Rogers 2014 Annual Report Download

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one
2014 ANNUAL REPORT
ROGERS COMMUNICATIONS INC.
WIRELESS
CABLE
MEDIA

Table of contents

  • Page 1
    one ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT WIRELESS CABLE MEDIA

  • Page 2
    ... and online shopping service. It operates more than 50 Canadian radio stations, publishes 40+ well known consumer and business magazines, and owns a suite of digital media properties including Next Issue. Media owns the Toronto Blue Jays Baseball Club and Rogers Centre, holds a 37.5% investment in...

  • Page 3
    ... 8% PREPAID VOICE 2% REVENUE ($ IN BILLIONS) ADJUSTED OPERATING PROFIT ($ IN BILLIONS) 2014 REVENUE $3.9 BILLION TELEVISION 45% INTERNET 33% 2014 0.38 3.5 2014 0.12 1.7 2013 0.37 3.5 2013 0.11 1.7 $3.9 BILLION PHONE 12% BUSINESS SOLUTIONS 10% 2012 0.35 BUSINESS SOLUTIONS / CABLE...

  • Page 4
    ..., networking, hosting, managed services and IP solutions to small, medium and large enterprise, government and carrier customers. Our Media segment is Canada's premier group of category-leading broadcast, specialty, print and online media assets, with businesses in radio and television broadcasting...

  • Page 5
    ... 91 Consolidated Statements of Changes in Shareholders' Equity 92 Consolidated Statements of Cash Flows 93 Notes to Consolidated Financial Statements 132 Glossary of Selected Industry Terms and Helpful Links 134 Corporate and Shareholder Information 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 1

  • Page 6
    ... and increase accountability across the business, improve our agility, and re-accelerate growth in revenue and cash flows relative to our competitors. Rogers 3.0 is now up and running, and gaining momentum. A MESSAGE FROM THE PRESIDENT AND CEO 2 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 7
    ... executive leadership team include Chief Customer Officer, Consumer Business Unit President, Enterprise Business Unit President, Chief Strategy Officer and Chief Corporate Affairs "The mindset of this company is about winning. The history of this company is about winning. Our plan going forward is...

  • Page 8
    ... these changes. The history and mindset of our company is about innovation and winning. Winning the hearts and minds of our millions of customers as we go forward is at the top of our priority list. OUR CORE PILL ARS OVERHAUL THE CUSTOMER EXPERIENCE 4 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 9
    Overhaul the CUSTOMER EXPERIENCE 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 5

  • Page 10
    ... in serving the enterprise market. The agreement also gives Rogers access to a number of new products, services and applications to help accelerate our growth in the business market. Specific to smaller enterprises, Rogers offers custom solutions that use our cable and wireless networks to provide...

  • Page 11
    Drive Growth in the BUSINESS MARKET 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 7

  • Page 12
    ... store or as a ride-along with a cable technician. These are important investments in the development and support of our greatest assets. We know that when our employees succeed, Rogers succeeds. OUR CORE PILL ARS INVEST IN AND DEVELOP OUR PEOPLE 8 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 13
    Invest In and Develop OUR PEOPLE 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 9

  • Page 14
    ..., digital and print assets in Canada; these assets reach nearly 90% of Canadians every week and at the same time increasingly add value to our core Wireless and Cable businesses. Our Sportsnet specialty network provides the best in sports programming across Canada through its four regional channels...

  • Page 15
    Deliver Compelling CONTENT EVERYWHERE 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 11

  • Page 16
    ...A LONG HISTORY OF FIRSTS, INCLUDING THE FIRST CELLULAR CALL IN CANADA, THE WORLD'S FIRST HIGH-SPEED CABLE INTERNET SERVICE, THE FIRST DIGITAL CELLULAR NETWORK IN NORTH AMERICA, CANADA'S FIRST VIDEO-ON-DEMAND AND MOBILE TV SERVICES, THE FIRST HSPA AND LTE NETWORKS, AND THE FIRST TO OFFER DEVICES SUCH...

