2006 GUIDANCE We currently have a generally positive bias towards
achieving or exceeding the higher ends of certain of our 2006
financial and operating metric guidance ranges. Based on our
current outlook for the second half of 2006, we are raising by 2%
the top ends of the summary level guidance ranges that we
originally issued on February 9, 2006 for each of Wireless network
revenue, Wireless operating profit, Cable and Telecom revenue, and
Cable and Telecom operating profit. There are no other updates at
this point to the summary level ranges of our 2006 financial and
operating metric guidance. (See the section entitled "Caution
Regarding Forward-Looking Statements" below.)
-----------------------------------------------
------------------------ (In millions of dollars, except
subscribers) Original 2006 Range Updates
-----------------------------------------------
------------------------ Revenue Wireless (network revenue) $4,125
to $4,175 High end of range up 2% Cable and Telecom 3,110 to 3,185
High end of range up 2% Media 1,165 to 1,205 Operating profit(1)
Wireless(2) $1,730 to $1,780 High end of range up 2% Cable and
Telecom 825 to 860 High end of range up 2% Media 115 to 120
PP&E expenditures(3) Wireless $ 600 to $ 650 Cable and Telecom
640 to 695 Net subscriber additions (000's) Wireless 525 to 575
Basic cable - to 10 Internet 125 to 175 Digital cable 175 to 225
Residential telephony 200 to 250 Rogers Telecom integration(4) $ 50
to $ 65 -----------------------------------------------
------------------------ (1) Before RCI corporate expenses and
management fees paid to Rogers Communications Inc. and excluding
costs associated with the integration of Fido and Call-Net (see
Note 4 below). (2) Excludes operating losses related to the
Inukshuk fixed wireless initiative. (3) Does not include Corporate,
Inukshuk or Media PP&E expenditures or the PP&E
expenditures component of the Call-Net integration (see Note 4
below). Corporate PP&E expenditures will include costs
associated with the January 4, 2006 purchase of the Greater Toronto
Area business campus by RCI. (4) Estimated breakdown: approximately
70% to be recorded as PP&E expenditures and approximately 30%
to be recorded as operating expense. SUPPLEMENTARY INFORMATION
Calculations of Wireless Non-GAAP Measures
---------------------------------------------------
--------------------- (In millions of dollars, Three months ended
Six months ended subscribers in thousands, June 30, June 30, except
ARPU figures and ---------------------- ---------------------
operating profit margin) 2006 2005 2006 2005
---------------------------------------------------
--------------------- Postpaid ARPU (monthly) Postpaid (voice and
data) revenue $ 1,002.5 $ 816.7 $ 1,909.2 $ 1,567.0 Divided by:
Average postpaid wireless voice and data subscribers 4,968.6
4,326.7 4,914.7 4,275.8 Divided by: 3 months for the quarter and 6
months for year-to-date 3 3 6 6 ----------------------
--------------------- $ 67.26 $ 62.92 $ 64.75 $ 61.08
---------------------------------------------------
--------------------- Prepaid ARPU (monthly) Prepaid revenue $ 48.8
$ 53.0 $ 95.4 $ 101.0 Divided by: Average prepaid subscribers
1,294.3 1,306.6 1,311.8 1,316.5 Divided by: 3 months for the
quarter and 6 months for year-to-date 3 3 6 6
---------------------- --------------------- $ 12.57 $ 13.52 $
12.12 $ 12.79 ---------------------------------------------------
--------------------- Cost of acquisition per gross addition Total
sales and marketing expenses $ 137.6 $ 133.2 $ 265.8 $ 257.2
Equipment margin loss (acquisition related) 45.6 36.2 95.3 86.2
---------------------- --------------------- $ 183.2 $ 169.4 $
361.1 $ 343.4 ---------------------- ---------------------
---------------------- --------------------- Total gross wireless
additions (postpaid, prepaid, and one-way messaging) 461.7 452.9
895.6 911.2 ---------------------- --------------------- $ 397 $
374 $ 403 $ 377 ---------------------------------------------------
--------------------- Operating expense per average subscriber
(monthly) Operating, general, administrative and integration
expenses $ 337.0 $ 304.6 $ 660.3 $ 598.1 Equipment margin loss
(retention related) 48.3 35.9 98.7 73.4 ----------------------
--------------------- $ 385.3 $ 340.5 $ 759.0 $ 671.5
---------------------- --------------------- ----------------------
--------------------- Divided by: Average total wireless
subscribers 6,417.0 5,815.8 6,384.5 5,779.2 Divided by: 3 months
for the quarter and 6 months for year-to-date 3 3 6 6
---------------------- --------------------- $ 20.01 $ 19.52 $
19.81 $ 19.36 ---------------------------------------------------
--------------------- Equipment margin loss Equipment sales $ 95.8
$ 89.2 $ 190.3 $ 161.3 Cost of equipment sales (189.7) (161.3)
(384.3) (320.9) ---------------------- --------------------- $
(93.9) $ (72.1) $ (194.0) $ (159.6) ----------------------
--------------------- ---------------------- ---------------------
Acquisition related $ (45.6) $ (36.2) $ (95.3) $ (86.2) Retention
related (48.3) (35.9) (98.7) (73.4) ----------------------
--------------------- $ (93.9) $ (72.1) $ (194.0) $ (159.6)
---------------------- --------------------- ----------------------
---------------------
---------------------------------------------------
--------------------- Operating Profit Margin Operating Profit $
486.8 $ 364.8 $ 891.9 $ 663.1 Divided by Network Revenue 1,055.3
874.7 2,012.1 1,678.0 ---------------------- ---------------------
Operating Profit Margin 46.1% 41.7% 44.3% 39.5%
---------------------------------------------------
--------------------- SUPPLEMENTARY INFORMATION Calculations of
Cable and Telecom Non-GAAP Measures
---------------------------------------------------
--------------------- (In millions, subscribers Three months ended
Six months ended in thousands, except ARPU June 30, June 30,
figures and operating ---------------------- ---------------------
profit margin) 2006 2005 2006 2005
---------------------------------------------------
--------------------- Core Cable ARPU Core Cable revenue $ 355.4 $
319.1 $ 697.8 $ 637.3 Divided by: Average basic cable subscribers
2,254.0 2,244.3 2,258.8 2,248.3 Divided by: 3 months for quarter
and 6 months for year-to-date 3 3 6 6 ----------------------
--------------------- $ 52.55 $ 47.34 $ 51.52 $ 47.20
---------------------------------------------------
--------------------- Internet ARPU Internet revenue(1) $ 129.7 $
104.7 $ 250.5 $ 204.5 Divided by: Average internet (residential)
subscribers 1,175.4 1,004.0 1,140.2 974.4 Divided by: 3 months for
quarter and 6 months for year-to-date 3 3 6 6
---------------------- --------------------- $ 36.79 $ 35.55 $
36.62 $ 35.83 ---------------------------------------------------
--------------------- Cable and Internet: Operating Profit $ 210.1
$ 172.3 $ 405.6 $ 348.8 Divided by Revenue 486.4 425.3 951.0 846.8
Cable and Internet Operating Profit Margin 43.2% 40.5% 42.6% 41.2%
---------------------------------------------------
--------------------- Rogers Home Phone: Operating Profit $ 4.9 $ -
$ 9.5 $ - Divided by Revenue 85.8 - 166.2 - Rogers Home Phone
Operating Profit Margin 5.7% n/m 5.7% n/m
---------------------------------------------------
--------------------- Rogers Business Solutions: Operating Profit $
17.4 $ (3.4) $ 30.2 $ (6.5) Divided by Revenue 143.5 1.1 292.5 2.2
Rogers Business Solutions Operating Profit Margin 12.1% n/m 10.3%
n/m ---------------------------------------------------
--------------------- Video stores: Operating Profit(2) $ 1.6 $ 2.7
$ 3.2 $ 9.9 Divided by Revenue 72.2 74.7 153.2 158.4 Video stores
Operating Profit Margin 2.2% 3.6% 2.1% 6.3%
---------------------------------------------------
--------------------- (1) Internet ARPU calculation does not
include amounts related to dial-up customers. (2) Video stores
operating profit in the three and six months ended June 30, 2006
include $0.4 million and $5.2 million, respectively, of costs
related to the closure of 21 Video stores. SUPPLEMENTARY
INFORMATION Rogers Communications Inc. Historical Quarterly
Summary(1) 2006
-------------------------------------------------------------------------
