Exhibit 99.2
Rogers Communications Inc.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Three months ended March 31, 2023 and 2022
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Rogers Communications Inc. | 1 | First Quarter 2023 |
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Rogers Communications Inc.
Interim Condensed Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts, unaudited)
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| | Three months ended March 31 | | |
| Note | 2023 | 2022 | | | |
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Revenue | 5 | | 3,835 | | 3,619 | | | | |
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Operating expenses: | | | | | | |
Operating costs | 6 | 2,184 | | 2,080 | | | | |
Depreciation and amortization | | 631 | | 646 | | | | |
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Restructuring, acquisition and other | 7 | 55 | | 96 | | | | |
Finance costs | 8 | 296 | | 258 | | | | |
Other income | 9 | (27) | | (6) | | | | |
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Income before income tax expense | | 696 | | 545 | | | | |
Income tax expense | | 185 | | 153 | | | | |
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Net income for the period | | 511 | | 392 | | | | |
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Earnings per share: | | | | | | |
Basic | 10 | $1.01 | $0.78 | | | |
Diluted | 10 | $1.00 | $0.77 | | | |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
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Rogers Communications Inc. | 2 | First Quarter 2023 |
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Rogers Communications Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
(In millions of Canadian dollars, unaudited)
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| Three months ended March 31 | | |
| 2023 | 2022 | | | |
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Net income for the period | 511 | | 392 | | | | |
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Other comprehensive income: | | | | | |
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Items that will not be reclassified to income: | | | | | |
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Equity investments measured at fair value through other comprehensive income (FVTOCI): | | | | | |
(Decrease) increase in fair value | (138) | | 27 | | | | |
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Related income tax recovery (expense) | 18 | | (1) | | | | |
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Equity investments measured at FVTOCI | (120) | | 26 | | | | |
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Items that may subsequently be reclassified to income: | | | | | |
Cash flow hedging derivative instruments: | | | | | |
Unrealized gain in fair value of derivative instruments | 134 | | 75 | | | | |
Reclassification to net income of loss on debt derivatives | 30 | | 385 | | | | |
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Reclassification to net income or property, plant and equipment of (gain) loss on expenditure derivatives | (25) | | 8 | | | | |
Reclassification to net income for accrued interest | (11) | | (3) | | | | |
Related income tax expense | (9) | | (46) | | | | |
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Cash flow hedging derivative instruments | 119 | | 419 | | | | |
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Share of other comprehensive income (loss) of equity-accounted investments, net of tax | 2 | | (4) | | | | |
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Other comprehensive income for the period | 1 | | 441 | | | | |
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Comprehensive income for the period | 512 | | 833 | | | | |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
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Rogers Communications Inc. | 3 | First Quarter 2023 |
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Rogers Communications Inc.
Interim Condensed Consolidated Statements of Financial Position
(In millions of Canadian dollars, unaudited)
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| | As at March 31 | As at December 31 | |
| Note | 2023 | 2022 | |
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Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | 553 | | 463 | | |
Restricted cash and cash equivalents | 11 | 12,837 | | 12,837 | | |
Accounts receivable | 12 | 4,137 | | 4,184 | | |
Inventories | | 555 | | 438 | | |
Current portion of contract assets | | 117 | | 111 | | |
Other current assets | | 727 | | 561 | | |
Current portion of derivative instruments | 11 | 445 | | 689 | | |
Total current assets | | 19,371 | | 19,283 | | |
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Property, plant and equipment | | 15,947 | | 15,574 | | |
Intangible assets | | 12,255 | | 12,251 | | |
Investments | 13 | | 1,965 | | 2,088 | | |
Derivative instruments | 11 | | 929 | | 861 | | |
Financing receivables | 12 | 891 | | 886 | | |
Other long-term assets | | 740 | | 681 | | |
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Goodwill | | 4,031 | | 4,031 | | |
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Total assets | | 56,129 | | 55,655 | | |
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Liabilities and shareholders' equity | | | | |
Current liabilities: | | | | |
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Short-term borrowings | 14 | | 4,323 | | 2,985 | | |
Accounts payable and accrued liabilities | | 2,928 | | 3,722 | | |
Income tax payable | | 59 | | — | | |
Other current liabilities | | 260 | | 252 | | |
Contract liabilities | | 455 | | 400 | | |
Current portion of long-term debt | 15 | | 1,750 | | 1,828 | | |
Current portion of lease liabilities | 16 | | 372 | | 362 | | |
Total current liabilities | | 10,147 | | 9,549 | | |
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Provisions | | 51 | | 53 | | |
Long-term debt | 15 | | 29,614 | | 29,905 | | |
Lease liabilities | 16 | | 1,676 | | 1,666 | | |
Other long-term liabilities | | 684 | | 738 | | |
Deferred tax liabilities | | 3,605 | | 3,652 | | |
Total liabilities | | 45,777 | | 45,563 | | |
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Shareholders' equity | 17 | 10,352 | | 10,092 | | |
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Total liabilities and shareholders' equity | | 56,129 | | 55,655 | | |
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Subsequent events | 3, 15, 17, 20, 22 | | | |
Contingent liabilities | 20 | | | |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
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Rogers Communications Inc. | 4 | First Quarter 2023 |
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Rogers Communications Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders' Equity
(In millions of Canadian dollars, except number of shares, unaudited)
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| Class A Voting Shares | Class B Non-Voting Shares | | | | | |
Three months ended March 31, 2023 | Amount | Number of shares (000s) | Amount | Number of shares (000s) | Retained earnings | FVTOCI investment reserve | Hedging reserve | Equity investment reserve | Total shareholders' equity |
Balances, January 1, 2023 | 71 | | 111,152 | | 397 | | 393,773 | | 9,816 | | 672 | | (872) | | 8 | | 10,092 | |
Net income for the period | — | | — | | — | | — | | 511 | | — | | — | | — | | 511 | |
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Other comprehensive income (loss): | | | | | | | | | |
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FVTOCI investments, net of tax | — | | — | | — | | — | | — | | (120) | | — | | — | | (120) | |
Derivative instruments accounted for as hedges, net of tax | — | | — | | — | | — | | — | | — | | 119 | | — | | 119 | |
Share of equity-accounted investments, net of tax | — | | — | | — | | — | | — | | — | | — | | 2 | | 2 | |
Total other comprehensive (loss) income | — | | — | | — | | — | | — | | (120) | | 119 | | 2 | | 1 | |
Comprehensive income for the period | — | | — | | — | | — | | 511 | | (120) | | 119 | | 2 | | 512 | |
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Transactions with shareholders recorded directly in equity: | | | | | | | | | |
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Dividends declared | — | | — | | — | | — | | (252) | | — | | — | | — | | (252) | |
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Total transactions with shareholders | — | | — | | — | | — | | (252) | | — | | — | | — | | (252) | |
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Balances, March 31, 2023 | 71 | | 111,152 | | 397 | | 393,773 | | 10,075 | | 552 | | (753) | | 10 | | 10,352 | |
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| Class A Voting Shares | Class B Non-Voting Shares | | | | | |
Three months ended March 31, 2022 | Amount | Number of shares (000s) | Amount | Number of shares (000s) | Retained earnings | FVTOCI investment reserve | Hedging reserve | Equity investment reserve | Total shareholders' equity |
Balances, January 1, 2022 | 71 | | 111,153 | | 397 | | 393,772 | | 8,912 | | 993 | | 161 | | (2) | | 10,532 | |
Net income for the period | — | | — | | — | | — | | 392 | | — | | — | | — | | 392 | |
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Other comprehensive income (loss): | | | | | | | | | |
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FVTOCI investments, net of tax | — | | — | | — | | — | | — | | 26 | | — | | — | | 26 | |
Derivative instruments accounted for as hedges, net of tax | — | | — | | — | | — | | — | | — | | 419 | | — | | 419 | |
Share of equity-accounted investments, net of tax | — | | — | | — | | — | | — | | — | | — | | (4) | | (4) | |
Total other comprehensive income (loss) | — | | — | | — | | — | | — | | 26 | | 419 | | (4) | | 441 | |
Comprehensive income for the period | — | | — | | — | | — | | 392 | | 26 | | 419 | | (4) | | 833 | |
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Transactions with shareholders recorded directly in equity: | | | | | | | | | |
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Dividends declared | — | | — | | — | | — | | (252) | | — | | — | | — | | (252) | |
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Total transactions with shareholders | — | | — | | — | | — | | (252) | | — | | — | | — | | (252) | |
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Balances, March 31, 2022 | 71 | | 111,153 | | 397 | | 393,772 | | 9,052 | | 1,019 | | 580 | | (6) | | 11,113 | |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
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Rogers Communications Inc. | 5 | First Quarter 2023 |
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Rogers Communications Inc.
