Rogers 2015 Annual Report Download - page 53

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MANAGEMENT’S DISCUSSION AND ANALYSIS
Loss on repayment of long-term debt
We recognized a $7 million loss on repayment of long-term debt
this year (2014 – $29 million loss) related to debt derivatives
associated with the repayment or repurchase of certain senior
notes in March 2015 and March 2014. These losses were deferred
in the hedging reserve until maturity of the notes and were then
recognized in net income. The 2015 loss relates to transactions in
2013 (2014 – transactions in 2008 and 2013) wherein foreign
exchange rates on the related debt derivatives were updated to
then-current rates.
Foreign exchange losses recognized in 2015 and 2014 were
primarily related to the impact of fluctuations in the value of the
Canadian dollar relative to the US dollar on working capital,
consisting mainly of the unhedged portion of our US dollar-
denominated accounts payable. During 2015, all of our US dollar-
denominated debt was hedged for accounting purposes.
See “Managing our Liquidity and Financial Resources” for more
information about our debt and related finance costs.
OTHER (INCOME) EXPENSE
Theincreaseinotherincomethisyearwasaresultof:
• a $102 million gain on acquisition of Mobilicity; partially offset by
• lower equity income pertaining to our various investments and
joint ventures, which included a $72 million loss related to our
share of an obligation to purchase at fair value the non-
controlling interest in one of our joint ventures, partially offset by
our share of a gain related to tax recoveries in one of our joint
ventures.
INCOME TAXES
The table below shows the difference between income taxes
computed by applying the statutory income tax rate to income
before income taxes and the actual income tax expense for the
year:
Years ended December 31
(In millions of dollars, except tax rates) 2015 2014
Statutory income tax rate 26.5% 26.5%
Income before income taxes 1,847 1,847
Computed income tax expense 489 489
Increase (decrease) in income taxes
resulting from:
Non-deductible (non-taxable)
stock-based compensation 5(2)
Income tax adjustment, legislative
tax change 614
Non-taxablegainonacquisition (27) –
Other items (7) 5
Total income taxes 466 506
Effectiveincometaxrate 25.2% 27.4%
Cash income taxes paid 184 460
Our effective income tax rate this year was 25.2% compared to
27.4% for 2014. The effective income tax rate for 2015 was lower
than the statutory tax rate primarily as a result of the non-taxable
gain on the acquisition of Mobilicity, partially offset by a deferred
tax revaluation due to an increase in the Alberta corporate income
tax rate.
Cash income taxes paid this year decreased as a result of the
utilization of tax loss carryforwards acquired as part of the Mobilicity
transaction.
In 2011, legislative changes eliminated the deferral of partnership
income, thereby accelerating the payment of approximately
$700 million of previously deferred cash taxes over a five-year
amortization period, beginning in 2012, at 15%, 20% in each of
2013 through 2015, and 25% in 2016. Our cash income tax
payments for the 2016 taxation year will continue to include this
additional amount. While the elimination of the deferral of
partnership income affects the timing of cash income tax
payments, it does not affect our income tax expense for accounting
purposes. See “About Forward-Looking Information” for more
information.
NET INCOME
Net income was 3% higher than last year. See “Key Changes in
Financial Results this Year Compared to 2014” for more
information.
Years ended December 31
(In millions of dollars, except per share
amounts) 2015 2014 % Chg
Net income 1,381 1,341 3
Basic earnings per share $2.68 $2.60 3
Diluted earnings per share $2.67 $2.56 4
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 51