Exhibit 99.2
Rogers Communications Inc.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Three and six months ended June 30, 2023 and 2022
| Rogers Communications Inc. | 1 | Second Quarter 2023 | ||||||
Rogers Communications Inc.
Interim Condensed Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts, unaudited)
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||
| Note | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
| Revenue | 6 | 5,046 | 3,868 | 8,881 | 7,487 | |||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Operating costs | 7 | 2,856 | 2,276 | 5,040 | 4,356 | |||||||||||||||
| Depreciation and amortization | 1,158 | 638 | 1,789 | 1,284 | ||||||||||||||||
| Restructuring, acquisition and other | 8 | 331 | 71 | 386 | 167 | |||||||||||||||
| Finance costs | 9 | 583 | 357 | 879 | 615 | |||||||||||||||
| Other income | 10 | (18) | (18) | (45) | (24) | |||||||||||||||
| Income before income tax expense | 136 | 544 | 832 | 1,089 | ||||||||||||||||
| Income tax expense | 27 | 135 | 212 | 288 | ||||||||||||||||
| Net income for the period | 109 | 409 | 620 | 801 | ||||||||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic | 11 | $0.21 | $0.81 | $1.20 | $1.59 | |||||||||||||||
| Diluted | 11 | $0.20 | $0.76 | $1.19 | $1.57 | |||||||||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
| Rogers Communications Inc. | 2 | Second Quarter 2023 | ||||||
Rogers Communications Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
(In millions of Canadian dollars, unaudited)
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Net income for the period | 109 | 409 | 620 | 801 | |||||||||||||
| Other comprehensive 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 | 22 | (242) | (116) | (215) | |||||||||||||
| Related income tax (expense) recovery | (2) | 30 | 16 | 29 | |||||||||||||
| Equity investments measured at FVTOCI | 20 | (212) | (100) | (186) | |||||||||||||
| Items that may subsequently be reclassified to income: | |||||||||||||||||
| Cash flow hedging derivative instruments: | |||||||||||||||||
| Unrealized (loss) gain in fair value of derivative instruments | (595) | 350 | (461) | 425 | |||||||||||||
| Reclassification to net income of loss (gain) on debt derivatives | 461 | (595) | 491 | (210) | |||||||||||||
| Reclassification to net income or property, plant and equipment of (gain) loss on expenditure derivatives | (22) | (1) | (47) | 7 | |||||||||||||
| Reclassification to net income for accrued interest | (16) | 2 | (27) | (1) | |||||||||||||
| Related income tax recovery (expense) | 72 | (2) | 63 | (48) | |||||||||||||
| Cash flow hedging derivative instruments | (100) | (246) | 19 | 173 | |||||||||||||
| Share of other comprehensive (loss) income of equity-accounted investments, net of tax | (4) | 6 | (2) | 2 | |||||||||||||
| Other comprehensive loss for the period | (84) | (452) | (83) | (11) | |||||||||||||
| Comprehensive income (loss) for the period | 25 | (43) | 537 | 790 | |||||||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
| Rogers Communications Inc. | 3 | Second Quarter 2023 | ||||||
Rogers Communications Inc.