  • Page 17
    Focus on INNOVATION AND NETWORK LEADERSHIP 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 13

  • Page 18
    ...phrase "One Rogers" describes our plan to use all Rogers' employee, network, content and brand assets to work together; as a powerful single force, we will increase agility, velocity and customer loyalty. OUR CORE PILL ARS GO TO MARKET AS ONE ROGERS 14 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 19
    Go to Market as ONE ROGERS 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 15

  • Page 20
    ... Connected for Success program. Over 4,200 families are currently registered in this program which began in 2013 and offers subsidized broadband Internet for families with low incomes in partnership with Toronto Community Housing. Rogers Employee Volunteer Program offers our employees one day off to...

  • Page 21
    Good CORPORATE CITIZENSHIP 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 17

  • Page 22
    ... on our Board and brings a long-term commitment to oversight and value creation. At the 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...

  • Page 23
    ... pension plans. ROGERS GOOD GOVERNANCE PRACTICES SEPARATION OF CEO & CHAIRMAN ROLES INDEPENDENT LEAD DIRECTOR FORMAL CORPORATE GOVERNANCE POLICY & CHARTERS CODE OF BUSINESS CONDUCT & WHISTLEBLOWER HOTLINE DIRECTOR SHARE OWNERSHIP GUIDELINES BOARD & COMMITTEE IN CAMERA DISCUSSIONS ANNUAL REVIEWS...

  • Page 24
    ... Isabelle Marcoux Chair, Transcontinental Inc. 8 4 9 For detailed biographical information of Rogers Directors, go to rogers.com/investors 5 10 The Hon. David R. Peterson, pc, qc Senior Partner and Chairman, Cassels Brock & Blackwell LLP 20 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 25
    ... President, Media Business Unit 8 2 For detailed biographical information of Rogers Executive Officers, go to rogers.com/investors 9 3 Frank Boulben Chief Strategy Officer Jacob Glick Chief Corporate Affairs Officer Dale Hooper Chief Brand Officer Nitin Kawale President, Enterprise Business Unit...

  • Page 26
    ... 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 consumers and businesses. MUST...

  • Page 27
    ...64 Governance at Rogers 65 Social Responsibility 67 Risk Management 67 Risks and Uncertainties Affecting Our Business 73 Controls and Procedures Regulation in Our Industry 75 Wireless 76 Cable 77 Media 29 73 33 37 87 87 87 88 41 89 90 91 92 93 57 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 28
    ... (IFRS) as issued by the International Accounting Standards Board. We report our results of operations in four segments: Wireless, Cable, Business Solutions and Media. Wireless, Cable and Business Solutions are operated by our wholly-owned subsidiary, Rogers Communications Partnership (RCP) 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. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 25

  • Page 30
    ... and businesses: wireless voice and data communications, high-speed Internet, cable television, cable telephony, wired telecom and data networking services. We also provide services in television and radio broadcasting, multi-platform shopping, sports media and entertainment, digital media, consumer...

  • Page 31
    ...'S DISCUSSION AND ANALYSIS 2014 HIGHLIGHTS KEY FINANCIAL INFORMATION Years ended December 31 (In millions of dollars, except margins and per share amounts) Consolidated Operating revenue As adjusted 1: Operating profit Operating profit margin Net income Diluted earnings per share Net income Basic...

  • Page 32
    ... POSITION • Issued $2.1 billion of senior notes at historically low rates for Rogers, consisting of $250 million three year floating rate senior notes, OPERATING REVENUE BY SEGMENT (IN MILLIONS OF DOLLARS) 2014 2013 2012 Media Business Solutions Cable $1,826 $1,704 $1,620 Wireless $382 $374...

  • Page 33
    ... AnyPlace TV; and • Rogers One Number. CABLE Our cable network provides a leading and innovative selection of highspeed broadband Internet access, digital television and online viewing, phone and advanced home Wi-Fi services to consumers and businesses. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 34
    ... a new subscription video-on-demand streaming service available both online and via cable set top boxes with a library of over 11,000 hours of movies and past seasons of some of the most popular TV shows; and • our joint operation, Inukshuk Wireless Partnership, created to operate a national fixed...

  • Page 35
    ..., magazines, television and outdoor advertising; and • with new technologies such as online web information services, music downloading, portable media players and online music streaming services. The Shopping Channel competes with: • retail stores, catalogue, Internet and direct mail retailers...

