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CONNECTIONS
COME ALIVE
CONNECTIONS
ROGERS COMMUNICATIONS INC.
2011 ANNUAL REPORT

Table of contents

  • Page 1
    ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT CONNECTIONS COME ALIVE

  • Page 2
    ...speed Internet access, and telephony products for residential and business customers. Rogers Media is Canada's premier group of category-leading broadcast, specialty, sports, print and on-line media assets with businesses in radio and television broadcasting, televised shopping, sports entertainment...

  • Page 3
    ... operating profit margin Adjusted net income Adjusted diluted earnings per share Annualized dividend rate at year-end Total assets Long-term debt (includes current portion) Shareholders' equity Market capitalization of equity Wireless subscribers (000s) Cable subscribers (000s) Internet subscribers...

  • Page 4
    ...and data solutions to enterprise customers in and around Rogers' cable footprint. MEDIA Rogers Media is Canada's premier combination of category-leading radio and television broadcasting, televised shopping, sports entertainment, publishing, and digital media properties. Its Radio group operates 55...

  • Page 5
    ... WIRELESS DATA 33% PREPAID VOICE 3% EQUIPMENT 8% 2009 2010 2011 2009 2010 2011 REVENUE ($ in billions) ADJUSTED OPER ATING PROFIT ($ in billions) F Y2011 REVENUE: $3.8 billion 3.7 3.8 3.8 1.3 1.4 1.6 TELEVISION 50% INTERNET 24% $3.8 BILLION HOME PHONE 13% BUSINESS SOLUTIONS 11% VIDEO...

  • Page 6
    ..., leading wireless and broadband networks, and a strong portfolio of diverse, category-leading media assets. And, we have a solid investment grade balance sheet with healthy cash flows, a seasoned leadership team, and a talented employee base. 02 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 7
    ...-digit growth in wireless data revenues, the economics of the wireless voice business continued to be under pressure as intense competition asserted influence on pricing and customer churn. We continued to deliver growth in our cable business, adding nearly 150,000 total cable service units in 2011...

  • Page 8
    ...in the advertising market as world economic concerns intensified, it finished 2011 with strong increases in operating profit and margins. A WINNING GAME PLAN Last year, I wrote about our focus on continuing to strengthen our core business in the areas of service, network and cost management. We made...

  • Page 9
    ...RECORD OF DRIVING GROWTH AND SHAREHOLDER VALUE, AND THE FINANCIAL STRENGTH TO CONTINUE TO DELIVER LONG-TERM GROWTH. LEADER IN CANADIAN COMMUNICATIONS INDUSTRY Canada's largest wireless carrier and a leading cable television provider, offering a 'quadruple play' of wireless, television, Internet and...

  • Page 10
    CONNECTIONS COME ALIVE WITH FREEDOM 06 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 11
    > ROGERS CUSTOMERS KNOW THAT THE FREEDOM OF BEING IN TOUCH WITH FAMILY, FRIENDS AND COLLEAGUES MAKES THEIR LIVES MORE CONNECTED, AND THAT BEING CONNECTED TO THE INFORMATION AND ENTERTAINMENT THAT MATTERS MOST MAKES LIFE EASIER AND MORE ENJOYABLE 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 07

  • Page 12
    > ACROSS MULTIPLE DEVICES AND SCREENS - WHETHER BY SMARTPHONE, TV, PC OR TABLET - ROGERS SEAMLESSLY CONNECTS ITS CUSTOMERS TO INNOVATIVE COMMUNICATIONS, INFORMATION AND ENTERTAINMENT EXPERIENCES 08 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 13
    CONNECTIONS COME ALIVE WITH EASE 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 09

  • Page 14
    CONNECTIONS COME ALIVE WITH POWER > ROGERS MAKES BUSINESSES MORE PRODUCTIVE, PROVIDING TODAY'S WORKER WITH SEAMLESS ACCESS TO MISSION-CRITICAL INFORMATION AND COMMUNICATIONS AT THE OFFICE, AT HOME AND ON THE ROAD 10 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 15
    2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 11

  • Page 16
    12 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 17
    > ROGERS' WORLD-CLASS MEDIA CONTENT AND CUTTING EDGE BROADBAND AND WIRELESS TECHNOLOGY COME TOGETHER TO BRING THE BEST IN ON-DEMAND ENTERTAINMENT AND INFORMATION TO CUSTOMERS ON THE SCREEN OF THEIR CHOICE CONNECTIONS COME ALIVE WITH WONDER 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 13

  • Page 18
    ...with their smartphone, listen to their voicemail on their laptop or tablet, screen their phone calls on their TV and even receive talking text messages on their home phone. The future is here today for Rogers customers who seamlessly experience content that's important to them on the screen of their...