Interim Condensed Consolidated Statements of Financial Position
(In millions of Canadian dollars, unaudited)
| As at June 30 | As at December 31 | ||||||||||
| Note | 2023 | 2022 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | 359 | 463 | |||||||||
| Restricted cash and cash equivalents | 3 | — | 12,837 | ||||||||
| Accounts receivable | 13 | 4,290 | 4,184 | ||||||||
| Inventories | 545 | 438 | |||||||||
| Current portion of contract assets | 160 | 111 | |||||||||
| Other current assets | 1,008 | 561 | |||||||||
| Current portion of derivative instruments | 12 | 359 | 689 | ||||||||
| Total current assets | 6,721 | 19,283 | |||||||||
| Property, plant and equipment | 3 | 23,693 | 15,574 | ||||||||
| Intangible assets | 3 | 18,433 | 12,251 | ||||||||
| Investments | 14 | 2,111 | 2,088 | ||||||||
| Derivative instruments | 12 | 698 | 861 | ||||||||
| Financing receivables | 13 | 885 | 886 | ||||||||
| Other long-term assets | 794 | 681 | |||||||||
| Goodwill | 3 | 16,404 | 4,031 | ||||||||
| Total assets | 69,739 | 55,655 | |||||||||
| Liabilities and shareholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Short-term borrowings | 15 | 2,583 | 2,985 | ||||||||
| Accounts payable and accrued liabilities | 3,550 | 3,722 | |||||||||
| Other current liabilities | 347 | 252 | |||||||||
| Contract liabilities | 655 | 400 | |||||||||
| Current portion of long-term debt | 16 | 2,725 | 1,828 | ||||||||
| Current portion of lease liabilities | 17 | 448 | 362 | ||||||||
| Total current liabilities | 10,308 | 9,549 | |||||||||
| Provisions | 58 | 53 | |||||||||
| Long-term debt | 16 | 38,411 | 29,905 | ||||||||
| Lease liabilities | 17 | 2,019 | 1,666 | ||||||||
| Other long-term liabilities | 1,463 | 738 | |||||||||
| Deferred tax liabilities | 5,918 | 3,652 | |||||||||
| Total liabilities | 58,177 | 45,563 | |||||||||
| Shareholders' equity | 18 | 11,562 | 10,092 | ||||||||
| Total liabilities and shareholders' equity | 69,739 | 55,655 | |||||||||
| Subsequent events | 16, 18, 23 | ||||||||||
| Contingent liabilities | 21 | ||||||||||
| Commitments | 3 | ||||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
| Rogers Communications Inc. | 4 | Second Quarter 2023 | ||||||
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 | ||||||||||||||||||||||||||||
| Six months ended June 30, 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 | — | — | — | — | 620 | — | — | — | 620 | ||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||
FVTOCI investments, net of tax | — | — | — | — | — | (100) | — | — | (100) | ||||||||||||||||||||
Derivative instruments accounted for as hedges, net of tax | — | — | — | — | — | — | 19 | — | 19 | ||||||||||||||||||||
Share of equity-accounted investments, net of tax | — | — | — | — | — | — | — | (2) | (2) | ||||||||||||||||||||
| Total other comprehensive (loss) income | — | — | — | — | — | (100) | 19 | (2) | (83) | ||||||||||||||||||||
Comprehensive income for the period | — | — | — | — | 620 | (100) | 19 | (2) | 537 | ||||||||||||||||||||
Transactions with shareholders recorded directly in equity: | |||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | (517) | — | — | — | (517) | ||||||||||||||||||||
| Shares issued as consideration (note 3) | — | — | 1,450 | 23,641 | — | — | — | — | 1,450 | ||||||||||||||||||||
Total transactions with shareholders | — | — | 1,450 | 23,641 | (517) | — | — | — | 933 | ||||||||||||||||||||
| Balances, June 30, 2023 | 71 | 111,152 | 1,847 | 417,414 | 9,919 | 572 | (853) | 6 | 11,562 | ||||||||||||||||||||
Class A Voting Shares | Class B Non-Voting Shares | ||||||||||||||||||||||||||||
| Six months ended June 30, 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 | — | — | — | — | 801 | — | — | — | 801 | ||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||
| FVTOCI investments, net of tax | — | — | — | — | — | (186) | — | — | (186) | ||||||||||||||||||||
| Derivative instruments accounted for as hedges, net of tax | — | — | — | — | — | — | 173 | — | 173 | ||||||||||||||||||||
| Share of equity-accounted investments, net of tax | — | — | — | — | — | — | — | 2 | 2 | ||||||||||||||||||||
| Total other comprehensive (loss) income | — | — | — | — | — | (186) | 173 | 2 | (11) | ||||||||||||||||||||
Comprehensive income for the period | — | — | — | — | 801 | (186) | 173 | 2 | 790 | ||||||||||||||||||||
Reclassification to retained earnings for disposition of FVTOCI investments | — | — | — | — | (18) | 18 | — | — | — | ||||||||||||||||||||
Transactions with shareholders recorded directly in equity: | |||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | (505) | — | — | — | (505) | ||||||||||||||||||||
Share class exchange | — | (1) | — | 1 | — | — | — | — | — | ||||||||||||||||||||
Total transactions with shareholders | — | (1) | — | 1 | (505) | — | — | — | (505) | ||||||||||||||||||||
Balances, June 30, 2022 | 71 | 111,152 | 397 | 393,773 | 9,190 | 825 | 334 | — | 10,817 | ||||||||||||||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
| Rogers Communications Inc. | 5 | Second Quarter 2023 | ||||||
Rogers Communications Inc.