  • Page 36
    ... content has become even more important for acquiring audiences that in turn attract advertisers and subscribers. Ownership of content or long-term agreements with content owners, therefore, have also become increasingly important to media companies. 32 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 37
    ... of the company to the benefit of our customers. Our 12-year NHL Agreement is a perfect example of One Rogers, wherein Media, Wireless and Cable have all worked as one to deliver enriched experiences right across our product sets and customer base. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 33

  • Page 38
    ... short-term opportunities and risks. 2014 KEY HIGHLIGHTS OVERHAUL THE CUSTOMER EXPERIENCE • Launched Roam Like Home, a simple and cost effective way for Wireless customers to use the Internet, make calls, send texts and emails in the US with their Rogers Share Everything Plan, letting them access...

  • Page 39
    ... our products and services in more disciplined and coordinated ways. We are using more cross-functional, multi-departmental teams from all parts of the business on go-to-market projects as we've demonstrated this year with our 12-year NHL Agreement. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 35

  • Page 40
    ... 2015 could potentially materially alter underlying assumptions around our 2015 Wireless, Cable, Business Solutions and/or Media results in the current and future years, the impacts of which are currently unknown and not factored into our guidance. 36 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 41
    ... investments in spectrum to: • support the rapidly growing usage of wireless data services; and • introduce new innovative network-enabled features and functionality. CABLE We distribute our cable products using various channels including: • company-owned Rogers retail stores; • customer...

  • Page 42
    ... with Videotron, which could lead to the acquisition of Videotron's Tier 3 Toronto AWS-1 spectrum. If a transaction does occur, it will be subject to regulatory approval. Who it will support 4G LTE subscribers. AWS-1 spectrum 4G LTE subscribers. 38 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 43
    ... listen to, their home voicemail on their wireless phone or over the Internet. In addition, we offer a wireless alternative to a fixed-line service called Rogers Wireless Home Phone. BUSINESS SOLUTIONS We own and operate some of the most advanced networks and data centres in Canada. We leverage our...

  • Page 44
    ... lines of credit, funds available under our accounts receivable securitization program and issuances of long-term debt. We also own approximately $1.1 billion of marketable equity securities in publicly traded companies as at December 31, 2014. 40 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 45
    ...more information. SUMMARY OF CONSOLIDATED RESULTS Years ended December 31 (In millions of dollars, except margins and per share amounts) Operating revenue Wireless Cable Business Solutions Media Corporate items and intercompany eliminations Operating revenue Adjusted operating profit Wireless Cable...

  • Page 46
    MANAGEMENT'S DISCUSSION AND ANALYSIS KEY CHANGES IN FINANCIAL RESULTS THIS YEAR COMPARED TO 2013 (In millions of dollars) Operating revenue changes - higher (lower): Network - Wireless Equipment - Wireless Cable Business Solutions Media Corporate items and intercompany eliminations Higher operating...

  • Page 47
    ... equipment sales and direct channel subsidies. WIRELESS NETWORK REVENUE (IN MILLIONS OF DOLLARS) 2014 2013 2012 $6,743 $6,748 $6,719 2 Wireless postpaid subscriber results do not include subscribers from our Wireless Home Phone product, with approximately 52,000 net new subscribers this year and...

  • Page 48
    ..., 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. Network revenue was consistent this year as a result of: • continued adoption of the customer-friendly Rogers Share...

  • Page 49
    ...and • pricing changes associated with our roaming plans. Adjusted operating profit margin as a percentage of network revenue increased to 48.1% this year from 46.8% in 2013. WIRELESS ADJUSTED OPERATING PROFIT (IN MILLIONS OF DOLLARS) 2014 2013 2012 $3,246 $3,157 $3,063 2014 ANNUAL REPORT ROGERS...

  • Page 50
    ... total balance for December 31, 2013. The acquisition also increased homes passed by 59,000. On November 4, 2014, we acquired approximately 16,000 cable high-speed Internet subscribers, 16,000 Television subscribers and 11,000 Phone subscribers from our acquisition of Source Cable. These subscribers...

  • Page 51
    ... small business and wholesale Internet access subscribers; and • modem rental fees. Television revenue includes: • digital cable services - includes digital channel service fees, including premium and specialty service subscription fees, pay per view service fees and video on demand service fees...

