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ROGERS COMMUNICATIONS INC.
2013 ANNUAL REPORT
MEDIAWIRELESS CABLE ROGERS.COM

Table of contents

  • Page 1
    ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT WIRELESS CABLE MEDIA ROGERS.COM

  • Page 2
    ... Channel, Canada's only nationally televised and online shopping service. It operates more than 50 Canadian radio stations, publishes 50+ well known consumer and business magazines, and owns a suite of digital media properties. Media owns the Toronto Blue Jays Baseball Club and Rogers Centre, Canada...

  • Page 3
    ... DATA 44% 2011 7.1 2011 3.0 EQUIPMENT 7% PREPAID VOICE 3% REVENUE ($ IN BILLIONS) ADJUSTED OPERATING PROFIT ($ IN BILLIONS) 2013 REVENUE $3.8 billion TELEVISION 47% INTERNET 30% 2013 0.37 3.5 2013 0.11 1.7 2012 0.35 3.4 2012 0.09 1.6 $3.8 BILLION PHONE 13% BUSINESS SOLUTIONS...

  • Page 4
    ... investments and cash we returned to shareholders during the year. named both the fastest wireless network and the fastest broadband ISP in Canada by PCMag.com. DATA REVENUE GROWTH WHAT WE SAID: Generate HIGHER VALUE WIRELESS SUBSCRIBERS WHAT WE SAID: Continue the EVOLVE AND ENHANCE TELEVISION...

  • Page 5
    ... per share 1 Annualized dividend rate at year-end Total assets Long-term debt (includes current portion) Shareholders' equity Market capitalization of equity Wireless subscribers (000s) Television subscribers (000s) Internet subscribers (000s) Cable telephony subscribers (000s) Number of employees...

  • Page 6
    ... Board announced that Guy Laurence would become President and Chief Executive Officer of Rogers effective in December 2013. Guy brings 30 years of global experience in telecom, pay television and media, and is a proven, hands-on executive who has consistently delivered strong financial and operating...

  • Page 7
    ... head-on. I look forward to continuing Ted's legacy, and to leading Rogers through the next phase of growth and to serving you, our shareholders. Thank you for your continued business, investment and support. GUY LAURENCE PRESIDENT AND CHIEF EXECUTIVE OFFICER ROGERS COMMUNICATIONS INC. 2013 ANNUAL...

  • Page 8
    ...and video, sports, business communications services, local and digital media services, and home automation. FOR A DETAILED DISCUSSION OF OUR STRATEGIC GOALS AND OBJECTIVES, SEE THE "OUR STRATEGY" SECTION IN THE ACCOMPANYING MD&A LATER IN THE REPORT. 04 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 9
    ... 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, Internet, television and telephony services to...

  • Page 10
    ... to their plans. WIRELESS VOICE & DATA SMARTPHONES & TABLETS CANADA'S FASTEST WIRELESS NETWORK MOBILE INTERNET SOCIAL MEDIA & NETWORKING ANYWHERE TV VIEWING MOBILE PAYMENTS VIRTUAL OFFICE CONNECTIVITY REMOTE HOME MONITORING & AUTOMATION 06 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 11
    ... to switch calls between their wireless device, computer, and home phone without interruption; manage e-mails, text messages and voicemail; hold live video chats; and combine and sync contacts from across multiple devices - no matter where they are. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 07

  • Page 12
    ...Customers can schedule, pause, rewind BROADBAND INTERNET HOME TELEPHONY WHOLE HOME PVR E-MAIL & MESSAGING ANY SCREEN STREAMING TV CATEGORYLEADING MEDIA CONTENT ON-DEMAND VIDEO CONTENT CONVERGED WIRELESS/ WIRELINE HOME MONITORING & AUTOMATION 08 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 13
    ..., or receive talking text messages on their home phone. Wireless customers can also use Rogers One Number to switch calls among their computer, home phone and wireless device without interruption; manage e-mails; text messages and voicemail; hold live video chats; and combine and sync contacts from...