  • Page 19
    ... complete access to customers, colleagues, files and corporate applications, today's workers are as productive on the road as they are in the office. Rogers makes it easier for customers to access the same personalized information, communications and entertainment experiences at work, at home and...

  • Page 20
    > LATE IN 2011, WE PROUDLY INTRODUCED THE ROGERS YOUTH FUND, A CORPORATE INITIATIVE THAT SUPPORTS AND EMPOWERS AT-RISK CANADIAN YOUTH THROUGH EDUCATION CONNECTIONS COME ALIVE WITH COMMITMENT 16 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 21
    ... 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 22
    ... and support NEW REVENUE STREAMS Drive future growth through an increased on-net business telecom presence, expansion of our media properties, and new revenue streams including M2M, Rogers Smart Home Monitoring, multi-screen video and digital media 18 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 23
    ...Net Income 25 Wireless 31 Cable 41 Media 44 Corporate 45 Reconciliation of Net Income to Operating Profit Consolidated Liquidity and Financing 47 Liquidity and Capital Resources 50 Interest Rate and Foreign Exchange Management 52 Outstanding Common Share Data 52 Dividends on RCI Equity Securities 53...

  • Page 24
    ... Our Business Our Strategy Consolidated Financial and Operating Results 2012 Financial Guidance Wireless Cable Media Corporate Reconciliation of Net Income to Operating Profit Liquidity and Capital Resources Interest Rate and Foreign Exchange Management Outstanding Common Share Data Dividends on...

  • Page 25
    ... operations and sales in Canada. We are engaged in wireless voice and data communications services through Wireless, Canada's largest wireless communications services provider. Through Cable, we are one of Canada's largest providers of cable television services as well as high-speed Internet access...

  • Page 26
    ... 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...

  • Page 27
    ... S TED OPERATIN G PROFIT BY S E G MENT (%) CABLE 33% WIRELESS 63% MEDIA 4% ADJU S TED EP S ($) $2.51 $2.91 $3.22 2009 20 1 0 20 11 For detailed discussions of Wireless, Cable and Media, refer to the respective segment discussions below. 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 23

  • Page 28
    ...share amounts) 2011 $ 7,138 3,309 405 82 3,796 $ 2010 6,973 3,190 452 143 3,785 1,461 (77) 12,142 % Chg 2 4 (10) (43) - 10 52 2 Operating revenue Wireless Cable Cable Operations RBS Video Media Corporate items and eliminations Total operating revenue Adjusted operating profit (loss)(1) Wireless...

  • Page 29
    ... million retail voice and data subscribers at December 31, 2011, representing approximately 35% of Canadian wireless subscribers. Wireless operates on the global standard Global System for Mobile communications/High-Speed Packet Access/Long Term Evolution ("GSM/HSPA/LTE") wireless network technology...

  • Page 30
    ... or prepaid payment options. Wireless' networks provide customers with advanced high-speed wireless data services, including mobile access to the Internet, e-mail, digital picture and video transmission, mobile video, music and application downloading, video calling, two-way short messaging service...

  • Page 31
    ... payments to roaming partners and long-distance carriers, network service delivery costs, and the Canadian Radio-television Telecommunications Commission ("CRTC") contribution levy; 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 27 The ongoing development of wireless data transmission technologies...

  • Page 32
    ... operating profit decreased by 4% during the same period reflecting the upfront costs associated with a record number of smartphone activations and iPhone sales and a decline in voice ARPU, with margins on network services for the year at 46.0%. 28 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 33
    ... driving increased usage of e-mail, wireless Internet access, text messaging and other wireless data services. In 2011, data revenue represented approximately 35% of total network revenue, compared to 28% in 2010. 2009 Postpa id 20 1 0 Prepaid 20 11 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 34
    ... 2010, excluding retention spending discussed below, was driven by the growth in the Wireless subscriber base, which resulted in increased customer care costs due to the complexity of supporting more sophisticated devices and services, and increased 30 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 35
    ...approximately 1.8 million residential subscribers. Under the Rogers Home Phone brand, it provides local telephone and long-distance services to residential and small business customers and had over one million subscriber lines at December 31, 2011. 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 31

  • Page 36
    ... direct sales force, exclusive and non-exclusive agents, as well as through business associations. Cable also offers products and services and customer service via our e-business website, rogers.com. INTERNET 24% Cable's Networks TELEVISION 50% HOME PHONE 13% BUSINESS SOLUTIONS 11% VIDEO 2% Cable...

