EX-99.2 3 rci-09302019xexhibit992.htm EXHIBIT 99.2 Exhibit

Exhibit 99.2
rogerslogoa11.jpg




Rogers Communications Inc.



INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Three and nine months ended September 30, 2019 and 2018


















Rogers Communications Inc.
1
Third Quarter 2019


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts, unaudited)
  
  
Three months ended September 30
 
 
Nine months ended
September 30
 
  
Note

2019

2018

 
2019

2018

 
 
 
 
 
 
 
Revenue
4

3,754

3,769

 
11,121

11,158

 
 
 
 
 


Operating expenses:
 
 
 
 


Operating costs
5

2,042

2,149

 
6,439

6,696

Depreciation and amortization
 
627

558

 
1,850

1,647

Gain on disposition of property, plant and equipment
 
—

(5
)
 
—

(16
)
Restructuring, acquisition and other
6

42

47

 
101

116

Finance costs
7

215

176

 
610

588

Other expense (income)
8

16

15

 
2

(6
)
 
 
 
 
 
 
 
Income before income tax expense
 
812

829

 
2,119

2,133

Income tax expense
 
219

235

 
544

576

 
 
 
 
 




Net income for the period
 
593

594

 
1,575

1,557

 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
Basic
9

$1.16
$1.15
 
$3.07
$3.02
Diluted
9

$1.14
$1.15
 
$3.05
$3.01
The accompanying notes are an integral part of the interim condensed consolidated financial statements.



Rogers Communications Inc.
2
Third Quarter 2019


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
(In millions of Canadian dollars, unaudited)
  
Three months ended September 30
 
 
Nine months ended
September 30
 
  
2019

2018

 
2019

2018

 
 
 
 
 
 
Net income for the period
593

594

 
1,575

1,557

 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Items that will not be reclassified to income
 
 
 
 
 
Equity investments measured at fair value through other comprehensive income (FVTOCI):
 
 
 
 
 
Increase (decrease) in fair value
202

(7
)
 
638

(428
)
Related income tax (expense) recovery
(27
)
2

 
(87
)
58

 
 
 
 
 
 
Equity investments measured at FVTOCI
175

(5
)
 
551

(370
)
 
 
 
 
 
 
Items that may subsequently be reclassified to income:
 
 
 
 
 
Cash flow hedging derivative instruments:
 
 
 
 
 
Unrealized gain (loss) in fair value of derivative instruments
653

(132
)
 
319

118

Reclassification to net income of (gain) loss on debt derivatives
(114
)
135

 
262

(249
)
Reclassification to net income or property, plant and equipment of (gain) loss on expenditure derivatives
(17
)
—

 
(51
)
5

Reclassification to net income for accrued interest
(11
)
(10
)
 
(35
)
(33
)
Related income tax (expense) recovery
(102
)
14

 
(62
)
5

 
 
 
 
 
 
Cash flow hedging derivative instruments
409

7

 
433

(154
)
 
 
 
 
 
 
Share of other comprehensive income (loss) of equity-accounted investments, net of tax
1

(5
)
 
(5
)
5

 
 
 
 
 
 
Other comprehensive income (loss) for the period
585

(3
)
 
979

(519
)
 
 
 
 
 
 
Comprehensive income for the period
1,178

591

 
2,554

1,038

The accompanying notes are an integral part of the interim condensed consolidated financial statements.
 

Rogers Communications Inc.
3
Third Quarter 2019


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Financial Position
(In millions of Canadian dollars, unaudited)
 
 
As at
September 30

As at
January 1

As at
December 31

  
Note

2019

2019

2018

 
 
 
(see note 2)

 
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
262

405

405

Accounts receivable
 
2,097

2,259

2,259

Inventories
 
393

466

466

Current portion of contract assets
 
1,154

1,052

1,052

Other current assets
 
472

413

436

Current portion of derivative instruments
10

129

270

270

Total current assets
 
4,507

4,865

4,888

 
 
 
 
 
Property, plant and equipment
 
13,661

13,261

11,780

Intangible assets
11

8,893

7,205

7,205

Investments
12

2,744

2,134

2,134

Derivative instruments
10

1,639

1,339

1,339

Contract assets
 
488

535

535

Other long-term assets
 
207

132

132

Goodwill
 
3,923

3,905

3,905

 
 
 
 
 
Total assets
 
36,062

33,376

31,918

 
 
 
 
 
Liabilities and shareholders' equity
 
 
 
 
Current liabilities:
 
 
 
 
Short-term borrowings
13

1,708

2,255

2,255

Accounts payable and accrued liabilities
 
2,572

2,997

3,052

Income tax payable
 
129

177

177

Other current liabilities
 
114

132

132

Contract liabilities
 
166

233

233

Current portion of long-term debt
14

1,400

900

900

Current portion of lease liabilities
15

219

190

—

Current portion of derivative instruments
10

3

87

87

Total current liabilities
 
6,311

6,971

6,836

 
 


 
 
Provisions
 
37

35

35

Long-term debt
14

14,879

13,390

13,390

Derivative instruments
10

11

22

22

Lease liabilities
15

1,435

1,355

—

Other long-term liabilities
 
445

546

546

Deferred tax liabilities
 
3,301

2,901

2,910

Total liabilities
 
26,419

25,220

23,739

 
 


 
 
Shareholders' equity
16

9,643

8,156

8,179

 
 


 
 
Total liabilities and shareholders' equity
 
36,062

33,376

31,918

 
 
 
 
 
Subsequent events
16

 
 
 
Contingent liabilities
19

 
 
 
The accompanying notes are an integral part of the interim condensed consolidated financial statements.


Rogers Communications Inc.
4
Third Quarter 2019


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders' Equity
(In millions of Canadian dollars, except number of shares, unaudited)
 
Class A
Voting Shares
Class B
Non-Voting Shares
 
 
 
 
 
Nine months ended September 30, 2019
Amount

Number
of shares
(000s)

Amount

Number
of shares
(000s)

Retained
earnings

FVTOCI investment reserve

Hedging
reserve

Equity
investment reserve

Total
shareholders'
equity

Balances, December 31, 2018
71

111,155

406

403,657

7,182

636

(125
)
9

8,179

Adjustments pertaining to IFRS 16 adoption (see note 2)
—

—

—

—

(23
)
—

—

—

(23
)
Balances, January 1, 2019 (see note 2)
71

111,155

406

403,657

7,159

636

(125
)
9

8,156

Net income for the period
—

—

—

—

1,575

—

—

—

1,575

 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
FVTOCI investments, net of tax
—

—

—

—

—

551

—

—

551

Derivative instruments accounted for as hedges, net of tax
—

—

—

—

—

—

433

—

433

Share of equity-accounted investments, net of tax
—

—

—

—

—

—

—

(5
)
(5
)
Total other comprehensive income (loss)
—

—

—

—

—

551

433

(5
)
979

Comprehensive income for the period
—

—

—

—

1,575

551

433

(5
)
2,554

 
 
 
 
 
 
 
 
 
 
Reclassification to retained earnings for disposition of FVTOCI investments
—

—

—

—

16

(16
)
—

—

—

 
 
 
 
 
 
 
 
 
 
Transactions with shareholders recorded directly in equity:
 
 
 
 
 
 
 
 
 
Repurchase of Class B Non-Voting Shares
—

—

(4
)
(4,273
)
(294
)
—

—

—

(298
)
Dividends declared
—

—

—

—

(769
)
—

—

—

(769
)
Share class exchange
—

(1
)
—

1

—

—

—

—

—

Total transactions with shareholders
—

(1
)
(4
)
(4,272
)
(1,063
)
—

—

—

(1,067
)
 
 
 
 
 
 
 
 
 
 
Balances, September 30, 2019
71

111,154

402

399,385

7,687

1,171

308

4

9,643

 
Class A
Voting Shares
Class B
Non-Voting Shares
 
 
 
 
 
Nine months ended September 30, 2018
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, 2018
72

112,407

405

402,403

6,070

1,013

(63
)
(5
)
7,492

Net income for the period
—

—

—

—

1,557

—

—

—

1,557

 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
FVTOCI investments, net of tax
—

—

—

—

—

(370
)
—

—

(370
)
Derivative instruments accounted for as hedges, net of tax
—

—

—

—

—

—

(154
)
—

(154
)
Share of equity-accounted investments, net of tax
—

—

—

—

—

—

—

5

5

Total other comprehensive income (loss)
—

—

—

—

—

(370
)
(154
)
5

(519
)
Comprehensive income for the period
—

—

—

—

1,557

(370
)
(154
)
5

1,038

 
 
 
 
 
 
 
 
 
 
Transactions with shareholders recorded directly in equity:
 
 
 
 
 
 
 
 
 
Dividends declared
—

—

—

—

(741
)
—

—

—

(741
)
Shares issued on exercise of stock options
—

—

—

2

—

—

—

—

—

Share class exchange
(1
)
(1,252
)
1

1,252

—

—

—

—

—

Total transactions with shareholders
(1
)
(1,252
)
1

1,254

(741
)
—

—

—

(741
)
 
 
 
 
 
 
 
 
 
 
Balances, September 30, 2018
71

111,155

406

403,657

6,886

643

(217
)
—

7,789

The accompanying notes are an integral part of the interim condensed consolidated financial statements.