(In thousands of dollars, except per share amounts) Q1 Q2
-------------------------------------------------------------------------
Income Statement Operating Revenue Wireless $ 1,051,237 $ 1,151,130
Cable and Telecom 774,032 786,916 Media 240,122 333,829 Corporate
and eliminations (33,639) (35,601)
-------------------------------------------------------------------------
2,031,752 2,236,274
-------------------------------------------------------------------------
Operating profit(2) Wireless 405,133 486,803 Cable and Telecom
211,628 232,413 Media 13,137 51,969 Corporate (33,606) (29,056)
-------------------------------------------------------------------------
596,292 742,129 Depreciation and amortization 386,113 394,763
-------------------------------------------------------------------------
Operating income 210,179 347,366 Interest on long-term debt
(161,575) (154,694) Other income (expense) 1,127 16,868 Income tax
recovery (expense) (34,914) 68,001 Non-controlling interest - -
-------------------------------------------------------------------------
Net income (loss) for the period 14,817 277,541
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss) per share - basic $ 0.05 $ 0.88 - diluted $ 0.05 $
0.87 Additions to property, plant and equipment(2) $ 340,056 $
402,734
-------------------------------------------------------------------------
2005
-------------------------------------------------------------------------
(Thousands of dollars, except per share amounts) Q1 Q2 Q3 Q4
-------------------------------------------------------------------------
Income Statement Operating Revenue Wireless $ 875,371 $ 963,886 $
1,068,888 $ 1,098,511 Cable and Telecom 505,256 500,080 725,676
760,612 Media 219,280 293,402 284,520 299,974 Corporate and
eliminations (17,492) (24,857) (32,017) (38,936)
-------------------------------------------------------------------------
1,582,415 1,732,511 2,047,067 2,120,161
-------------------------------------------------------------------------
Operating profit(2) Wireless 298,376 364,760 381,488 292,425 Cable
and Telecom 180,669 171,562 195,101 217,211 Media 11,320 44,195
33,293 39,038 Corporate (15,141) (15,063) (20,510) (35,155)
-------------------------------------------------------------------------
475,224 565,454 589,372 513,519 Depreciation and amortization
341,633 358,746 376,984 400,648
-------------------------------------------------------------------------
Operating income 133,591 206,708 212,388 112,871 Interest on
long-term debt (184,767) (180,325) (178,792) (166,195) Other income
(expense) 8,663 (3,441) 17,894 (21,098) Income tax recovery
(expense) (3,514) (3,748) (2,603) 7,710 Non-controlling interest -
- - -
-------------------------------------------------------------------------
Net income (loss) for the period (46,027) 19,194 48,887 (66,712)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss) per share - basic $ (0.17) $ 0.07 $ 0.17 $ (0.22) -
diluted $ (0.17) $ 0.07 $ 0.16 $ (0.22) Additions to property,
plant and equipment(2) $ 260,419 $ 344,738 $ 318,656 $ 429,983
-------------------------------------------------------------------------
2004
-------------------------------------------------------------------------
(thousands of dollars, except per share amounts) Q1 Q2 Q3 Q4
-------------------------------------------------------------------------
Income Statement Operating Revenue Wireless $ 592,841 $ 655,920 $
721,136 $ 813,628 Cable and Telecom 473,074 474,846 489,371 508,364
Media 215,741 230,881 244,319 266,171 Corporate and eliminations
(16,907) (18,152) (21,138) (21,846)
-------------------------------------------------------------------------
1,264,749 1,343,495 1,433,688 1,566,317
-------------------------------------------------------------------------
Operating profit(2) Wireless 219,644 247,083 269,565 214,099 Cable
and Telecom 171,186 173,294 173,143 191,036 Media 6,470 38,819
14,981 55,102 Corporate (15,443) (13,409) (1,714) (9,717)
-------------------------------------------------------------------------
381,857 445,787 455,975 450,520 Depreciation and amortization
246,090 250,528 255,857 340,076
-------------------------------------------------------------------------
Operating income 135,767 195,259 200,118 110,444 Interest on
long-term debt (137,539) (132,292) (129,868) (176,298) Other income
(expense) (75,384) (41,775) 29,676 37,776 Income tax recovery
(expense) (1,453) (3,555) (3,371) 4,932 Non-controlling interest
423 (25,596) (48,480) (5,928)
-------------------------------------------------------------------------
Net income (loss) for the period (78,186) (7,959) 48,075 (29,074)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss) per share - basic $ (0.33) $ (0.03) $ 0.20 $ (0.12)
- diluted $ (0.33) $ (0.03) $ 0.19 $ (0.12) Additions to property,
plant and equipment(2) $ 228,666 $ 218,267 $ 221,147 $ 386,858
-------------------------------------------------------------------------
(1) Certain prior year numbers have been reclassified to conform to
the current year presentation as described in Notes 1 and 9 to the
Unaudited Interim Consolidated Financial Statements. (2) As
defined. See the "Key Performance Indicators and Non-GAAP Measures"
section. Rogers Communications Inc. Unaudited Consolidated
Statements of Income (In thousands of Three Months Ended Six Months
Ended dollars, except per June 30, June 30, share amounts) 2006
2005 2006 2005 ---------------------------------- ------------
------------ ------------ Operating revenue $ 2,236,274 $ 1,732,511
$ 4,268,026 $ 3,314,926 Cost of sales 265,087 231,338 543,594
471,107 Sales and marketing costs 289,520 248,721 561,876 482,015
Operating, general and administrative expenses 936,466 675,288
1,810,044 1,305,546 Integration expenses 2,717 11,710 8,936 15,580
Video store closure expenses (note 6) 355 - 5,155 - Depreciation
and amortization 394,763 358,746 780,876 700,379
---------------------------------- ------------ ------------
------------ Operating income 347,366 206,708 557,545 340,299
Interest on long-term debt (154,694) (180,325) (316,269) (365,091)
---------------------------------- ------------ ------------
------------ 192,672 26,383 241,276 (24,792) Foreign exchange gain
(loss) 45,300 (18,270) 41,016 (24,229) Change in the fair value of
derivative instruments (32,707) 10,514 (29,591) 15,312 Other
income, net 4,275 4,315 6,570 14,140
---------------------------------- ------------ ------------
------------ Income (loss) before income taxes 209,540 22,942
259,271 (19,569) Income tax expense (recovery) (note 7): Current
(2,253) 3,748 491 7,263 Future (65,748) - (33,577) -
---------------------------------- ------------ ------------
------------ Net income (loss) for the period $ 277,541 $ 19,194 $
292,357 $ (26,832) ---------------------------------- ------------
------------ ------------ ----------------------------------
------------ ------------ ------------ Earning (loss) per share
(note 8): Basic $ 0.88 $ 0.07 $ 0.93 $ (0.10) Diluted 0.87 0.07
0.91 (0.10) -----------------------------------------------
-------------------------
-----------------------------------------------
------------------------- See accompanying Notes to Unaudited
Interim Consolidated Financial Statements. Rogers Communications
Inc. Unaudited Consolidated Statements of Cash Flows Three Months
Ended Six Months Ended (In thousands June 30, June 30, of dollars)
2006 2005 2006 2005 ---------------------------------- ------------
------------ ------------ Cash provided by (used in): Operating
activities: Net income (loss) for the period $ 277,541 $ 19,194 $
292,357 $ (26,832) Adjustments to reconcile net income (loss) to
net cash flows from operating activities: Depreciation and
amortization 394,763 358,746 780,876 700,379 Program rights and
video rental inventory depreciation 18,580 21,342 36,907 43,830
Unrealized foreign exchange gain (loss) (36,725) 16,578 (35,879)
22,785 Change in the fair value of derivative instruments 32,707
(10,514) 29,591 (15,312) Accreted interest on convertible preferred
securities - 5,433 - 10,809 Future income taxes (65,748) - (33,577)
- Stock-based compensation expense 9,152 6,918 19,963 12,916