  • Page 52
    ...DOLLARS) 2014 2013 $122 $106 $89 Business Solutions continues to focus primarily on next generation IPbased services, leveraging higher margin on-net and near-net service revenue opportunities, and using existing network facilities to expand 2012 48 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 53
    ... OPERATING PROFIT Adjusted operating profit decreased this year, reflecting the revenue and expense changes described above. MEDIA ADJUSTED OPERATING PROFIT (IN MILLIONS OF DOLLARS) 2014 2013 2012 $131 $161 $190 2014 2013 2012 $1,826 $1,704 $1,620 2014 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 54
    ... network has now reached approximately 84% of Canada's population as at December 31, 2014. MEDIA Media property, plant and equipment additions increased this year as a result of investments made to our IT infrastructure and NHL broadcast facilities. 50 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 55
    ..., Business Solutions and Media during 2013 and 2014. FINANCE COSTS Years ended December 31 (In millions of dollars) Interest on borrowings 1 Interest on pension liability Loss on repayment of long-term debt Foreign exchange loss Change in fair value of derivatives Capitalized interest Other Total...

  • Page 56
    ... of our operating groups, including shared services and the corporate office. Total salaries and benefits for full time employees and part-time employees in 2014 were approximately $1,940 million, which is unchanged from the amount in 2013. There was a decrease in the number of employees, a decrease...

  • Page 57
    ... that year. Consolidated adjusted net income decreased to $1,769 million in 2013, from $1,781 million in 2012, primarily due to increases in finance costs and depreciation and amortization, partially offset by the increase in adjusted operating profit. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 58
    ...FINANCIAL SUMMARY 2014 Full Year Full Year 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 operating profit (loss) Wireless Cable Business Solutions Media...

  • Page 59
    ... in Next Issue Canada, partially offset by continued softness in conventional television and print advertising. Wireless The trends in Wireless revenue and adjusted operating profit reflect: • the growing number of wireless voice and data subscribers; • higher usage of wireless data; • higher...

  • Page 60
    ... of certain dealer stores following its closing in early 2014. n/m Mainly relates to our Source Cable acquisition in 2014. Derivative instruments 788 148 640 n/m Other long-term assets Deferred tax assets Goodwill Total assets Liabilities and shareholders' equity Current liabilities: Short...

  • Page 61
    ...FINANCING ACTIVITIES Accounts receivable securitization This year we received funding of $192 million, net of repayments, under our accounts receivable securitization program, compared to borrowings of $650 million last year. As at December 31, 2014, a total 2014 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 62
    ...and October 2013 and March 2014, at historically low interest rates for Rogers and long-term maturities ranging up to 30 years; and • the scheduled repayments and repurchases of relatively more expensive debt made in June 2013 and March 2014. WEIGHTED AVERAGE COST OF BORROWINGS (%) 2014 2013 2012...

  • Page 63
    ...conditions of our long-term debt agreements and, throughout 2014, these covenants did not impose restrictions of any material consequence on our operations. 2014 2013 2012 $1,437 $1,548 $1,649 CREDIT RATINGS Credit ratings provide an independent measure of credit quality of an issue of securities...

  • Page 64
    ... accrued benefit obligation, pension expense and the deficiency of plan assets over accrued obligations in the future. See Critical accounting estimates for more information. FINANCIAL RISK MANAGEMENT We use derivative instruments from time to time to manage risks related to our business activities...

  • Page 65
    ... for our stock-based compensation programs. In April 2014, we executed extension agreements for each of our equity derivative contracts under substantially the same terms and conditions with revised expiry dates to April 2015 (from April 2014). 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 61

  • Page 66
    ... 2014 to pay for our 700 MHz spectrum investment made in April 2014. Our long-term target range of adjusted net debt / adjusted operating profit is a ratio of 2.0 to 2.5. DIVIDENDS AND SHARE INFORMATION DIVIDENDS In February 2014, the Board authorized an increase to the annualized dividend rate...

  • Page 67
    ... to regulatory approval and completion of BCE's acquisition of Glentel. Program rights are the agreements we have entered into to acquire broadcasting rights for sports broadcasting programs and films for periods ranging from one to twelve years. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 63

  • Page 68
    ...28 to our 2014 audited consolidated financial statements for more information. Code of business conduct and whistleblower hotline Director share ownership guidelines Board and committee in camera discussions Annual reviews of Board and director performance Audit Committee meetings with internal...

  • Page 69
    .... Employee experience • Employee Engagement: We work to build high-performing teams through a number of programs and policies, including a bi-annual engagement survey, leadership development programs, and communication and idea sharing between employees and management. • Talent Management: We...