Rogers Communications Inc.
5
Third Quarter 2019


Rogers Communications Inc.
Interim Condensed Consolidated Statements of Cash Flows
(In millions of Canadian dollars, unaudited)
  
  
Three months ended September 30
 

Nine months ended September 30
 
  
Note

2019

2018

 
2019

2018

Operating activities:
 
 
 
 
 
 
Net income for the period
 
593

594

 
1,575

1,557

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 


Depreciation and amortization
 
627

558

 
1,850

1,647

Program rights amortization
 
17

9

 
58

39

Finance costs
7

215

176

 
610

588

Income tax expense
 
219

235

 
544

576

Post-employment benefits contributions, net of expense
 
33

31

 
(82
)
(38
)
Gain on disposition of property, plant and equipment
 
—

(5
)
 
—

(16
)
Net change in contract asset balances
 
(26
)
(74
)
 
(55
)
(168
)
Other
 
5

20

 
65

15

Cash provided by operating activities before changes in non-cash working capital items, income taxes paid, and interest paid
 
1,683

1,544

 
4,565

4,200

Change in non-cash operating working capital items
20

(57
)
77

 
(279
)
(72
)
Cash provided by operating activities before income taxes paid and interest paid
 
1,626

1,621

 
4,286

4,128

Income taxes paid
 
(99
)
(125
)
 
(345
)
(316
)
Interest paid
 
(222
)
(192
)
 
(581
)
(575
)
 
 
 
 
 
 
 
Cash provided by operating activities
 
1,305

1,304

 
3,360

3,237

 
 
 
 
 
 
 
Investing activities:
 
 
 
 
 
 
Capital expenditures
20

(657
)
(700
)
 
(2,016
)
(1,962
)
Additions to program rights
 
(15
)
(16
)
 
(29
)
(28
)
Changes in non-cash working capital related to capital expenditures and intangible assets
 
(63
)
(37
)
 
(144
)
(232
)
Acquisitions and other strategic transactions, net of cash acquired
11

—

—

 
(1,731
)
—

Other
 
11

5

 
1

16

 
 
 
 
 
 
 
Cash used in investing activities
 
(724
)
(748
)
 
(3,919
)
(2,206
)
 
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
 
Net (repayment) proceeds received on short-term borrowings
13

(311
)
(255
)
 
(523
)
252

Net issuance (repayment) of long-term debt
14

—

—

 
2,276

(823
)
Net (payments) proceeds on settlement of debt derivatives and forward contracts
10

(22
)
16

 
(126
)
362

Principal payments of lease liabilities
15

(45
)
—

 
(124
)
—

Transaction costs incurred
14

—

(2
)
 
(33
)
(18
)
Repurchase of Class B Non-Voting Shares
16

(89
)
—

 
(294
)
—

Dividends paid
 
(256
)
(247
)
 
(760
)
(741
)
 
 
 
 
 
 
 
Cash (used in) provided by financing activities
 
(723
)
(488
)
 
416

(968
)
 
 
 
 
 
 
 
Change in cash and cash equivalents
 
(142
)
68

 
(143
)
63

Cash and cash equivalents (bank advances), beginning of period
 
404

(11
)
 
405

(6
)
 
 
 
 
 
 
 
Cash and cash equivalents, end of period
 
262

57

 
262

57

The accompanying notes are an integral part of the interim condensed consolidated financial statements.


Rogers Communications Inc.
6
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)


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:
Segment
Principal activities
Wireless
Wireless telecommunications operations for Canadian consumers and businesses.
Cable
Cable telecommunications operations, including Internet, television, telephony (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 nine months ended September 30, 2019, 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 fluctuations are described in note 1 to our annual audited consolidated financial statements for the year ended December 31, 2018 (2018 financial statements).

Statement of Compliance
We prepared our interim condensed consolidated financial statements for the three and nine months ended September 30, 2019 (third quarter 2019 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 2018 financial statements with the exception of new accounting policies that were adopted on January 1, 2019 as described in note 2. These third quarter 2019 interim financial statements were approved by RCI's Board of Directors on October 22, 2019.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The notes presented in these third quarter 2019 interim financial statements include only significant transactions and changes occurring for the nine months since our year-end of December 31, 2018 and do not include all disclosures required by International Financial Reporting Standards (IFRS) as issued by the IASB for annual financial statements. These third quarter 2019 interim financial statements should be read in conjunction with the 2018 financial statements.

All dollar amounts are in Canadian dollars unless otherwise stated.

New Accounting Standards
IFRS 16 - Leases (IFRS 16)
Effective January 1, 2019, we adopted IFRS 16, which supersedes previous accounting standards for leases, including IAS 17, Leases (IAS 17) and IFRIC 4, Determining whether an arrangement contains a lease (IFRIC 4).

IFRS 16 introduced a single accounting model for lessees. A lessee is required to recognize, on its statement of financial position, a right-of-use asset, representing its right to use the underlying leased asset, and a lease liability, representing its obligation to make lease payments. As a result of adopting IFRS 16, we have recognized a significant increase to both assets and liabilities on our Consolidated Statements of Financial Position, as well as a decrease to operating costs (for the removal of rent expense for leases), an increase to depreciation and amortization (due to depreciation of the

Rogers Communications Inc.
7
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

right-of-use asset), and an increase to finance costs (due to accretion of the lease liability). The accounting treatment for lessors remains largely the same as under IAS 17.

We adopted IFRS 16 with the cumulative effect of initial application recognized as an adjustment to retained earnings within shareholders' equity on January 1, 2019. We have not restated comparatives for 2018. At transition, we applied the practical expedient available to us as lessee that allows us to maintain our lease assessments made under IAS 17 and IFRIC 4 for existing contracts. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed after January 1, 2019.

For leases that were classified as operating leases under IAS 17, lease liabilities at transition have been measured at the present value of remaining lease payments, discounted at the related incremental borrowing rate as at January 1, 2019. Generally, right-of-use assets at transition have been measured at an amount equal to the corresponding lease liabilities, adjusted for any prepaid or accrued rent relating to that lease. For certain leases where we have readily available information, we have elected to measure the right-of-use assets at their carrying amounts as if IFRS 16 had been applied since the lease commencement date using the related incremental borrowing rate for the remaining lease period as at January 1, 2019.

When applying IFRS 16 to leases previously classified as operating leases, the following practical expedients were available to us. We have:
•
applied a single discount rate to a portfolio of leases with similar characteristics;
•
excluded initial direct costs from measuring the right-of-use asset as at January 1, 2019;
•
used hindsight in determining the lease term where the contract contains purchase, extension, or termination options; and
•
relied upon our assessment of whether leases are onerous under the requirements of IAS 37, Provisions, contingent liabilities and contingent assets as at December 31, 2018 as an alternative to reviewing our right-of-use assets for impairment.

We have elected to not separate fixed non-lease components from lease components and instead account for each lease component and associated fixed non-lease components as a single lease component. On transition, we have not elected the recognition exemptions on short-term leases or low-value leases; however, we may choose to elect the recognition exemptions on a class-by-class basis for new classes, and lease-by-lease basis, respectively, in the future.

There was no significant impact for contracts in which we are the lessor.