Interim Condensed Consolidated Statements of Cash Flows
(In millions of Canadian dollars, unaudited)
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| | Three months ended March 31 | | |
| Note | 2023 | 2022 | | | |
Operating activities: | | | | | | |
Net income for the period | | 511 | | 392 | | | | |
Adjustments to reconcile net income to cash provided by operating activities: | | | | | | |
Depreciation and amortization | | 631 | | 646 | | | | |
Program rights amortization | | 18 | | 20 | | | | |
Finance costs | 8 | | 296 | | 258 | | | | |
Income tax expense | | 185 | | 153 | | | | |
Post-employment benefits contributions, net of expense | | (2) | | 6 | | | | |
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Other | | (9) | | 13 | | | | |
Cash provided by operating activities before changes in net operating assets and liabilities, income taxes paid, and interest paid | | 1,630 | | 1,488 | | | | |
Change in net operating assets and liabilities | 21 | | (704) | | (321) | | | | |
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Income taxes paid | | (150) | | (140) | | | | |
Interest paid | | (323) | | (214) | | | | |
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Cash provided by operating activities | | 453 | | 813 | | | | |
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Investing activities: | | | | | | |
Capital expenditures | | (892) | | (649) | | | | |
Additions to program rights | | (25) | | (12) | | | | |
Changes in non-cash working capital related to capital expenditures and intangible assets | | (38) | | (172) | | | | |
Acquisitions and other strategic transactions, net of cash acquired | | — | | (9) | | | | |
Other | | 9 | | 12 | | | | |
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Cash used in investing activities | | (946) | | (830) | | | | |
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Financing activities: | | | | | | |
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Net proceeds received from short-term borrowings | 14 | | 1,342 | | 503 | | | | |
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Net (repayment) issuance of long-term debt | 15 | | (388) | | 13,311 | | | | |
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Net proceeds (payments) on settlement of debt derivatives and forward contracts | 11 | | 227 | | (74) | | | | |
Transaction costs incurred | 15 | | (264) | | (169) | | | | |
Principal payments of lease liabilities | 16 | | (81) | | (77) | | | | |
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Dividends paid | | (253) | | (252) | | | | |
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Cash provided by financing activities | | 583 | | 13,242 | | | | |
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Change in cash and cash equivalents and restricted cash and cash equivalents | | 90 | | 13,225 | | | | |
Cash and cash equivalents and restricted cash and cash equivalents, beginning of period | | 13,300 | | 715 | | | | |
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Cash and cash equivalents and restricted cash and cash equivalents, end of period | | 13,390 | | 13,940 | | | | |
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Cash and cash equivalents | | 553 | | 809 | | | | |
Restricted cash and cash equivalents | 11 | | 12,837 | | 13,131 | | | | |
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Cash and cash equivalents and restricted cash and cash equivalents, end of period | | 13,390 | | 13,940 | | | | |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
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Rogers Communications Inc. | 6 | First Quarter 2023 |
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NOTE 1: NATURE OF THE BUSINESS
Rogers Communications Inc. is a diversified Canadian communications and media company. Substantially all of our operations and sales are in Canada. RCI is incorporated in Canada and its registered office is located at 333 Bloor Street East, Toronto, Ontario, M4W 1G9. RCI's shares are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).
We, us, our, Rogers, Rogers Communications, and the Company refer to Rogers Communications Inc. and its subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including its subsidiaries. Rogers also holds interests in various investments and ventures.
We report our results of operations in three reportable segments. Each segment and the nature of its business is as follows:
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Segment | Principal activities |
Wireless | Wireless telecommunications operations for Canadian consumers and businesses. |
Cable | Cable telecommunications operations, including Internet, television and other video (Video), telephony (Home Phone), and smart home monitoring services for Canadian consumers and businesses, and network connectivity through our fibre network and data centre assets to support a range of voice, data, networking, hosting, and cloud-based services for the business, public sector, and carrier wholesale markets. |
Media | A diversified portfolio of media properties, including sports media and entertainment, television and radio broadcasting, specialty channels, multi-platform shopping, and digital media. |
During the three months ended March 31, 2023, Wireless and Cable were operated by our wholly owned subsidiary, Rogers Communications Canada Inc. (RCCI), and certain other wholly owned subsidiaries. Media was operated by our wholly owned subsidiary, Rogers Media Inc., and its subsidiaries.
Our operating results are subject to seasonal fluctuations that materially 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 typical fluctuations are described in note 1 to our annual audited consolidated financial statements for the year ended December 31, 2022 (2022 financial statements).
Statement of Compliance
We prepared our interim condensed consolidated financial statements for the three months ended March 31, 2023 (first quarter 2023 interim financial statements) in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB), following the same accounting policies and methods of application as those disclosed in our 2022 financial statements with the exception of new accounting policies that were adopted on January 1, 2023 as described in note 2. These first quarter 2023 interim financial statements were approved by RCI's Board of Directors (the Board) on April 25, 2023.
NOTE 2: MATERIAL ACCOUNTING POLICIES
Basis of Presentation
The notes presented in these first quarter 2023 interim financial statements include only material transactions and changes occurring for the three months since our year-end of December 31, 2022 and do not include all disclosures required by International Financial Reporting Standards (IFRS) as issued by the IASB for annual financial statements. These first quarter 2023 interim financial statements should be read in conjunction with the 2022 financial statements.
All dollar amounts are in Canadian dollars unless otherwise stated.
New Accounting Pronouncements Adopted in 2023
We adopted the following accounting amendments that were effective for our interim and annual consolidated financial statements commencing January 1, 2023. The adoption of these standards have not had a material impact on our financial results.
•IFRS 17, Insurance Contracts, a replacement of IFRS 4, Insurance Contracts, that aims to provide consistency in the application of accounting for insurance contracts.
•Amendments to IAS 1, Presentation of Financial Statements - Disclosure of Accounting Policies, requiring entities to disclose material, instead of significant, accounting policy information.
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Rogers Communications Inc. | 7 | First Quarter 2023 |
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•Amendments to IAS 8, Accounting Policies - Changes in Accounting Estimates and Errors, clarifying the definition of "accounting policies" and "accounting estimates".
•Amendments to IAS 12, Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction, narrowing the scope for exemption when recognizing deferred taxes.
Recent Accounting Pronouncements Not Yet Adopted
The IASB has issued the following new standard and amendments to existing standards that will become effective in future years:
•Amendments to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, clarifying the classification requirements in the standard for liabilities as current or non-current (January 1, 2024).
•Amendments to IFRS 16, Leases - Lease Liability in a Sale and Leaseback, clarifying subsequent measurement requirements for sale and leaseback transactions for sellers-lessees. (January 1, 2024).
•Amendments to IAS 1, Presentation of Financial Statements - Non-current Liabilities with Covenants, modifying the 2020 amendments to IAS 1 to further clarify the classification, presentation, and disclosure requirements in the standard for non-current liabilities with covenants. (January 1, 2024).
We are assessing the impacts, if any, the amendments to existing standards will have on our consolidated financial statements, but we currently do not expect any material impacts.
NOTE 3: CAPITAL RISK MANAGEMENT
Key Metrics and Ratios
We monitor adjusted net debt, debt leverage ratio, free cash flow, and available liquidity to manage our capital structure and related risks. These are not standardized financial measures under IFRS and might not be comparable to similar capital management measures disclosed by other companies. A summary of our key metrics and ratios follows, along with a reconciliation between each of these measures and the items presented in the consolidated financial statements.
Adjusted net debt and debt leverage ratio
We monitor adjusted net debt and debt leverage ratio as part of the management of liquidity to sustain future development of our business, conduct valuation-related analyses, and make decisions about capital. In so doing, we typically aim to have an adjusted net debt and debt leverage ratio that allow us to maintain investment-grade credit ratings, which allows us the associated access to capital markets. Our debt leverage ratio can increase due to strategic, long-term investments (for example, to obtain new spectrum licences or to consummate an acquisition) and we work to lower the ratio over time. As a result of the acquisition of Shaw Communications Inc. (Shaw) (Shaw Transaction) (see note 22) on April 3, 2023, our adjusted net debt increased due to the drawings on our $6 billion term loan facility, the debt assumed from Shaw, and the use of restricted cash, and our debt leverage ratio increased correspondingly. As at March 31, 2023 and December 31, 2022, we met our objectives for these metrics.
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| | As at March 31 | | As at December 31 |
(In millions of dollars) | Note | 2023 | | 2022 |
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Current portion of long-term debt | 15 | 1,750 | | | 1,828 | |
Long-term debt | 15 | 29,614 | | | 29,905 | |
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Deferred transaction costs and discounts | 15 | 1,095 | | | 1,122 | |
| | 32,459 | | | 32,855 | |
Add (deduct): | | | | |
Subordinated notes adjustment 1 | | (1,508) | | | (1,508) | |
Net debt derivative assets 2 | | (890) | | | (988) | |
Credit risk adjustment related to net debt derivative assets 3 | | (36) | | | (10) | |
Short-term borrowings | 14 | 4,323 | | | 2,985 | |
Current portion of lease liabilities | 16 | 372 | | | 362 | |
Lease liabilities | 16 | 1,676 | | | 1,666 | |
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Cash and cash equivalents | | (553) | | | (463) | |
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Restricted cash and cash equivalents 4 | 11 | (12,837) | | | (12,837) | |
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Adjusted net debt | | 23,006 | | | 22,062 | |
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Rogers Communications Inc. | 8 | First Quarter 2023 |
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| | As at March 31 | | As at December 31 |
(In millions of dollars, except ratios) | | 2023 | | 2022 |
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Adjusted net debt | | 23,006 | | | 22,062 | |
Divided by: trailing 12-month adjusted EBITDA | | 6,505 | | | 6,393 | |
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Debt leverage ratio | | 3.5 | | | 3.5 | |
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1 For the purposes of calculating adjusted net debt, we believe adjusting 50% of the value of our subordinated notes is appropriate as this methodology factors in certain circumstances with respect to priority for payment and this approach is commonly used to evaluate debt leverage by rating agencies.
2 Net debt derivative assets consists of the net fair value of our debt derivatives on issued debt.
3 For accounting purposes in accordance with IFRS, we recognize the fair values of our debt derivatives using an estimated credit-adjusted mark-to-market valuation by discounting cash flows to the measurement date. For purposes of calculating adjusted net debt, we believe including debt derivatives valued without adjustment for credit risk is commonly used to evaluate debt leverage and for market valuation and transactional purposes.
4 For the purposes of calculating adjusted net debt, we have deducted our restricted cash and cash equivalents as these funds were raised solely to fund a portion of the cash consideration of the Shaw Transaction or, if the Shaw Transaction was not consummated, were to have been used to redeem the applicable senior notes excluding any premium. We therefore believe including only the underlying senior notes would not represent our view of adjusted net debt prior to the consummation of the Shaw Transaction or the redemption of the senior notes.
Free cash flow
We use free cash flow to understand how much cash we generate that is available to repay debt or reinvest in our business, which is an important indicator of our financial strength and performance.