Amortization on fair value increment of long-term debt and
derivatives (2,330) (3,351) (5,681) (6,702) Other (6,288) (157)
(2,766) (7,271) Sale of income tax losses to related party (note
11) 6,838 - 6,838 - ---------------------------------- ------------
------------ ------------ 628,490 414,189 1,088,629 734,602 Change
in non-cash working capital items (150,552) (85,733) (71,872)
(233,020) ---------------------------------- ------------
------------ ------------ 477,938 328,456 1,016,757 501,582
---------------------------------- ------------ ------------
------------ Financing activities: Issuance of long- term debt
367,000 416,000 830,000 798,000 Repayment of long- term debt
(443,768) (343,847) (978,763) (698,110) Proceeds on termination of
cross-currency interest rate exchange agreements - - - 402,191
Payment on maturity of cross-currency interest rate exchange
agreements (10,286) - (10,286) (470,825) Financing costs incurred -
(2,400) - (2,400) Issue of capital stock 26,083 37,127 39,782
63,240 Dividend on Class A Voting and Class B Non-Voting shares - -
(23,543) (12,313) ---------------------------------- ------------
------------ ------------ (60,971) 106,880 (142,810) 79,783
Investing activities: Additions to property, plant and equipment
("PP&E") (402,734) (344,738) (742,790) (605,157) Change in
non-cash working capital items related to PP&E 11,623 (14,450)
(37,613) (49,966) Exercise of Fido call rights on warrants -
(38,778) - (38,778) Acquisition of Rogers Centre - 1,345 - (24,512)
Proceeds on sale of investments 1,107 2,719 1,107 12,203 Other
(39,738) (24,977) (45,985) (11,790)
---------------------------------- ------------ ------------
------------ (429,742) (418,879) (825,281) (718,000)
---------------------------------- ------------ ------------
------------ Increase (decrease) in cash (12,775) 16,457 48,666
(136,635) Cash and cash equivalents (deficiency), beginning of
period (42,440) 90,901 (103,881) 243,993
---------------------------------- ------------ ------------
------------ Cash and cash equivalents (deficiency), end of period
$ (55,215) $ 107,358 $ (55,215) $ 107,358
---------------------------------- ------------ ------------
------------ ---------------------------------- ------------
------------ ------------ Supplemental cash flow information:
Interest paid $ 198,411 $ 268,241 $ 331,715 $ 363,320 Income taxes
paid (1,072) 3,436 4,101 8,269 ----------------------------------
------------ ------------ ------------
---------------------------------- ------------ ------------
------------ Cash and cash equivalents (deficiency) are defined as
cash and short-term deposits which have an original maturity of
less than 90 days, less bank advances. Change in Non-Cash Working
Capital Items Three Months Ended Six Months Ended (In thousands
June 30, June 30, of dollars) 2006 2005 2006 2005
---------------------------------- ------------ ------------
------------ Cash provided by (used in): Increase in accounts
receivable $ (107,090) $ (102,721) $ (36,716) $ (18,354) Increase
(decrease) in accounts payable and accrued liabilities (29,967)
49,017 (11,195) (150,453) Increase (decrease) in unearned revenue
(3,534) (11,027) 43,022 4,046 Increase in other assets (9,961)
(21,002) (66,983) (68,259) ----------------------------------
------------ ------------ ------------ $ (150,552) $ (85,733) $
(71,872) $ (233,020) ----------------------------------
------------ ------------ ------------
---------------------------------- ------------ ------------
------------ See accompanying Notes to Unaudited Interim
Consolidated Financial Statements. Rogers Communications Inc.
Unaudited Consolidated Balance Sheets June 30, December 31, (In
thousands of dollars) 2006 2005
----------------------------------------------------------
-------------- Assets Current assets Accounts receivable $ 943,840
$ 890,701 Other current assets 343,199 297,846 Future income tax
asset 234,751 113,150
----------------------------------------------------------
-------------- 1,521,790 1,301,697 Property, plant and equipment
6,358,903 6,151,526 Goodwill (note 7) 2,780,098 3,035,787 Other
intangible assets 2,328,983 2,627,466 Investments 141,259 138,212
Deferred charges 116,142 129,119 Future income tax asset 552,580
347,252 Other long-term assets 133,404 103,230
----------------------------------------------------------
-------------- $ 13,933,159 $ 13,834,289
----------------------------------------------------------
--------------
----------------------------------------------------------
-------------- Liabilities and Shareholders' Equity Liabilities
Current liabilities Bank advances, arising from outstanding cheques
$ 55,215 $ 103,881 Accounts payable and accrued liabilities
1,367,809 1,411,045 Current portion of long-term debt (note 4)
474,280 286,139 Current portion of derivative instruments 20,245
14,180 Unearned revenue 218,624 176,266
----------------------------------------------------------
-------------- 2,136,173 1,991,511 Long-term debt (note 4)
6,860,624 7,453,412 Derivative instruments 1,007,657 787,369 Other
long-term liabilities 79,832 74,382
----------------------------------------------------------
-------------- 10,084,286 10,306,674 Shareholders' equity (note 5)
3,848,873 3,527,615
----------------------------------------------------------
-------------- $ 13,933,159 $ 13,834,289
----------------------------------------------------------
--------------
----------------------------------------------------------
-------------- Subsequent events (notes 4 and 11) Contingencies
(note 12) See accompanying Notes to Unaudited Interim Consolidated
Financial Statements. Rogers Communications Inc. Unaudited
Consolidated Statements of Deficit Six Months Six Months Ended
Ended June 30, June 30, (In thousands of dollars) 2006 2005
----------------------------------------------------------
-------------- Deficit, beginning of period $ (601,548) $ (416,731)
Adjustment for convertible preferred securities - (102,720)
----------------------------------------------------------
-------------- As restated (601,548) (519,451) Net income (loss)
for the period 292,357 (26,832) Dividends on Class A Voting shares
and Class B Non-Voting shares (23,668) (13,895)
----------------------------------------------------------
-------------- Deficit, end of period $ (332,859) $ (560,178)
----------------------------------------------------------
--------------
----------------------------------------------------------
-------------- See accompanying Notes to Unaudited Interim
Consolidated Financial Statements. Rogers Communications Inc. Notes
to Unaudited Interim Consolidated Financial Statements Three and
Six Months Ended June 30, 2006 and 2005 These interim Unaudited
Consolidated Financial Statements do not include all of the
disclosures required by Canadian generally accepted accounting
principles (GAAP) for annual financial statements. They should be
read in conjunction with the Audited Consolidated Financial
Statements, including the Notes thereto, for the year ended
December 31, 2005 (the "2005 Financial Statements"). 1. Basis of
Presentation and Accounting Policies: The interim Unaudited
Consolidated Financial Statements include the accounts of Rogers
Communications Inc. and its subsidiaries (collectively "Rogers" or
"the Company"). The Notes presented in these interim Unaudited
Consolidated Financial Statements include only significant changes
and transactions occurring since the Company's last year end, and
are not fully inclusive of all matters normally disclosed in the
Company's annual audited consolidated financial statements. The
Company's operating results are subject to seasonal fluctuations
that impact quarter-to-quarter operating results, and thus one
quarter's operating results are not necessarily indicative of a
subsequent quarter's operating results. These interim Unaudited
Consolidated Financial Statements follow the same accounting
policies and methods of application as the 2005 Financial
Statements except for the changes in segment reporting as described
in note 10. Certain of the prior year's comparative figures have
been reclassified to conform to the current year's presentation.