  • Page 37
    ... areas; • Offering a wide selection of advanced and innovative information, entertainment and communications products and services over its broadband networks, such as the ongoing expansion of its HDTV, specialty and on-demand video services, increasingly faster broadband Internet speeds...

  • Page 38
    ...cable networks as well as certain customer service activities, such as installations and repair; • customer care expenses, which include the costs associated with customer order-taking and billing inquiries; • community television expenses, which consist of the costs to operate a series of local...

  • Page 39
    ... segment includes Cable Television services, Internet services and Home Phone services. As defined. See the sections entitled "Key Performance Indicators and Non-GAAP Measures" and "Supplementary Information: Non-GAAP Calculations". See the section entitled "Stock-based Compensation". Relates to the...

  • Page 40
    ...detailed discussion of operating results. CABLE OPERATIONS Summarized Financial Results Years ended December 31, (In millions of dollars, except margin) 2011(1) $ 1,904 927 478 3,309 $ 2010(1) 1,835 848 507 3,190 % Chg 4 9 (6) 4 Operating revenue Cable Television Internet Home Phone Total Cable...

  • Page 41
    ... 507 1,904 927 478 2,296 1,664 1,619 937 2,305 1,733 1,686 1,003 2,297 1,777 1,793 1,052 42.2% 44.5% 46.8% 2009 Television 20 1 0 Internet 20 11 Home Phone 2009 20 1 0 20 11 2009 Television Internet 20 1 0 Digital Home Phone 20 11 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 37

  • Page 42
    MANAGEMENT'S DISCUSSION AND ANALYSIS Cable Television Revenue The increase in Cable Television revenue for 2011, compared to 2010, reflects the continuing increase in penetration of our digital cable product offerings and pricing changes. The increase in the year-overyear growth rate of Cable ...

  • Page 43
    ... result of the revenue growth and cost changes described above. As a result, Cable Operations' adjusted operating profit margins increased to 46.8% for 2011, compared to 44.5% for 2010. 26% 27% 28% 2009 20 1 0 20 11 ROGERS BUSINESS SOLUTIONS Summarized Financial Results Years ended December...

  • Page 44
    ... the acquisition of Atria contributed adjusted operating profit of $43 million, contributing to the growth of the next generation services market, including data and Internet. VIDEO Summarized Financial Results Years ended December 31, (In millions of dollars, except margin) 2011 $ 82 105 (23) (14...

  • Page 45
    ... activity and timing of expenditures on customer networks and support capital. 20 11 CABLE OPERATION S ADDITION S TO PP&E (%) SUPPORT CAPITAL 26% UPGRADES AND REBUILD 2% LINE EXTENSIONS 6% SCALABLE INFRESTRUCTURE 36% MEDIA MEDIA'S BUSINESS Media operates our television and radio broadcasting...

  • Page 46
    MANAGEMENT'S DISCUSSION AND ANALYSIS Media's publishing group produces 54 consumer, trade and professional publications. Media's digital group provides digital advertising solutions to over 1,000 websites. Media's sports entertainment group ("Sports Entertainment") owns the Toronto Blue Jays, a ...

  • Page 47
    ... to broadcast highly popular Ultimate Fighting Championship ("UFC") events in Canada. • Media launched its CityNews Channel, a new 24-hour, interactive, local news channel in Toronto leveraging trusted news brands Citytv, 680News and Maclean's. • Media launched its reality TV competition series...

  • Page 48
    ... into the London, Ontario market. Media Additions to PP & E Media's PP&E additions increased during 2011 primarily due to television broadcast equipment additions related to the CRTC mandated digital transition and planned infrastructure upgrades. 44 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 49
    ... of long-term debt Foreign exchange loss (gain) Change in fair value of derivative instruments Capitalized interest Amortization of deferred transaction costs Operating income Impairment of assets Depreciation and amortization Operating profit Stock-based compensation expense Settlement of pension...