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| | Three months ended March 31 | | |
(In millions of dollars) | Note | 2023 | 2022 | | | |
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Adjusted EBITDA | 4 | 1,651 | | 1,539 | | | | |
Deduct: | | | | | | |
Capital expenditures 1 | | 892 | | 649 | | | | |
Interest on borrowings, net and capitalized interest | 8 | 239 | | 235 | | | | |
Cash income taxes 2 | | 150 | | 140 | | | | |
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Free cash flow | | 370 | | 515 | | | | |
1 Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences, additions to right-of-use assets, or assets acquired through business combinations.
2 Cash income taxes are net of refunds received.
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| | Three months ended March 31 | | |
(In millions of dollars) | Note | 2023 | 2022 | | | |
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Cash provided by operating activities | | 453 | | 813 | | | | |
Add (deduct): | | | | | | |
Capital expenditures | | (892) | | (649) | | | | |
Interest on borrowings, net and capitalized interest | 8 | (239) | | (235) | | | | |
Interest paid | | 323 | | 214 | | | | |
Restructuring, acquisition and other | 7 | 55 | | 96 | | | | |
Program rights amortization | | (18) | | (20) | | | | |
Change in net operating assets and liabilities | 21 | 704 | | 321 | | | | |
Other adjustments 1 | | (16) | | (25) | | | | |
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Free cash flow | | 370 | | 515 | | | | |
1 Other adjustments consists of post-employment benefit contributions, net of expense, cash flows relating to other operating activities, and other (income) expense from our financial statements.
Available liquidity
Available liquidity fluctuates based on business circumstances. We continually manage, and aim to have sufficient, available liquidity at all times to help protect our ability to meet all of our commitments (operationally and for maturing debt obligations), to execute our business plan (including to acquire spectrum licences or consummate acquisitions), to mitigate the risk of economic downturns, and for other unforeseen circumstances. As at March 31, 2023 and December 31, 2022, we had sufficient liquidity available to us to meet this objective.
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Rogers Communications Inc. | 9 | First Quarter 2023 |
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Below is a summary of our total available liquidity from our cash and cash equivalents, bank credit facilities, letter of credit facilities, and short-term borrowings, including our receivables securitization program and our US dollar-denominated commercial paper (US CP) program.
Our restricted cash and cash equivalents (see note 11) are not included in available liquidity as the funds were raised solely to fund a portion of the cash consideration of the Shaw Transaction (see note 22). Our $6 billion non-revolving credit facility (term loan facility) related to the Shaw Transaction is also not included in available liquidity as we could only draw on that facility to partially fund the Shaw Transaction. Our Canada Infrastructure Bank credit agreement (see note 15) is not included in available liquidity as it can only be drawn upon for use in broadband projects under the Universal Broadband Fund, and therefore is not available for other general purposes.
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As at March 31, 2023 | | Total sources | Drawn | Letters of credit | US CP program 1 | Net available |
(In millions of dollars) | Note |
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Cash and cash equivalents | | 553 | | — | | — | | — | | 553 | |
Bank credit facilities 2: | | | | | | |
Revolving | 15 | 4,000 | | 298 | | 8 | | 930 | | 2,764 | |
Non-revolving | 14 | 1,000 | | 1,000 | | — | | — | | — | |
Outstanding letters of credit | | 61 | | — | | 61 | | — | | — | |
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Receivables securitization 2 | 14 | 2,400 | | 2,400 | | — | | — | | — | |
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Total | | 8,014 | | 3,698 | | 69 | | 930 | | 3,317 | |
1 The US CP program amounts are gross of the discount on issuance.
2 The total liquidity sources under our bank credit facilities and receivables securitization represents the total credit limits per the relevant agreements. The amount drawn and letters of credit are currently outstanding under those agreements. The US CP program amount represents our currently outstanding US CP borrowings that are backstopped by our revolving credit facility.
| | | | | | | | | | | | | | | | | | | | |
As at December 31, 2022 | | Total sources | Drawn | Letters of credit | US CP program 1 | Net available |
(In millions of dollars) | Note |
| | | | | | |
Cash and cash equivalents | | 463 | | — | | — | | — | | 463 | |
Bank credit facilities 2: | | | | | | |
Revolving | 15 | 4,000 | | — | | 8 | | 215 | | 3,777 | |
Non-revolving | 14 | 1,000 | | 375 | | — | | — | | 625 | |
Outstanding letters of credit | 15 | 75 | | — | | 75 | | — | | — | |
| | | | | | |
| | | | | | |
Receivables securitization 2 | 14 | 2,400 | | 2,400 | | — | | — | | — | |
| | | | | | |
| | | | | | |
Total | | 7,938 | | 2,775 | | 83 | | 215 | | 4,865 | |
1 The US CP program amounts are gross of the discount on issuance.
2 The total liquidity sources under our bank credit facilities and receivables securitization represents the total credit limits per the relevant agreements. The amount drawn and letters of credit are currently outstanding under those agreements. The US CP program amount represents our currently outstanding US CP borrowings that are backstopped by our revolving credit facility.
NOTE 4: SEGMENTED INFORMATION
Our reportable segments are Wireless, Cable, and Media. All three segments operate substantially in Canada. Corporate items and eliminations include our interests in businesses that are not reportable operating segments, corporate administrative functions, and eliminations of inter-segment revenues and costs. We follow the same accounting policies for our segments as those described in note 2 of our 2022 financial statements. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. We account for transactions between reportable segments in the same way we account for transactions with external parties, however eliminate them on consolidation.
The Chief Executive Officer and Chief Financial Officer of RCI are, collectively, our chief operating decision maker and regularly review our operations and performance by segment. They review adjusted EBITDA as the key measure of profit for the purpose of assessing performance of each segment and to make decisions about the allocation of resources. Adjusted EBITDA is defined as income before depreciation and amortization; (gain) loss on disposition of property, plant and equipment; restructuring, acquisition and other; finance costs; other (income) expense; and income tax expense.
| | | | | | | | |
Rogers Communications Inc. | 10 | First Quarter 2023 |
|
Information by Segment
| | | | | | | | | | | | | | | | | | | | |
Three months ended March 31, 2023 | Note | Wireless | Cable | Media | Corporate items and eliminations | Consolidated totals |
(In millions of dollars) |
| | | | | | |
Revenue | 5 | | 2,346 | | 1,017 | | 505 | | (33) | | 3,835 | |
Operating costs | 6 | 1,167 | | 460 | | 543 | | 14 | | 2,184 | |
| | | | | | |
Adjusted EBITDA | | 1,179 | | 557 | | (38) | | (47) | | 1,651 | |
| | | | | | |
Depreciation and amortization | | | | | | 631 | |
| | | | | | |
Restructuring, acquisition and other | 7 | | | | | 55 | |
Finance costs | 8 | | | | | 296 | |
Other income | 9 | | | | | (27) | |
| | | | | | |
Income before income taxes | | | | | | 696 | |
| | | | | | | | | | | | | | | | | | | | |
Three months ended March 31, 2022 | Note | Wireless | Cable | Media | Corporate items and eliminations | Consolidated totals |
(In millions of dollars) |
| | | | | | |
Revenue | 5 | | 2,140 | | 1,036 | | 482 | | (39) | | 3,619 | |
Operating costs | 6 | 1,055 | | 485 | | 548 | | (8) | | 2,080 | |
| | | | | | |
Adjusted EBITDA | | 1,085 | | 551 | | (66) | | (31) | | 1,539 | |
| | | | | | |
Depreciation and amortization | | | | | | 646 | |
| | | | | | |
Restructuring, acquisition and other | 7 | | | | | 96 | |
Finance costs | 8 | | | | | 258 | |
Other income | 9 | | | | | (6) | |
| | | | | | |
Income before income taxes | | | | | | 545 | |
| | | | | | | | |
Rogers Communications Inc. | 11 | First Quarter 2023 |
|
NOTE 5: REVENUE
| | | | | | | | | | | |
| Three months ended March 31 | | |
(In millions of dollars) | 2023 | 2022 | | | |
| | | | | |
Wireless | | | | | |
Service revenue | 1,836 | | 1,723 | | | | |
Equipment revenue | 510 | | 417 | | | | |
| | | | | |
Total Wireless | 2,346 | | 2,140 | | | | |
| | | | | |
Cable | | | | | |
| | | | | |
| | | | | |
| | | | | |
Service revenue | 1,006 | | 1,030 | | | | |
Equipment revenue | 11 | | 6 | | | | |
| | | | | |
Total Cable | 1,017 | | 1,036 | | | | |
| | | | | |
Total Media | 505 | | 482 | | | | |
| | | | | |
Corporate items and intercompany eliminations | (33) | | (39) | | | | |
| | | | | |
Total revenue | 3,835 | | 3,619 | | | | |
| | | | | |
Total service revenue | 3,314 | | 3,196 | | | | |
Total equipment revenue | 521 | | 423 | | | | |
| | | | | |
Total revenue | 3,835 | | 3,619 | | | | |
NOTE 6: OPERATING COSTS
| | | | | | | | | | | |
| Three months ended March 31 | | |
(In millions of dollars) | 2023 | 2022 | | | |
| | | | | |
Cost of equipment sales | 518 | | 431 | | | | |
Merchandise for resale | 52 | | 60 | | | | |
Other external purchases | 1,144 | | 1,087 | | | | |
Employee salaries, benefits, and stock-based compensation | 470 | | 502 | | | | |
| | | | | |
Total operating costs | 2,184 | | 2,080 | | | | |
NOTE 7: RESTRUCTURING, ACQUISITION AND OTHER
During the three months ended March 31, 2023, we incurred $55 million (2022 - $96 million) in restructuring, acquisition and other expenses, which included $33 million (2022 - $59 million) of incremental costs supporting acquisition and integration activities related to the Shaw Transaction (see note 22). The remaining costs in 2023 and 2022, were primarily severance costs associated with the targeted restructuring of our employee base.
| | | | | | | | |
Rogers Communications Inc. | 12 | First Quarter 2023 |
|
NOTE 8: FINANCE COSTS
| | | | | | | | | | | | | | |
| | Three months ended March 31 | | |
(In millions of dollars) | Note | 2023 | 2022 | | | |
| | | | | | |
Interest on borrowings | | 254 | | 214 | | | | |
Interest on Shaw senior note financing | 15 | 139 | | 31 | | | | |
| | | | | | |
Total interest on borrowings 1 | | 393 | | 245 | | | | |
Interest earned on restricted cash and cash equivalents | | (146) | | (3) | | | | |
| | | | | | |
Interest on borrowings, net | | 247 | | 242 | | | | |
| | | | | | |
Interest on lease liabilities | 16 | 23 | | 19 | | | | |
Interest on post-employment benefits liability | | (2) | | — | | | | |
| | | | | | |
Loss (gain) on foreign exchange | | 14 | | (50) | | | | |
Change in fair value of derivative instruments | | (11) | | 49 | | | | |
Capitalized interest | | (8) | | (7) | | | | |
Deferred transaction costs and other | | 33 | | 5 | | | | |
| | | | | | |
| | | | | | |
Total finance costs | | 296 | | 258 | | | | |
1Interest on borrowings includes interest on short-term borrowings and on long-term debt.