Emerging Issues Committee ("EIC") Abstract 162, "Stock-Based
Compensation for Employees Eligible to Retire Before the Vesting
Date" was issued on July 6, 2006. EIC 162 requires that the
compensation cost attributable to awards granted to employees
eligible to retire at the grant date should be recognized on the
grant date if the award's exercisability does not depend on
continued service. Additionally, awards granted to employees who
will become eligible to retire during the vesting period should be
recognized over the period from the grant date to the date the
employee becomes eligible to retire. EIC 162 must be applied
retroactively, with restatement of prior periods, effective with
the financial statements of the Company for the year ending
December 31, 2006. The Company is currently evaluating the impact
of this new standard. 2. Business Combinations: Call-Net
Enterprises Inc.: On July 1, 2005, the Company acquired 100% of
Call-Net Enterprises Inc. ("Call-Net") in a share-for-share
transaction. During the six months ended June 30, 2006, the Company
finalized the purchase price allocation upon receipt of the final
valuations of certain tangible and intangible assets acquired.
These adjustments included an increase in the fair value assigned
to property, plant and equipment of $22.3 million from that
recorded and disclosed in the 2005 Financial Statements.
Additionally, the fair value of the subscriber base acquired
increased by $24.0 million from that recorded and disclosed in the
2005 Financial Statements. Accompanied with a $1.2 million
adjustment to accrued transaction costs, these adjustments resulted
in a decrease in goodwill acquired of $47.5 million. During the
three and six months ended June 30, 2006, the Company incurred
integration expenses of $1.5 million and $4.4 million,
respectively, related to the Call-Net acquisition. Fido Solutions
Inc. (Fido): During the three and six months ended June 30, 2006,
the Company incurred $1.2 million and $4.5 million, respectively
(2005 - $11.7 million and $15.6 million, respectively) in
integration expenses related to its November 2004 acquisition of
Microcell Telecommunications Inc. ("Fido"). Additionally, during
the three and six months ended June 30, 2006, the Company paid $2.8
million and $10.7 million, respectively (2005 - $4.7 million and
$10.8 million, respectively), related to the liabilities assumed on
acquisition and included in the purchase price allocation. Other
Acquisitions: During the three months ended June 30, 2006, the
Company made other acquisitions totalling approximately $7.3
million. During the three months ended June 30, 2006, the Company
entered into an agreement to acquire certain Alberta radio stations
for a cash purchase price of $39.7 million, subject to working
capital adjustments. The transaction has not yet closed pending
approval by the Canadian Radio-television and Telecommunications
Commission. 3. Contributions to Inukshuk Wireless Partnership: On
March 31, 2006, the Company contributed certain assets to Inukshuk
Wireless Partnership ("Inukshuk"), a joint venture with Bell
Canada, whereby each venturer has a 50% ownership interest.
Inukshuk provides wireless broadband Internet capacity to the
partners in 20 centres across the country. The partners in turn
market, sell, support and bill for their respective service
offerings over their network. The Company's contribution on March
31, 2006 included 2.5GHz spectrum with a fair value of $55.0
million. As at June 30, 2006 and for the three and six months ended
June 30, 2006, proportionately consolidating 50% of Inukshuk
resulted in the following increases (decreases) in the accounts of
the Company:
-------------------------------------------------------------------------
As at and For the three for the six months ended months ended June
30, June 30, (In thousands of dollars) 2006 2006
-------------------------------------------------------------------------
Current assets $ 14,692 Long term assets 38,979 Current liabilities
7,274 Revenue $ 8 38 Expenses 4,873 6,803 Net loss 4,865 6,765
-------------------------------------------------------------------------
4. Long-Term Debt: Interest June 30, December 31, (In thousands of
dollars) Rate 2006 2005
-----------------------------------------------------------
------------ (A) Corporate: Senior Secured Notes, due 2006 10.50% $
- $ 75,000
-----------------------------------------------------------
------------ (B) Wireless: (i) Bank credit facility Floating 35,000
71,000 (ii) Senior Secured Notes, due 2006 10.50% - 160,000 (iii)
Floating Rate Senior Secured Notes, due 2010 Floating 613,250
641,245 (iv) Senior Secured Notes, due 2011 9.625% 546,350 571,291
(v) Senior Secured Notes, due 2011 7.625% 460,000 460,000 (vi)
Senior Secured Notes, due 2012 7.25% 524,050 547,973 (vii) Senior
Secured Notes, due 2014 6.375% 836,250 874,425 (viii) Senior
Secured Notes, due 2015 7.50% 613,250 641,245 (ix) Senior Secured
Debentures, due 2016 9.75% 172,714 180,598 (x) Senior Subordinated
Notes, due 2012 8.00% 446,000 466,360 (xi) Fair value increment
arising from purchase accounting 39,211 44,326
-----------------------------------------------------------
------------ 4,286,075 4,658,463 (C) Cable: (i) Bank credit
facility Floating 385,000 267,000 (ii) Senior Secured Second
Priority Notes, due 2007 7.60% 450,000 450,000 (iii) Senior Secured
Second Priority Notes, due 2011 7.25% 175,000 175,000 (iv) Senior
Secured Second Priority Notes, due 2012 7.875% 390,250 408,065 (v)
Senior Secured Second Priority Notes, due 2013 6.25% 390,250
408,065 (vi) Senior Secured Second Priority Notes, due 2014 5.50%
390,250 408,065 (vii) Senior Secured Second Priority Notes, due
2015 6.75% 312,200 326,452 (viii) Senior Secured Second Priority
Debenture, due 2032 8.75% 223,000 233,180
-----------------------------------------------------------
------------ 2,715,950 2,675,827 (D) Media: Bank credit facility
Floating 306,000 274,000
-----------------------------------------------------------
------------ (E) Telecom: (i) Senior Secured Notes, due 2008
10.625% - 25,703 (ii) Fair value increment arising from purchase
accounting - 1,619
-----------------------------------------------------------
------------ - 27,322 Mortgages and other Various 26,879 28,939
-----------------------------------------------------------
------------ 7,334,904 7,739,551 Less current portion (474,280)
(286,139)
-----------------------------------------------------------
------------ $ 6,860,624 $ 7,453,412
-----------------------------------------------------------
------------
-----------------------------------------------------------
------------ On January 3, 2006, the Company redeemed the remaining
outstanding amount of Rogers Telecom Holdings Inc.'s 10.625% Senior
Secured Notes due 2008. The total redemption amount was US$23.2
million including a redemption premium of US$1.2 million. On
February 14, 2006, the Company repaid, at maturity, the $75.0
million aggregate principal amount outstanding of its 10.50% Senior
Secured Notes due 2006. On June 1, 2006, the Company repaid, at
maturity, the $160.0 million aggregate principal amount outstanding
of its 10.50% Senior Secured Notes due 2006. Subsequent to June 30,
2006, Rogers Cable Inc. entered into an amendment to its bank
credit facility to insert provisions for the springing release of
security in a similar fashion as provided in all of Rogers Cable
Inc.'s public debt indentures. Basically, this provision provides
that if Rogers Cable Inc. has two investment grade ratings on its