Interim Condensed Consolidated Statements of Cash Flows
(In millions of Canadian dollars, unaudited)
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||
| Note | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
| Operating activities: | ||||||||||||||||||||
| Net income for the period | 109 | 409 | 620 | 801 | ||||||||||||||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||||||||
| Depreciation and amortization | 1,158 | 638 | 1,789 | 1,284 | ||||||||||||||||
| Program rights amortization | 26 | 19 | 44 | 39 | ||||||||||||||||
| Finance costs | 9 | 583 | 357 | 879 | 615 | |||||||||||||||
| Income tax expense | 27 | 135 | 212 | 288 | ||||||||||||||||
| Post-employment benefits contributions, net of expense | 6 | (69) | 4 | (63) | ||||||||||||||||
| Other | 79 | (14) | 70 | (1) | ||||||||||||||||
| Cash provided by operating activities before changes in net operating assets and liabilities, income taxes paid, and interest paid | 1,988 | 1,475 | 3,618 | 2,963 | ||||||||||||||||
| Change in net operating assets and liabilities | 22 | 261 | 216 | (443) | (105) | |||||||||||||||
| Income taxes paid | (125) | (145) | (275) | (285) | ||||||||||||||||
| Interest paid | (489) | (227) | (812) | (441) | ||||||||||||||||
| Cash provided by operating activities | 1,635 | 1,319 | 2,088 | 2,132 | ||||||||||||||||
| Investing activities: | ||||||||||||||||||||
| Capital expenditures | (1,079) | (778) | (1,971) | (1,427) | ||||||||||||||||
| Additions to program rights | (12) | (10) | (37) | (22) | ||||||||||||||||
| Changes in non-cash working capital related to capital expenditures and intangible assets | 9 | 76 | (29) | (96) | ||||||||||||||||
| Acquisitions and other strategic transactions, net of cash acquired | (17,001) | — | (17,001) | (9) | ||||||||||||||||
| Other | 3 | 49 | 12 | 61 | ||||||||||||||||
| Cash used in investing activities | (18,080) | (663) | (19,026) | (1,493) | ||||||||||||||||
| Financing activities: | ||||||||||||||||||||
| Net (repayment of) proceeds received from short-term borrowings | 15 | (1,931) | 108 | (589) | 611 | |||||||||||||||
| Net issuance (repayment) of long-term debt | 16 | 5,788 | (600) | 5,400 | 12,711 | |||||||||||||||
| Net (payments) proceeds on settlement of debt derivatives and forward contracts | 12 | (106) | 20 | 121 | (54) | |||||||||||||||
| Transaction costs incurred | 16 | (1) | — | (265) | (169) | |||||||||||||||
| Principal payments of lease liabilities | 17 | (84) | (76) | (165) | (153) | |||||||||||||||
| Dividends paid | (252) | (252) | (505) | (504) | ||||||||||||||||
| Cash provided by (used in) financing activities | 3,414 | (800) | 3,997 | 12,442 | ||||||||||||||||
| Change in cash and cash equivalents and restricted cash and cash equivalents | (13,031) | (144) | (12,941) | 13,081 | ||||||||||||||||
| Cash and cash equivalents and restricted cash and cash equivalents, beginning of period | 13,390 | 13,940 | 13,300 | 715 | ||||||||||||||||
| Cash and cash equivalents and restricted cash and cash equivalents, end of period | 359 | 13,796 | 359 | 13,796 | ||||||||||||||||
| Cash and cash equivalents | 359 | 665 | 359 | 665 | ||||||||||||||||
| Restricted cash and cash equivalents | — | 13,131 | — | 13,131 | ||||||||||||||||
| Cash and cash equivalents and restricted cash and cash equivalents, end of period | 359 | 13,796 | 359 | 13,796 | ||||||||||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
| Rogers Communications Inc. | 6 | Second Quarter 2023 | ||||||
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 and other video (Video), Satellite, 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 six months ended June 30, 2023, Wireless and Cable were operated by our wholly owned subsidiary, Rogers Communications Canada Inc. (RCCI), and certain other wholly owned subsidiaries. Following the acquisition of Shaw Communications Inc. (Shaw) (see note 3), aspects of Cable were also operated by other wholly owned subsidiaries, including Shaw Cablesystems G.P., Shaw Telecom G.P., and Shaw Satellite G.P. 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). The acquired Shaw business has substantially consistent fluctuations. Additionally, Satellite subscriber activity is modestly higher during the second and third quarter, when subscribers increasingly begin using second or vacation homes for the season.