NOTE 9: OTHER INCOME
| | | | | | | | | | | |
| Three months ended March 31 | | |
(In millions of dollars) | 2023 | 2022 | | | |
| | | | | |
(Income) losses from associates and joint ventures | (14) | | 6 | | | | |
| | | | | |
Other investment income | (13) | | (12) | | | | |
| | | | | |
Total other income | (27) | | (6) | | | | |
NOTE 10: EARNINGS PER SHARE
| | | | | | | | |
| Three months ended March 31 |
(In millions of dollars, except per share amounts) | 2023 | 2022 |
| | |
Numerator (basic) - Net income for the period | 511 | | 392 | |
| | |
| | |
Denominator - Number of shares (in millions): | | |
Weighted average number of shares outstanding - basic | 505 | | 505 | |
Effect of dilutive securities (in millions): | | |
Employee stock options and restricted share units | 2 | | 2 | |
| | |
Weighted average number of shares outstanding - diluted | 507 | | 507 | |
| | |
Earnings per share: | | |
Basic | $1.01 | $0.78 |
Diluted | $1.00 | $0.77 |
For the three months ended March 31, 2023 and 2022, accounting for outstanding share-based payments using the equity-settled method for stock-based compensation was determined to be more dilutive than using the cash-settled method. As a result, net income for the three months ended March 31, 2023 was reduced by $2 million (2022 - $1 million) in the diluted earnings per share calculation.
A total of 6,540,217 options were out of the money for the three months ended March 31, 2023 (2022 - 1,042,625). These options were excluded from the calculation of the effect of dilutive securities because they were anti-dilutive.
| | | | | | | | |
Rogers Communications Inc. | 13 | First Quarter 2023 |
|
NOTE 11: FINANCIAL INSTRUMENTS
Restricted Cash and Cash Equivalents
In March 2022, we issued US$7.05 billion ($9.05 billion) and $4.25 billion senior notes (see note 15). At the same time, we terminated the committed credit facility we entered into in March 2021. The arrangement agreement between Rogers and Shaw required us to maintain sufficient liquidity to ensure we were able to fund the Shaw Transaction upon closing and, as a result of the termination of the committed credit facility, we have restricted $12,837 million in funds, which are recognized as "restricted cash and cash equivalents" on our interim condensed consolidated statement of financial position. These funds were held as cash deposits with major Canadian financial institutions as at March 31, 2023.
Derivative Instruments
We use derivative instruments to manage financial risks related to our business activities. These include debt derivatives, interest rate derivatives, expenditure derivatives, and equity derivatives. We only use derivatives to manage risk and not for speculative purposes.
All of our currently outstanding debt derivatives related to our senior notes, senior debentures, subordinated notes, and lease liabilities, as well as our expenditure derivatives have been designated as hedges for accounting purposes.
Debt derivatives
We use cross-currency interest rate exchange agreements, forward cross-currency interest rate exchange agreements, and forward foreign exchange agreements (collectively, debt derivatives) to manage risks from fluctuations in foreign exchange rates and interest rates associated with our US dollar-denominated senior notes, debentures, subordinated notes, lease liabilities, credit facility borrowings, and US CP borrowings (see note 14). We typically designate the debt derivatives related to our senior notes, debentures, subordinated notes, and lease liabilities as hedges for accounting purposes against the foreign exchange risk or interest rate risk associated with specific issued and forecast debt instruments. Debt derivatives related to our credit facility and US CP borrowings have not been designated as hedges for accounting purposes.
Below is a summary of the debt derivatives we entered into and settled related to our credit facility borrowings and US CP program during the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2023 | | Three months ended March 31, 2022 |
(In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | | Notional (US$) | Exchange rate | Notional (Cdn$) |
| | | | | | | |
Credit facilities | | | | | | | |
Debt derivatives entered | 958 | | 1.350 | | 1,293 | | | — | | — | | — | |
Debt derivatives settled | 273 | | 1.341 | | 366 | | | 400 | | 1.268 | | 507 | |
Net cash (paid) received on settlement | | | (5) | | | | | 9 | |
| | | | | | | |
US commercial paper program | | | | | | | |
Debt derivatives entered | 1,174 | | 1.362 | | 1,599 | | | 2,075 | | 1.263 | | 2,620 | |
Debt derivatives settled | 651 | | 1.352 | | 880 | | | 2,063 | | 1.264 | | 2,608 | |
Net cash (paid) received on settlement | | | (2) | | | | | 1 | |
As at March 31, 2023, we had US$685 million and US$681 million notional amount of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2022 - nil and US$158 million), respectively.
| | | | | | | | |
Rogers Communications Inc. | 14 | First Quarter 2023 |
|
Senior and subordinated notes
We did not enter into any debt derivatives related to senior notes issued during the three months ended March 31, 2023. Below is a summary of the debt derivatives we entered into related to senior and subordinated notes during the three months March 31, 2022.
| | | | | | | | | | | | | | | | | | | | |
(In millions of dollars, except interest rates) | | | |
| | US$ | | Hedging effect |
Effective date | Principal/Notional amount (US$) | Maturity date | Coupon rate | | Fixed hedged (Cdn$) interest rate 1 | Equivalent (Cdn$) |
| | | | | | |
2022 issuances | | | | | | |
February 11, 2022 | 750 | | 2082 | 5.250 | % | | 5.635 | % | 951 | |
March 11, 2022 2 | 1,000 | | 2025 | 2.950 | % | | 2.991 | % | 1,283 | |
March 11, 2022 | 1,300 | 2027 | 3.200 | % | | 3.413 | % | 1,674 | |
March 11, 2022 | 2,000 | 2032 | 3.800 | % | | 4.232 | % | 2,567 | |
March 11, 2022 | 750 | 2042 | 4.500 | % | | 5.178 | % | 966 | |
March 11, 2022 | 2,000 | 2052 | 4.550 | % | | 5.305 | % | 2,564 | |
1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.
2 The derivatives associated with our US$1 billion senior notes due 2025 have not been designated as hedges for accounting purposes.
In March 2023, we settled the derivatives associated with our US$1 billion senior notes due 2025, which were not designated as hedges for accounting purposes. We subsequently entered into new derivatives associated with those senior notes, which we designated as hedges for accounting purposes. We received a net $60 million relating to these transactions.
As at March 31, 2023, we had US$15,600 million (December 31, 2022 - US$16,100 million) in US dollar-denominated senior notes, debentures, and subordinated notes, of which all of the associated foreign exchange risk had been economically hedged using debt derivatives.
During the three months ended March 31, 2022, in connection with the issuance of the US$2 billion senior notes due 2052, we terminated US$2 billion notional amount of forward starting cross-currency swaps and received $43 million upon settlement.
Lease liabilities
Below is a summary of the debt derivatives we entered into and settled related to our outstanding lease liabilities for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2023 | | Three months ended March 31, 2022 |
(In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | | Notional (US$) | Exchange rate | Notional (Cdn$) |
| | | | | | | |
Debt derivatives entered | 35 | | 1.371 | | 48 | | | 33 | | 1.273 | | 42 | |
Debt derivatives settled | 33 | | 1.333 | | 44 | | | 27 | | 1.333 | | 36 | |
As at March 31, 2023, we had US$227 million notional amount of debt derivatives outstanding relating to our outstanding lease liabilities (December 31, 2022 - US$225 million) with terms to maturity ranging from April 2023 to March 2026 (December 31, 2022 - January 2023 to December 2025), at an average rate of $1.313/US$ (December 31, 2022 - $1.306/US$).
Interest rate derivatives
From time to time, we use bond forward derivatives or interest rate swap derivatives (collectively, interest rate derivatives) to hedge interest rate risk on current and future debt instruments. Our interest rate derivatives are designated as hedges for accounting purposes.
Concurrent with our issuance of US$750 million subordinated notes in February 2022, we terminated $950 million of interest rate swap derivatives and received $33 million upon settlement.
Concurrent with our issuance of US$7.05 billion ($9.05 billion) and $4.25 billion senior notes in March 2022, we terminated:
•US$2 billion of interest rate swap derivatives and paid US$129 million ($165 million) upon settlement; and
| | | | | | | | |
Rogers Communications Inc. | 15 | First Quarter 2023 |
|
•$500 million of bond forwards and $2.3 billion of interest rate swap derivatives and received $80 million upon settlement.
As at March 31, 2023 and 2022, we had no interest rate derivatives outstanding.
Expenditure derivatives
We use foreign currency forward contracts (expenditure derivatives) to manage the foreign exchange risk in our operations, designating them as hedges for accounting purposes for certain of our forecast operational and capital expenditures.