  • Page 50
    .... This change in fair value of the Debt Derivatives 46 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT Our employee stock option plans attach cash-settled share appreciation rights ("SARs") to all new and previously granted options. The SAR feature allows the option holder to elect to receive in cash...

  • Page 51
    ... of employee stock options. Net funds used during 2011 totalled approximately $5,906 million, the details of which include the following: • additions to PP&E of $2,216 million, including $89 million of related changes in non-cash working capital; 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 52
    ... settlement of the associated Debt Derivatives and forward contracts (comprising $330 million net settlement paid on termination); • the payment of quarterly dividends in the aggregate amount of $758 million on our Class A Voting and Class B Non-Voting shares; • the purchase for cancellation of...

  • Page 53
    ... Firm Contractual Agreements"). Credit Ratings The following information relating to our credit ratings is provided as it relates to our financing costs and liquidity. Specifically, credit ratings may affect our ability to obtain short-term and long-term 2011 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 54
    ...contributing to the plans on this basis. As further discussed in the section entitled "Critical Accounting Estimates", changes in factors such as the discount rate, the rate of compensation increase and the expected return on plan assets can impact the accrued benefit obligation, pension expense and...

  • Page 55
    ... analytical value provides the most relevant and practical measure of our outstanding net debt-related obligations. We use this non-GAAP measure internally to conduct valuation-related analysis and make capital structure-related decisions and it is reviewed 2011 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 56
    ... purchase price of approximately $1,099 million. For additional information, refer to Note 21 to our 2011 Audited Consolidated Financial Statements. December 31, 2011 December 31, 2010 112,462,014 443,072,044 555,534,058 Common shares(1) Class A Voting Class B Non-Voting Total Common shares Options...

  • Page 57
    ... regular quarterly cash dividends automatically reinvested in additional Class B Non-Voting shares of Rogers' common stock. No commissions, service charges or brokerage fees are payable by Plan participants in connection with shares purchased under the DRIP. Shareholders who elect to participate...

  • Page 58
    ... discussion of regulatory matters and recent developments specific to the Wireless, Cable and Media segments follows. GOVERNMENT REGULATION AND REGULATORY DEVELOPMENTS Substantially all of our business activities, except for Cable's Video segment and the non-broadcasting operations of Media...

  • Page 59
    ... 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 60
    ... services, such as cable systems or direct-to-home ("DTH") satellite services. The Policy: • Prohibits companies from offering television programs on an exclusive basis to their mobile or Internet subscribers. Any program broadcast on television, including hockey games and other live events...

  • Page 61
    ... obligations related to equal access and supply of directory listings to other LECs. A wireless CLEC is entitled to shared-cost, bill and keep, local interconnection arrangements. Regarding IP interconnection, the CRTC determined that in areas where a carrier uses IP to transfer telephone calls to...

  • Page 62
    .... DAVE Wireless Inc., under the brand name Mobilicity, launched in Toronto in the spring of 2010 with subsequent expansion in 58 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT Canadian cable television systems generally face competition from several alternative Canadian multi-channel broadcasting...

  • Page 63
    ...web information services, music downloading, MP3 players and on-line music streaming services, provide competition for radio stations' audience share. The Shopping Channel competes with various retail stores, catalogue retailers, Internet retailers and direct mail retailers for sales of its products...

  • Page 64
    ... 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 operations facility...

  • Page 65
    ... to that province's Class Proceedings Act, 1992 against Cable and other providers of communications services in Canada. The proceedings involved allegations of, among other things, false, misleading and deceptive advertising relating to charges for long-distance telephone usage. The plaintiffs were...

  • Page 66
    ... Class B Non-Voting Shares. Accordingly, the Rogers Control Trust is able to elect all of our Board of Directors and to control the vote on matters submitted to a vote of our shareholders. In June 2007, Industry Canada released a new Tower Policy (CPC-2-0-03) outlining a new antenna siting policy...

  • Page 67
    ... Biography Channel (Canada), Outdoor Life Network, and FX (Canada). A Loss in Media's Market Position in Radio, Television or Magazine Readership Could Adversely Impact Media's Sales Volumes and Advertising Rates. Cable requires access to support structures and municipal rights of way in order to...

  • Page 68
    ... production costs, and Industry Canada license fees associated with spectrum utilization. In the wireless and cable industries in Canada, the demand for services continues to grow and the variable costs, such as commissions paid for subscriber activations, as well as the fixed costs of acquiring new...