  • Page 70
    ... Code of Conduct, we set out high standards for any vendor that does business with us. See our annual Corporate Social Responsibility report on our website (rogers.com/csr) for more about our social, environmental and community contributions and performance. INCOME TAX AND OTHER GOVERNMENT PAYMENTS...

  • Page 71
    ... reduced advertising, lower demand for our products and services, decreased revenue and profitability, and higher churn and bad debt expense. A significant portion of our broadcasting, publishing and digital revenues come from the sale of advertising. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 72
    ... are delivered, including: • Broadband; • IP-based voice, data and video delivery services; • increased use of optical fibre technologies to businesses and/or residences; and • broadband wireless access and wireless services using a radio frequency spectrum to which we may have limited...

  • Page 73
    ... network upgrades. Changes to government spectrum fees could significantly increase our payments and therefore materially reduce our operating profit. UNAUTHORIZED ACCESS TO DIGITAL BOXES OR INTERNET MODEMS We use encryption technology developed and supported by our vendors to protect our cable...

  • Page 74
    ... new products and services profitably or keep pace with changing consumer preferences, we could experience slower revenue growth and increased churn. This could have a materially adverse effect on our business, results of operations and financial condition. 70 ROGERS COMMUNICATIONS INC. 2014 ANNUAL...

  • Page 75
    ... to meet these obligations or to successfully execute our business strategy. INCREASING PROGRAMMING COSTS Acquiring programming is the single most significant purchasing commitment in our Cable television business and is also a material cost for Media television properties. Programming costs have...

  • Page 76
    ... launched in British 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...

  • Page 77
    ... 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 and the networks of others; • ownership and operation...

  • Page 78
    ... of the operation of radio and television stations; • the frequency-related operations of cable television networks; and • awarding and supervising spectrum for wireless communications systems in Canada. ROYALTIES The Copyright Board of Canada (Copyright Board) oversees the administration...

  • Page 79
    ... is 60 days, after which arbitration according to Industry Canada arbitration rules will begin. • The roaming capabilities must provide connectivity for digital voice and data services regardless of the spectrum band or underlying technology used. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 75

  • Page 80
    ... REGARDING DOMESTIC AND US WIRELESS ROAMING On December 12, 2013, the CRTC issued a call for comments entitled Wholesale mobile wireless roaming in Canada - Unjust discrimination/ undue preference (Telecom Notice of Consultation CRTC 2013-685). 76 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 81
    ...In a related decision released the same day, the CRTC found that it would be an undue preference under the Telecommunications Act for a vertically integrated company that offers a Mobile TV service to exempt this service from standard monthly wireless data caps and usage charges generally applicable...

  • Page 82
    ...networks are capitalized to property, plant and equipment. The capitalized amounts are calculated based on estimated costs of projects that are capital in nature, and are generally based on a per-hour rate. In addition, interest costs are capitalized during 78 ROGERS COMMUNICATIONS INC. 2014 ANNUAL...

  • Page 83
    ...we believe most accurately INCOME AND OTHER TAXES We accrue income and other tax provisions based on information currently available in each of the jurisdictions in which we operate. While we believe we have paid and provided for adequate amounts of 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 79

  • Page 84
    ... 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: Years ended December 31 (In millions of dollars) Printing, legal services and commission paid on premiums for insurance coverage 2014 2013...

  • Page 85
    ...subscribers with service plans integrating both voice and data. • Wireless prepaid subscribers are considered active for a period of 180 days from the date of their last revenue-generating usage. 6,495 8,095 12 $66.86 6,470 7,957 12 $67.76 Prepaid ARPU (monthly) Prepaid (voice and data) revenue...

  • Page 86
    ... for GAAP measures. It is 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. 82 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 87
    ... operating profit • To conduct valuation-related analysis and make decisions about capital structure. • We believe this helps investors and analysts analyze our enterprise and equity value and assess our leverage. Long-term debt divided by net income 2014 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 88
    ... Change in non-cash working capital Other adjustments Free cash flow 2014 3,698 (2,366) (756) 173 778 (11) (79) 1,437 2013 3,990 (2,240) (709) 85 700 (238) (40) 1,548 1,341 515 2.60 1,669 515 3.24 1,341 (15) 1,326 517 2.56 1,669 - 1,669 518 3.22 84 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 89
    ... are accounted for by the equity method. Amounts recorded in current liabilities and non-current liabilities for RCP do not include any obligations arising as a result of being a guarantor or co-obligor, as the case may be, under any of RCI's long-term debt. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 90
    ... CONSOLIDATED FINANCIAL RESULTS (In millions of dollars, except per share amounts, subscriber count results, ARPU, churn, percentages and ratios) Income and Cash Flow: Revenue Wireless Cable Business Solutions Media Corporate items and intercompany eliminations Years ended December 31 2014 2013 2012...