Rogers Communications Inc.
8
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Reconciliation of condensed consolidated statement of financial position as at January 1, 2019
Below is the effect of transition to IFRS 16 on our condensed consolidated statement of financial position as at January 1, 2019.
(In millions of dollars)
Reference
As reported as at
December 31, 2018

Effect of IFRS 16 transition

Subsequent to transition as at
January 1, 2019

 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
405

—

405

Accounts receivable
 
2,259

—

2,259

Inventories
 
466

—

466

Current portion of contract assets
 
1,052

—

1,052

Other current assets
 
436

(23
)
413

Current portion of derivative instruments
 
270

—

270

Total current assets
 
4,888

(23
)
4,865

 
 
 
 
 
Property, plant and equipment
i
11,780

1,481

13,261

Intangible assets
 
7,205

—

7,205

Investments
 
2,134

—

2,134

Derivative instruments
 
1,339

—

1,339

Contract assets
 
535

—

535

Other long-term assets
 
132

—

132

Goodwill
 
3,905

—

3,905

 
 
 
 
 
Total assets
 
31,918

1,458

33,376

 
 
 
 
 
Liabilities and shareholders' equity
 
 
 
 
Current liabilities:
 
 
 
 
Short-term borrowings
 
2,255

—

2,255

Accounts payable and accrued liabilities
 
3,052

(55
)
2,997

Income tax payable
 
177

—

177

Other current liabilities
 
132

—

132

Contract liabilities
 
233

—

233

Current portion of long-term debt
 
900

—

900

Current portion of derivative instruments
 
87

—

87

Current portion of lease liabilities
i
—

190

190

Total current liabilities
 
6,836

135

6,971

 
 
 
 
 
Provisions
 
35

—

35

Long-term debt
 
13,390

—

13,390

Derivative instruments
 
22

—

22

Lease liabilities
i
—

1,355

1,355

Other long-term liabilities
 
546

—

546

Deferred tax liabilities
 
2,910

(9
)
2,901

Total liabilities
 
23,739

1,481

25,220

 
 
 
 
 
Shareholders' equity
 
8,179

(23
)
8,156

 
 
 
 
 
Total liabilities and shareholders' equity
 
31,918

1,458

33,376


Prior to adopting IFRS 16, our total minimum operating lease commitments as at December 31, 2018 were $979 million. The weighted average discount rate applied to the total lease liabilities recognized on transition was 3.82%. The difference between the total of the minimum lease payments set out in Note 27 to our 2018 Annual Financial Statements and the total lease liabilities recognized on transition was a result of:
•
the inclusion of lease payments beyond minimum commitments relating to reasonably certain renewal periods or extension options that had not yet been exercised as at December 31, 2018; partially offset by
•
the effect of discounting on the minimum lease payments; and

Rogers Communications Inc.
9
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

•
certain costs to which we are contractually committed under lease contracts but which do not qualify to be accounted for as a lease liability, such as variable lease payments not tied to an index or rate.

i) Right-of-use assets and lease liabilities
We have recorded a right-of-use asset and a lease liability for all existing leases at the lease commencement date, which is January 1, 2019 for the purposes of our adoption. The lease liability has been initially measured at the present value of lease payments that remain to be paid at the commencement date. Lease payments included in the measurement of the lease liability include:
•
fixed payments, including in-substance fixed payments;
•
variable lease payments that depend on an index or rate;
•
amounts expected to be payable under a residual value guarantee; and
•
the exercise price under a purchase option that we are reasonably certain to exercise, lease payments in an optional renewal period if we are reasonably certain to exercise an extension option, and penalties for early termination of a lease unless we are reasonably certain not to terminate early.

After transition, the right-of-use asset will initially be measured at cost, consisting of:
•
the initial amount of the lease liability, adjusted for any lease payments made at or before the commencement date; plus
•
any initial direct costs incurred; and
•
an estimate of costs to dismantle and remove the underlying asset or restore the site on which it is located; less
•
any lease incentives received.

The right-of-use asset will typically be depreciated on a straight-line basis over the lease term, unless we expect to obtain ownership of the leased asset at the end of the lease. The lease term will consist of:
•
the non-cancellable period of the lease;
•
periods covered by options to extend the lease, where we are reasonably certain to exercise the option; and
•
periods covered by options to terminate the lease, where we are reasonably certain not to exercise the option.

See note 15 for our accounting policies, including estimates and judgments, to be used for accounting for leases under IFRS 16.

NOTE 3: 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 2018 Annual Audited Consolidated Financial Statements and as described in note 2 of the third quarter 2019 interim 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
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Information by Segment
Three months ended September 30, 2019
Note

Wireless

Cable

Media

Corporate
items and
eliminations

Consolidated
totals

(In millions of dollars)
 
 
 
 
 
 
 
Revenue
4

2,324

994

483

(47
)
3,754

 
 
 
 
 
 
 
Operating costs
5

1,186

495

353

8

2,042

 
 
 
 
 
 
 
Adjusted EBITDA
 
1,138

499

130

(55
)
1,712

 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
627

Restructuring, acquisition and other
6

 
 
 
 
42

Finance costs
7

 
 
 
 
215

Other expense
8

 
 
 
 
16

 
 
 
 
 
 
 
Income before income taxes
 
 
 
 
 
812

Three months ended September 30, 2018
Note

Wireless

Cable

Media

Corporate
items and
eliminations

Consolidated
totals

(In millions of dollars)
 
 
 
 
 
 
 
Revenue
4

2,331

983

488

(33
)
3,769

 
 
 
 
 
 
 
Operating costs
5

1,232

493

415

9

2,149

 
 
 
 
 
 
 
Adjusted EBITDA
 
1,099

490

73

(42
)
1,620

 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
558

Gain on disposition of property, plant and equipment
 
 
 
 
 
(5
)
Restructuring, acquisition and other
6

 
 
 
 
47

Finance costs
7

 
 
 
 
176

Other expense
8

 
 
 
 
15

 
 
 
 
 
 
 
Income before income taxes
 
 
 
 
 
829

Nine months ended September 30, 2019
Note

Wireless

Cable

Media

Corporate
items and
eliminations

Consolidated
totals

(In millions of dollars)
 
 
 
 
 
 
 
Revenue
4

6,757

2,967

1,542

(145
)
11,121

 
 
 
 
 
 
 
Operating costs
5

3,476

1,545

1,424

(6
)
6,439

 
 
 
 
 
 
 
Adjusted EBITDA
 
3,281

1,422

118

(139
)
4,682

 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
1,850

Restructuring, acquisition and other
6

 
 
 
 
101

Finance costs
7

 
 
 
 
610

Other expense
8

 
 
 
 
2

 
 
 
 
 
 
 
Income before income taxes
 
 
 
 
 
2,119


Rogers Communications Inc.
11
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Nine months ended September 30, 2018
Note

Wireless

Cable

Media

Corporate
items and
eliminations

Consolidated
totals

(In millions of dollars)
 
 
 
 
 
 
 
Revenue
4

6,736

2,943

1,628

(149
)
11,158

 
 
 
 
 
 
 
Operating costs
5

3,674

1,558

1,472

(8
)
6,696

 
 
 
 
 
 
 
Adjusted EBITDA
 
3,062

1,385

156

(141
)
4,462

 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
1,647

Gain on disposition of property, plant and equipment
 
 
 
 
 
(16
)
Restructuring, acquisition and other
6

 
 
 
 
116

Finance costs
7

 
 
 
 
588

Other income
8

 
 
 
 
(6
)
 
 
 
 
 
 
 
Income before income taxes
 
 
 
 
 
2,133


NOTE 4: REVENUE
 
Three months ended September 30
 
 
Nine months ended September 30
 
(In millions of dollars)
2019

2018

 
2019

2018

 
 
 
 
 
 
Wireless
 
 
 
 
 
Service revenue
1,808

1,837

 
5,368

5,285

Equipment revenue
516

494

 
1,389

1,451

 
 
 
 
 
 
Total Wireless
2,324

2,331

 
6,757

6,736

 
 
 
 
 
 
Cable
 
 
 
 
 
Internet
570

534

 
1,684

1,578

Television
363

357

 
1,075

1,079

Phone
56

88

 
197

277

Service revenue
989

979

 
2,956

2,934

Equipment revenue
5

4

 
11

9

 
 
 
 
 
 
Total Cable
994

983

 
2,967

2,943

 
 
 
 
 
 
Total Media
483

488

 
1,542

1,628

 
 
 
 
 
 
Corporate items and intercompany eliminations
(47
)
(33
)
 
(145
)
(149
)
 
 
 
 
 
 
Total revenue
3,754

3,769

 
11,121

11,158


NOTE 5: OPERATING COSTS
  
Three months ended September 30
 
 
Nine months ended September 30
 
(In millions of dollars)
2019

2018

 
2019

2018

 
 
 
 
 
 
Cost of equipment sales
537

526

 
1,516

1,584

Merchandise for resale
58

54

 
167

163

Other external purchases
949

1,001

 
3,192

3,312

Employee salaries, benefits, and stock-based compensation
498

568

 
1,564

1,637

 
 
 
 
 
 
Total operating costs
2,042

2,149

 
6,439

6,696



Rogers Communications Inc.
12
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

NOTE 6: RESTRUCTURING, ACQUISITION AND OTHER

During the three and nine months ended September 30, 2019, we incurred $42 million and $101 million (2018 - $47 million and $116 million), respectively, in restructuring, acquisition and other expenses. These expenses in 2019 and 2018 consisted of severance costs associated with the targeted restructuring of our employee base and contract termination and other costs.