  • Page 69
    ... provided to customers related to combined purchases of Wireless, Cable and Media products and services are charged directly to the revenue for the products and services to which they relate; and 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 65 Additions to PP&E include those costs associated with...

  • Page 70
    ... the related asset, liability, revenue and expense amounts. 66 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT A provision for onerous contracts is recognized when the unavoidable costs of meeting the obligation under the contract exceed the expected benefits to be derived by the Company. The...

  • Page 71
    ... the applicability of these rates going forward. The useful lives of roaming agreements are based on estimates of the useful lives of the related network equipment. The useful lives of wholesale agreements and dealer Impact of Changes in Estimated Useful Lives (In millions of dollars) networks are...

  • Page 72
    ... January 1, 2010. Borrowing Costs 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 are for...

  • Page 73
    ...form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring interests in jointly controlled entities to be accounted for under the equity method. This new standard is effective for the Company's interim and annual consolidated financial...

  • Page 74
    ... of dollars) or its subsidiary companies. Total amounts paid to these related parties, directly or indirectly, are as follows: 2011 $ 41 2010 $ 39 % Chg 5 Printing, legal services and commission paid on premiums for insurance coverage We have entered into certain transactions with our controlling...

  • Page 75
    ... entitled "Key Performance Indicators and Non-GAAP Measures". Cash flow from operations excluding changes in working capital amounts. Debt includes net derivative liabilities at the risk free mark-to-market value and is net of cash as applicable. 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 71

  • Page 76
    ... from our subscribers travelling outside of Canada, 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...

  • Page 77
    ... share amounts) Q4 2011 Q3 Q2 Q1 Q4 2010 Q3 Q2 Q1 Operating revenue Wireless Cable Media Corporate items and eliminations Total operating revenue Adjusted operating profit (loss)(2) Wireless Cable Media Corporate items and eliminations Adjusted operating profit(2) Stock-based compensation...

  • Page 78
    ...to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations...

  • Page 79
    ... of dollars, except for margins) 2011 $ 4,716 12,428 37.9% $ 2010 4,635 12,142 38.2% RCI: Adjusted operating profit Divided by total revenue RCI adjusted operating profit margin WIRELESS: Adjusted operating profit Divided by network revenue Wireless adjusted operating profit margin CABLE: Cable...

  • Page 80
    ...except per share amounts; number of shares outstanding in millions) 2011 $ 4,571 64 11 70 - $ $ 4,716 1,563 64 11 70 - 99 - (60) - $ 1,747 $ $ $ $ 2010 4,531 50 - 40 14 4,635 1,502 50 - 40 14 87 11 (66) 40 1,678 Operating profit Add (deduct): Stock-based compensation expense Settlement of pension...

  • Page 81
    ...and adjusted operating profit margin) 2011 $ 6,275 7,443 12 70.26 $ 2010 6,229 7,148 12 72.62 Postpaid ARPU (monthly) Postpaid (voice and data) revenue Divided by: average postpaid wireless voice and data subscribers Divided by: 12 months $ Prepaid ARPU (monthly) Prepaid (voice and data) revenue...

  • Page 82
    ... and form a proper basis for the preparation of consolidated financial statements and that Rogers Communications lnc.'s assets are properly accounted for and safeguarded. The internal control processes include management's communication to employees of policies that govern ethical business conduct...

  • Page 83
    ... for using the equity method, net of tax Income before income taxes Income tax expense (note 9) Net income for the year Earnings per share (note 10): Basic Diluted See accompanying notes to consolidated financial statements. $ 2.88 2.86 $ 2.61 2.59 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 84
    ...Net income for the year Other comprehensive income (loss): Defined benefit pension plans: Actuarial loss Related income tax recovery (89) 22 (67) (80) 21 (59) Change in fair value of available-for-sale investments: Increase in fair value Related income tax expense 174 (22) 152 102 (13) 89 Cash...

  • Page 85
    ... (note 25) Contingent liabilities (note 26) Subsequent events (note 27) See accompanying notes to consolidated financial statements. 3,572 18,362 $ 17,033 $ 16,725 On behalf of the Board: Alan D. Horn, C.A. Director Ronald D. Besse Director 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 81

  • Page 86
    ...) Class B Non-Voting shares Number of shares Amount (000s) Share premium Retained earnings Available-for-sale financial assets reserve Total Hedging shareholders' reserve equity Balances, January 1, 2010 Net income for the year Other comprehensive income (loss): Defined benefit pension plans...