Statement of Compliance
We prepared our interim condensed consolidated financial statements for the three and six months ended June 30, 2023 (second 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 second quarter 2023 interim financial statements were approved by the Audit and Risk Committee of RCI's Board of Directors (the Board) on July 25, 2023.
NOTE 2: MATERIAL ACCOUNTING POLICIES
Basis of Presentation
The notes presented in these second quarter 2023 interim financial statements include only material transactions and changes occurring for the six 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 second 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.
| Rogers Communications Inc. | 7 | Second Quarter 2023 | ||||||
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.
•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).
•Amendments to IAS 7, Statement of Cash Flows and IFRS 7, Financial Instruments: Disclosures - Supplier Finance Arrangements, adding disclosure requirements that require entities to provide qualitative and quantitative information about supplier finance arrangements. (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: BUSINESS COMBINATIONS
Acquisition of Shaw Communications Inc.
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 (Shaw Transaction) for total consideration of $20.5 billion, consisting of:
•$19 billion of cash (consisting of $13 billion of cash and restricted cash and $6 billion borrowed from our $6 billion non-revolving term loan facility); and
•approximately $1.5 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, the outstanding shares of Freedom Mobile Inc. (Freedom), a subsidiary of Shaw, were sold 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. 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 Communications Inc. | 8 | Second Quarter 2023 | ||||||
As consideration for the above arrangements, Quebecor paid $2.85 billion as adjusted pursuant to the terms of the divestiture agreement, resulting in net cash received of $2.15 billion after accounting for the Freedom debt assumed by Quebecor.
Rogers and Quebecor will also provide each other with customary transition services as necessary to facilitate (i) the operation of the Freedom and Shaw Mobile businesses 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.
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 $4.55 billion as at April 3, 2023. As a result, the assumed senior notes now rank equally with RCI’s other unsecured senior notes and debentures, bank credit facilities, and letter of credit facilities. 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 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 existing 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).
The combined Rogers and Shaw has the scale, assets, and capabilities delivering wireline and wireless broadband and network investments, innovation, and growth in new telecommunications services, and greater choice for Canadian consumers and businesses. The combination is accelerating the delivery of critical 5G service across Western Canada, from rural areas to dense cities, more quickly than either company could achieve on its own, by bringing together the expertise and assets of both companies.
The results from the acquired Shaw wireline operations are included in our Cable segment and the results of the acquired Shaw Mobile operations are included in our Wireless segment, from the date of acquisition, consistent with our reportable segment definitions.
| Rogers Communications Inc. | 9 | Second Quarter 2023 | ||||||
Preliminary purchase price allocation
The following table summarizes the fair value of the consideration paid and our current best estimate of the fair value assigned to each major class of assets and liabilities as at April 3, 2023. The preliminary purchase price allocation includes estimates and is therefore subject to change, relating to the finalization of the value of the acquired intangibles and related assets and corresponding tax impacts.
| (In millions of dollars) | Total | ||||
Cash consideration 1 | 19,033 | ||||
Issuance of 23.6 million Class B Non-Voting shares 2 | 1,450 | ||||
| Fair value of consideration transferred | 20,483 | ||||
| Net identifiable asset or liability: | |||||
| Accounts receivable (net of allowance for doubtful accounts of $31 million) | 310 | ||||
Other current assets 3 | 2,321 | ||||
Property, plant and equipment 4 | 7,483 | ||||
Intangible assets 5 | 6,314 | ||||
| Investments | 123 | ||||
Other long-term assets 3 | 33 | ||||
| Bank advances | (25) | ||||
Short-term borrowings 6 | (200) | ||||
| Accounts payable and accrued liabilities | (545) | ||||
| Other current liabilities | (54) | ||||
Contract liabilities 7 | (164) | ||||
Current portion of long-term debt 8 | (1,000) | ||||
Current portion of lease liabilities 9 | (59) | ||||
| Provisions | (6) | ||||
Long-term debt 8 | (3,526) | ||||
Lease liabilities 9 | (268) | ||||
Other long-term liabilities 10 | (109) | ||||
Deferred tax liabilities 11 | (2,450) | ||||
| Total fair value of identifiable net assets acquired | 8,178 | ||||
Goodwill 12 | 12,305 | ||||
1 Includes $151 million of cash used to settle Shaw stock-based compensation programs.
2 Recorded at fair value based on the market price of RCI Class B Non-Voting shares on the acquisition date.
3 Consists of contract assets, inventories, prepaid expenses, and other assets.
4 Includes land and buildings, cable networks, computer equipment and software, customer premise equipment, leasehold improvements, equipment and vehicles, and right-of-use assets. Property, plant and equipment (excluding land) are expected to be amortized over remaining useful lives of 1 to 36 years.