Below is a summary of the expenditure derivatives we entered into and settled during the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2023 | | Three months ended March 31, 2022 |
(In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | | Notional (US$) | Exchange rate | Notional (Cdn$) |
| | | | | | | |
Expenditure derivatives entered | 210 | | 1.329 | | 279 | | | 378 | | 1.249 | | 472 | |
Expenditure derivatives settled | 225 | | 1.244 | | 280 | | | 225 | | 1.293 | | 291 | |
As at March 31, 2023, we had US$945 million notional amount of expenditure derivatives outstanding (December 31, 2022 - US$960 million) with terms to maturity ranging from April 2023 to December 2024 (December 31, 2022 - January 2023 to December 2023), at an average rate of $1.268/US$ (December 31, 2022 - $1.250/US$).
Equity derivatives
We use total return swaps (equity derivatives) to hedge the market price appreciation risk of the RCI Class B Non-Voting common shares (Class B Non-Voting Shares) granted under our stock-based compensation programs. The equity derivatives have not been designated as hedges for accounting purposes.
As at March 31, 2023, we had equity derivatives outstanding for 5.5 million (December 31, 2022 - 5.5 million) Class B Non-Voting Shares with a weighted average price of $53.65 (December 31, 2022 - $53.65).
During the three months ended March 31, 2023, we executed extension agreements for the remainder of our equity derivative contracts under substantially the same commitment terms and conditions with revised expiry dates to April 2024 (from April 2023).
Cash settlements on debt derivatives and forward contracts
Below is a summary of the net proceeds (payments) on settlement of debt derivatives and forward contracts.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2023 | | Three months ended March 31, 2022 |
(In millions of dollars, except exchange rates) | US$ settlements | Exchange rate | Cdn$ settlements | | US$ settlements | Exchange rate | Cdn$ settlements |
| | | | | | | |
Credit facilities | | | (5) | | | | | 9 | |
US commercial paper program | | | (2) | | | | | 1 | |
Senior and subordinated notes | | | 234 | | | | | (75) | |
Forward starting cross-currency swaps | | | — | | | | | 43 | |
Interest rate derivatives (Cdn$) | | | — | | | | | 113 | |
Interest rate derivatives (US$) | — | | — | | — | | | (129) | | 1.279 | | (165) | |
| | | | | | | |
Net proceeds (payments) on settlement of debt derivatives and forward contracts | | | 227 | | | | | (74) | |
Fair Values of Financial Instruments
The carrying value of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, bank advances, short-term borrowings, and accounts payable and accrued liabilities approximate their fair values because of the short-term nature of these financial instruments. The carrying value of our lease liabilities approximates their fair value because the discount rate used to calculate them approximates our current borrowing rate. The carrying values of our financing receivables also approximate their fair values based on our recognition of an expected credit loss allowance.
| | | | | | | | |
Rogers Communications Inc. | 16 | First Quarter 2023 |
|
We determine the fair value of each of our publicly traded investments using quoted market values. We determine the fair value of our private investments by using implied valuations from follow-on financing rounds, third-party sale negotiations, or using market-based approaches. These are applied appropriately to each investment depending on its future operating and profitability prospects.
The fair values of each of our public debt instruments are based on the period-end estimated market yields, or period-end trading values, where available. We determine the fair values of our debt derivatives and expenditure derivatives using an estimated credit-adjusted mark-to-market valuation by discounting cash flows to the measurement date. In the case of debt derivatives and expenditure derivatives in an asset position, the credit spread for the financial institution counterparty is added to the risk-free discount rate to determine the estimated credit-adjusted value for each derivative. For those debt derivatives and expenditure derivatives in a liability position, our credit spread is added to the risk-free discount rate for each derivative.
The fair value of our interest rate derivatives is determined by discounting to the measurement date the cash flows that result from multiplying the interest rate derivative's notional amount by the difference between the period-end market forward rate and the forward rate in each derivative.
The fair values of our equity derivatives are based on the quoted market value of Class B Non-Voting Shares.
Our disclosure of the three-level fair value hierarchy reflects the significance of the inputs used in measuring fair value:
•financial assets and financial liabilities in Level 1 are valued by referring to quoted prices in active markets for identical assets and liabilities;
•financial assets and financial liabilities in Level 2 are valued using inputs based on observable market data, either directly or indirectly, other than the quoted prices; and
•Level 3 valuations are based on inputs that are not based on observable market data.
There were no material financial instruments categorized in Level 3 as at March 31, 2023 or December 31, 2022 and there were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 2023 or 2022.
Below is a summary of our financial instruments carried at fair value as at March 31, 2023 and December 31, 2022.
| | | | | | | | | | | | | | | | | | | | |
| Carrying value | Fair value (Level 1) | Fair value (Level 2) |
| As at Mar. 31 | As at Dec. 31 | As at Mar. 31 | As at Dec. 31 | As at Mar. 31 | As at Dec. 31 |
(In millions of dollars) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| | | | | | |
Financial assets | | | | | | |
Investments, measured at FVTOCI: | | | | | | |
Investments in publicly traded companies | 1,067 | | 1,200 | | 1,067 | | 1,200 | | — | | — | |
Derivatives: | | | | | | |
Debt derivatives accounted for as cash flow hedges | 1,245 | | 1,330 | | — | | — | | 1,245 | | 1,330 | |
Debt derivatives not accounted for as hedges | 5 | | 72 | | — | | — | | 5 | | 72 | |
| | | | | | |
Expenditure derivatives accounted for as cash flow hedges | 74 | | 94 | | — | | — | | 74 | | 94 | |
Equity derivatives not accounted for as hedges | 50 | | 54 | | — | | — | | 50 | | 54 | |
| | | | | | |
Total financial assets | 2,441 | | 2,750 | | 1,067 | | 1,200 | | 1,374 | | 1,550 | |
| | | | | | |
Financial liabilities | | | | | | |
Derivatives: | | | | | | |
Debt derivatives accounted for as cash flow hedges | 351 | | 414 | | — | | — | | 351 | | 414 | |
Debt derivatives not accounted for as hedges | 9 | | — | | — | | — | | 9 | | — | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Total financial liabilities | 360 | | 414 | | — | | — | | 360 | | 414 | |
| | | | | | | | |
Rogers Communications Inc. | 17 | First Quarter 2023 |
|
Below is a summary of the fair value of our long-term debt as at March 31, 2023 and December 31, 2022.
| | | | | | | | | | | | | | |
| As at March 31, 2023 | As at December 31, 2022 |
(In millions of dollars) | Carrying amount | Fair value 1 | Carrying amount | Fair value 1 |
| | | | |
Long-term debt (including current portion) | 31,364 | | 29,905 | | 31,733 | | 29,355 | |
1 Long-term debt (including current portion) is measured at Level 2 in the three-level fair value hierarchy.
NOTE 12: FINANCING RECEIVABLES
Financing receivables represent amounts owed to us under device or accessory financing agreements that have not yet been billed. Our financing receivable balances are included in "accounts receivable" (when they are to be billed and collected within twelve months) and "financing receivables" on our interim condensed consolidated statements of financial position. Below is a breakdown of our financing receivable balances.
| | | | | | | | |
| As at March 31 | As at December 31 |
(In millions of dollars) | 2023 | 2022 |
| | |
Current financing receivables | 1,893 | | 1,922 | |
Long-term financing receivables | 891 | | 886 | |
| | |
Total financing receivables | 2,784 | | 2,808 | |
NOTE 13: INVESTMENTS
| | | | | | | | |
| As at March 31 | As at December 31 |
(In millions of dollars) | 2023 | 2022 |
| | |
Investments in: | | |
Publicly traded companies | 1,067 | | 1,200 | |
Private companies | 48 | | 53 | |
Investments, measured at FVTOCI | 1,115 | | 1,253 | |
Investments, associates and joint ventures | 850 | | 835 | |
| | |
Total investments | 1,965 | | 2,088 | |
NOTE 14: SHORT-TERM BORROWINGS
Below is a summary of our short-term borrowings as at March 31, 2023 and December 31, 2022.
| | | | | | | | |
| As at March 31 | As at December 31 |
(In millions of dollars) | 2023 | 2022 |
| | |
Receivables securitization program | 2,400 | | 2,400 | |
US commercial paper program (net of the discount on issuance) | 922 | | 214 | |
Non-revolving credit facility borrowings | 1,001 | | 371 | |
| | |
Total short-term borrowings | 4,323 | | 2,985 | |
| | | | | | | | |
Rogers Communications Inc. | 18 | First Quarter 2023 |
|
Below is a summary of the activity relating to our short-term borrowings for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended March 31, 2023 | | | Three months ended March 31, 2022 |
(In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | | Notional (US$) | Exchange rate | Notional (Cdn$) |
| | | | | | | |
Proceeds received from receivables securitization | | | — | | | | | 1,000 | |
| | | | | | | |
Net proceeds received from receivables securitization | | | — | | | | | 1,000 | |
| | | | | | | |
Proceeds received from US commercial paper | 1,174 | | 1.362 | | 1,599 | | | 2,074 | | 1.263 | | 2,620 | |
Repayment of US commercial paper | (654) | | 1.350 | | (883) | | | (2,064) | | 1.265 | | (2,610) | |
Net proceeds received from US commercial paper | | | 716 | | | | | 10 | |
| | | | | | | |
Proceeds received from non-revolving credit facilities (Cdn$) | | | 375 | | | | | 495 | |
Proceeds received from non-revolving credit facilities (US$) | 738 | | 1.344 | | 992 | | | — | | — | | — | |
Total proceeds received from non-revolving credit facilities | | | 1,367 | | | | | 495 | |
| | | | | | | |
Repayment of non-revolving credit facilities (Cdn$) | | | (375) | | | | | (495) | |
Repayment of non-revolving credit facilities (US$) | (273) | | 1.341 | | (366) | | | (400) | | 1.268 | | (507) | |
Total repayment of non-revolving credit facilities | | | (741) | | | | | (1,002) | |
| | | | | | | |
Net proceeds received from (repayment of) non-revolving credit facilities | | | 626 | | | | | (507) | |
| | | | | | | |
Net proceeds received from short-term borrowings | | | 1,342 | | | | | 503 | |
Receivables Securitization Program
Below is a summary of our receivables securitization program as at March 31, 2023 and December 31, 2022.