  • Page 91
    ... December 31, 2014 and 2013 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Chartered Professional Accountants, Licensed Public Accountants February 13, 2015 Toronto, Canada 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 87

  • Page 92
    ... notes are an integral part of the consolidated financial statements. Note 5 2014 12,850 7,868 2,144 173 817 1 1,847 506 1,341 2013 12,706 7,797 1,898 85 742 (81) 2,265 596 1,669 6 7,8 9 10 11 12 13 13 $ $ 2.60 2.56 $ $ 3.24 3.22 88 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 93
    ...-accounted investments Items that may subsequently be reclassified to net income Other comprehensive income for the year Comprehensive income for the year The accompanying notes are an integral part of the consolidated financial statements. 10 535 412 1,753 2014 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 94
    ...long-term liabilities Deferred tax liabilities Total liabilities Shareholders' equity Total liabilities and shareholders' equity Guarantees Commitments and contingent liabilities Subsequent events The accompanying notes are an integral part of the consolidated financial statements. Note 2014 2013...

  • Page 95
    ... for the year Transactions with shareholders recorded directly in equity: Dividends declared Share class exchange Shares issued on exercise of stock options Total transactions with shareholders Balances, December 31, 2014 Number of shares Amount (000s) 72 112,462 Number of shares Amount (000s...

  • Page 96
    ...operating activities: Depreciation and amortization Program rights amortization Finance costs Income taxes Stock-based compensation Gain on sale of TVtropolis Post-employment benefits contributions, net of expense Other Cash provided by operating activities before changes in non-cash working capital...

  • Page 97
    ... OF THE BUSINESS Rogers Communications Inc. 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...

  • Page 98
    ... and assumptions that affect how accounting policies are applied and the amounts we report as assets, liabilities, revenue and expenses. Significant changes in these assumptions, including those related to our future business plans and cash flows, 94 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 99
    .... Source of revenue Monthly subscriber fees for wireless airtime and data services, cable, telephony and Internet services, network services, media subscriptions and rental of equipment Revenue from roaming, long-distance and other optional or nonsubscription services, pay-per-use services and...

  • Page 100
    ... goods and services as unearned revenue. Advance payments include subscriber deposits, cable installation fees and amounts subscribers pay for services and subscriptions that will be provided in future periods. • costs directly associated with bringing the assets to a working condition for their...

  • Page 101
    ...as intangible assets and amortized to operating expenses over the contract term. To the extent that prepayments are made for annual contractual fees within a season, they are included in other current assets - prepaid expenses in our Consolidated Statement of Financial Position as the rights will be...

  • Page 102
    ...securities and accounts payable and accrued liabilities on the date they originate. All other financial assets and financial liabilities are initially recognized on the trade date when we become a party to the contractual provision of the instrument. 98 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 103
    ...in offsetting the changes in the fair value or cash flows of the item it is hedging. We assess whether an embedded derivative is required to be separated from its host contract and accounted for as a derivative when we first become a party to a contract. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 104
    ... liabilities related to the arrangement. We use the equity method to account for our investments in associates and joint ventures, and we recognize our proportionate interest in the assets, liabilities, revenues and expenses of our joint operations. 100 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 105
    ...in return for their service in the current and prior years, and discounting those benefits to determine their present value. We accrue our pension plan obligations as employees provide the services necessary to earn the pension. We use a discount rate based on market yields on high quality corporate...

  • Page 106
    ...' return to sustain future development of the business, conduct valuation-related analyses and make decisions about capital. The Rogers First Rewards Credit Card program (operated through a 100% owned subsidiary of RCI) is regulated by the Office of the Superintendent of Financial Institutions...

  • Page 107
    ...FINANCIAL STATEMENTS NOTE 4: SEGMENTED INFORMATION Our reportable segments are Wireless, Cable, Business Solutions and Media. All four segments operate substantially in Canada. Corporate items and eliminations include our interests in businesses that are not reportable operating segments, corporate...