  • Page 14
    ... solutions available. Because Rogers WIRELESS VOICE & DATA BUSINESS TELEPHONY ADVERTISING MEDIA SOLUTIONS MOBILE INTERNET & E-MAIL ADVANCED M2M SOLUTIONS DATA CENTRE & CLOUD SERVICES BUSINESS IP SOLUTIONS VIRTUAL OFFICE DATA NETWORKING 10 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 15
    ...electronic payments solutions in the Canadian market. Businesses across Canada also connect with customers through Rogers leading media brands as the one-stop solution for all their local and national radio, television, online and print advertising needs. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 16
    ... TV FRANCHISE NATIONAL RADIO PORTFOLIO CITY NATIONAL TELEVISION NETWORK OMNI MULTICULTURAL NETWORK TELEVISED SHOPPING NETWORK TORONTO BLUE JAYS BASEBALL TEAM 37.5% OWNERSHIP OF LEAFS, RAPTORS & TFC ICONIC MAGAZINE BRANDS DIGITAL MEDIA PORTFOLIO 12 ROGERS COMMUNICATIONS INC. 2013 ANNUAL...

  • Page 17
    ... Rogers Centre stadium, Canada's largest sports and entertainment facility and home field of the Blue Jays. Rogers also holds a 37.5% investment in Maple Leaf Sports & Entertainment which owns the NHL Maple Leafs, NBA Raptors, MLS Toronto FC and a number of other sports related assets. 2013 ANNUAL...

  • Page 18
    ... like never before. LEADING NEXT GENERATION NETWORKS MACHINE-TOMACHINE COMMUNICATIONS MOBILE COMMERCE DIGITAL MEDIA MOBILE STREAMING TELEVISION HOME AUTOMATION ADVANCED IP SOLUTIONS CONVERGED WIRELESS/ WIRELINE ENTERPRISE MOBILE APPLICATIONS 14 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 19
    ... and small businesses share wireless data and unlimited nationwide talk and text, with up to 10 wireless devices. Rogers recently further enhanced its exciting One Number service by introducing smartphone apps which enable customers to use mobile data or Wi-Fi to talk, text and video chat using...

  • Page 20
    ... a more sustainable world. Applying social and environmental responsibility throughout Rogers' daily operations - and beyond our own walls to our supply chain and communities - helps us attract customers, enhance employee recruitment and retention, mitigate risks and provide value to all of our...

  • Page 21
    ...each month, we've been an early and strong proponent of paperless electronic billing. In 2013, Rogers was also named one of Canada's Greenest Employers, an award recognizing companies that lead the nation in incorporating environmental values into their corporate culture. Across our supply chain, we...

  • Page 22
    ... same time, we benefit from having outside Directors who are experienced North American business leaders. The Rogers Communications Board believes that the Company's governance and risk management systems are effective and that the appropriate structures and procedures are in place. The composition...

  • Page 23
    .... At Rogers, we have successfully overlaid disciplined corporate governance processes that strike a healthy balance of being supportive of the company's continued success, making business sense, and benefiting all shareholders." ALAN D. HORN, CPA , CA CHAIRMAN OF THE BOARD ROGERS COMMUNICATIONS INC...

  • Page 24
    ... Chairman and Executive Vice President, Emerging Business, Corporate Development, Rogers Communications For detailed biographical information of Rogers Directors, go to rogers.com/investors * Management Directors are pictured on the following page. 20 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 25
    ... 24 Anthony Staffieri, FCPA, FCA Executive Vice President and Chief Financial Officer 25 Terrie L. Tweddle Vice President, Corporate Communications For detailed biographical information of Rogers Executive Officers, go to rogers.com/investors 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 21

  • Page 26
    POWERFUL LIKE NEVER BEFORE 22 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 27
    ... Long-Term Debt 112 Note 19: Capital Risk Management 113 Note 20: Financial Risk Management and Financial Instruments 117 Note 21: Other Long-Term Liabilities 118 Note 22: Pensions 120 Note 23: Shareholders' Equity 121 Note 24: Stock Options, Share Units and Share Purchase Plans 122 Note 25: Related...

  • Page 28
    ...and Notes, which have been prepared in accordance with International Financial Reporting Standards (IFRS). We report our results of operations in four segments: Wireless, Cable, Business Solutions and Media. Wireless, Cable and Business Solutions are operated by Rogers Communications Partnership and...

  • Page 29
    ... of this MD&A. You can also go to rogers.com/investors for information about our governance practices, corporate social responsibility reporting, a glossary of communications and media industry terms, and additional information about our business. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 25

  • Page 30
    ..., digital media and consumer, trade and professional publications. Almost all of our operations and sales are in Canada. We have a highly skilled and diversified workforce of approximately 28,000 employees. Our head-office is in Toronto, Ontario and we have numerous offices across Canada. 2013...