5 Includes customer relationships, brand names, and other intangible assets. Intangible assets of $270 million, $5,635 million, and $390 million were allocated to our Wireless (group), Cable (group), and Satellite cash-generating units (CGUs), respectively. Customer relationships, brand names, and other intangible assets are expected to be amortized over average useful lives of eight to twelve years, three years, and fifteen years, respectively.
6 Short-term borrowings were repaid in April 2023 (see note 15).
7 Represents the fair value of the cost required to fulfill the related contractual obligations.
8 Represents the notional principal value of Shaw's outstanding senior notes of $4,550 million and the fair value decrement of $24 million, which will be amortized into finance costs using the effective interest method over the respective remaining terms of the outstanding senior notes, representing a weighted average term to maturity of 9.7 years and weighted average interest rate of 4.7%.
9 Represents the present value of future lease payments at current incremental borrowing rates of the consolidated company.
10 Includes the fair value of the cost required to fulfill the related pension and post-employment obligations.
11 Represents the net deferred income tax liability relating to the estimated fair values of assets acquired and liabilities assumed.
12 Goodwill arises principally from the expected synergies following the integration of Shaw, and future growth of our combined business and customer base as a result of the acquisition. Goodwill is not deductible for tax purposes. Goodwill arising from the transaction of $463 million, $11,732 million, and $110 million was allocated to our Wireless (group), Cable (group), and Satellite CGUs, respectively.
| Rogers Communications Inc. | 10 | Second Quarter 2023 | ||||||
Property, plant and equipment
The table below summarizes the preliminary allocation for property, plant and equipment acquired from Shaw on closing as at June 30, 2023.
| (In millions of dollars) | Land and buildings | Cable networks | Computer equipment and software | Customer premise equipment | Leasehold improvements | Equipment and vehicles | Construction in process | Total owned assets | Right-of-use assets (note 17) | Total property, plant and equipment | ||||||||||||||||||||||
| Acquired from business combination | 308 | 5,428 | 370 | 599 | 78 | 99 | 273 | 7,155 | 328 | 7,483 | ||||||||||||||||||||||
| Depreciation since April 3, 2023 | 2 | 227 | 27 | 58 | 10 | 4 | — | 328 | 21 | 349 | ||||||||||||||||||||||
| Net carrying amount | 306 | 5,201 | 343 | 541 | 68 | 95 | 273 | 6,827 | 307 | 7,134 | ||||||||||||||||||||||
Property, plant and equipment will be amortized over their remaining estimated useful lives, estimated as follows.
| Asset | Basis | Estimated remaining useful life | ||||||
| Buildings | Diminishing balance | 1 to 36 years | ||||||
| Cable and wireless network | Straight-line | 1 to 30 years | ||||||
| Computer equipment and software | Straight-line | 1 to 10 years | ||||||
| Customer premise equipment | Straight-line | 1 to 5 years | ||||||
| Leasehold improvements | Straight-line | 1 to 10 years | ||||||
| Equipment and vehicles | Diminishing balance | 1 to 10 years | ||||||
| Right-of-use assets | Straight-line | Over remaining lease term | ||||||
Intangible assets
The table below summarizes the preliminary allocation for intangible assets acquired from Shaw on closing as at June 30, 2023.
| (In millions of dollars) | Customer relationships | Brand names | Other intangible assets | Total intangible assets | Goodwill | Total intangible assets and goodwill | ||||||||||||||
| Acquired from business combination | 6,220 | 75 | 19 | 6,314 | 12,305 | 18,619 | ||||||||||||||
| Amortization since April 3, 2023 | 132 | 6 | — | 138 | — | 138 | ||||||||||||||
| Net carrying amount | 6,088 | 69 | 19 | 6,176 | 12,305 | 18,481 | ||||||||||||||
Customer relationships will be amortized over their estimated useful lives of eight to twelve years. Brand names will be amortized over their estimated useful life of three years. Other intangible assets will be amortized over their estimated useful life of fifteen years.