  • Page 87
    ... of cross-currency interest rate exchange agreement and forward contracts Transaction costs incurred Repurchase of Class B Non-Voting shares Proceeds received on exercise of stock options Dividends paid 4,100 (2,802) (76) (1,208) 878 (10) (1,099) 3 (758) (972) Change in cash and cash equivalents...

  • Page 88
    ... wireless voice and data communications services. RCI's Cable segment ("Cable") consists of Cable Operations, Rogers Business Solutions ("RBS") and Rogers Video ("Video"). Through Cable Operations, RCI provides television, high-speed Internet and telephony products primarily to residential customers...

  • Page 89
    ...is 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 85 (vi) monthly subscription revenues received by television stations for subscriptions from cable and satellite providers are recorded in the month in which they are earned; (vii) The Toronto Blue Jays Baseball Club's ("Blue Jays") revenue from home...

  • Page 90
    ... All of the Company's non-derivative financial assets are classified as available-for-sale or loans and receivables. Available-for-sale financial assets are comprised of the Company's publicly traded and private investments. These investments are carried at fair value plus transaction costs directly...

  • Page 91
    ... liabilities in Level 2 include valuations using inputs based on observable market data, either directly or indirectly, other than the quoted prices. Level 3 valuations are based on inputs that are not based on observable market data. (v) Current/non-current distinction: Financial assets and...

  • Page 92
    ... to subscribers. The provision is based on historical data and an estimate of the future replacements required for products sold on or before the reporting date. 88 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT (i) Pension benefits: The Company provides both contributory and non-contributory...

  • Page 93
    ... the lowest level at which goodwill is monitored for internal management purposes and it is never larger than an operating segment. During the year ended December 31, 2011, no significant changes were made in estimated useful lives compared to 2010. 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 94
    ...of the Company's stock options. Fair value is determined using the Company's Class B Non-Voting share price, and the Black-Scholes or trinomial option pricing models, depending on the nature of the share based award. Details of the assumptions used are included in note 22. Significant changes in the...

  • Page 95
    ...form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring interests in jointly controlled entities to be accounted for using the equity method. This new standard is effective for the Company's interim and annual consolidated financial...

  • Page 96
    ...Other long-term liabilities Deferred tax liabilities - 8,463 1,004 133 458 12,745 (h) (g) (m) 19 (58) - 44 (34) (14) (117) $ (131) (h) (g) (b),(c),(f) (m) 58 8,396 1,004 177 291 12,569 Shareholders' equity $ 4,273 17,018 (n) $ 4,156 16,725 92 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 97
    ... Other long-term liabilities Deferred tax liabilities - 8,718 840 124 814 13,371 (h) (g) (m) 26 (55) - 105 (52) 46 (199) $ (153) (h) (g) (b),(c),(f) (m) 62 8,654 840 229 655 13,273 Shareholders' equity $ 3,959 17,330 (n) $ 3,760 17,033 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 98
    ...expense), net Share of the income (loss) of associates and joint ventures accounted for using the equity method, net of tax Income before income taxes Income tax expense Net income for the year Other comprehensive income (loss): Defined benefit pension plans: Actuarial gain (loss) Related income tax...

  • Page 99
    ... in note 22, the Company has granted stock-based compensation to employees. The Company applied IFRS 2 to its unsettled stock-based compensation arrangements at January 1, 2010, which requires that stock-based compensation be measured based on 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 95

  • Page 100
    ... interest and other borrowing costs as part of the cost of certain qualifying assets which take a substantial period of time to get ready for its intended use. Under previous Canadian GAAP, the Company elected not to capitalize borrowing costs. 96 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT $ 4

  • Page 101
    ... as available-for-sale and measured at cost, as cost closely approximated fair value. The impact of this change is summarized as follows: Year ended December 31, 2010 Consolidated statements of financial position: Other long-term assets - reclassify unamortized discounts Long-term debt - reclassify...

  • Page 102
    ... taxes Related income tax effect Adjustment to retained earnings (k) Share of the income or loss of associates: $ 7 $ 1 Consolidated statements of financial position: Other current assets Intangible assets Other long-term assets Adjustment to retained earnings (m) Income taxes: January 1, 2010...

  • Page 103
    ... SEGMENTED INFORMATION: (iii) Video segment operates a DVD and video game sale and rental business. (c) Media-This segment operates the Company's radio and television broadcasting operations, televised shopping, consumer, trade and professional publications, sports entertainment, and digital media...