  • Page 31
    ... Internet subscribers Phone subscribers Additional Wireless metrics 3 Wireless blended ARPU Wireless churn Ratios Dividend payout ratio 3 Dividends as a percentage of pre-tax free cash flow 1 Return on assets 3 Adjusted net debt/adjusted operating profit 1,3 Employee-related information Total active...

  • Page 32
    ... per Class A Voting and Class B Non-Voting share and paid a quarterly dividend of $0.435 per share during 2013. We further increased our annualized dividend on February 12, 2014, by 5% to $1.83. New CEO • Guy Laurence joined Rogers in December 2013, as our new President and Chief Executive Officer...

  • Page 33
    ... with highly reliable network and data centre solutions. MEDIA see page 47 A diversified Canadian media company that engages in television and radio broadcasting, multi-platform shopping, publishing, digital, and sports media and entertainment. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 29

  • Page 34
    MANAGEMENT'S DISCUSSION AND ANALYSIS OUR STRENGTHS LEADER IN CANADIAN COMMUNICATIONS INDUSTRY Canada's largest wireless carrier and a leading cable television provider, offering quad-play services (i.e. wireless, television, Internet and telephony) to consumers and businesses. POWERFUL BRANDS ...

  • Page 35
    ... services and supportive dynamic network infrastructure. In response, carriers are dismantling legacy networks and investing in next generation platforms that converge voice, data and video solutions onto a single distribution and access platform. MEDIA TRENDS Consumer demand for digital media...

  • Page 36
    ... our wireless offering this year, redesigning and simplifying wireless offerings and pricing tiers, and introducing Canada's first wireless Share Everything plan. We also launched a hybrid wireless home and small business phone solution that operates on our national wireless network. Cable unveiled...

  • Page 37
    ... us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them. Includes additions to property, plant and equipment expenditures for Wireless, Cable, Media, Business Solutions, and Corporate segments. In the third quarter of 2013, we reduced our...

  • Page 38
    ... or any other financial measure of performance under IFRS. See "Key Performance Indicators" and "Non-GAAP Measures" for more information. SUMMARY OF CONSOLIDATED RESULTS (In millions of dollars, except per share amounts) Operating revenue Wireless Cable Business Solutions Media Corporate items and...

  • Page 39
    ...enhanced voice, text and data roaming value packages. • A hybrid wireless home and small business phone solution was launched, that operates on our national wireless network. The service is available in regions outside Rogers' cable territories and offers a traditional home or office phone service...

  • Page 40
    ...network revenue was higher than last year because of higher adoption and usage of wireless data services, partially offset by the introduction of lower priced roaming plans and pricing changes made over this year. Cable operating revenue was higher than last year mainly because of growth in Internet...

  • Page 41
    ... high speed Internet access • wireless voice and enhanced voice features • wireless home phone • device protection • text messaging • e-mail • global voice and data roaming • machine-to-machine solutions • advanced business solutions • Suretap mobile wallet • Rogers AnyPlace TV...

  • Page 42
    ... making significant capital investments in spectrum to: • support the rapidly growing usage of wireless data services • introduce new innovative network-enabled features and functionality. Our spectrum holdings include: CURRENT S PECTRUM LICENCE S Type of spectrum 850 MHz 1900 MHz Rogers...

  • Page 43
    ... services from postpaid monthly fees, airtime, data usage, long distance charges, optional service charges, inbound and outbound roaming charges and certain fees, as well as prepaid usage for airtime, data and other ancillary charges such as long distance. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 44
    ... higher data revenue related to an increase in subscriber levels and higher usage of wireless data services • partially offset by our introduction of new lower priced US and international roaming plans and rates which offer consumers more value, and • the continued adoption of customer friendly...

  • Page 45
    ... service into homes and business over copper facilities. 2013 CABLE SERVICE REVENUE MIX (%) TELEVISION 52% INTERNET 33% $3.5 BILLION PHONE 15% DISTRIBUTION We distribute our cable products using various channels including: • company-owned Rogers retail stores • customer self-serve rogers.com...

