Rogers 2010 Annual Report Download - page 42

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
46 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT
3. CONSOLIDATED LIQUIDITY AND FINANCING
LIQUIDITY AND CAPITAL RESOURCES
Operations
For 2010, 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 $3,800 million from $3,526
million in 2009. The $274 million increase includes the impact of a $265
million increase in adjusted operating profit.
Taking into account the changes in non-cash working capital items for
2010, cash generated from operations was $3,620 million, a decrease of
$170 million, compared to $3,790 million in 2009. The cash generated
from operations of $3,620 million, together with the following items,
resulted in total net funds of approximately $5,323 million in 2010:
• thereceiptofanaggregate$1,700milliongrossproceedsfromtwo
new public debt issues: the August 2010 issuance of $800 million
6.11%SeniorNotesdue2040andtheSeptember2010issuanceof
$900million4.70%SeniorNotesdue2020;
• thereceiptof$3millionfromtheissuanceofClassBNon-Voting
shares under the exercise of employee stock options.
Net funds used during 2010 totalled approximately $5,746 million, the
details of which include the following:
• additionstoPP&Eof$1,713million,netof$126millionofrelated
changes in non-cash working capital;
• thepaymentofanaggregate$1,499millionfortheAugust2010
redemption of three public debt issues maturing in 2011, comprising
$1,151 million aggregate principal amount, $79 million aggregate
redemption premiums and $269 million net settlement paid on
termination of the associated Derivatives;
• thepurchaseforcancellationof37,080,906ClassBNon-Votingshares
for an aggregate purchase price of $1,312 million;
• thepaymentofquarterlydividendsaggregating$734milliononour
Class A Voting and Class B Non-Voting shares;
• thepurchaseof892,250subordinatevotingsharesofCogecoCable
Inc. and 946,090 subordinate voting shares of Cogeco Inc. for an
aggregate purchase price of $75 million;
• acquisitionsandothernetinvestmentsaggregating$242million,
including $131 million to acquire Blink Communications Inc.,
$47 million for the acquisition
of spectrum licences through
Inukshuk, $26 million to acquire
Cityfone Telecommunications
Inc., $20 million to acquire
Kincardine Cable T.V. Ltd. and
$24 million to acquire BV!
Media Inc.;
• additions to program rights
aggregating $170 million; and
• therepaymentof$1millionof
capital leases.
Taking into account the opening cash and cash equivalents balance of
$383 million at the beginning of the year and the cash sources and uses
described above, the cash deficiency at December 31, 2010, represented
by bank advances, was $40 million.
Financing
Our long-term debt instruments are described in Note 14 and Note 15
to the 2010 Audited Consolidated Financial Statements. During 2010,
the following financing activities took place.
Debt Issuances
On August 25, 2010, RCI issued in Canada $800 million aggregate
principalamountof6.11%SeniorNotesdue2040(the“2040Notes”).
The2040Noteswereissuedatadiscountof99.904%foraneffective
yieldof6.117%perannumifheldtomaturity.RCIreceivednetproceeds
of $794 million from the issuance of the 2040 Notes after deducting the
original issue discount, agents’ fees and other related expenses. The
net proceeds from the 2040 Notes were used together with cash on
hand and advances under our bank credit facility to fund the August
2010 redemptions of three public debt issues maturing in 2011 together
with the termination of the associated Derivatives, each as described
below under the section entitled “Debt Redemptions and Termination
of Derivatives”.
On September 29, 2010, RCI issued in Canada $900 million aggregate
principalamountof4.70%SeniorNotesdue2020(the“2020Notes”).
The2020Noteswereissuedatadiscountof99.945%foraneffective
yield of 4.707% per annum if held to maturity. RCI received net
proceeds of $895 million from the issuance of the 2020 Notes after
deducting the original issue discount, agents’ fees and other related
expenses. The net proceeds from the 2020 Notes were used to repay
outstanding advances under our bank credit facility, which had been
borrowed to partially fund the redemptions and termination of the
associated Derivatives, and for general corporate purposes.
RCI received an aggregate net proceeds of $1,689 million from the
issuance of the 2040 Notes and the 2020 Notes after deducting the
original issue discount, agents’ fees and other related expenses. We
recorded debt issuance costs of $10 million in 2010 due to the
transaction costs incurred in connection with the issuance of the 2040
Notes and the 2020 Notes. Each of the 2040 Notes and the 2020 Notes
are guaranteed by RCP and rank pari passu with all of RCI’s other senior
unsecured notes and debentures and bank credit facility. See the
section entitled “July 1, 2010 Corporate Reorganization”.
20102009
2008
2009
200
8
201
0
$3,526$3,500 $3,800
CONSOLIDATED CASH FLOW
FROM OPERATIONS
(In millions of dollars)
2010 USES OF CASH
(In millions of dollars)
2010
Additions to program rights: $170
Acquisitions and other net investments: $318
Dividends: $734
Repurchase of shares: $1,312
Redemption of long-term debt: $1,499
$5,746
Cash PP&E expenditures: $1,713