NOTE 7: FINANCE COSTS
  
 
Three months ended September 30
 
 
Nine months ended September 30
 
(In millions of dollars)
Note
2019

2018

 
2019

2018

 
 
 
 
 
 
 
Interest on borrowings 1
 
194

173

 
554

536

Interest on post-employment benefits liability
 
2

5

 
8

10

Loss on repayment of long-term debt
14
—

—

 
—

28

Loss (gain) on foreign exchange
 
20

(27
)
 
(52
)
46

Change in fair value of derivative instruments
 
(19
)
27

 
54

(32
)
Capitalized interest
 
(5
)
(5
)
 
(14
)
(15
)
Other
 
8

3

 
16

15

 
 
 
 
 
 
 
Finance costs before interest on lease liabilities
 
200

176

 
566

588

Interest on lease liabilities
15
15

—

 
44

—

 
 
 
 
 
 
 
Total finance costs
 
215

176

 
610

588

1 
Interest on borrowings includes interest on short-term borrowings and on long-term debt.

NOTE 8: OTHER EXPENSE (INCOME)
  
Three months ended September 30
 
 
Nine months ended September 30
 
(In millions of dollars)
2019

2018

 
2019

2018

 
 
 
 
 
 
Losses from associates and joint ventures
25

20

 
28

17

Other investment income
(9
)
(5
)
 
(26
)
(23
)
 
 
 
 
 
 
Total other expense (income)
16

15

 
2

(6
)

NOTE 9: EARNINGS PER SHARE
  
Three months ended September 30
 
 
Nine months ended September 30
 
(In millions of dollars, except per share amounts)
2019

2018

 
2019

2018

 
 
 
 
 
 
Numerator (basic) - Net income for the period
593

594

 
1,575

1,557

 
 
 
 
 
 
Denominator - Number of shares (in millions):
 
 
 
 
 
Weighted average number of shares outstanding - basic
511

515

 
513

515

Effect of dilutive securities (in millions):
 
 
 
 
 
Employee stock options and restricted share units
2

1

 
1

1

 
 
 
 
 
 
Weighted average number of shares outstanding - diluted
513

516

 
514

516

 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
Basic

$1.16

$1.15
 
$3.07
$3.02
Diluted

$1.14

$1.15
 
$3.05
$3.01

For the three and nine months ended September 30, 2019, and for the nine months ended September 30, 2018, 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 and nine months ended September 30, 2019 was reduced by $9 million and $6 million (2018 - nil and $2 million), respectively, in the diluted earnings per share calculation.

Rogers Communications Inc.
13
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

A total of 1,077,885 and 1,040,170 options were out of the money for the three and nine months ended September 30, 2019 (2018 - 37,715 and 527,550), respectively. These options were excluded from the calculation of the effect of dilutive securities because they were anti-dilutive.

NOTE 10: FINANCIAL INSTRUMENTS

Derivative Instruments
We use derivative instruments to manage financial risks related to our business activities. These include debt derivatives, bond forwards, expenditure derivatives, and equity derivatives. We only use derivatives to manage risk and not for speculative purposes.

Debt derivatives
We use cross-currency interest rate agreements (debt derivatives) to manage risks from fluctuations in foreign exchange rates associated with our US dollar-denominated senior notes and debentures, credit facility borrowings, and US dollar-denominated commercial paper (US CP) borrowings (see note 13). We designate the debt derivatives related to our senior notes and debentures as hedges for accounting purposes against the foreign exchange risk associated with specific debt instruments. Debt derivatives related to our credit facility and US CP borrowings have not been designated as hedges for accounting purposes.

The tables below summarize the debt derivatives we entered into and settled related to our credit facility borrowings and US CP program during the three and nine months ended September 30, 2019 and 2018.


Three months ended September 30, 2019
 


Nine months ended September 30, 2019
 
(In millions of dollars, except exchange rates)
Notional
 (US$)

Exchange rate

Notional (Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Credit facilities
 
 
 
 
 
 
 
Debt derivatives entered
—

—

—

 
420

1.34

561

Debt derivatives settled
—

—

—

 
420

1.34

564

Net cash received
 
 
—

 
 
 
3

 
 
 
 
 
 
 
 
US commercial paper program
 
 
 
 
 
 
 
Debt derivatives entered
3,228

1.32

4,257

 
10,046

1.33

13,361

Debt derivatives settled
3,452

1.33

4,578

 
10,421

1.33

13,865

Net cash paid
 
 
(22
)
 
 
 
(18
)


Three months ended September 30, 2018
 


Nine months ended September 30, 2018
 
(In millions of dollars, except exchange rates)
Notional
 (US$)

Exchange rate

Notional
(Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Credit facilities
 
 
 
 
 
 
 
Debt derivatives entered
—

—

—

 
125

1.26

157

Debt derivatives settled
—

—

—

 
125

1.26

157

Net cash (paid) received
 
 
—

 
 
 
(1
)
 
 
 
 
 
 
 
 
US commercial paper program
 
 
 
 
 
 
 
Debt derivatives entered
4,314

1.31

5,649

 
11,436

1.29

14,726

Debt derivatives settled
4,503

1.31

5,877

 
11,213

1.29

14,413

Net cash received
 
 
16

 
 
 
37


As at September 30, 2019, we had nil and US$799 million notional amount of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2018 - nil and US$1,178 million), respectively.


Rogers Communications Inc.
14
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Senior notes
Below is a summary of the debt derivatives into which we entered related to senior notes during the nine months ended September 30, 2019 and 2018. We did not enter into any debt derivatives related to senior notes during the three months ended September 30, 2019 or 2018.
(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$)

 
 
 
 
 
 
 
2019 issuances
 
 
 
 
 
 
April 30, 2019
1,250

2049
4.350
%
 
4.173
%
1,676

 
 
 
 
 
 
 
2018 issuances
 
 
 
 
 
 
February 8, 2018
750

2048
4.300
%
 
4.193
%
938

1 
Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.

As at September 30, 2019, we had US$7,300 million (December 31, 2018 - US$6,050 million) in US dollar-denominated senior notes and debentures, of which all of the associated foreign exchange risk had been hedged using debt derivatives.

In April 2018, we repaid the entire outstanding principal amount of our US$1.4 billion senior notes that were otherwise due in August 2018. At the same time, the associated debt derivatives were settled for net proceeds of $326 million, resulting in a net repayment of $1.5 billion, which was separately funded through our US CP program and our bank credit facility.

Bond forwards
From time to time, we have used bond forward derivatives (bond forwards) to hedge interest rate risk on the senior notes we had expected to issue in the future.

During the nine months ended September 30, 2019, we exercised a $500 million notional bond forward due 2019 in relation to the issuance of the $1 billion senior notes due 2029 and paid $54 million to settle the derivative. We also exercised a $400 million notional bond forward due 2019 in relation to the issuance of the US$1.25 billion senior notes due 2049 and paid $57 million to settle the derivative. We did not enter into or settle any other bond forwards during the three and nine months ended September 30, 2019 or 2018.

As at September 30, 2019, we had nil (December 31, 2018 - $900 million) notional amount of bond forwards outstanding. The outstanding bond forwards as at December 31, 2018 were all designated as hedges for accounting purposes.

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.

The tables below summarize the expenditure derivatives we entered into and settled during the three and nine months ended September 30, 2019 and 2018.


Three months ended September 30, 2019
 


Nine months ended September 30, 2019
 
(In millions of dollars, except exchange rates)
Notional (US$)

Exchange rate

Notional (Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Expenditure derivatives entered
—

—

—

 
780

1.32

1,031

Expenditure derivatives settled
240

1.25

301

 
690

1.25

863


Rogers Communications Inc.
15
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)



Three months ended September 30, 2018
 


Nine months ended September 30, 2018
 
(In millions of dollars, except exchange rates)
Notional (US$)

Exchange rate

Notional (Cdn$)

 
Notional
(US$)

Exchange
rate

Notional
(Cdn$)

 
 
 
 
 
 
 
 
Expenditure derivatives entered
120

1.30

156

 
720

1.24

896

Expenditure derivatives settled
210

1.30

273

 
630

1.30

819


As at September 30, 2019, we had US$1,170 million notional amount of expenditure derivatives outstanding (December 31, 2018 - US$1,080 million) with terms to maturity ranging from October 2019 to December 2020 (December 31, 2018 - January 2019 to December 2020), at an average rate of $1.29/US$ (December 31, 2018 - $1.24/US$).

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 September 30, 2019, we had equity derivatives outstanding for 4.3 million (December 31, 2018 - 5.0 million) Class B Non-Voting Shares with a weighted average price of $51.76 (December 31, 2018 - $51.54).

During the nine months ended September 30, 2019, we settled 0.7 million equity derivatives at a weighted average price of $71.66 for net proceeds of $16 million.