| | | | | | | | |
| As at March 31 | As at December 31 |
(In millions of dollars) | 2023 | 2022 |
| | |
Receivables sold to buyer as security | 3,124 | | 2,914 | |
Short-term borrowings from buyer | (2,400) | | (2,400) | |
| | |
Overcollateralization | 724 | | 514 | |
Below is a summary of the activity related to our receivables securitization program for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | |
| Three months ended March 31 | | |
(In millions of dollars) | 2023 | 2022 | | | |
| | | | | |
Receivables securitization program, beginning of period | 2,400 | | 800 | | | | |
Net proceeds received from receivables securitization | — | | 1,000 | | | | |
| | | | | |
Receivables securitization program, end of period | 2,400 | | 1,800 | | | | |
| | | | | | | | |
Rogers Communications Inc. | 19 | First Quarter 2023 |
|
US Commercial Paper Program
Below is a summary of the activity relating to our US CP program for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended March 31, 2023 | | | Three months ended March 31, 2022 |
(In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | | Notional (US$) | Exchange rate | Notional (Cdn$) |
| | | | | | | |
US commercial paper program, beginning of period | 158 | | 1.354 | | 214 | | | 704 | | 1.268 | | 893 | |
Net proceeds received from US commercial paper | 520 | | 1.377 | | 716 | | | 10 | | n/m | 10 | |
Discounts on issuance 1 | 2 | | n/m | 3 | | | 1 | | n/m | 1 | |
Gain on foreign exchange 1 | | | (11) | | | | | (9) | |
| | | | | | | |
US commercial paper program, end of period | 680 | | 1.356 | | 922 | | | 715 | | 1.252 | | 895 | |
n/m - not meaningful
1 Included in finance costs.
Concurrent with the commercial paper issuances, we entered into debt derivatives to hedge the foreign currency risk associated with the principal and interest components of the borrowings under the US CP program (see note 11). We have not designated these debt derivatives as hedges for accounting purposes.
Non-Revolving Credit Facility
Below is a summary of the activity relating to our non-revolving credit facilities for the three months ended March 31, 2023 and 2022.
| | | | | | | | |
| Three months ended March 31 |
(In millions of dollars) | 2023 | 2022 |
| | |
Non-revolving credit facility, beginning of period | 371 | | 507 | |
Net proceeds received from (repayment of) non-revolving credit facilities | 626 | | (507) | |
Loss on foreign exchange 1 | 4 | | — | |
| | |
Non-revolving credit facility, end of period | 1,001 | | — | |
1 Included in "finance costs".
In January 2023, we borrowed US$273 million under our non-revolving facility maturing in January 2024. In February 2023, we borrowed US$186 million under the remaining facility, maturing in February 2024. As a result, we have fully drawn on the facilities. Borrowings under our non-revolving facility mature and are reissued regularly, such that until repaid, we maintain net outstanding borrowings equivalent to $1 billion on the reissue dates.
In February 2022, we repaid the outstanding US$400 million and terminated the June 2021 facility.
| | | | | | | | |
Rogers Communications Inc. | 20 | First Quarter 2023 |
|
NOTE 15: LONG-TERM DEBT
| | | | | | | | | | | | | | | | | | | | |
| | | Principal amount | Interest rate | As at March 31 | As at December 31 |
(In millions of dollars, except interest rates) | Due date | | 2023 | 2022 |
| | | | | | |
| | | | | | |
| | | | | | |
Bank credit facilities (US$ portion) | | US | 220 | | Floating | 298 | | — | |
| | | | | | |
Senior notes | 2023 | US | 500 | | 3.000 | % | — | | 677 | |
Senior notes | 2023 | US | 850 | | 4.100 | % | 1,150 | | 1,151 | |
Senior notes | 2024 | | 600 | | 4.000 | % | 600 | | 600 | |
Senior notes 1 | 2025 | US | 1,000 | | 2.950 | % | 1,353 | | 1,354 | |
Senior notes 1 | 2025 | | 1,250 | | 3.100 | % | 1,250 | | 1,250 | |
Senior notes | 2025 | US | 700 | | 3.625 | % | 947 | | 948 | |
Senior notes | 2026 | US | 500 | | 2.900 | % | 677 | | 677 | |
Senior notes | 2027 | | 1,500 | | 3.650 | % | 1,500 | | 1,500 | |
Senior notes 1 | 2027 | US | 1,300 | | 3.200 | % | 1,759 | | 1,761 | |
Senior notes 1 | 2029 | | 1,000 | | 3.750 | % | 1,000 | | 1,000 | |
Senior notes | 2029 | | 1,000 | | 3.250 | % | 1,000 | | 1,000 | |
Senior notes 1 | 2032 | US | 2,000 | | 3.800 | % | 2,707 | | 2,709 | |
Senior notes 1 | 2032 | | 1,000 | | 4.250 | % | 1,000 | | 1,000 | |
Senior debentures 2 | 2032 | US | 200 | | 8.750 | % | 271 | | 271 | |
Senior notes | 2038 | US | 350 | | 7.500 | % | 474 | | 474 | |
Senior notes | 2039 | | 500 | | 6.680 | % | 500 | | 500 | |
Senior notes | 2040 | | 800 | | 6.110 | % | 800 | | 800 | |
Senior notes | 2041 | | 400 | | 6.560 | % | 400 | | 400 | |
Senior notes 1 | 2042 | US | 750 | | 4.500 | % | 1,015 | | 1,016 | |
Senior notes | 2043 | US | 500 | | 4.500 | % | 677 | | 677 | |
Senior notes | 2043 | US | 650 | | 5.450 | % | 880 | | 880 | |
Senior notes | 2044 | US | 1,050 | | 5.000 | % | 1,421 | | 1,422 | |
Senior notes | 2048 | US | 750 | | 4.300 | % | 1,015 | | 1,016 | |
Senior notes | 2049 | US | 1,250 | | 4.350 | % | 1,692 | | 1,693 | |
Senior notes | 2049 | US | 1,000 | | 3.700 | % | 1,353 | | 1,354 | |
Senior notes 1 | 2052 | US | 2,000 | | 4.550 | % | 2,705 | | 2,709 | |
Senior notes 1 | 2052 | | 1,000 | | 5.250 | % | 1,000 | | 1,000 | |
Subordinated notes 3 | 2081 | | 2,000 | | 5.000 | % | 2,000 | | 2,000 | |
Subordinated notes 3 | 2082 | US | 750 | | 5.250 | % | 1,015 | | 1,016 | |
| | | | | 32,459 | | 32,855 | |
| | | | | | |
Deferred transaction costs and discounts | | | | | (1,095) | | (1,122) | |
Less current portion | | | | | (1,750) | | (1,828) | |
| | | | | | |
Total long-term debt | | | | | 29,614 | | 29,905 | |
| | | | | | |
| | | | | | |
1 Included in Shaw senior note financing.
2 Senior debentures originally issued by Rogers Cable Inc. which are unsecured obligations of RCI and for which RCCI was an unsecured guarantor as at March 31, 2023 and December 31, 2022.
3 The subordinated notes can be redeemed at par on the respective five-year anniversary from issuance dates of December 2021 and February 2022 or on any subsequent interest payment date.
| | | | | | | | |
Rogers Communications Inc. | 21 | First Quarter 2023 |
|
The tables below summarize the activity relating to our long-term debt for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2023 | | Three months ended March 31, 2022 |
(In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | | Notional (US$) | Exchange rate | Notional (Cdn$) |
| | | | | | | |
| | | | | | | |
Credit facility borrowings (US$) | 220 | | 1.368 | | 301 | | | — | | — | | — | |
Total credit facility borrowings | | | 301 | | | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Senior note issuances (Cdn$) | | | — | | | | | 4,250 | |
Senior note issuances (US$) | — | | — | | — | | | 7,050 | | 1.284 | | 9,054 | |
Total issuances of senior notes | | | — | | | | | 13,304 | |
| | | | | | | |
| | | | | | | |
Senior note repayments (US$) | (500) | | 1.378 | | (689) | | | (750) | | 1.259 | | (944) | |
Total senior notes repayments | | | (689) | | | | | (944) | |
| | | | | | | |
Net (repayment) issuance of senior notes | | | (689) | | | | | 12,360 | |
| | | | | | | |
| | | | | | | |
Subordinated note issuances (US$) | — | | — | | — | | | 750 | | 1.268 | | 951 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net (repayment) issuance of long-term debt | | | (388) | | | | | 13,311 | |
| | | | | | | | | | | |
| | | Three months ended March 31 |
(In millions of dollars) | | | | 2023 | 2022 |
| | | | | |
Long-term debt net of transaction costs, beginning of period | | | | 31,733 | | 18,688 | |
Net (repayment) issuance of long-term debt | | | | (388) | | 13,311 | |
Gain on foreign exchange | | | | (8) | | (415) | |
Deferred transaction costs incurred | | | | (3) | | (169) | |
Amortization of deferred transaction costs | | | | 30 | | 5 | |
| | | | | |
Long-term debt net of transaction costs, end of period | | | | 31,364 | | 31,420 | |
In January 2023, we amended our revolving credit facility to further extend the maturity date of the $3 billion tranche to January 2028, from April 2026, and the $1 billion tranche to January 2026, from April 2024.