  • Page 46
    ...The acquisition also increased homes passed by 59,000. Includes television, Internet and phone subscribers. CABLE SUBSCRIBER BREAKDOWN (IN THOUSANDS) 2013 2012 2011 Phone Internet Television 1,153 1,074 1,052 1,961 1,864 1,793 2,127 2,214 2,297 42 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 47
    ... MILLIONS OF DOLLARS) DIGITAL HOUSEHOLDS AND DIGITAL PENETRATION OF TELEVISION CUSTOMERS % (IN THOUSANDS) $498 $477 $478 $1,159 $998 $926 $1,809 $1,868 $1,878 2013 2012 2011 Phone Internet Television 2013 2012 2011 84% 1,78 9 1,76 8 1,777 80% 77% 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 48
    ... cost of equipment sales (cable digital set-top box and Internet modem equipment) CABLE TELEPHONY SUBSCRIBERS AND CABLE TELEPHONY PENETRATION OF HOMES PASSED % (IN THOUSANDS) 2013 2012 2011 29% • the cost of programming • all other expenses involved in day-to-day operations, to service existing...

  • Page 49
    ... Bell and Videotron • Atlantic Canada: Bell Alliant and Eastlink. • Western Canada: Shaw and Telus BUSINESS SOLUTIONS SERVICE REVENUE BREAKDOWN (IN MILLIONS OF DOLLARS) 2013 2012 2011 Legacy Next Generation $149 $183 $271 $213 $162 $128 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 45

  • Page 50
    ..., cable and wireless networks. Next generation revenue also includes Data Centre services revenue from the 2013 dates of business acquisitions. Legacy revenue is generated mainly by long distance, switched voice services and lower speed data communications, provided over TDM and end of life data...

  • Page 51
    ...Issue Canada digital magazine service offering. Publishing Digital Media Sports Entertainment Our online and mobile digital media platforms include digital advertising across websites and mobile platforms, digital content subscriptions, and commerce solutions. We own the Toronto Blue Jays, Canada...

  • Page 52
    ... and merchandise sales at Blue Jays games • higher sales at The Shopping Channel. The increases in revenue were partially offset by continuing volatility in advertising spending across most industry sectors, driven by a continued slow economy. 48 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 53
    ...products sold by The Shopping Channel and Sports Entertainment • Blue Jays player payroll • all other expenses involved in day-to-day operations. Operating expenses were 8% higher than 2012, mainly because of higher programming costs at Sportsnet, higher Toronto Blue Jays player salaries, higher...

  • Page 54
    ..., PLANT AND EQUIPMENT (%) MEDIA Media additions increased this year compared to last year because of higher expenditures on digital and broadcast facilities. C ABLE 49% $2.2 BILLION WIRELESS 39% BUSINESS SOLUTIONS 5% MEDIA 4% CORPORATE 3% 50 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 55
    ... significant investment and roll out of new customer premise equipment, mostly NextBox 2.0 and 3.0 set-top boxes at Cable; these are now amortized over three years, compared to five years prior to 2012, which also contributed to the increase • the timing of readiness of certain network and system...

  • Page 56
    ... interest rate on our outstanding debt, mainly related to refinancing activities completed in 2013. See "Managing Our Liquidity and Financial Resources" for more information. In 2013, the foreign exchange loss of $23 million primarily relates to the depreciation in the Canadian dollar relative...

  • Page 57
    ...all of our operating groups, including shared services and the corporate office. Total salaries and benefits for full time employees (FTE) and part-time employees (PTE) in 2013 were approximately $1,940 million, up 7% from $1,813 million in 2012 due to the increase in the number of employees, higher...

  • Page 58
    ... results and key performance indicators for 2013 and 2012. QUARTERLY CONSOLIDATED FINANCIAL SUMMARY 2013 (In millions of dollars, except per share amounts) Operating revenue Wireless Cable Business Solutions Media Corporate items and intercompany eliminations Total operating revenue Adjusted...

  • Page 59
    ... new wireless handset models. Cable The trends in Cable services revenue and operating profit increases are primarily due to: • higher penetration and usage of Internet, digital and telephony products and services • offset by competitive losses of television subscribers and pricing changes...

  • Page 60
    ... levels, data revenue and equipment sales at Wireless and higher Internet revenue at Cable, partially offset by lower overall revenue at Business Solutions due to the phased exit of the legacy services business. Adjusted Operating Profit Consolidated adjusted operating profit increased in 2012 by...

  • Page 61
    ...securitization program. Includes an increase in trade payables due to the timing of payments. - - Reflects US$1.1 billion of senior notes maturing in March 2014 (2012 -US$350 million repaid and bought in June 2013). Reflects the change in market values of our derivatives due to scheduled settlements...

  • Page 62
    ... in non-cash working capital, compared to $2,142 million in 2012. See "Additions to Property, Plant and Equipment". Acquisitions and Strategic Initiatives We made net investments of $1,080 million this year mainly to acquire theScore, Blackiron, Mountain Cable and Pivot Data Centres. In 2012, we...