  • Page 108
    ... FINANCIAL STATEMENTS NOTE 5: OPERATING REVENUE (In millions of dollars) Wireless: Postpaid Prepaid Network revenue Equipment sales Total Wireless Cable: Internet Television Phone Service revenue Equipment sales Total Cable 2014 6,495 248 6,743 562 7,305 1,245 1,734 478 3,457 10 3,467 2013...

  • Page 109
    ... millions of dollars) December 31, 2013 Acquisitions from business combinations - 6 - - 3 - 9 December 31, 2014 Net book value Land and buildings Cable and wireless network Computer equipment and software Customer premise equipment Leasehold improvements Equipment and vehicles Total property, plant...

  • Page 110
    ... and 2013. (In millions of dollars) December 31, 2013 Acquisitions from business combinations - - - 73 - - 73 - 73 132 205 December 31, 2014 Net book value Spectrum licences Broadcast licences Brand names Customer relationships Roaming agreements Marketing agreements Acquired program rights Total...

  • Page 111
    ... of dollars) Interest on borrowings Interest on post-employment benefits liability Loss on repayment of long-term debt Loss on foreign exchange Change in fair value of derivative instruments Capitalized interest Other Total finance costs Note 23 16 21 2014 782 7 29 11 2 (26) 12 817 2013 734...

  • Page 112
    ... 31, 2013 Goodwill and other intangibles (360) (9) - (60) (429) Stub period income and partnership reserve (735) 141 - - (594) Investments (4) - (23) - (27) Non-capital loss 25 19 - 2 46 Other Total 205 (1,470) (99) (83) (26) (49) 5 (69) 85 (1,671) 108 ROGERS COMMUNICATIONS INC. 2014 ANNUAL...

  • Page 113
    ...per share for 2014 and 2013. (In millions of dollars, except per share amounts) Numerator (basic) - Net income for the year Denominator - Number of shares (in millions): Weighted average number of shares outstanding - basic Effect of dilutive securities (in millions): Employee stock options Weighted...

  • Page 114
    ... for doubtful accounts. (In millions of dollars) Customer accounts receivables (net of allowance for doubtful accounts) Less than 30 days past billing date 30-60 days past billing date 61-90 days past billing date Greater than 90 days past billing date Total 2014 2013 Financial Risks Credit...

  • Page 115
    ... Net interest payments December 31, 2013 (In millions of dollars) Net interest payments Less than 1 year 757 Less than 1 year 743 1 to 3 years 1,343 1 to 3 years 1,258 4 to 5 More than years 5 years 1,143 6,022 4 to 5 More than years 5 years 1,093 5,341 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 116
    ... income 2014 2013 (Change in millions of dollars) Share price of publicly traded investments $1 change Expenditure derivatives - change in foreign exchange rate $0.01 change in Cdn$ relative to US$ Short-term borrowings 1% change in interest rates Senior notes (floating) 1% change in interest rates...

  • Page 117
    ... purposes. The September 27, 2013 termination is related to debt derivatives hedging senior notes that were scheduled to mature in 2014 and 2015. Only the fixed foreign exchange rate differed between the new debt derivatives and the terminated debt derivatives. All other terms are the same as the...

  • Page 118
    ... activity or balances in 2013. (In millions of dollars, except interest rates) GoC term (years) 10 10 10 30 Total 1 We entered into expenditure derivatives to manage foreign exchange risk on certain forecasted expenditures as follows: (In millions of dollars, except exchange rates) Notional Trade...

  • Page 119
    ...-term debt (including current portion) is measured at level 2 in the three-level fair value hierarchy, based on year-end trading values. We did not have any non-derivative held-to-maturity financial assets during the years ended December 31, 2014 and 2013. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 120
    ... a joint venture and is accounted for using the equity method. shomi In 2014, we entered into a joint venture equally owned by Rogers and Shaw Communications Inc. to develop, launch and operate a premium subscription video-on-demand service offering movies and television Some of our joint ventures...

  • Page 121
    ..., which are long-term in nature. The timing and extent of restoration work that will be ultimately required for these sites is uncertain. Other provisions include onerous contracts and legal claims, which are expected to be settled in one to five years. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC...