In April 2023, we drew the maximum $6 billion on the term loan facility upon closing the Shaw Transaction (see note 22), consisting of $2 billion from each of the three tranches. The three tranches mature on April 3, 2026, 2027, and 2028, respectively.
| | | | | | | | |
Rogers Communications Inc. | 22 | First Quarter 2023 |
|
Senior and Subordinated Notes
Issuance of senior and subordinated notes and related debt derivatives
We did not issue senior or subordinated notes in the three months ended March 31, 2023. Below is a summary of the senior and subordinated notes we issued for the three months ended March 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions of dollars, except interest rates and discounts) | | Discount/ premium at issuance | Total gross
proceeds 1 (Cdn$) | Transaction costs and discounts 2 (Cdn$) |
Date issued | | Principal amount | Due date | Interest rate | Upon issuance | Upon modification 3 |
| | | | | | | | |
2022 issuances | | | | | | | | |
February 11, 2022 (subordinated) 4 | US | 750 | | 2082 | 5.250 | % | At par | 951 | | 13 | — | |
March 11, 2022 (senior) 5 | US | 1,000 | | 2025 | 2.950 | % | 99.934 | % | 1,283 | | 9 | 50 | |
March 11, 2022 (senior) | | 1,250 | | 2025 | 3.100 | % | 99.924 | % | 1,250 | | 7 | — | |
March 11, 2022 (senior) | US | 1,300 | | 2027 | 3.200 | % | 99.991 | % | 1,674 | | 13 | 82 | |
March 11, 2022 (senior) | | 1,000 | | 2029 | 3.750 | % | 99.891 | % | 1,000 | | 7 | 57 | |
March 11, 2022 (senior) | US | 2,000 | | 2032 | 3.800 | % | 99.777 | % | 2,567 | | 27 | 165 | |
March 11, 2022 (senior) | | 1,000 | | 2032 | 4.250 | % | 99.987 | % | 1,000 | | 6 | 58 | |
March 11, 2022 (senior) | US | 750 | | 2042 | 4.500 | % | 98.997 | % | 966 | | 20 | 95 | |
March 11, 2022 (senior) | US | 2,000 | | 2052 | 4.550 | % | 98.917 | % | 2,564 | | 55 | 250 | |
March 11, 2022 (senior) | | 1,000 | | 2052 | 5.250 | % | 99.483 | % | 1,000 | | 12 | 62 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
1 Gross proceeds before transaction costs, discounts, and premiums.
2 Transaction costs, discounts, and premiums are included as deferred transaction costs and discounts in the carrying value of the long-term debt, and recognized in net income using the effective interest method.
3 Accounted for as a modification of the respective financial liabilities. Reflects initial consent fee of $557 million incurred in September 2022 and additional consent fee of $262 million incurred in December 2022.
4 Deferred transaction costs and discounts (if any) in the carrying value of the subordinated notes are recognized in net income using the effective interest method over a five-year period. The subordinated notes due 2082 can be redeemed at par on March 15, 2027 or on any subsequent interest payment date.
5 The US$1 billion senior notes due 2025 can be redeemed at par on or after March 15, 2023.
In February 2022, we issued US$750 million subordinated notes due 2082 with an initial coupon of 5.25% for the first five years. Upon the occurrence of certain events involving a bankruptcy or insolvency of RCI, the outstanding principal and interest of such subordinated notes would automatically convert into preferred shares. Concurrently, we terminated $950 million of interest rate derivatives entered into in 2021 to hedge the interest rate risk associated with future debt issuances. Concurrent with the issuance, we also entered into debt derivatives to convert all interest and principal payment obligations to Canadian dollars. As a result, we received net proceeds of US$740 million ($938 million) from the issuance.
In March 2022, we issued $13.3 billion of senior notes, consisting of US$7.05 billion ($9.05 billion) and $4.25 billion (Shaw senior note financing), in order to partially finance the cash consideration for the Shaw Transaction (see note 22). These senior notes (except the $1.25 billion senior notes due 2025) contained a "special mandatory redemption" provision (SMR notes), which initially required them to be redeemed at 101% of principal amount (plus accrued interest) if the Shaw Transaction was not consummated prior to December 31, 2022 (SMR outside date). In August 2022, we received consent from the note holders of the SMR notes, and paid an initial consent fee of $557 million (including directly attributable transaction costs), to extend the SMR outside date to December 31, 2023. Because the Shaw Transaction had not yet been consummated by December 31, 2022, and we had not become obligated to complete a special mandatory redemption, we were required to pay $262 million ($55 million and US$152 million) of additional consent fees to the holders of the SMR notes in January 2023. We recognized approximately $12.8 billion of the net proceeds as "restricted cash and cash equivalents" on our interim condensed consolidated statements of financial position.
Concurrent with the March 2022 senior note issuances, we terminated certain derivatives (see note 11) we had entered into in 2021 to hedge the interest rate risk associated with future debt issuances. Concurrent with the US dollar-denominated issuances, we also entered into debt derivatives to convert all interest and principal payment obligations to Canadian dollars. As a result, we received net proceeds of US$6.95 billion ($8.93 billion) from the US dollar-denominated issuances.
Repayment of senior notes and related derivative settlements
In March 2023, we repaid the entire outstanding principal amount of our US$500 million 3.00% senior notes and the associated debt derivatives at maturity. As a result, we repaid $515 million, including receipt of $174 million on settlement of the associated debt derivatives.
| | | | | | | | |
Rogers Communications Inc. | 23 | First Quarter 2023 |
|
In March 2022, we repaid the entire outstanding principal amount of our US$750 million floating rate senior notes and the associated debt derivatives at maturity. As a result, we repaid $1,019 million, including $75 million on settlement of the associated debt derivatives.
NOTE 16: LEASES
Below is a summary of the activity related to our lease liabilities for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | |
| Three months ended March 31 | | |
(In millions of dollars) | 2023 | 2022 | | | |
| | | | | |
Lease liabilities, beginning of period | 2,028 | | 1,957 | | | | |
Net additions | 100 | | 107 | | | | |
| | | | | |
Interest on lease liabilities | 23 | | 19 | | | | |
Interest payments on lease liabilities | (22) | | (18) | | | | |
Principal payments of lease liabilities | (81) | | (77) | | | | |
| | | | | |
| | | | | |
Lease liabilities, end of period | 2,048 | | 1,988 | | | | |
NOTE 17: SHAREHOLDERS' EQUITY
Dividends
Below is a summary of the dividends we declared and paid on our outstanding RCI Class A Voting common shares (Class A Shares) and Class B Non-Voting Shares in 2023 and 2022.
| | | | | | | | |
Date declared | Date paid | Dividend per share (dollars) |
| | |
February 1, 2023 | April 3, 2023 | 0.50 | |
| | |
| | |
| | |
| | 0.50 | |
| | |
January 26, 2022 | April 1, 2022 | 0.50 | |
April 19, 2022 | July 4, 2022 | 0.50 | |
July 26, 2022 | October 3, 2022 | 0.50 | |
November 8, 2022 | January 3, 2023 | 0.50 | |
| | 2.00 | |
On April 25, 2023, the Board declared a dividend of $0.50 per Class A Share and Class B Non-Voting Share to be paid on July 5, 2023 to shareholders of record on June 9, 2023.
On April 3, 2023, we issued 23.6 million Class B Non-Voting Shares as partial consideration for the Shaw Transaction (see note 22).
The holders of Class A Shares are entitled to receive dividends at the rate of up to five cents per share but only after dividends at the rate of five cents per share have been paid or set aside on the Class B Non-Voting Shares. Class A Shares and Class B Non-Voting Shares therefore participate equally in dividends above five cents per share.
| | | | | | | | |
Rogers Communications Inc. | 24 | First Quarter 2023 |
|
NOTE 18: STOCK-BASED COMPENSATION
Below is a summary of our stock-based compensation expense, which is included in net income, for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | |
| | Three months ended March 31 |
(In millions of dollars) | | | | 2023 | 2022 |
| | | | | |
Stock options | | | | 16 | | 35 | |
Restricted share units | | | | 6 | | 25 | |
Deferred share units | | | | — | | 15 | |
Equity derivative effect, net of interest receipt | | | | (1) | | (61) | |
| | | | | |
Total stock-based compensation expense | | | | 21 | | 14 | |
As at March 31, 2023, we had a total liability recognized at its fair value of $196 million (December 31, 2022 - $229 million) related to stock-based compensation, including stock options, restricted share units (RSUs), and deferred share units (DSUs).
During the three months ended March 31, 2023, we paid $51 million (2022 - $53 million) to holders of stock options, RSUs, and DSUs upon exercise using the cash settlement feature.
Stock Options
Summary of stock options
Below is a summary of the activity related to stock option plans, including performance options, for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2023 | | | Three months ended March 31, 2022 |
(in number of units, except prices) | Number of options | Weighted average exercise price | | | | Number of options | Weighted average exercise price |
| | | | | | | |
Outstanding, beginning of period | 9,860,208 | | $63.58 | | | | 6,494,001 | | $61.62 |
Granted | 1,467,899 | | $65.22 | | | | 4,234,288 | | $65.73 |
Exercised | (60,000) | | $48.56 | | | | (180,027) | | $52.42 |
Forfeited | — | | — | | | | | (71,835) | | $61.20 |
| | | | | | | |
Outstanding, end of period | 11,268,107 | | $63.87 | | | | 10,476,427 | | $63.44 |
| | | | | | | |
Exercisable, end of period | 4,732,300 | | $63.08 | | | | 3,139,486 | | $61.70 |
We did not grant any performance stock options during the three months ended March 31, 2023 (2022 - 2,469,014). These performance options have certain non-market vesting conditions related to the Shaw Transaction.
Unrecognized stock-based compensation expense related to stock option plans was $24 million as at March 31, 2023 (December 31, 2022 - $14 million) and will be recognized in net income within periods of up to the next four years as the options vest.
| | | | | | | | |
Rogers Communications Inc. | 25 | First Quarter 2023 |
|
Restricted Share Units
Summary of RSUs
Below is a summary of the activity related to RSUs outstanding, including performance RSUs, for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | |
| | Three months ended March 31 |
(in number of units) | | | | 2023 | 2022 |
| | | | | |
Outstanding, beginning of period | | | | 2,402,489 | | 2,691,288 | |
Granted and reinvested dividends | | | | 697,874 | | 908,242 | |
Exercised | | | | (708,448) | | (585,261) | |
Forfeited | | | | (160,503) | | (109,558) | |
| | | | | |
Outstanding, end of period | | | | 2,231,412 | | 2,904,711 | |
Included in the above table are grants of 84,420 performance RSUs to certain key executives during the three months ended March 31, 2023 (2022 - 206,719).