During the nine months ended September 30, 2018, we settled 0.4 million equity derivatives at a weighted average price of $61.15 for net proceeds of $4 million.

We did not enter into any equity derivatives during the three or nine months ended September 30, 2019 or 2018. We have executed extension agreements for our equity derivative contracts under substantially the same terms and conditions with revised expiry dates to April 2020 (from April 2019).

Fair Values of Financial Instruments
The carrying values of 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.

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 each of our bond forwards is determined by discounting to the measurement date the cash flows that result from multiplying the bond forward's notional amount by the difference between the period-end market forward yields and the forward yield in each bond forward.

The fair values of our equity derivatives are based on the quoted market value of Class B Non-Voting Shares.


Rogers Communications Inc.
16
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

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 September 30, 2019 or December 31, 2018 and there were no transfers between Level 1, Level 2, or Level 3 during the three or nine months ended September 30, 2019 or 2018.
Below is a summary of our financial instruments carried at fair value as at September 30, 2019 and December 31, 2018.
  
Carrying value
 
Fair value (Level 1)
 
Fair value (Level 2)
 
 
As at
Sept. 30

As at
Dec. 31

As at
Sept. 30

As at
Dec. 31

As at
Sept. 30

As at
Dec. 31

(In millions of dollars)
2019

2018

2019

2018

2019

2018

 
 
 
 
 
 
 
Financial assets
 
 
 
 
 
 
Investments, measured at fair value:
 
 
 
 
 
 
Investments in publicly traded companies
1,711

1,051

1,711

1,051

—

—

Derivatives:
 
 
 
 
 
 
Debt derivatives accounted for as cash flow hedges
1,670

1,354

—

—

1,670

1,354

Debt derivatives not accounted for as hedges
1

41

—

—

1

41

Expenditure derivatives accounted for as cash flow hedges
42

122

—

—

42

122

Equity derivatives not accounted for as hedges
55

92

—

—

55

92

 
 
 
 
 
 
 
Total financial assets
3,479

2,660

1,711

1,051

1,768

1,609

 
 
 
 
 
 
 
Financial liabilities
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
Debt derivatives accounted for as cash flow hedges
10

22

—

—

10

22

Bond forwards accounted for as cash flow hedges
—

87

—

—

—

87

Expenditure derivatives accounted for as cash flow hedges
4

—

—

—

4

—

 
 
 
 
 
 
 
Total financial liabilities
14

109

—

—

14

109


Below is a summary of the fair value of our long-term debt as at September 30, 2019 and December 31, 2018.
  
As at September 30, 2019
 
As at December 31, 2018
 
(In millions of dollars)
Carrying amount

Fair value 1

Carrying amount

Fair value 1

 
 
 
 
 
Long-term debt (including current portion)
16,279

18,843

14,290

15,110

1 
Long-term debt (including current portion) is measured at Level 2 in the three-level fair value hierarchy.

NOTE 11: INTANGIBLE ASSETS

600 MHz Spectrum Licence Acquisition
In April 2019, Innovation, Science and Economic Development Canada announced the results of the 600 MHz spectrum licence auction that was held in March and April 2019. We were awarded fifty-two 10 MHz spectrum licences consisting of contiguous, paired blocks in all provinces and territories across Canada. Upon acquisition, we recognized the spectrum licences as indefinite-life intangible assets of $1,731 million, including directly attributable costs.


Rogers Communications Inc.
17
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

NOTE 12: INVESTMENTS
 
As at
September 30

As at
December 31

(In millions of dollars)
2019

2018

 
 
 
Investments in:
 
 
Publicly traded companies
1,711

1,051

Private companies
128

145

Investments, measured at FVTOCI
1,839

1,196

Investments, associates and joint ventures
905

938

 
 
 
Total investments
2,744

2,134


NOTE 13: SHORT-TERM BORROWINGS

Below is a summary of our short-term borrowings as at September 30, 2019 and December 31, 2018.
 
As at
September 30

As at
December 31

(In millions of dollars)
2019

2018

 
 
 
Accounts receivable securitization program
650

650

US commercial paper program
1,058

1,605

 
 
 
Total short-term borrowings
1,708

2,255


The tables below summarize the activity relating to our short-term borrowings for the three and nine months ended September 30, 2019 and 2018.


Three months ended September 30, 2019
 


Nine months ended September 30, 2019
 
 
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(In millions of dollars, except exchange rates)
(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
Proceeds received from US commercial paper
3,228

1.32

4,257

 
10,046

1.33

13,361

Repayment of US commercial paper
(3,461
)
1.32

(4,568
)
 
(10,446
)
1.33

(13,881
)
Net repayment of US commercial paper
 


(311
)
 
 


(520
)
 
 
 
 
 
 
 
 
Proceeds received from credit facilities
—

—

—

 
420

1.34

561

Repayment of credit facilities
—

—

—

 
(420
)
1.34

(564
)
Net repayment of credit facilities
 
 
—

 
 
 
(3
)
 
 
 
 
 
 
 
 
Net repayment of short-term borrowings
 
 
(311
)
 
 
 
(523
)


Three months ended September 30, 2018
 


Nine months ended September 30, 2018
 
 
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(In millions of dollars, except exchange rates)
(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
Proceeds received from US commercial paper
4,314

1.31

5,649

 
11,436

1.29

14,726

Repayment of US commercial paper
(4,512
)
1.31

(5,904
)
 
(11,232
)
1.29

(14,474
)
Net (repayment of) proceeds received from US commercial paper




(255
)
 




252

 
 
 
 
 
 
 
 
Proceeds received from accounts receivable securitization
 
 
—

 
 
 
225

Repayment of accounts receivable securitization
 
 
—

 
 
 
(225
)
Net proceeds received from accounts receivable securitization
 
 
—

 
 
 
—

 
 
 
 
 
 
 
 
Net (repayment of) proceeds received on short-term borrowings
 
 
(255
)
 
 
 
252


Rogers Communications Inc.
18
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Accounts Receivable Securitization Program
Below is a summary of our accounts receivable securitization program as at September 30, 2019 and December 31, 2018.
 
As at
September 30

As at
December 31

(In millions of dollars)
2019

2018

 
 
 
Trade accounts receivable sold to buyer as security
1,263

1,391

Short-term borrowings from buyer
(650
)
(650
)
 
 
 
Overcollateralization
613

741


There was no net activity related to our accounts receivable securitization program for the three and nine months ended September 30, 2019 and 2018.

US Commercial Paper Program
The tables below summarize the activity relating to our US CP program for the three and nine months ended September 30, 2019 and 2018.


Three months ended September 30, 2019
 


Nine months ended September 30, 2019
 
 
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(In millions of dollars, except exchange rates)
(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
US commercial paper program, beginning of period
1,023

1.31

1,339

 
1,178

1.36

1,605

Net repayment of US commercial paper
(233
)
1.33

(311
)
 
(400
)
1.30

(520
)
Discounts on issuance 1
9

1.11

10

 
21

1.33

28

Loss (gain) on foreign exchange 1
 
 
20

 
 
 
(55
)
 
 
 
 
 
 
 
 
US commercial paper program, end of period
799

1.32

1,058

 
799

1.32

1,058

1 Included in finance costs.


Three months ended September 30, 2018
 


Nine months ended September 30, 2018
 
 
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(In millions of dollars, except exchange rates)
(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
US commercial paper program, beginning of period
1,159

1.32

1,526

 
746

1.25

935

Net (repayment of) proceeds received from US commercial paper
(198
)
1.29

(255
)
 
204

1.24

252

Discounts on issuance 1
7

1.29

9

 
18

1.33

24

(Gain) loss on foreign exchange 1
 
 
(27
)
 
 
 
42

 
 
 
 
 
 
 
 
US commercial paper program, end of period
968

1.29

1,253

 
968

1.29

1,253

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 10). We have not designated these debt derivatives as hedges for accounting purposes.

Non-Revolving Credit Facility
On April 1, 2019, we entered into a new US$2.2 billion ($2.9 billion) non-revolving credit facility. Subsequently, we borrowed US$420 million ($561 million) and subsequently repaid US$420 million ($564 million) on this facility. Concurrent with the borrowings, we entered into debt derivatives to hedge the foreign currency risk associated with the borrowings under the non-revolving credit facility. We did not designate these debt derivatives as hedges for accounting purposes. On May 3, 2019, we cancelled the non-revolving credit facility.