debt and there is no other debt or cross-currency interest rate
exchange agreement secured by a bond issued under the Rogers Cable
Inc. deed of trust, then the security provided for a particular
debt instrument will be discharged upon 45 days prior notice by
Rogers Cable Inc. A similar amendment is being made in each of
Rogers Cable Inc.'s cross-currency interest rate exchange
agreements. 5. Shareholders' Equity: June 30, December 31, (In
thousands of dollars) 2006 2005
-----------------------------------------------------------
------------ Capital stock issued, at stated value: Common Shares:
56,233,894 Class A Common Shares $ 72,311 $ 72,311 259,731,263
Class B Common Shares (2005 - 257,702,341) 422,005 418,695
-----------------------------------------------------------
------------ Total capital stock 494,316 491,006 Contributed
surplus 3,687,416 3,638,157 Deficit (332,859) (601,548)
-----------------------------------------------------------
------------ $ 3,848,873 $ 3,527,615
-----------------------------------------------------------
------------
-----------------------------------------------------------
------------ (i) During the six months ended June 30, 2006, the
Company issued 2,028,922 Class B Non-Voting shares to employees
upon exercise of options for consideration of $35.1 million. (ii)
On April 25, 2006, the Company declared a dividend of $0.075 per
share on each of its outstanding Class B Non-Voting shares and
Class A Voting shares. This semi-annual dividend totalling $23.7
million was paid on July 4, 2006 to the shareholders of record on
June 14, 2006. (iii) Stock-based compensation: During the three and
six months ended June 30, 2006, the Company granted 22,140 and
314,050 options, respectively, to employees (2005 ? 13,712 and
424,562 options, respectively). During the three and six months
ended June 30, 2006, the Company recorded compensation expense of
approximately $9.2 million and $20.0 million, respectively, (2005 -
$6.9 million and $12.9 million, respectively) related to stock
option grants to employees; an amendment to the option plans;
performance option grants to certain key employees; and restricted
share unit grants to employees. The details of these stock-based
compensation transactions are as follows: (a) The weighted average
estimated fair value at the date of the grant for RCI options
granted during the three and six months ended June 30, 2006 was
$18.17 and $17.63 per share, respectively (2005 - $15.35 and $15.34
per share, respectively). The fair value of each option granted was
estimated on the date of the grant using the Black-Scholes option
pricing model with the following assumptions: Three Months Ended
Six Months Ended June 30, June 30, 2006 2005 2006 2005
------------------------------------- ----------- -----------
----------- Risk-free interest rate 4.34% 3.86% 4.07% 4.01%
Dividend yield 0.32% 0.28% 0.33% 0.29% Volatility factor of the
future expected market price of Class B Non-Voting shares 36.57%
43.88% 37.42% 43.93% Weighted average expected life of the options
4.9 years 5.4 years 4.9 years 5.6 years
------------------------------------- ----------- -----------
----------- (b) Effective March 1, 2006, the Company amended
certain provisions of its stock option plans which resulted in a
new measurement date for purposes of determining compensation cost.
The amendment provides that on the death or retirement of an option
holder, or the resignation of a director, options would continue to
be exercisable until the original expiry date in accordance with
their original terms and the vesting would not be accelerated but
instead would continue in accordance with the original vesting
period. The amendment resulted in additional compensation cost of
$6.6 million, of which $2.4 million was immediately recorded as
compensation expense related to vested options. The remaining $4.2
million related to unvested options will be charged to income over
the remaining vesting period. The fair value of each modified
option was estimated on the March 1, 2006 measurement date using
the Black-Scholes option pricing model with the following
assumptions:
-------------------------------------------------------------------------
Risk-free interest rate 4.05% Dividend yield 0.33% Volatility
factor of the future expected market price of Class B Non-Voting
shares 42.30% Weighted average expected life of options 5.6 years
-------------------------------------------------------------------------
(c) On March 1, 2006, the Company granted 699,400 performance
options to certain employees of the Company. These options vest on
a straight line basis over four years provided that certain
targeted stock prices are met. A binomial valuation model was used
to determine the $12.1 million fair value of these options at the
date of grant. Of this $12.1 million, $0.5 million and $0.8 million
was recorded as compensation cost in the three and six months ended
June 30, 2006, respectively, with the remainder to be recognized
over the remaining service period. The fair value of each option
was calculated on the March 1, 2006 measurement date based on the
following assumptions:
-------------------------------------------------------------------------
Risk-free interest rate 4.05% Dividend yield 0.33% Volatility
factor of the future expected market price of Class B Non-Voting
shares 39.60% Weighted average expected life of options 5.4 years
-------------------------------------------------------------------------
(d) During the three and six months ended June 30, 2006, the
Company issued 2,000 and 198,582 restricted share units,
respectively (2005 - nil and 236,801 respectively). As at June 30,
2006, 475,839 restricted share units were outstanding. These
restricted share units vest at the end of three years from the
grant date. The Company records compensation expense over the
vesting period taking into account fluctuations in the market price
of the Class B Non- Voting shares. 6. Video Store Closure Expenses:
During the first quarter of 2006, the Company made the decision to
close 21 of its Video stores in Ontario and Quebec. The costs to
exit these stores include lease termination and involuntary
severance costs totalling nil and $2.3 million for the three and
six months ended June 30, 2006, respectively, as well as a write
down of the related property, plant and equipment totalling $0.3
million and $2.8 million for the three and six months ended June
30, 2006, respectively. 7. Income Taxes: Current income tax expense
has historically consisted primarily of the Canadian Federal Large
Corporations Tax ("LCT"). Due to the elimination of the LCT, a
current income tax recovery of $2.3 million was recorded for the
three month period ended June 30, 2006 which includes a reversal of
LCT expensed during the first quarter of 2006. A net future income
tax recovery of $65.7 million and $33.6 million has been recorded
for the three and six month periods ended June 30, 2006,
respectively. Based on management's assessment of the expected
realization of future income tax assets during the current period,
the Company reduced the valuation allowance recorded against
certain future income tax assets by $429.2 million to reflect that
it is more likely than not that the future income tax assets will
be realized. Approximately $300.2 million of the reduction in the
valuation allowance related to future income tax assets arising on
acquisitions. Accordingly, the benefit related to these assets has
been reflected as a reduction of goodwill in the amount of $208.6
million and other intangible assets in the amount of $91.6 million.