Unsatisfied portions of performance obligations
The table below shows the revenue we expect to recognize in the future related to unsatisfied or partially satisfied performance obligations acquired from Shaw as at June 30, 2023.
| (In millions of dollars) | Within 1 year | 1-2 years | 2-3 years | Thereafter | Total | ||||||||||||
| Telecommunications service | 1,719 | 753 | 162 | 115 | 2,749 | ||||||||||||
Acquired commitments
As a result of the Shaw Transaction, we assumed Shaw's outstanding contractual commitments. The table below summarizes the acquired commitments for purchase obligations, which are not recognized as liabilities as at June 30, 2023.
| (In millions of dollars) | Remainder of 2023 | 2024 and 2025 | 2026 and 2027 | Thereafter | Total | ||||||||||||
| Purchase obligations | 103 | 250 | 101 | 169 | 623 | ||||||||||||
We also acquired commitments for property, plant and equipment of approximately $90 million, which are not recognized as liabilities as at June 30, 2023.
| Rogers Communications Inc. | 11 | Second Quarter 2023 | ||||||
Pro forma information
Revenue of approximately $1.1 billion and a net loss of approximately $120 million from the acquired Shaw operations are included in the consolidated statement of income from the date of acquisition. Our consolidated revenue and net income for the six months ended June 30, 2023 would have been approximately $10 billion and $425 million, respectively, had the Shaw Transaction closed on January 1, 2023. These pro forma amounts reflect financing costs, depreciation and amortization of applicable elements of the purchase price allocation, related tax adjustments, and the elimination of intercompany transactions.
Acquisition of BAI Canada
On April 24, 2023, we acquired BAI Communications' Canadian operations (BAI Canada), which held the exclusive rights to build the Toronto Transit Commission's (TTC) wireless network. With this acquisition, we will be able to undertake the investments required to upgrade the existing wireless network and build a comprehensive and reliable 5G network for the entire TTC subway system. The completed 5G network will deliver seamless wireless coverage with mobile voice and data services in all 75 stations and the entire subway system, part of our commitment to expand connectivity for Toronto residents.
The results of the acquired BAI Canada operations are included in our Wireless segment, consistent with our reportable segment definitions. The acquired BAI Canada operations did not have a significant impact on our consolidated revenue or results of operations during the three months ended June 30, 2023, nor would they have had a significant impact had the acquisition closed on January 1, 2023.
NOTE 4: 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 Shaw Transaction (see note 3) 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 June 30, 2023 and December 31, 2022, we met our objectives for these metrics.
| As at June 30 | As at December 31 | |||||||
| (In millions of dollars, except ratios) | 2023 | 2022 | ||||||
Adjusted net debt 1,2,3 | 44,274 | 21,184 | ||||||
| Divided by: trailing 12-month adjusted EBITDA | 7,103 | 6,393 | ||||||
| Debt leverage ratio | 6.2 | 3.3 | ||||||
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 Effective this quarter, we amended our calculation of adjusted net debt such that we include our US-dollar denominated debt at the hedged foreign exchange rate. Our US-dollar denominated debt is 100% hedged and we believe this presentation is better representative of the economic obligations on this debt. Previously, our calculation of adjusted net debt had included a current fair market value of the net debt derivative assets.
3 For the purposes of calculating adjusted net debt prior to closing the Shaw Transaction, we 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.
Trailing 12-month adjusted EBITDA reflects the combined results of Rogers including Shaw for the period since the Shaw Transaction closed in April 2023 to June 2023 and standalone Rogers results prior to April 2023.
| Rogers Communications Inc. | 12 | Second Quarter 2023 | ||||||
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.
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||
| (In millions of dollars) | Note | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Adjusted EBITDA | 5 | 2,190 | 1,592 | 3,841 | 3,131 | |||||||||||||||
| Deduct: | ||||||||||||||||||||
Capital expenditures 1 | 1,079 | 778 | 1,971 | 1,427 | ||||||||||||||||
| Interest on borrowings, net and capitalized interest | 9 | 510 | 325 | 749 | 560 | |||||||||||||||
Cash income taxes 2 | 125 | 145 | 275 | 285 | ||||||||||||||||
| Free cash flow | 476 | 344 | 846 | 859 | ||||||||||||||||
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.