Rogers Communications Inc.
19
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

NOTE 14: LONG-TERM DEBT
 
 
 
Principal
amount

Interest
rate

As at
September 30

As at
December 31

(In millions of dollars, except interest rates)
Due date
  
2019

2018

 
 
 
 
 
 
 
Senior notes
2019
 
400

2.800
%
—

400

Senior notes
2019
 
500

5.380
%
500

500

Senior notes
2020
 
900

4.700
%
900

900

Senior notes
2021
 
1,450

5.340
%
1,450

1,450

Senior notes
2022
 
600

4.000
%
600

600

Senior notes
2023
US
500

3.000
%
662

682

Senior notes
2023
US
850

4.100
%
1,126

1,160

Senior notes
2024
 
600

4.000
%
600

600

Senior notes
2025
US
700

3.625
%
927

955

Senior notes
2026
US
500

2.900
%
662

682

Senior notes
2029
 
1,000

3.250
%
1,000

—

Senior debentures 1
2032
US
200

8.750
%
265

273

Senior notes
2038
US
350

7.500
%
464

478

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
2043
US
500

4.500
%
662

682

Senior notes
2043
US
650

5.450
%
861

887

Senior notes
2044
US
1,050

5.000
%
1,390

1,433

Senior notes
2048
US
750

4.300
%
993

1,022

Senior notes
2049
US
1,250

4.350
%
1,655

—

 
 
 
 
 
16,417

14,404

Deferred transaction costs and discounts
 
 
 
 
(138
)
(114
)
Less current portion
 
 
 
 
(1,400
)
(900
)
 
 
 
 
 
 
 
Total long-term debt
 
 
 
 
14,879

13,390

1 
Senior debentures originally issued by Rogers Cable Inc. which are unsecured obligations of RCI and for which RCCI was an unsecured guarantor as at September 30, 2019 and December 31, 2018.


Rogers Communications Inc.
20
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

The tables below summarize the activity relating to our long-term debt for the three and nine months ended September 30, 2019 and 2018.
 
 
Three months ended September 30, 2019
 
 
 
Nine months ended September 30, 2019
 
(In millions of dollars, except exchange rates)
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
Senior note issuances (Cdn$)
 
 
—

 
 
 
1,000

Senior note issuances (US$)
—

—

—

 
1,250

1.34

1,676

Total issuance of senior notes
 
 
—

 
 
 
2,676

 
 
 
 
 
 
 
 
Senior note repayments (Cdn$)
 
 
—

 
 
 
(400
)
 
 
 
 
 
 
 
 
Net issuance of senior notes
 
 
—

 
 
 
2,276

 
 
 
 
 
 
 
 
Net issuance of long-term debt
 
 
—

 
 
 
2,276

 
 
Three months ended September 30, 2018
 
 
 
Nine months ended September 30, 2018
 
(In millions of dollars, except exchange rates)
Notional

Exchange

Notional

 
Notional

Exchange

Notional

(US$)

rate

(Cdn$)

 
(US$)

rate

(Cdn$)

 
 
 
 
 
 
 
 
Credit facility borrowings (US$)
—

—

—

 
125

1.26

157

Credit facility repayments (US$)
—

—

—

 
(125
)
1.26

(157
)
Net borrowings under credit facilities
 
 
—

 
 
 
—

 
 
 
 
 
 
 
 
Senior note issuances (US$)
—

—

—

 
750

1.25

938

Senior note repayments (US$)
—

—

—

 
(1,400
)
1.26

(1,761
)
Net repayment of senior notes
 
 
—

 
 
 
(823
)
 
 
 
 
 
 
 
 
Net repayment of long-term debt
 
 
—

 
 
 
(823
)
 
Three months ended September 30
 
 
Nine months ended September 30
 
(In millions of dollars)
2019

2018

 
2019

2018

 
 
 
 
 
 
Long-term debt net of transaction costs, beginning of period
16,163

14,000

 
14,290

14,448

Net issuance (repayment) of long-term debt
—

—

 
2,276

(823
)
Loss (gain) on foreign exchange
113

(135
)
 
(263
)
250

Deferred transaction costs incurred
—

(2
)
 
(33
)
(18
)
Amortization of deferred transaction costs
3

2

 
9

8

 
 
 
 
 
 
Long-term debt net of transaction costs, end of period
16,279

13,865

 
16,279

13,865


Senior Notes
Issuance of senior notes and related derivatives
In April 2019, we issued $1 billion senior notes due 2029 at a rate of 3.25% and US$1.25 billion senior notes due 2049 at a rate of 4.35%. Concurrent with the issuances, we exercised our outstanding bond forwards and entered into debt derivatives to convert all interest and principal payment obligations on the US$-denominated senior notes to Canadian dollars. We received net proceeds of $2.7 billion from the issuances. See note 10 for more information on our derivative instruments.

In February 2018, we issued US$750 million senior notes due 2048 with a coupon of 4.3%. At the same time, we entered into debt derivatives to convert all interest and principal payment obligations to Canadian dollars. As a result, we received net proceeds of $938 million from the issuance.


Rogers Communications Inc.
21
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Repayment of senior notes and related derivative settlements
The tables below summarize the repayment of our senior notes for the three and nine months ended September 30, 2019 and 2018. There were no debt derivatives associated with the Canadian dollar-denominated senior notes repaid in 2019.
  
Three months ended September 30, 2019
 
 
Nine months ended September 30, 2019
 
(In millions of dollars)
Maturity date
Notional
amount (US$)

Notional
amount (Cdn$)

 
Notional
amount (US$)

Notional
amount (Cdn$)

 
 
 
 
 
 
March 2019
—

—

 
—

400

  
Three months ended September 30, 2018
 
 
Nine months ended September 30, 2018
 
(In millions of dollars)
Maturity date
Notional
amount (US$)

Notional
amount (Cdn$)

 
Notional
amount (US$)

Notional
amount (Cdn$)

 
 
 
 
 
 
August 2018, repaid April 2018
—

—

 
1,400

1,761


In April 2018, we repaid the entire outstanding principal amount of our US$1.4 billion ($1.8 billion) 6.8% senior notes otherwise due in August 2018. At the same time, the associated debt derivatives were settled for net proceeds received of $326 million. As a result, we repaid a net amount of $1.5 billion including settlement of the associated debt derivatives, which was separately funded through our US CP program and our bank credit facility. During the nine months ended September 30, 2018, we recognized a $28 million loss on repayment of long-term debt reflecting our obligation to pay redemption premiums upon repayment (see note 7).

Letter of Credit Facilities
Subsequent to the final payment for the 600 MHz spectrum licence acquisition in May 2019 (see note 11), we cancelled $881 million of letters of credit.

NOTE 15: LEASES

Accounting Policy
At inception of a contract, we assess whether that contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, we assess whether:
•
the contract involves the use of an identified asset;
•
we have the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use; and
•
we have the right to direct the use of the asset.

Lessee accounting
We record a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, consisting of:
•
the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date; plus
•
any initial direct costs incurred; and
•
an estimate of costs to dismantle and remove the underlying asset or restore the site on which it is located; less
•
any lease incentives received.

The right-of-use asset is typically depreciated on a straight-line basis over the lease term, unless we expect to obtain ownership of the leased asset at the end of the lease. The lease term consists of:
•
the non-cancellable period of the lease;
•
periods covered by options to extend the lease, where we are reasonably certain to exercise the option; and
•
periods covered by options to terminate the lease, where we are reasonably certain not to exercise the option.

If we expect to obtain ownership of the leased asset at the end of the lease, we depreciate the right-of-use asset over the underlying asset's estimated useful life. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our incremental borrowing rate. We use the relevant incremental borrowing rate as the interest rate implicit in our leases cannot be

Rogers Communications Inc.
22
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

readily determined. The lease liability is subsequently measured at amortized cost using the effective interest rate method.

Lease payments included in the measurement of the lease liability include:
•
fixed payments, including in-substance fixed payments;
•
variable lease payments that depend on an index or rate;
•
amounts expected to be payable under a residual value guarantee; and
•
the exercise price under a purchase option that we are reasonably certain to exercise, lease payments in an optional renewal period if we are reasonably certain to exercise an extension option, and penalties for early termination of a lease unless we are reasonably certain not to terminate early.

The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in our estimate of the amount expected to be payable under a residual value guarantee, or if we change our assessment of whether or not we will exercise a purchase, extension, or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset.

The lease liability is also remeasured when the underlying lease contract is amended. When there is a decrease in contract scope, the lease liability and right-of-use asset will decrease relative to this change with the difference recorded in net income prior to the remeasurement of lease liability.

We have elected not to separate fixed non-lease components and account for the lease and any fixed non-lease components as a single lease component.

Variable lease payments
Certain leases contain provisions that result in differing lease payments over the term as a result of market rate reviews or changes in the Consumer Price Index (CPI) or other similar indices. We reassess the lease liabilities related to these leases when the index or other data is available to calculate the change in lease payments.

Certain leases require us to make payments that relate to property taxes, insurance, and other non-rental costs. These non-rental costs are typically variable and are not included in the calculation of the right-of-use asset or lease liability.