  • Page 63
    ... of our trade receivables has no claim on any of our other assets. The terms of our accounts receivable securitization program are committed by the participating financial institution until expiry on December 31, 2015. 2013 2012 2011 5.5% 6.1% 6.2% 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 64
    ...A Voting and Class B Non-Voting shares. We paid $876 million in cash dividends, an increase of $73 million from 2012. See "Dividend and Share Information". Shelf Prospectuses Our two shelf prospectuses expired in January 2014. One shelf prospectus qualified the public offering of our debt securities...

  • Page 65
    ... AND ANALYSIS FINANCIAL CONDITION Capital Resources Our capital resources consist primarily of cash flow from operations, cash and cash equivalents, available lines of credit, funds available under our accounts receivable securitization program and issuances of long-term debt. This information is...

  • Page 66
    ... did not make any additional lump-sum contributions to our pension plans in 2013 or 2012, and the pension plans did not purchase additional annuities. FINANCIAL RISK MANAGEMENT We normally use three categories of derivative instruments to manage risks related to our business activities: Categories...

  • Page 67
    ...% of US dollar-denominated debt is hedged for accounting purposes compared to 100% on an economic basis. Long-term debt includes the effect of the Debt Derivatives. Weighted average term to maturity excludes US$1.1 billion senior notes due March 2014. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 68
    ...not a defined term under IFRS, and does not have a standard meaning, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about this measure, including how we calculate it. 900 1.0262 923 37 $ 75 64 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 69
    ... protection available to shareholders under our constating documents. If an offer is made to purchase both classes of 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. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 70
    ... payment under these indemnifications or guarantees. See Note 26 to our 2013 audited consolidated financial statements for more information. Operating Leases We have entered into operating leases for the rental of premises, distribution facilities, equipment and wireless towers and other contracts...

  • Page 71
    ...cable television programming services we must, and can, distribute • wireless and wireline interconnection agreements • rates we can charge third parties for access to our network • the resale of our networks • roaming on our networks • ownership and operation of our communications systems...

  • Page 72
    ...March 2013, Industry Canada released Revised Frameworks for Mandatory Roaming and Antenna Tower and Site Sharing, concluding a consultation initiated in 2012. It sets out the current rules for roaming and tower and site sharing. Its key terms are: • All holders of spectrum licences, radio licences...

  • Page 73
    .... Key things to note: • The code establishes several new obligations on wireless carriers, including contract term length, roaming caps, unlocking requirements and contract summaries. It also lays out the rules for device subsidies and early cancellation fees. • Under the code, if a customer...

  • Page 74
    ... strategic transaction with Shaw to acquire Mountain Cable (Shaw's cable system in Hamilton, Ontario), and to secure an option to purchase Shaw's Advanced Wireless Services spectrum holdings in 2014. As part of the agreement, we sold our one-third equity interest in the TVtropolis special channel...

  • Page 75
    ... and ethics • full committee charters • director biographies • a summary of the differences between the NYSE corporate governance rules that apply to US-based companies and our governance practices as a non-US-based issuer listed on the NYSE. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 71

  • Page 76
    ... risk management plans. They are responsible for identifying, assessing, managing and monitoring risks in the business units impacting our strategic and business plans, and reporting to the Executive Leadership Team and Enterprise Risk Management. 72 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 77
    ... social responsibility throughout our supply chain, including compliance with the Rogers Supplier Code of Conduct Employee engagement Community investment Environmental responsibility Ethical supply chain See our annual Corporate Social Responsibility report (available on our website rogers.com...

  • Page 78
    ...way our services are delivered, including: • broadband • IP-based voice, data and video delivery services • increased use of optical fibre technologies to businesses and, or residences • broadband wireless access and wireless services using a radio frequency spectrum that we may have limited...

  • Page 79
    ... cable television programming services that we must distribute, wireless and wireline interconnection agreements, the rates we may charge to provide access to our network by third parties, the resale of our networks and roaming on our networks, our operation and ownership of communications systems...

  • Page 80
    ...the terms and conditions of accessing the poles of hydroelectric companies. As a result, we obtained access under orders from the Ontario Energy Board and the New Brunswick Public Utilities Board. Dependence on Facilities and Services of ILECs Business telephony operations that are outside our cable...

  • Page 81
    .... If our radio and television ratings or magazine readership levels decrease substantially, our advertising sales volumes and the rates that we charge advertisers could be adversely affected. FINANCIAL RISKS Capital Commitments Liquidity, Debt and Interest Payments Our capital commitments and...