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||
| (In millions of dollars) | Note | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Cash provided by operating activities | 1,635 | 1,319 | 2,088 | 2,132 | ||||||||||||||||
| Add (deduct): | ||||||||||||||||||||
| Capital expenditures | (1,079) | (778) | (1,971) | (1,427) | ||||||||||||||||
| Interest on borrowings, net and capitalized interest | 9 | (510) | (325) | (749) | (560) | |||||||||||||||
| Interest paid | 489 | 227 | 812 | 441 | ||||||||||||||||
| Restructuring, acquisition and other | 8 | 331 | 71 | 386 | 167 | |||||||||||||||
| Program rights amortization | (26) | (19) | (44) | (39) | ||||||||||||||||
| Change in net operating assets and liabilities | 22 | (261) | (216) | 443 | 105 | |||||||||||||||
Other adjustments 1 | (103) | 65 | (119) | 40 | ||||||||||||||||
| Free cash flow | 476 | 344 | 846 | 859 | ||||||||||||||||
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 June 30, 2023 and December 31, 2022, we had sufficient liquidity available to us to meet this objective.
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 $6 billion non-revolving credit facility (term loan facility) related to the Shaw Transaction is not included in available liquidity as we could only draw on that facility to partially fund the Shaw Transaction and the facility is now fully drawn. Our Canada Infrastructure Bank credit agreement (see note 16) 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.
| Rogers Communications Inc. | 13 | Second Quarter 2023 | ||||||
| As at June 30, 2023 | Total sources | Drawn | Letters of credit | Net available | |||||||||||||
| (In millions of dollars) | Note | ||||||||||||||||
| Cash and cash equivalents | 359 | — | — | 359 | |||||||||||||
Bank credit facilities 1: | |||||||||||||||||
| Revolving | 16 | 4,000 | — | 11 | 3,989 | ||||||||||||
| Non-revolving | 15 | 1,000 | 1,000 | — | — | ||||||||||||
| Outstanding letters of credit | 61 | — | 61 | — | |||||||||||||
Receivables securitization 1 | 15 | 2,400 | 1,600 | — | 800 | ||||||||||||
| Total | 7,820 | 2,600 | 72 | 5,148 | |||||||||||||
1 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 | 16 | 4,000 | — | 8 | 215 | 3,777 | ||||||||||||||
| Non-revolving | 15 | 1,000 | 375 | — | — | 625 | ||||||||||||||
| Outstanding letters of credit | 16 | 75 | — | 75 | — | — | ||||||||||||||
Receivables securitization 2 | 15 | 2,400 | 2,400 | — | — | — | ||||||||||||||
Total 3 | 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.
3 Our restricted cash and cash equivalents 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 3).
NOTE 5: 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. | 14 | Second Quarter 2023 | ||||||
Information by Segment
| Three months ended June 30, 2023 | Note | Wireless | Cable | Media | Corporate items and eliminations | Consolidated totals | ||||||||||||||
| (In millions of dollars) | ||||||||||||||||||||
| Revenue | 6 | 2,424 | 2,013 | 686 | (77) | 5,046 | ||||||||||||||
| Operating costs | 7 | 1,202 | 987 | 682 | (15) | 2,856 | ||||||||||||||
| Adjusted EBITDA | 1,222 | 1,026 | 4 | (62) | 2,190 | |||||||||||||||
| Depreciation and amortization | 1,158 | |||||||||||||||||||
| Restructuring, acquisition and other | 8 | 331 | ||||||||||||||||||
| Finance costs | 9 | 583 | ||||||||||||||||||
| Other income | 10 | (18) | ||||||||||||||||||
| Income before income taxes | 136 | |||||||||||||||||||
| Three months ended June 30, 2022 | Note | Wireless | Cable | Media | Corporate items and eliminations | Consolidated totals | ||||||||||||||
| (In millions of dollars) | ||||||||||||||||||||
| Revenue | 6 | 2,212 | 1,041 | 659 | (44) | 3,868 | ||||||||||||||
| Operating costs | 7 | 1,094 | 521 | 657 | 4 | 2,276 | ||||||||||||||
| Adjusted EBITDA | 1,118 | 520 | 2 | (48) | 1,592 | |||||||||||||||
| Depreciation and amortization | 638 | |||||||||||||||||||
| Restructuring, acquisition and other | 8 | 71 | ||||||||||||||||||
| Finance costs | 9 | 357 | ||||||||||||||||||