  • Page 122
    ...and debentures; and • quarterly on our floating rate senior notes. We have the option to redeem each of our fixed rate senior notes and debentures, in whole or in part, at any time, if we pay the premiums specified in the corresponding agreements. 118 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 123
    ... investment grade ratings are maintained. Our other senior notes do not have any of these restrictions, regardless of the related credit ratings. The repayment dates of certain debt agreements can also be accelerated if there is a change in control of RCI. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS...

  • Page 124
    ... were completed as at January 1, 2014. There are risks related to contribution increases, inadequate plan surplus, unfunded obligations and return risk for the defined benefit pension plans, which we mitigate through the governance described above. 120 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 125
    ... are comprised mainly of pooled funds that invest in common stocks and bonds that are traded in an active market. The table below shows the fair value of the total pension plan assets by major category for the years ended December 31, 2014 and 2013. 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 121

  • Page 126
    ... plans for the years ended December 31: (In millions of dollars) Employer contribution Employee contribution Total contribution 2014 106 30 136 2013 101 26 127 Sensitivity of key assumptions In the sensitivity analysis shown below, we determine the defined benefit obligation using the same method...

  • Page 127
    ... TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 24: SHAREHOLDERS' EQUITY CAPITAL STOCK Share class Preferred shares Number of shares authorized for issue 400 million Features • Without par value • Issuable in series, with rights and terms of each series to be fixed by our Board of Directors prior to...

  • Page 128
    ...-based compensation expense, which is included in employee salaries and benefits expense: (In millions of dollars) Stock-based compensation: Stock options Restricted share units Deferred share units Equity Derivative effect, net of interest receipt 2014 (9) 34 2 10 37 2013 30 42 4 8 84 We paid $48...

  • Page 129
    ...Compensation expense related to the employee share accumulation plan was $38 million in 2014 (2013 - $30 million). RESTRICTED SHARE UNITS The RSU plan allows employees, officers and directors to participate in the growth and development of Rogers. Under the terms of the plan, RSUs are issued to the...

  • Page 130
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Source Cable Limited (Source) In November 2014, we acquired 100% of the common shares of Source for cash consideration of $156 million. Source is a television, Internet, and phone service provider situated in Hamilton, Ontario, and its subscriber footprint is...

  • Page 131
    ... 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: (In millions of dollars) Salaries and other short-term employee benefits...

  • Page 132
    ... and completion of BCE lnc.'s acquisition of Glentel lnc. (see note 31). Program rights are the agreements we have entered into to acquire broadcasting rights for sports broadcasting programs and films for periods ranging from one to twelve years. 128 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT

  • Page 133
    ... whether matching claims should be allowed to proceed in those provinces. System Access Fee - British Columbia In December 2011, a class action was launched in British Columbia against providers of wireless communications in Canada about the 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 129

  • Page 134
    ... The changes in non-cash operating working capital items are as follows: Accounts receivable Inventory Other current assets Accounts payable and accrued liabilities Unearned revenue Total change in non-cash operating working capital items 2014 2013 (In millions of dollars) Payments on termination of...

  • Page 135
    NOTES Notes 2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 131

  • Page 136
    ... and cable industries to describe the revenue generated per customer per month. ARPU is an indicator of a wireless or cable business' operating performance. AWS (Advanced Wireless Services): The wireless telecommunications spectrum band that is used for wireless voice, data, messaging services and...

  • Page 137
    ...service where a subscriber pays a fixed monthly fee for a significant portion of services and usage in arrears, subsequent to consuming the services. The fees are usually arranged on a term contract basis. Prepaid: A method of payment for wireless service that allows a subscriber to prepay for a set...

  • Page 138
    ... CORPORATE OFFICES Rogers Communications Inc. 333 Bloor Street East, 10th Floor Toronto, ON M4W 1G9 416-935-7777 CUSTOMER SERVICE AND PRODUCT INFORMATION 888-764-3771 or rogers.com SHAREHOLDER SERVICES If you are a registered shareholder and have inquiries regarding your account, wish to change...

  • Page 139
    .... NHL and the NHL Shield are registered trademarks and NHL GameCentre LIVE and GameCentre LIVE are trademarks of the National Hockey League. NHL and NHL team marks are the property of the NHL and its teams. © NHL 2015. All Rights Reserved. National Hockey League Players' Association, NHLPA and the...

  • Page 140
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