  • Page 82
    ..., several of whom are also directors of our Board. The trust holds voting control of Rogers Communications Inc. and its subsidiaries for the benefit of successive generations of the Rogers family. The trust also deals with Rogers on the company's long-term strategy and direction. The trustee is the...

  • Page 83
    ...periods. Impairment of Assets Indefinite-lived intangible assets (including goodwill and spectrum and/ or broadcast licences) and definite life assets (including property, plant and equipment and other intangible assets) are assessed for impairment 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 79

  • Page 84
    ... value changes after it has been granted and before the settlement date, we record the resulting changes in our liability as a charge to operating costs in the year that the change occurs. The payment amount is established as of the exercise date. 80 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 85
    ... officers of which are Directors of Rogers and/or our subsidiary companies. Total amounts paid to these related parties, directly or indirectly, were as follows: (In millions of dollars) Printing, legal services and commission paid on premiums for insurance coverage 2013 Years ended December 31 2012...

  • Page 86
    ... operating profit margin) Postpaid ARPU (monthly) Postpaid (voice and data) revenue Divided by: average postpaid wireless voice and data subscribers Divided by: twelve months for the year Years ended December 31 2013 2012 KEY PERFORMANCE INDICATORS We measure the success of our strategy using...

  • Page 87
    ...income Divided by: total assets as at December 31 Return on assets $ 1,669 23,601 7.1% $ 1,693 19,618 8.6% Years ended December 31 2013 2012 Adjusted Net Debt to Adjusted Operating Profit We use adjusted net debt to conduct valuation-related analysis and make capital structure related decisions and...

  • Page 88
    ... about capital structure. • We believe this helps investors and analysts analyze our enterprise and equity value and assess various leverage ratios as performance measures. Cash flows from operating activities Adjusted net debt Long-term debt 84 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 89
    ... 519 3.43 Years ended December 31 2013 2012 518 3.42 $ 522 3.41 Reconciliation of Pre-tax and After-tax Free Cash Flow (In millions of dollars) Cash provided by operating activities Add (deduct): Property, plant and equipment expenditures Interest on long-term debt expense, net of capitalization...

  • Page 90
    MANAGEMENT'S DISCUSSION AND ANALYSIS SUMMARY OF FINANCIAL RESULTS OF LONG-TERM DEBT GUARANTOR Our outstanding public debt, $2.5 billion bank credit and letter of credit facilities and Derivatives are unsecured obligations of RCI, as obligor, and Rogers Communications Partnership (RCP), as either co...

  • Page 91
    ...Shareholders' equity Subscriber count results (000s) Wireless subscribers Television subscribers Internet subscribers Phone subscribers Additional wireless metrics Wireless blended ARPU Wireless chum Ratios: Revenue growth Adjusted operating profit growth Dividends declared per share Dividend payout...

  • Page 92
    ... Committee. February 11, 2014 Guy Laurence President and Chief Executive Officer Anthony Staffieri, FCPA, FCA Executive Vice President and Chief Financial Officer INDEPENDENT AUDITORS' REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of Rogers Communications Inc.: We have audited...

  • Page 93
    ... Earnings per share - basic Earnings per share - diluted: Earnings per share from continuing operations Loss per share from discontinued operations Earnings per share - diluted The accompanying notes are an integral part of the consolidated financial statements. Note 3 2013 $ 12,706 2012 $ 12,486...

  • Page 94
    ... FINANCIAL STATEMENTS Consolidated Statements of Comprehensive Income (In millions of Canadian dollars) Years ended December 31 Net income for the year Other comprehensive income (loss): Items that will not be reclassified to net income: Defined benefit pension plans: Remeasurements Related...

  • Page 95
    ... 17 18 20 21 9 40 12,173 83 328 1,702 18,932 23 4,669 $ 23,601 $ 19,618 26 27 7, 28 On behalf of the Board: Alan D. Horn, CPA, CA Director John H. Clappison, FCPA, FCA Director 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 91

  • Page 96
    ...-for-sale investments, net of tax Derivative instruments, net of tax Total other comprehensive income (loss) Comprehensive income for the year Transactions with shareholders, recorded directly in equity: Repurchase/cancellation of Class B Non-Voting shares (note 23) Dividends declared Shares issued...