8. Earnings (Loss) Per Share: Three Months Six Months (In
thousands, except Ended June 30, Ended June 30, per share amounts)
2006 2005 2006 2005 -------------------------------------
----------- ----------- ----------- Numerator: Net income (loss) -
basic and diluted $ 277,541 $ 19,194 $ 292,357 $ (26,832)
------------------------------------- ----------- -----------
----------- Denominator: Weighted average number of Class A and
Class B shares outstanding: Basic 315,263 277,246 314,773 276,498
Effect of dilutive securities: Employee stock options 5,069 6,428
5,238 - ------------------------------------- -----------
----------- ----------- Diluted 320,332 283,674 320,011 276,498
Earnings (loss) per share for the period: Basic $ 0.88 $ 0.07 $
0.93 $ (0.10) Diluted 0.87 0.07 0.91 (0.10)
------------------------------------- ----------- -----------
----------- 9. Pensions: For the three and six months ended June
30, 2006, the Company recorded pension expense in the amount of
$7.4 million and $16.7 million, respectively (2005 - $6.8 million
and $9.9 million, respectively). In addition, the expense related
to unfunded supplemental executive retirement plans was $0.9
million and $2.0 million for the three and six months ended June
30, 2006, respectively (2005 - $0.8 million and $1.5 million,
respectively). 10. Segmented Information: In January 2006, the
Company completed a re-organization whereby ownership of the
operating subsidiaries of Rogers Telecom Holdings Inc., a wholly
owned subsidiary of the Company, was transferred to Rogers Cable
Inc. The re-organization impacted the Company's management
reporting resulting in changes to the Company's reportable
segments. Effective the first quarter of 2006, the following are
the reportable segments of the Company: Wireless, Media, Cable and
Internet, Rogers Business Solutions, Rogers Home Phone and Video
stores. Comparative figures are presented on this basis. For the
Three Months Ended June 30, 2006 Cable & Telecom
----------------------------------------------- Rogers Rogers Cable
& Home Business Video (In thousands Internet Phone Solutions
store of dollars) Wireless services operations operations
operations
-------------------------------------------------------------------------
Operating revenue $1,151,130 $ 486,366 $ 85,823 $ 143,546 $ 72,158
Cost of sales 189,721 - - - 35,724 Sales and marketing costs
137,678 30,895 22,515 17,711 29,702 Operating, general and admin-
istrative expenses 335,763 245,363 58,434 108,462 4,767 Video store
closure expenses - - - - 355
-------------------------------------------------------------------------
487,968 $ 210,108 $ 4,874 $ 17,373 $ 1,610
-----------------------------------------------
----------------------------------------------- Management fees
3,096 Integration expenses 1,165
-------------------------------------------------------------------------
483,707 Depreciation and amortization 151,788
-------------------------------------------------------------------------
Operating income (loss) 331,919 Interest Long-term debt and other
(99,668) Intercompany 39,890 Foreign exchange gain 36,447 Change in
fair value of derivative instruments (33,002) Other income
(expense) 573 Income tax expense (recovery) (87,845)
------------------------------------------------------------------------
Net income (loss) for the period $ 188,314
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Additions to property, plant and equipment $ 206,985 $ 106,877 $
37,522 $ 16,266 $ 1,278
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cable & Telecom ----------------------- Cable corporate
Corporate items Total items Consol- (In thousands and elimi- Cable
and elimi- idated of dollars) nations & Telecom Media nations
Totals
-------------------------------------------------------------------------
Operating revenue $ (977) $ 786,916 $ 333,829 $ (35,601) $2,236,274
Cost of sales - 35,724 39,642 - 265,087 Sales and marketing costs -
100,823 49,844 1,175 289,520 Operating, general and admin-
istrative expenses (977) 416,049 192,374 (7,720) 936,466 Video
store closure expenses - 355 - - 355
-------------------------------------------------------------------------
$ - 233,965 51,969 (29,056) 744,846 --------------------------
-------------------------- Management fees 15,757 4,242 (23,095) -
Integration expenses 1,552 - - 2,717
-------------------------------------------------------------------------
216,656 47,727 (5,961) 742,129 Depreciation and amortization
159,578 12,438 70,959 394,763
-------------------------------------------------------------------------
Operating income (loss) 57,078 35,289 (76,920) 347,366 Interest
Long-term debt and other (53,495) (4,303) 2,772 (154,694)
Intercompany (7,783) (392) (31,715) - Foreign exchange gain 4,465
1,388 3,000 45,300 Change in fair value of derivative instruments
295 - - (32,707) Other income (expense) (439) 440 3,701 4,275
Income tax expense (recovery) 461,147 83,087 (388,388) 68,001
----------------------------------------------- Net income (loss)
for the period $ 461,268 $ 115,509 $ (487,550) $ 277,541
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Additions to property, plant and equipment $ - $ 161,943 $ 16,220 $
17,586 $ 402,734
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the Three Months Ended June 30, 2005 Cable & Telecom
----------------------------------------------- Rogers Rogers Cable
& Home Business Video (In thousands Internet Phone Solutions
store of dollars) Wireless services operations operations
operations
-------------------------------------------------------------------------
Operating revenue $ 963,886 $ 425,270 $ - $ 1,107 $ 74,735 Cost of
sales 161,325 - - - 34,148 Sales and marketing costs 133,179 33,725
- 829 33,346 Operating, general and administrative expenses 292,914
219,230 - 3,756 4,515
-------------------------------------------------------------------------
376,468 $ 172,315 $ - $ (3,478) $ 2,726
-----------------------------------------------
----------------------------------------------- Management fees
3,006 Integration expenses 11,710 ------------------------- 361,752
Depreciation and amortization 163,932 -------------------------
Operating income (loss) 197,820 Interest Long-term debt and other
(101,321) Intercompany 5,754 Foreign exchange loss (11,754) Change
in fair value of derivative instruments 10,340 Other income
(expense) 608 Income tax expense (recovery) (1,661)
------------------------- Net income (loss) for the period $ 99,786
------------------------- Additions to property, plant and
equipment $ 153,736 $ 136,280 $ 35,011 $ 6,182 $ 4,215
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cable & Telecom ----------------------- Cable corporate
Corporate items Total items Consol- (In thousands and elimi- Cable
and elimi- idated of dollars) nations & Telecom Media nations
Totals
------------------------------------------------------------------------
Operating revenue $ (1,032) $ 500,080 $ 293,402 $ (24,857)
$1,732,511 Cost of sales - 34,148 35,865 - 231,338 Sales and
marketing costs - 67,900 47,642 - 248,721 Operating, general and
administrative expenses (1,032) 226,469 165,700 (9,795) 675,288
-------------------------------------------------------------------------
$ - 171,563 44,195 (15,062) 577,164 -------------------------
------------------------- Management fees 9,971 4,186 (17,163) -
Integration expenses - - - 11,710
--------------------------------------------- 161,592 40,009 2,101
565,454 Depreciation and amortization 115,462 13,448 65,904 358,746
--------------------------------------------- Operating income
(loss) 46,130 26,561 (63,803) 206,708 Interest Long-term debt and
other (59,623) (3,016) (16,365) (180,325) Intercompany (4,774)
(1,071) 91 - Foreign exchange loss (2,544) (98) (3,874) (18,270)
Change in fair value of derivative instruments 173 - 1 10,514 Other
income (expense) 2,344 942 421 4,315 Income tax expense (recovery)