  • Page 104
    ..., 2011 Rogers Business Total Solutions Video Cable Year ended December 31, 2010 Rogers Business Total Solutions Video Cable Cable Operations Cable Operations Operating revenue Operating costs* Integration, restructuring and acquisition costs Stock-based compensation expense* Settlement of pension...

  • Page 105
    ..., 2011 December 31, 2010 Revenue is comprised of the following: 7. BUSINESS COMBINATIONS AND DIVESTITURES: 2011 Acquisitions: (a) Wireless: Postpaid Prepaid Network revenue Equipment sales $ 6,275 326 6,601 537 7,138 $ 6,229 297 6,526 447 6,973 Cable: Cable Operations: Television Internet...

  • Page 106
    ... 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 102 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 107
    ... 2010, the Company closed an agreement to purchase 100% of the outstanding common shares of BV! Media Inc. ("BV! Media") for cash consideration of $24 million. BV! Media is a Canadian Internet advertising network and publisher of news and information portals. The acquisition was accounted for using...

  • Page 108
    ... FINANCIAL STATEMENTS During 2011, the Company incurred $22 million (2010 - $5 million) of restructuring expenses and other exit costs related to the closure of underperforming retail store locations, primarily located in the province of Ontario, and other exit costs. During 2011, the Company...

  • Page 109
    ... is charged to merchandise for resale in the consolidated statements of income and amounted to $26 million in 2011 (2010 - $54 million). Cost of equipment sales and merchandise for resale includes $1,637 million (2010 - $1,472 million) of inventory costs. 2011 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 110
    ...Net book depreciation value December 31, 2010 Accumulated Net book depreciation value January 1, 2010 Accumulated Net book depreciation value Cost Cost Cost Land and buildings Towers, head-ends and transmitters Distribution cable and subscriber drops Network equipment Wireless network radio base...

  • Page 111
    ... agreements Marketing agreements Acquired program rights $ 3,011 1,871 110 232 4 298 25 100 5,651 $ 97 - - - 72 - - - 169 $ 51 51 $ - - - (17) (15) (44) (11) (74) (161) $ - - (11 11) $ 3,108 1,871 99 215 61 254 14 77 5,699 $ $ $ $ $ $ 2011 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 112
    ... radio markets. 14. INVESTMENTS: December 31, December 31, 2011 2010 Carrying Carrying value value January 1, 2010 Carrying value Number Description Publicly traded companies, at quoted market value: Cogeco Cable Inc. Cogeco Inc. December 31, 2011 - Subordinate Voting 10,687,925, Common shares...

  • Page 113
    ...) Indefeasible right of use agreements Long-term receivables Cash surrender value of life insurance Deferred installation costs Deferred compensation Other $ 33 25 16 15 12 10 23 $ 26 27 47 13 14 10 10 $ 13 29 23 11 16 12 9 $ 134 $ 147 $ 113 2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 114
    ..., at any time, subject to a certain prepayment premium. On September 29, 2010, the Company issued $900 million of 4.70% Senior Notes which mature on September 29, 2020. The notes are redeemable, in whole or in part, at the Company's option, at any 110 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 115
    ...December 31, 2011. 2010 Redemptions: Prior to the Company's reorganization completed on July 1, 2010, RCI's public debt originally issued by Rogers Cable Inc. had Rogers Cable Communications Inc. ("RCCI"), a wholly-owned subsidiary, as a co-obligor, and Rogers Wireless Partnership ("RWP"), a wholly...

  • Page 116
    ... of certain debt agreements may be accelerated if there is a change in control of the Company. At December 31, 2011 and 2010 and January 1, 2010, the Company was in compliance with all of the terms and conditions of its longterm debt agreements. 112 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 117
    ...for the Company's stock-based compensation. All of the Company's outstanding stock options are classified as liabilities and are carried at their fair value, as adjusted for vesting, determined using the Company's Class B Non-Voting share price, Black2011 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 113...

  • Page 118
    ... and DSU. At December 31, 2011, a $1 change in the market price of the Company's Class B Non-Voting shares would have resulted in a change of $6 million in net income (iii) Foreign exchange and interest rates: The Company uses derivative financial instruments to manage its risks from fluctuations in...