Unrecognized stock-based compensation expense related to these RSUs was $60 million as at March 31, 2023 (December 31, 2022 - $48 million) and will be recognized in net income within periods of up to the next three years as the RSUs vest.
Deferred Share Unit Plan
Summary of DSUs
Below is a summary of the activity related to DSUs outstanding, including performance DSUs, for the three months ended March 31, 2023 and 2022.
| | | | | | | | | | | |
| | Three months ended March 31 |
(in number of units) | | | | 2023 | 2022 |
| | | | | |
Outstanding, beginning of period | | | | 1,139,885 | | 1,421,342 | |
Granted and reinvested dividends | | | | 13,279 | | 12,318 | |
Exercised | | | | (106,993) | | (166,710) | |
Forfeited | | | | (764) | | (516) | |
| | | | | |
Outstanding, end of period | | | | 1,045,407 | | 1,266,434 | |
Included in the above table are grants of 1,452 performance DSUs to certain key executives during the three months ended March 31, 2023 (2022 - nil).
There was no unrecognized stock-based compensation expenses related to these DSUs as at March 31, 2023 or December 31, 2022. All DSUs granted are fully vested.
NOTE 19: RELATED PARTY TRANSACTIONS
Controlling Shareholder
We enter into certain transactions with private companies controlled by the controlling shareholder of RCI, the Rogers Control Trust. These transactions were recognized at the amount agreed to by the related parties and are subject to the terms and conditions of formal agreements approved by the Audit and Risk Committee. The totals received or paid during the three months ended March 31, 2023 and 2022 were less than $1 million, respectively.
Transactions with Related Parties
We have entered into business transactions with Dream Unlimited Corp. (Dream), which is controlled by our Director Michael J. Cooper. Dream is a real estate company that rents spaces in office and residential buildings. Total amounts paid to this related party were nominal for the three months ended March 31, 2023 and 2022.
We recognized these transactions at the amounts agreed to by the related parties, which were also approved by the Audit and Risk Committee. The amounts owing for these services were unsecured, interest-free, and generally due for payment in cash within one month of the date of the transaction.
| | | | | | | | |
Rogers Communications Inc. | 26 | First Quarter 2023 |
|
NOTE 20: CONTINGENT LIABILITIES
Videotron Ltd.
On October 29, 2021, Videotron launched a lawsuit against Rogers in the Quebec Superior Court, in connection with an agreement entered into by the parties in 2013 for the development and operation of a joint LTE network in the province of Quebec. The lawsuit involved allegations by Videotron that Rogers breached its contractual obligations by developing its own network in the territory and sought damages of $850 million. On April 3, 2023, Rogers and Videotron settled the lawsuit; Rogers remains committed to serving our customers through continued investment in the joint network.
NOTE 21: SUPPLEMENTAL CASH FLOW INFORMATION
Change in Net Operating Assets and Liabilities
| | | | | | | | | | | |
| Three months ended March 31 | | |
(In millions of dollars) | 2023 | 2022 | | | |
| | | | | |
Accounts receivable, excluding financing receivables | (3) | | 185 | | | | |
Financing receivables | 23 | | 110 | | | | |
Contract assets | (6) | | 3 | | | | |
Inventories | (117) | | (5) | | | | |
Other current assets | (97) | | (118) | | | | |
Accounts payable and accrued liabilities | (558) | | (530) | | | | |
Contract and other liabilities | 54 | | 34 | | | | |
| | | | | |
Total change in net operating assets and liabilities | (704) | | (321) | | | | |
NOTE 22: SHAW TRANSACTION
On April 3, 2023, after receiving all required regulatory approvals and after the Freedom Transaction (as defined below) closed, we acquired all the issued and outstanding Class A Participating Shares and Class B Non-Voting Participating Shares (collectively, Shaw Shares) of Shaw for preliminary consideration of approximately $20.3 billion, consisting of:
•$18.9 billion of cash (consisting of $12.9 billion of cash and restricted cash and $6 billion borrowed from our $6 billion non-revolving term loan facility); and
•$1.4 billion through the issuance of 23.6 million RCI Class B Non-Voting common shares (based on the opening share price of Rogers Class B Non-Voting Shares on April 3, 2023 of $61.33).
The Shaw Transaction was implemented through a court-approved plan of arrangement under the Business Corporations Act (Alberta).
On April 3, 2023, immediately prior to the closing of the Shaw Transaction, Shaw completed the sale of all of the outstanding shares of Freedom Mobile Inc. (Freedom), a subsidiary of Shaw, to Videotron Ltd. (Videotron), a subsidiary of Quebecor Inc. (Quebecor) (Freedom Transaction). The Freedom Transaction was effected pursuant to an agreement entered into on August 12, 2022 among Rogers, Shaw, Quebecor, and Videotron, which provided for the sale of all Freedom-branded wireless and Internet customers and all of Freedom's infrastructure, spectrum licences, and retail locations. The purchase price payable by Quebecor to Shaw under this agreement was $2.85 billion as adjusted pursuant to the terms of the divestiture agreement. In connection with the closing of the Freedom Transaction, Rogers entered into long-term commercial arrangements with Freedom, Videotron and/or Quebecor under which Rogers (or its subsidiaries) will provide to Quebecor (or its subsidiaries) certain services, including:
•continued access to Shaw's business "Go WiFi" hotspots for Freedom Mobile subscribers;
•roaming services on an incidental, non-permanent basis;
•wholesale mobile virtual network operator access services;
•third-party Internet access services; and
•certain backhaul, backbone, and other transport services.
Rogers and Quebecor will also provide each other with customary transition services as necessary to facilitate (i) the operation of Freedom's business for a period of time post-closing and (ii) the separation of Freedom's business from the other businesses and operations of Shaw and its affiliates. The Freedom Transaction did not include the sale of Shaw Mobile-branded wireless subscribers; accordingly, these wireless subscribers remained with the Shaw business acquired by Rogers.
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Rogers Communications Inc. | 27 | First Quarter 2023 |
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On April 3, 2023, following the completion of the Shaw Transaction, Shaw Communications Inc. was amalgamated with RCI. As a result of this amalgamation, RCI became the issuer and assumed all of Shaw's obligations under the indenture governing Shaw's outstanding senior notes with a total principal amount of $4.5 billion as at April 3, 2023. In connection with the Shaw Transaction, RCCI provided a guarantee for Shaw's payment obligations under those senior notes.
Regulatory approval
On March 31, 2023, the Minister of Innovation, Science and Industry approved the transfer of Freedom's spectrum licences to Videotron, following which the Freedom Transaction closed on April 3, 2023.
As part of the regulatory approval process, we have agreed to certain legally enforceable undertakings with Innovation, Science and Economic Development Canada (ISED Canada), including:
•$1 billion of investments over five years to connect rural, remote, and Indigenous communities across Western Canada and to close critical connectivity gaps faster for underserved areas, including to make broadband Internet services available where broadband Internet at a minimum 50 megabit per second (Mbps) download speeds and 10 Mbps upload speeds is not currently available and to make 5G wireless service available where mobile service using long-term evolution (LTE) is not available;
•$2.5 billion of investments over five years to enhance and expand 5G coverage across Western Canada and $3 billion over five years related to additional network, services, and technology investments, including the expansion of our Cable network;
•expanding Connected for Success, our low-cost, high-speed Internet program, to low-income Canadians across Western Canada and implementing a new Connected for Success wireless program for low-income Canadians across Canada, such that Connected for Success will be available to more than 2.5 million eligible Canadians within five years;
•maintaining a strong presence in Western Canada, including creating 3,000 new jobs within five years (and maintaining those jobs until the tenth anniversary of closing) and maintaining a Western Canada headquarters in Calgary for at least ten years; and
•continuing to offer wireless plans to Shaw Mobile customers as at the closing date with the same terms and conditions (including eligibility) as the Shaw Mobile plans that were available as at the closing date for five years.
If any material element of any of the above commitments is not met, we could be liable to pay ISED $100 million in damages per year (to a maximum of $1 billion) until the earlier of (i) such material elements having been met or fulfilled or (ii) ten years after the closing date.
The Shaw business we acquired provides cable telecommunications, satellite video services, and data networking to residential customers, businesses, and public-sector entities in British Columbia, Alberta, Saskatchewan, and Manitoba (Western Canada). Shaw's primary products as at April 3, 2023, include Internet (through Fibre+), Video (through Total TV and Shaw Direct satellite), home phone services, and Wireless services (through Shaw Mobile to consumers in British Columbia and Alberta). This excludes the Freedom Mobile business, which we did not acquire.
Due to the limited time since the acquisition date, restrictions on access to Shaw information arising from regulatory considerations prior to closing, and the size and complexity of the Shaw Transaction, the accounting for the business combination is not yet complete. We are not able to provide the allocation of consideration paid to the assets acquired or liabilities assumed.
The major classes of assets acquired through the Shaw Transaction include cash and cash equivalents, accounts receivable, property, plant and equipment, and customer relationship assets. The major classes of liabilities assumed include accounts payable and accrued liabilities, lease liabilities, deferred tax liabilities, and long-term debt with a total principal amount of $4.5 billion.
Other related developments
In April 2023, we utilized a portion of the cash acquired from closing the Shaw Transaction to repay $1.45 billion in outstanding debt, including:
•US$220 million ($301 million) of borrowings under our revolving bank credit facilities;
•US$333 million ($453 million) of outstanding US commercial paper at maturity;
•$500 million of outstanding borrowings under our receivables securitization program; and
•$200 million of outstanding borrowings under Shaw's legacy accounts receivable securitization program, subsequent to which the program was terminated.
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