(1,386) (431) (270) (3,748)
--------------------------------------------- Net income (loss) for
the period $ (19,680) $ 22,887 $ (83,799) $ 19,194
---------------------------------------------
--------------------------------------------- Additions to
property, plant and equipment $ - $ 181,688 $ 8,825 $ 489 $ 344,738
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the Six Months Ended June 30, 2006 Cable & Telecom
----------------------------------------------- Rogers Rogers Cable
& Home Business Video (In thousands Internet Phone Solutions
store of dollars) Wireless services operations operations
operations
-------------------------------------------------------------------------
Operating revenue $2,202,367 $ 951,021 $ 166,188 $ 292,482 $
153,211 Cost of sales 384,322 - - - 73,952 Sales and marketing
costs 265,814 61,415 39,726 34,217 60,811 Operating, general and
administrative expenses 655,807 483,955 116,943 228,108 10,131
Video store closure expenses - - - - 5,155
-------------------------------------------------------------------------
896,424 $ 405,651 $ 9,519 $ 30,157 $ 3,162
-----------------------------------------------
----------------------------------------------- Management fees
6,192 Integration expenses 4,488 ------------------------- 885,744
Depreciation and amortization 297,499 -------------------------
Operating income (loss) 588,245 Interest Long-term debt and other
(201,251) Intercompany 79,342 Foreign exchange gain 35,218 Change
in fair value of derivative instruments (30,175) Other income
(expense) 46 Income tax expense (recovery) (138,045)
------------------------- Net income (loss) for the period $
333,380
-------------------------------------------------------------------------
Additions to property, plant and equipment $ 321,908 $ 188,723 $
59,133 $ 23,814 $ 2,376
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cable & Telecom ----------------------- Cable corporate
Corporate items Total items Consol- (In thousands and elimi- Cable
and elimi- idated of dollars) nations & Telecom Media nations
Totals
-------------------------------------------------------------------------
Operating revenue $ (1,954) $1,560,948 $ 573,951 $ (69,240)
$4,268,026 Cost of sales - 73,952 85,320 - 543,594 Sales and
marketing costs - 196,169 97,729 2,164 561,876 Operating, general
and administrative expenses (1,954) 837,183 325,796 (8,742)
1,810,044 Video store closure expenses - 5,155 - - 5,155
-------------------------------------------------------------------------
$ - 448,489 65,106 (62,662) 1,347,357 ------------------------
------------------------ Management fees 31,238 7,869 (45,299) -
Integration expenses 4,448 - - 8,936
----------------------------------------------- 412,803 57,237
(17,363) 1,338,421 Depreciation and amortization 319,915 24,747
138,715 780,876 -----------------------------------------------
Operating income (loss) 92,888 32,490 (156,078) 557,545 Interest
Long-term debt and other (112,603) (7,096) 4,681 (316,269)
Intercompany (15,189) (805) (63,348) - Foreign exchange gain 1,305
2,016 2,477 41,016 Change in fair value of derivative instruments
584 - - (29,591) Other income (expense) (708) 716 6,516 6,570
Income tax expense (recovery) 459,992 81,549 (370,410) 33,086
----------------------------------------------- Net income (loss)
for the period $ 426,269 $ 108,870 $ (576,162) $ 292,357
-------------------------------------------------------------------------
Additions to property, plant and equipment $ - $ 274,046 $ 25,403 $
121,433 $ 742,790
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the Six Months Ended June 30, 2005 Cable & Telecom
----------------------------------------------- Rogers Rogers Cable
& Home Business Video (In thousands Internet Phone Solutions
store of dollars) Wireless services operations operations
operations
-------------------------------------------------------------------------
Operating revenue $1,839,259 $ 846,763 $ - $ 2,173 $ 158,376 Cost
of sales 320,911 - - - 72,567 Sales and marketing costs 257,157
64,540 - 1,711 66,139 Operating, general and administrative
expenses 582,475 433,440 - 6,921 9,764
-------------------------------------------------------------------------
678,716 $ 348,783 $ - $ (6,459) $ 9,906
-----------------------------------------------
----------------------------------------------- Management fees
6,012 Integration expenses 15,580 ------------------------- 657,124
Depreciation and amortization 309,360 -------------------------
Operating income (loss) 347,764 Interest Long-term debt and other
(201,287) Intercompany 26,564 Foreign exchange loss (15,741) Change
in fair value of derivative instruments 14,099 Other income
(expense) (133) Income tax expense (recovery) (3,453)
------------------------- Net income (loss) for the period $
167,813
-------------------------------------------------------------------------
Additions to property, plant and equipment $ 272,964 $ 223,068 $
58,906 $ 7,757 $ 7,807
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cable & Telecom ----------------------- Cable corporate
Corporate items Total items Consol- (In thousands and elimi- Cable
and elimi- idated of dollars) nations & Telecom Media nations
Totals
-------------------------------------------------------------------------
Operating revenue $ (1,977) $1,005,335 $ 512,682 $ (42,350)
$3,314,926 Cost of sales - 72,567 77,629 - 471,107 Sales and
marketing costs - 132,390 92,468 - 482,015 Operating, general and
administrative expenses (1,977) 448,148 287,070 (12,147) 1,305,546
-------------------------------------------------------------------------
$ - 352,230 55,515 (30,203) 1,056,258 -------------------------
------------------------- Management fees 20,076 7,328 (33,416) -
Integration expenses - - - 15,580
----------------------------------------------- 332,154 48,187
3,213 1,040,678 Depreciation and amortization 239,602 25,917
125,500 700,379 -----------------------------------------------
Operating income (loss) 92,552 22,270 (122,287) 340,299 Interest
Long-term debt and other (127,210) (4,205) (32,389) (365,091)
Intercompany (6,888) (3,546) (16,130) - Foreign exchange loss
(3,413) (550) (4,525) (24,229) Change in fair value of derivative
instruments 1,210 - 3 15,312 Other income (expense) 2,837 1,102
10,334 14,140 Income tax expense (recovery) (2,771) (733) (306)
(7,263) ----------------------------------------------- Net income
(loss) for the period $ (43,683) $ 14,338 $ (165,300) $ (26,832)
-------------------------------------------------------------------------
Additions to property, plant and equipment $ - $ 297,538 $ 22,360 $
12,295 $ 605,157
-------------------------------------------------------------------------
-------------------------------------------------------------------------
11. Related Party Transactions: During the three and six months
ended June 30, 2006 and 2005, the Company has entered into certain
transactions in the normal course of business with certain
broadcasters in which the Company has an equity interest as
follows: Three Months Ended Six Months Ended June 30, June 30, (In
thousands of dollars) 2006 2005 2006 2005
------------------------------------------- --------- ---------
--------- Fees paid to broadcasters accounted for by the equity
method $ 5,190 $ 4,723 $ 10,025 $ 9,214
------------------------------------------- --------- ---------
--------- The fees above were paid to a number of Canadian pay,
specialty and digital specialty channels including Viewer's Choice
Canada, Prime, Outdoor Life Network, G4TechTV, and Biography
Channel. On June 12, 2006, the Company increased its ownership in
Biography Canada and G4TechTV Canada to 100% and 66 2/3%,
respectively. The Company has entered into certain transactions
with companies, the partners or senior officers of which are or
have been directors of the Company and/or its subsidiary companies.