  • Page 119
    ...bank credit facility, all of the Company's long-term debt was at fixed interest rates. Net income would have changed by $1 million in the year ended December 31, 2011, net of income taxes of $1 million, if there was a 1% change in the interest rates charged on advances under the bank credit facility...

  • Page 120
    ...are carried at fair value in Level 1; fair value determined by quoted market prices (**) Denotes financial assets and liabilities that are carried at fair value in Level 2; fair value determined by valuation technique using observable market inputs 116 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT

  • Page 121
    ... 1, 2010. 19. OTHER LONG-TERM LIABILITIES: December 31, 2011 December 31, 2010 January 1, 2010 Deferred pension liability (note 20) Supplemental executive retirement plan (note 20) Restricted share units Deferred compensation CRTC commitments (note 25) Liabilities related to stock options Program...

  • Page 122
    ... rate of compensation increase used to determine pension expense Weighted average expected long-term rate of return on plan assets Expected return on assets represents management's best estimate of the long-term rate of return on plan assets applied to the fair value of the plan assets. The Company...

  • Page 123
    ... the Class A Voting and Class B Non-Voting shares in order to ensure that the Company remains qualified to hold or obtain licences required to carry on certain of its business undertakings in Canada. Funded plan: Actuarial loss on plan liabilities Effect of asset ceiling limit Total loss recognized...

  • Page 124
    ... price of $285 million. These purchases were made under issuer bid exemption orders issued by the Ontario Securities Commission and were included in calculating the number of Class B Non-Voting shares that the Company purchased pursuant to the NCIB. 120 ROGERS COMMUNICATIONS INC. 2011 ANNUAL REPORT...

  • Page 125
    ... 2011 2010 using the cash settlement feature at an average share price of RCI Class B Non-Voting share of $36.42. (a) Stock options: Stock-based compensation: Stock options (a) Restricted share units (b) Deferred share units (c) $ 29 26 9 64 $ 28 19 3 50 $ $ Total fair value amount of stock...

  • Page 126
    ... statements of financial position. DSUs are measured at fair value, determined using the Company's Class B Non-Voting share price. During the year ended December 31, 2011, the Company granted 154,937 DSUs (2010 - 89,136). At December 31, 2011, 751,903 DSUs 122 ROGERS COMMUNICATIONS INC. 2011 ANNUAL...

  • Page 127
    ...responsible for planning, directing and controlling the Company's business activities. (i) Compensation: The compensation expense associated with key management for employee services was included in employee salaries and benefits as follows: December 31, 2011 December 31, 2010 Salaries, pension and...

  • Page 128
    ...Rogers Media Inc. FIDO Solutions Inc. Rogers Wireless Alberta Inc. Rogers Communications Partnership Rogers Broadcasting Limited Rogers Publishing Limited Blue Jays Holdco Inc. Joint ventures: Inukshuk Wireless Inc. Dome Productions Inc. The annual financial statement reporting period of the Company...

  • Page 129
    .... The actual number of Class B Non-Voting shares purchased, if any, and the timing of such purchases will be determined by the Company considering market conditions, share prices, its cash position, and other factors. In February 2012, the Company's Board increased the annualized dividend rate from...

  • Page 130
    ...DIRECTOR ROGERS COMMUNICATIONS INC. "Over the years, the Canadian economy has benefited greatly from family-founded-andcontrolled companies that are able to take a longer-term view of investment horizons and general business management. At Rogers, we have successfully overlaid disciplined corporate...

  • Page 131
    ... of the public equity markets. With the December 2008 passing of Company founder and CEO Ted Rogers, his voting control of Rogers Communications passed to a trust of which members of the Rogers family are beneficiaries. This trust holds voting control of Rogers Communications for the benefit of...

  • Page 132
    ... 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 133
    ...Chief Financial Officer Edward S. Rogers Deputy Chairman and Executive Vice President, Emerging Business, Corporate Development Robert F. Berner Executive Vice, President Network and Chief Technology Officer Linda P. Jojo Executive Vice President, Information Technology and Chief Information Officer...

  • Page 134
    ... regarding your account, wish to change your name or address, or have questions about lost stock certificates, share transfers or dividends, please contact our Transfer Agent and Registrar: Computershare Investor Services Inc. 100 University Ave., 9th Floor, North Tower, Toronto, Ontario M5J 2Y1 877...

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    "THE BEST IS YET TO COME." TED ROGERS / 1933 -2008

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    ROGERS.COM