services in Canada. The proceedings involve allegations of, among other things, false, misleading and deceptive advertising relating to charges for long-distance telephone usage...

  • Page 112
    ... and costs, net (h) Other Shareholders' equity based on United States GAAP $ $ 3,959 $ (8) 101 96 49 (14) (244) 9 13 (7) 3,954 $ 2009 4,273 (8) 101 85 49 13 (165) (14) 16 (7) 4,343 $ (97) (55) 1,651 $ (113) (45) 1,597 $ 1,729 $ 74 2009 1,616 139 116 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT

  • Page 113
    ...10 (10) 124 $ 2009 139 4 11 (9) 145 The impact of these changes on shareholders' equity is summarized as follows: 2010 Deferral of transaction costs United States GAAP difference in ending shareholders' equity (pre-tax) $ $ 49 $ 49 $ 2009 49 49 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 117

  • Page 114
    ... TO CONSOLIdATEd FINANCIAL STATEMENTS (E) STOCk-bASEd COMPENSATION: All of the Company's outstanding stock options can be settled in cash at the discretion of the employee or director (note 19(a)(i)). Under United States GAAP, the cost of stock-based awards that are settled in cash, or may be...

  • Page 115
    ...after the balance sheet date but before financial statements are issued ("subsequent events") if there is evidence that conditions related to the subsequent event existed at the date of the balance sheet, including the impact of such events on management's estimates and assumptions used in preparing...

  • Page 116
    ... corporate governance processes that strike a healthy balance of being supportive of the business' continued success, making business sense, and benefiting all shareholders." ALAN d. hORN CHAIRMAN OF THE BOARD ROGERS COMMUNICATIONS INC. 120 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT ROGERS...

  • Page 117
    ... Business, Corporate Development Rogers Communications Loretta A. Rogers Company Director Martha L. Rogers Doctor of Naturopathic Medicine Melinda M. Rogers* Senior Vice President, Strategy and Development Rogers Communications William T. Schleyer Company Director John H. Tory Company Director...

  • Page 118
    ...-LINE INFORMATION Rogers is committed to open and full financial disclosure and best practices in corporate governance. We invite you to visit the Investor Relations section of rogers.com where you will find additional information about our business including events and presentations, news releases...

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