During the three and six months ended June 30, 2006 and 2005, total
amounts paid by the Company to these related parties are as
follows: Three Months Ended Six Months Ended June 30, June 30, (In
thousands of dollars) 2006 2005 2006 2005
------------------------------------------- --------- ---------
--------- Legal services and commissions paid on premiums for
insurance coverage $ 1,079 $ 1,500 $ 1,593 $ 3,200
Telecommunications and programming services - 100 - 1,600 Interest
charges and other financing fees - 10,400 - 22,000
------------------------------------------- --------- ---------
--------- $ 1,079 $ 12,000 $ 1,593 $ 26,800
------------------------------------------- --------- ---------
--------- During the three and six months ended June 30, 2006 and
2005, the Company made payments to companies controlled by the
controlling shareholder of the Company as follows: Three Months
Ended Six Months Ended June 30, June 30, (In thousands of dollars)
2006 2005 2006 2005 -------------------------------------------
--------- --------- --------- Net charges for business use of
aircraft and other administrative services $ 129 $ 148 $ 442 $ 331
------------------------------------------- --------- ---------
--------- As disclosed in Note 18 to the Annual Audited
Consolidated Financial Statements for the year ended December 31,
2005, with the approval of a special committee of the Board of
Directors, the Company entered into an arrangement to sell to the
controlling shareholder of the Company, for $13 million in cash,
the shares in two wholly owned subsidiaries whose only asset
consists of tax losses aggregating approximately $100 million.
Further to this arrangement, on April 7, 2006, a company controlled
by the controlling shareholder of the Company purchased the shares
in one of these wholly owned subsidiaries for cash of $6.8 million.
On July 24, 2006, the shares of the second wholly owned subsidiary
were purchased by a company controlled by the controlling
shareholder for cash of $6.2 million. 12. Contingencies: In 2000,
the Company received a $241 million payment (the "Termination
Payment") from Le Group Videotron Ltee ("Videotron") in respect of
the termination of a merger agreement between the Company and
Videotron. The Canada Revenue Agency disagrees with the Company's
tax filing position in respect of the Termination Payment and in
May 2006, issued a Notice of Reassessment which would result in
additional income tax and related interest of approximately $63
million being payable by the Company. Management intends to
vigorously contest this reassessment and is of the view that the
Company should ultimately prevail; accordingly the Company has not
recorded a liability for this contingency. On August 9, 2004, a
proceeding under the Class Actions Act (Saskatchewan) was brought
against providers of wireless communications in Canada, including
the Company. The proceeding involves allegations by wireless
customers of breach of contract, misrepresentation, false
advertising and unjust enrichment arising out of the charging of
system access fees. The plaintiffs are seeking un-quantified
damages from the defendant wireless communications service
providers. In July 2006, the Saskatchewan court denied the
plaintiffs' application to have the proceeding certified as a class
action. However, the court granted leave to the plaintiffs to renew
their applications in order to address the requirements of the
Saskatchewan class proceedings legislation. Similar proceedings
have also been brought against the Company and other providers of
wireless communications in most of Canada. The Company has not
recorded a liability for this contingency since the likelihood and
amount of any potential loss cannot be reasonably estimated.
Caution Regarding Forward-Looking Statements This MD&A includes
forward-looking statements and assumptions concerning the future
performance of our business, its operations and its financial
performance and condition. These forward-looking statements
include, but are not limited to, statements with respect to our
objectives and strategies to achieve those objectives, as well as
statements with respect to our beliefs, plans, expectations,
anticipations, estimates or intentions. Statements containing
expressions such as "could", "expect", "may", "anticipate",
"assume", "believe", "intend", "estimate", "plan", "guidance", and
similar expressions generally constitute forward-looking
statements. These forward- looking statements also include, but are
not limited to, guidance relating to revenue, operating profit and
PP&E expenditures, expected growth in subscribers, the
deployment of new services, integration costs, and all other
statements that are not historical facts. Such forward-looking
statements are based on current expectations and various factors
and assumptions applied which we believe to be reasonable at the
time, including but not limited to general economic and industry
growth rates, currency exchange rates, product pricing levels and
competitive intensity, subscriber growth and usage rates,
technology deployment, content and equipment costs, the integration
of acquisitions, and industry structure and stability. We caution
that all forward-looking information is inherently uncertain and
that actual results may differ materially from the assumptions,
estimates or expectations reflected in the forward-looking
information. A number of factors could cause actual results to
differ materially from those in the forward-looking statements,
including but not limited to economic conditions, technological
change, the integration of acquisitions, unanticipated changes in
content or equipment costs, changing conditions in the
entertainment, information and communications industries,
regulatory changes, litigation and tax matters, and the level of
competitive intensity, many of which are beyond our control.
Therefore, should one or more of these risks materialize, or should
assumptions underlying the forward-looking statements prove
incorrect, actual results may vary significantly from what we
currently foresee. Accordingly, we warn investors to exercise
caution when considering any such forward-looking information
herein and to not place undue reliance on such statements and
assumptions. We are under no obligation (and we expressly disclaim
any such obligation) to update or alter any forward-looking
statements or assumptions whether as a result of new information,
future events or otherwise, except as required by law. Before
making any investment decisions and for a more detailed discussion
of the risks, uncertainties, material factors and assumptions
associated with our business that were applied in drawing
conclusions or making a forecasts set out in such forward-looking
information, see the MD&A sections of our 2005 Annual Report
entitled "Risks and Uncertainties" (found on pages 62 to 74) and
"Material Assumptions" (found on pages 88 to 89), as well as the
"Updates to Risks and Uncertainties" and "Government Regulation and
Regulatory Developments" sections herein. Our annual and quarterly
reports can be found at http://www.rogers.com/.
http://www.sedar.com/, and http://www.sec.gov/. Additional
Information Additional information relating to us, including our
Annual Information Form, Form 40-FA and discussions of our most
recent quarterly results, may be found on SEDAR at
http://www.sedar.com/ or on EDGAR at http://www.sec.gov/. Separate
annual and quarterly financial results for RWI and Cable are also
filed and are available on SEDAR and EDGAR. About the Company
Rogers Communications Inc. (TSX: RCI; NYSE: RG) is a diversified
Canadian communications and media company engaged in three primary
lines of business. Rogers Wireless is Canada's largest wireless
voice and data communications services provider and the country's
only carrier operating on the world standard GSM technology
platform. Rogers Cable and Telecom is Canada's largest cable
television provider offering cable television, high-speed Internet
access, residential telephony services, and video retailing, while
its Rogers Business Solutions division is a national provider of
voice communications services, data networking, and broadband
Internet connectivity to small, medium and large businesses. Rogers
Media is Canada's premier collection of category leading media
assets with businesses in radio and television broadcasting,
televised shopping, publishing, and sports entertainment. For
further information about the Rogers group of companies, please
visit http://www.rogers.com/. Separate annual and quarterly
financial results for Rogers Wireless Inc. and Rogers Cable Inc.
are also filed and are available on SEDAR and EDGAR. Quarterly
Investment Community Conference Call As previously announced by
press release, a live Webcast of our quarterly results conference
call with the investment community will be broadcast via the
Internet at http://www.rogers.com/webcast beginning at 10:00 ET on
August 1, 2006. A rebroadcast of this call will be available on the
Webcast Archive page of the Investor Relations section of
http://www.rogers.com/ for a period of at least two weeks following
the call. DATASOURCE: Rogers Communications Inc. CONTACT:
PRNewswire - - Aug. 1
Copyright