Lessor accounting
When we act as a lessor, we determine at lease inception whether each lease is a finance lease or an operating lease.

In order to classify each lease as either finance or operating, we make an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards incidental to ownership of the underlying asset. If it does, the lease is a finance lease; if not, it is an operating lease.

We act as the lessor on certain collocation leases, whereby, due to certain regulatory requirements, we must allow other telecommunication companies to lease space on our wireless network towers. We do not believe we transfer substantially all of the risks and rewards incidental to ownership of the underlying leased asset to the lessee and therefore classify these leases as operating leases.

If an arrangement contains both lease and non-lease components, we apply IFRS 15, Revenue from contracts with customers to allocate the consideration in the contract between the lease and the non-lease components.

We recognize lease payments received under operating leases into income on a straight-line basis. All of the leases for which we act as lessor are classified as operating leases.

Use of Estimates and Judgments
Estimates
We estimate the lease term by considering the facts and circumstances that can create an economic incentive to exercise an extension option, or not exercise a termination option. We make certain qualitative and quantitative assumptions when deriving the value of the economic incentive.

Judgments
We make judgments in determining whether a contract contains an identified asset. The identified asset should be physically distinct or represent substantially all of the capacity of the asset, and should provide us with the right to substantially all of the economic benefits from the use of the asset.


Rogers Communications Inc.
23
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

We also make judgments in determining whether or not we have the right to control the use of the identified asset. We have that right when we have the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decisions about how and for what purpose the asset is used are predetermined, we have the right to direct the use of the asset if we have the right to operate the asset or if we designed the asset in a way that predetermines how and for what purpose the asset will be used.

We make judgments in determining the incremental borrowing rate used to measure our lease liability for each lease contract, including an estimate of the asset-specific security impact. The incremental borrowing rate should reflect the interest that we would have to pay to borrow at a similar term and with a similar security.

Certain of our leases contain extension or renewal options that are exercisable only by us and not by the lessor. At lease commencement, we assess whether we are reasonably certain to exercise any of the extension options based on our expected economic return from the lease. We typically exercise extension options on our leases, especially related to our networks, primarily due to the significant cost that would be required to relocate our network towers and related equipment. We periodically reassess whether we are reasonably certain to exercise the options and account for any changes at the date of the reassessment.

Explanatory Information
We primarily lease land and buildings relating to our wireless and cable networks, our retail store presence, and certain of our offices and other corporate buildings. The non-cancellable contract periods for our leases typically range from five to fifteen years.

Lease liabilities
Below is a summary of the activity related to our lease liabilities for the three and nine months ended September 30, 2019.
 
Three months ended September 30

 
Nine months ended September 30

(In millions of dollars)
2019

 
2019

 
 
 
 
Lease liabilities, beginning of period
1,608

 
1,545

Net additions
89

 
223

Interest on lease liabilities
15

 
44

Interest payments on lease liabilities
(13
)
 
(34
)
Principal payments of lease liabilities
(45
)
 
(124
)
 
 
 
 
Lease liabilities, end of period
1,654

 
1,654


NOTE 16: 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 2019 and 2018.
Date declared
Date paid
Dividend per share (dollars)  

 
 
 
January 24, 2019
April 1, 2019
0.50

April 17, 2019
July 2, 2019
0.50

June 5, 2019
October 1, 2019
0.50

 
 
 
January 25, 2018
April 3, 2018
0.48

April 19, 2018
July 3, 2018
0.48

August 15, 2018
October 3, 2018
0.48

October 19, 2018
January 3, 2019
0.48

 
 
1.92


On October 22, 2019, the Board of Directors declared a dividend of $0.50 per Class A Share and Class B Non-Voting Share to be paid on January 2, 2020 to shareholders of record on December 11, 2019.


Rogers Communications Inc.
24
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

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.

Normal Course Issuer Bid
In April 2019, the TSX accepted a notice of our intention to commence a NCIB program that allows us to purchase, during the twelve-month period beginning April 24, 2019 and ending April 23, 2020, the lesser of 35.7 million Class B Non-Voting Shares and that number of Class B Non-Voting Shares that can be purchased under the NCIB for an aggregate purchase price of $500 million (2019 NCIB). Rogers security holders may obtain a copy of this notice, without charge, by contacting us.

In April 2018, the TSX accepted a notice of our intention to commence the normal course issuer bid (NCIB) that allows us to purchase, during the twelve-month period beginning April 24, 2018 and ending April 23, 2019, the lesser of 35.8 million Class B Non-Voting Shares and that number of Class B Non-Voting Shares that can be purchased under the NCIB for an aggregate purchase price of $500 million (2018 NCIB).

During the three months ended September 30, 2019, pursuant to the 2019 NCIB, we repurchased for cancellation 1,374,848 Class B Non-Voting Shares for $93 million, $4 million of which was paid in October. During the three months ended June 30, 2019, pursuant to the 2019 NCIB, we repurchased for cancellation 734,257 Class B Non-Voting Shares for $50 million. During the three months ended March 31, 2019, pursuant to the 2018 NCIB, we repurchased for cancellation 2,164,113 Class B Non-Voting Shares for $155 million, $19 million of which was paid in early April.

NOTE 17: STOCK-BASED COMPENSATION

Below is a summary of our stock-based compensation expense, which is included in employee salaries, benefits, and stock-based compensation, for the three and nine months ended September 30, 2019 and 2018.
  
Three months ended September 30
 
 
Nine months ended September 30
 
(In millions of dollars)
2019

2018

 
2019

2018

 
 
 
 
 
 
Stock options
(6
)
8

 
(1
)
9

Restricted share units
8

16

 
35

33

Deferred share units
(7
)
11

 
2

19

Equity derivative effect, net of interest receipt
23

(23
)
 
15

(13
)
 
 
 
 
 
 
Total stock-based compensation expense
18

12

 
51

48


As at September 30, 2019, we had a total liability recognized at its fair value of $207 million (December 31, 2018 - $252 million) related to stock-based compensation, including stock options, restricted share units (RSUs), and deferred share units (DSUs).

During the three and nine months ended September 30, 2019, we paid $8 million and $77 million (2018 - $13 million and $61 million), respectively, to holders of stock options, RSUs, and DSUs upon exercise using the cash settlement feature.

Stock Options
Summary of stock options
The tables below summarize the activity related to stock option plans, including performance options, for the three and nine months ended September 30, 2019 and 2018.
  
Three months ended September 30, 2019
 
Nine months ended September 30, 2019
(In number of units, except prices)
Number of options

Weighted average
exercise price
 
Number of options

Weighted average
exercise price
 
 
 
 
 
 
Outstanding, beginning of period
3,072,767

$61.43
 
2,719,612

$53.22
Granted
91,310

$65.43
 
1,131,480

$72.39
Exercised
(32,295
)
$45.63
 
(719,310
)
$46.37
 
 
 
 
 
 
Outstanding, end of period
3,131,782

$61.71
 
3,131,782

$61.71
 
 
 
 
 
 
Exercisable, end of period
1,018,312

$52.37
 
1,018,312

$52.37

Rogers Communications Inc.
25
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

  
Three months ended September 30, 2018
 
Nine months ended September 30, 2018
(In number of units, except prices)
Number of options

Weighted average
exercise price
 
Number of options

Weighted average
exercise price
 
 
 
 
 
 
Outstanding, beginning of period
2,915,904

$52.82
 
2,637,890

$49.42
Granted
37,715

$68.10
 
850,700

$58.88
Exercised
(29,125
)
$46.38
 
(564,096
)
$44.69
Forfeited
(73,080
)
$55.53
 
(73,080
)
$55.53
 
 
 
 



Outstanding, end of period
2,851,414

$53.02
 
2,851,414

$53.02
 
 
 
 



Exercisable, end of period
1,175,200

$46.40
 
1,175,200

$46.40

Included in the above table are grants of nil and nil performance options to certain key executives during the three and nine months ended September 30, 2019 (2018 - nil and 439,435), respectively.

Unrecognized stock-based compensation expense related to stock option plans was $7 million as at September 30, 2019 (December 31, 2018 - $8 million) and will be recognized in net income over the next four years as the options vest.

Restricted Share Units
Summary of RSUs
Below is a summary of the activity related to RSUs outstanding, including performance RSUs, for the three and nine months ended September 30, 2019 and 2018.
  