  • Page 97
    ... of cross-currency interest rate exchange agreement and debt-related forward contracts Transaction costs incurred Proceeds received on short-term borrowings Repurchase of Class B Non-Voting shares, net of issuances Dividends paid Cash provided by (used) in financing activities Change in cash and...

  • Page 98
    ... Rogers Communications is a diversified Canadian communications and media group. Substantially all of our operations and sales are in Canada. RCI is incorporated in Canada and its registered office is located at 333 Bloor Street East, Toronto, Ontario, M4W 1G9. RCI's shares are publicly traded...

  • Page 99
    ... and goods are sold • Recognize revenue when it can be determined Activation fees charged to subscribers in Wireless Advertising revenue Monthly subscription revenues received by television stations for subscriptions from cable and satellite providers Toronto Blue Jays' revenue from home game...

  • Page 100
    ... plan. This feature allows the option holder to choose to receive a cash payment equal to the intrinsic value of the option (the amount by which the market price of the Class B Non-Voting share exceeds the exercise price of the option on the exercise date) instead of exercising the option to acquire...

  • Page 101
    ..., digital cable equipment and merchandise for resale, at the lower of cost (determined on a firstin, first-out basis) and its net realizable value. We will reverse a previous write down to net realizable value if the inventories later increase in value. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 102
    ... and methods for pension accounting related to our defined benefit plans: • the expected rates of salary increases for calculating increases in future benefits • mortality rates for calculating the life expectancy of plan members, and • past service costs from plan amendments are immediately...

  • Page 103
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We incur costs related to subscriber acquisition and retention. • We capitalize cable installation costs that relate to the cable network and depreciate them over the expected life of the cable customer. • We defer direct incremental installation costs...

  • Page 104
    ...unit or asset to their present value using a pretax rate that reflects current market assessments of the time value of money and the risks specific to the asset. Estimated cash flows are based on management's assumptions and are supported by external information. The above concepts used to determine...

  • Page 105
    ... consolidated financial statements. • IAS 19, Employee Benefits (2011) (IAS 19) - On January 1, 2013, we adopted IAS 19, which changes the basis for determining the income or expense related to defined benefit plans. This amendment eliminated the concept of return on plan assets and interest cost...

  • Page 106
    ... mandatory effective date of IFRS 9. We are assessing the impact of this new standard on our consolidated financial statements. NOTE 3: SEGMENTED INFORMATION Our reportable segments are Wireless, Cable, Business Solutions and Media. All four segments operate substantially in Canada. Corporate items...

  • Page 107
    ...4: OPERATING COSTS 2013 Cost of equipment sales and direct channel subsidies Merchandise for resale Other external purchases Employee salaries and benefits and stock-based compensation $ 1,541 190 4,126 1,940 $ 7,797 2012 $ 1,605 173 4,138 1,813 $ 7,729 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 108
    ... television, Internet and telephony services over its recently upgraded hybrid fibre and coaxial cable network. The acquisition expands our cable business in the Southern Ontario area and will allow us to drive synergies through a larger service area and cost efficiencies. Sale of TVtropolis In 2013...

  • Page 109
    ... 31, 2013 $ 44 19 $ 63 The remaining liability of $63 million as at December 31, 2013, is included in accounts payable and accrued liabilities and other long-term liabilities. We expect to pay the remaining liability over the next two years. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 105

  • Page 110
    ... from discontinued operations Total income tax expense Note 2013 $ 513 2012 $ 428 Statutory income tax rate 89 160 Computed income tax expense Increase (decrease) in income taxes resulting from: Revaluation of deferred tax balances due to legislative changes Non-taxable portion of capital gains...

  • Page 111
    ... 2013 and 2012. December 31, 2012 Net book value Land and buildings Cable and wireless network Computer equipment and software Customer premise equipment Leasehold improvements Equipment and vehicles $ 634 6,667 1,328 445 159 343 Acquisitions (note 7) $ 3 91 6 6 44 8 December 31, 2013 Net book value...

  • Page 112
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property, plant and equipment not yet in service and therefore not depreciated at December 31, 2013 was $882 million (December 31, 2012 - $917 million). Capitalized interest on property, plant and equipment was recorded at a weighted average rate of ...

  • Page 113
    ... in program rights. The recoverable amounts of these cash generating units were lower in 2012 than 2011 mainly due to the decline in advertising revenue in certain markets. NOTE 14: INVESTMENTS 2013 Publicly traded companies Private companies Available-for-sale investments Investments in joint...

  • Page 114
    ... the program in 2013. We continue to service and retain substantially all of the risks and rewards relating to the accounts receivables we sold, and therefore, the receivables remain recognized on our consolidated statements of financial position and the funding received is recorded as short-term...

  • Page 115
    ... Inter-Bank Offered Rate. S enior Notes Interest is paid semi-annually on all of our senior notes and debentures. We have the option to redeem each of our senior notes and debentures, in whole or in part, at any time, if we pay the specified premium. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 116
    ...long-term debt agreements. NOTE 19: CAPITAL RISK MANAGEMENT Our objectives in managing capital are to ensure we have sufficient liquidity to meet all of our commitments and to execute our business plan. We define capital that we manage as shareholders' equity (including issued capital, share premium...

  • Page 117
    ...such as credit checks, deposits on account and billing in advance, to mitigate credit risk, and will suspend services when customers have fully used their approved credit limits or violated established payment terms. While our credit controls and processes have been effective in managing credit risk...

  • Page 118
    ...our publicly traded investments, our share price, foreign exchange rates and interest rates, will affect our income, cash flows or the value of our financial instruments. The derivative instruments we use to manage this risk are described in note 2. Publicly Traded Investments We manage risk related...

  • Page 119
    ... liability Long-term liability (63) (83) (146) Net mark-to-market asset (liability) $ 75 $ 2012 8 42 50 (144) (417) (561) $ (511) In 2013, we recorded a $4 million increase to net income related to hedge ineffectiveness (2012 - $4 million decrease). 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 120
    ... counterparty is added to the risk-free discount rate to determine the estimated credit-adjusted value for each derivative. For Derivatives in a liability position, our credit spread is added to the risk-free discount rate for each derivative. 116 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 121
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair values of our Equity Derivatives are based on the quoted market value of RCI's Class B Non-Voting shares. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial ...

  • Page 122
    ... shows the fair value of the total pension plan assets by major category for the years ended December 31, 2013 and 2012. 2013 Equity securities Debt securities Other - cash Total fair value of plan assets $ 631 403 3 2012 $ 480 348 5 $ 833 $ 1,037 118 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT

  • Page 123
    ...included in the salaries and benefits expense in the consolidated statements of income. 2013 Plan cost: Service cost Net interest cost Net pension expense Administrative expense Total pension cost recognized in net income $ $ 71 12 83 2 85 $ $ 2012 46 5 51 2 53 Sensitivity of Key Assumptions In the...

  • Page 124
    ... of the TSX. In 2013, we cancelled 43,993 Class B Non-Voting shares that related to old employee share plans for proceeds of nil. Available-for- S ale Financial Assets Reserve We carry available-for-sale investments at fair value on the consolidated statements of financial position, and record...

  • Page 125
    ... weighted average share price on the date of exercise of $48.18 (2012 - $39.42). S tock Options Stock Option Plans Options to purchase our Class B Non-Voting shares on a one-for-one basis may be granted to our employees, directors and officers by the Board of Directors or our Management Compensation...

  • Page 126
    ... corporate officers who are primarily responsible for planning, directing and controlling our business activities. Compensation The compensation expense for key management for employee services was included in employee salaries and benefits as follows: 2013 Salaries, pension and other short-term...

  • Page 127
    ... Board of Directors. The amounts owing are unsecured, interest-free and due for payment in cash within one month from the date of the transaction. There are no significant outstanding balances with these related parties at December 31, 2013. Transaction value 2013 2012 Printing, legal services and...

  • Page 128
    ... Columbia against providers of wireless communications in Canada about the system access fee wireless carriers charge to some of their customers. The class action relates to allegations of misrepresentations contrary to the Business Practices and Consumer Protection Act (British Columbia), among...

  • Page 129
    ... of operations. NOTE 28: SUBSEQUENT EVENTS The following events occurred after the year ended December 31, 2013: Increase in Annual Dividend Rate and Declaration of Dividends In February 2014, the Board approved an increase of 5% in the annualized dividend rate, to $1.83 per Class A Voting share and...

  • Page 130
    ... responsibly and we focus our social and environmental sustainability efforts where we can make the most meaningful impacts on both. To learn more, please visit rogers.com/csr STOCK EXCHANGE LISTINGS Toronto Stock Exchange (TSX): RCI.b - Class B Non-Voting shares (CUSIP # 775109200) RCI.a - Class...

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    WHAT'S NEXT? IF YOU'RE WITH ROGERS, YOU'LL BE THE FIRST TO KNOW.

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