Three months ended September 30
 
 
Nine months ended September 30
 
(In number of units)
2019

2018

 
2019

2018

 
 
 
 
 
 
Outstanding, beginning of period
2,400,049

2,242,858

 
2,218,925

1,811,845

Granted and reinvested dividends
163,850

207,482

 
942,049

1,186,553

Exercised
(21,069
)
(98,603
)
 
(541,551
)
(562,750
)
Forfeited
(44,481
)
(79,454
)
 
(121,074
)
(163,365
)
 
 
 
 
 
 
Outstanding, end of period
2,498,349

2,272,283

 
2,498,349

2,272,283


Included in the above table are grants of 15,844 and 170,674 performance RSUs to certain key executives during the three and nine months ended September 30, 2019 (2018 - 22,896 and 260,395), respectively.

Unrecognized stock-based compensation expense related to these RSUs was $65 million as at September 30, 2019 (December 31, 2018 - $59 million) and will be recognized in net income over 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 and nine months ended September 30, 2019 and 2018.
  
Three months ended September 30
 
 
Nine months ended September 30
 
(In number of units)
2019

2018

 
2019

2018

 
 
 
 
 
 
Outstanding, beginning of period
1,867,775

2,177,066

 
2,004,440

2,327,647

Granted and reinvested dividends
34,193

21,221

 
93,637

113,973

Exercised
(103,711
)
(85,661
)
 
(288,058
)
(287,751
)
Forfeited
(1,557
)
(61,527
)
 
(13,319
)
(102,770
)
 
 
 
 
 
 
Outstanding, end of period
1,796,700

2,051,099

 
1,796,700

2,051,099


Included in the above table are grants of 2,113 and 27,210 performance DSUs to certain key executives during the three and nine months ended September 30, 2019 (2018 - 5,337 and 37,761), respectively.


Rogers Communications Inc.
26
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Unrecognized stock-based compensation expense related to these DSUs as at September 30, 2019 was $3 million (December 31, 2018 - $7 million) and will be recognized in net income over the next three years as the executive DSUs vest. All other DSUs are fully vested.

NOTE 18: 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 and nine months ended September 30, 2019 and 2018 were less than $1 million, respectively.

Transactions with Related Parties
We have entered into business transactions with companies whose partners or senior officers are Directors of RCI. These Directors are:
•
the non-executive chairman emeritus of Cassels Brock and Blackwell LLP, a law firm that provides legal services to the Company; and
•
the chair of the board of Transcontinental Inc., a company that provides printing services to the Company.

We recognize these transactions at the amounts agreed to by the related parties, which are also reviewed by the Audit and Risk Committee. The amounts owing for these services are unsecured, interest-free, and due for payment in cash within one month of the date of the transaction. Below is a summary of the related party activity for the business transactions described above.
  
Three months ended September 30
 
 
Nine months ended September 30
 
(In millions of dollars)
2019

2018

 
2019

2018

 
 
 
 
 
 
Printing and legal services 1
1

4

 
5

9

1 
The amount paid for legal services is nominal.

NOTE 19: CONTINGENT LIABILITIES

Wholesale Internet Costing and Pricing
On August 15, 2019, in Telecom Order CRTC 2019-288, Follow-up to Telecom Orders 2016-396 and 2016-448 - Final rates for aggregated wholesale high-speed access services (Order), the Canadian Radio-television and Telecommunications Commission (CRTC) set final rates for facilities-based carriers' wholesale high-speed access services, including Rogers' third-party Internet access (TPIA) service. The Order set final rates for Rogers that are significantly lower than the interim rates that were previously billed and it further determined that these final rates will apply retroactively to March 31, 2016.

We do not believe the final rates set by the CRTC are just and reasonable as required by the Telecommunications Act as we believe they are below cost. On September 13, 2019, Rogers, in conjunction with the other large Canadian cable companies (Cable Carriers), filed a motion for Leave to Appeal pursuant to Section 64(1) of the Telecommunications Act with the Federal Court of Appeal (Court) and an associated motion for an interlocutory Stay of the CRTC Order. On September 27, 2019, the Court granted an Interim Stay suspending the Order until the Court rules on the Cable Carriers' motion for an interlocutory Stay of the CRTC's Order pending the Court's determination of the Cable Carriers' motion for Leave to Appeal.

Due to the Court's granting of an Interim Stay and the significant uncertainty surrounding both the outcome and the amount, if any, we could ultimately have to repay to the resellers, we have not recorded a liability for this contingency at this time. The CRTC's order as drafted would have resulted in a refund of amounts previously billed to the resellers of approximately $140 million this quarter, representing the impact on a retroactive basis from March 31, 2016 to September 30, 2019. We estimate the ongoing impact will be approximately $11 million per quarter.

System Access Fee - Saskatchewan
In 2004, a class action was commenced against providers of wireless communications in Canada under the Class Actions Act (Saskatchewan). The class action relates to the system access fee wireless carriers charge to some of their customers. The plaintiffs are seeking unspecified damages and punitive damages, which would effectively be a reimbursement of all system access fees collected.


Rogers Communications Inc.
27
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

In 2007, the Saskatchewan Court granted the plaintiffs' application to have the proceeding certified as a national, "opt-in" class action where affected customers outside Saskatchewan must take specific steps to participate in the proceeding. In 2008, our motion to stay the proceeding based on the arbitration clause in our wireless service agreements was granted. The Saskatchewan Court directed that its order, in respect of the certification of the action, would exclude customers who are bound by an arbitration clause from the class of plaintiffs.

In 2009, counsel for the plaintiffs began a second proceeding under the Class Actions Act (Saskatchewan) asserting the same claims as the original proceeding. If successful, this second class action would be an "opt-out" class proceeding. This second proceeding was ordered conditionally stayed on the basis that it was an abuse of process.

At the time the Saskatchewan class action was commenced, corresponding claims were filed in multiple jurisdictions across Canada. The claims in all provinces other than Saskatchewan have now been dismissed or discontinued. We have not recognized a liability for this contingency.

911 Fee
In June 2008, a class action was launched in Saskatchewan against providers of wireless communications services in Canada. It involves allegations of breach of contract, misrepresentation, and false advertising, among other things, in relation to the 911 fee that had been charged by us and the other wireless telecommunication providers in Canada. The plaintiffs are seeking unspecified damages and restitution. The plaintiffs intend to seek an order certifying the proceeding as a national class action in Saskatchewan. We have not recognized a liability for this contingency.

Cellular Devices
In July 2013, a class action was launched in British Columbia against providers of wireless communications in Canada and manufacturers of wireless devices. The class action relates to the alleged adverse health effects incurred by long-term users of cellular devices. The plaintiffs were seeking unspecified damages and punitive damages, effectively equal to the reimbursement of the portion of revenue the defendants have received that can reasonably be attributed to the sale of cellular phones in Canada. In March 2019, the plaintiffs discontinued the class action without any payment by Rogers.

Income Taxes
We provide for income taxes based on all of the information that is currently available and believe that we have adequately provided these items. The calculation of applicable taxes in many cases, however, requires significant judgment in interpreting tax rules and regulations. Our tax filings are subject to audits, which could materially change the amount of current and deferred income tax assets and liabilities and provisions, and could, in certain circumstances, result in the assessment of interest and penalties.

Outcome of Proceedings
The outcome of all the proceedings and claims against us, including the matters described above, is subject to future resolution that includes the uncertainties of litigation. It is not possible for us to predict the result or magnitude of the claims due to the various factors and uncertainties involved in the legal process. Based on information currently known to us, we believe it is not probable that the ultimate resolution of any of these proceedings and claims, individually or in total, will have a material adverse effect on our business, financial results, or financial condition. If it becomes probable that we will be held liable for claims against us, we will recognize a provision during the period in which the change in probability occurs, which could be material to our Consolidated Statements of Income or Consolidated Statements of Financial Position.

NOTE 20: SUPPLEMENTAL CASH FLOW INFORMATION

Change in Non-Cash Operating Working Capital Items
  
Three months ended September 30
 
 
Nine months ended
September 30
 
(In millions of dollars)
2019

2018

 
2019

2018

 
 
 
 
 
 
Accounts receivable
71

(12
)
 
42

35

Inventories
66

7

 
73

52

Other current assets
(25
)
13

 
(68
)
(40
)
Accounts payable and accrued liabilities
(119
)
148

 
(252
)
(32
)
Contract and other liabilities
(50
)
(79
)
 
(74
)
(87
)
 
 
 
 
 
 
Total change in non-cash operating working capital items
(57
)
77

 
(279
)
(72
)

Rogers Communications Inc.
28
Third Quarter 2019


Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

Capital Expenditures
  
Three months ended September 30
 
 
Nine months ended
September 30
 
(In millions of dollars)
2019

2018

 
2019

2018

 
 
 
 
 
 
Capital expenditures before proceeds on disposition
660

705

 
2,050

1,982

Proceeds on disposition
(3
)
(5
)
 
(34
)
(20
)
 
 
 
 
 
 
Capital expenditures
657

700

 
2,016

1,962


Rogers Communications Inc.
29
Third Quarter 2019