| Other income | 10 | (18) | ||||||||||||||||||
| Income before income taxes | 544 | |||||||||||||||||||
| Six months ended June 30, 2023 | Note | Wireless | Cable | Media | Corporate items and eliminations | Consolidated totals | ||||||||||||||
| (In millions of dollars) | ||||||||||||||||||||
| Revenue | 6 | 4,770 | 3,030 | 1,191 | (110) | 8,881 | ||||||||||||||
| Operating costs | 7 | 2,369 | 1,447 | 1,225 | (1) | 5,040 | ||||||||||||||
| Adjusted EBITDA | 2,401 | 1,583 | (34) | (109) | 3,841 | |||||||||||||||
| Depreciation and amortization | 1,789 | |||||||||||||||||||
| Restructuring, acquisition and other | 8 | 386 | ||||||||||||||||||
| Finance costs | 9 | 879 | ||||||||||||||||||
| Other income | 10 | (45) | ||||||||||||||||||
| Income before income taxes | 832 | |||||||||||||||||||
| Rogers Communications Inc. | 15 | Second Quarter 2023 | ||||||
| Six months ended June 30, 2022 | Note | Wireless | Cable | Media | Corporate items and eliminations | Consolidated totals | ||||||||||||||
| (In millions of dollars) | ||||||||||||||||||||
| Revenue | 6 | 4,352 | 2,077 | 1,141 | (83) | 7,487 | ||||||||||||||
| Operating costs | 7 | 2,149 | 1,006 | 1,205 | (4) | 4,356 | ||||||||||||||
| Adjusted EBITDA | 2,203 | 1,071 | (64) | (79) | 3,131 | |||||||||||||||
| Depreciation and amortization | 1,284 | |||||||||||||||||||
| Restructuring, acquisition and other | 8 | 167 | ||||||||||||||||||
| Finance costs | 9 | 615 | ||||||||||||||||||
| Other income | 10 | (24) | ||||||||||||||||||
| Income before income taxes | 1,089 | |||||||||||||||||||
NOTE 6: REVENUE
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Wireless | |||||||||||||||||
| Service revenue | 1,920 | 1,791 | 3,756 | 3,514 | |||||||||||||
| Equipment revenue | 504 | 421 | 1,014 | 838 | |||||||||||||
| Total Wireless | 2,424 | 2,212 | 4,770 | 4,352 | |||||||||||||
| Cable | |||||||||||||||||
| Service revenue | 2,005 | 1,037 | 3,011 | 2,067 | |||||||||||||
| Equipment revenue | 8 | 4 | 19 | 10 | |||||||||||||
| Total Cable | 2,013 | 1,041 | 3,030 | 2,077 | |||||||||||||
| Total Media | 686 | 659 | 1,191 | 1,141 | |||||||||||||
| Corporate items and intercompany eliminations | (77) | (44) | (110) | (83) | |||||||||||||
| Total revenue | 5,046 | 3,868 | 8,881 | 7,487 | |||||||||||||
| Total service revenue | 4,534 | 3,443 | 7,848 | 6,639 | |||||||||||||
| Total equipment revenue | 512 | 425 | 1,033 | 848 | |||||||||||||
| Total revenue | 5,046 | 3,868 | 8,881 | 7,487 | |||||||||||||
NOTE 7: OPERATING COSTS
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Cost of equipment sales | 518 | 442 | 1,036 | 873 | |||||||||||||
| Merchandise for resale | 51 | 57 | 103 | 117 | |||||||||||||
| Other external purchases | 1,535 | 1,165 | 2,679 | 2,252 | |||||||||||||
| Employee salaries, benefits, and stock-based compensation | 752 | 612 | 1,222 | 1,114 | |||||||||||||
| Total operating costs | 2,856 | 2,276 | 5,040 | 4,356 | |||||||||||||
| Rogers Communications Inc. | 16 | Second Quarter 2023 | ||||||
NOTE 8: RESTRUCTURING, ACQUISITION AND OTHER
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||
| (In millions of dollars) | Note | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Restructuring and other | 143 | 39 | 165 | 76 | ||||||||||||||||
| Shaw Transaction-related costs | 3 | 188 | 32 | 221 | 91 | |||||||||||||||
| Total restructuring, acquisition and other | 331 | 71 | 386 | 167 | ||||||||||||||||
The acquisition costs in 2022 and 2023 consisted of incremental costs supporting acquisition and integration activities related to the Shaw Transaction. In the second quarter of 2023, these costs primarily reflected closing-related fees, the Shaw Transaction-related employee retention program, and the cost of the tangible benefits package related to the broadcasting portion of the Shaw Transaction.
The restructuring and other costs in 2022 and 2023 were primarily severance costs associated with the targeted restructuring of our employee base. Severance costs in 2023 included costs associated with integration-related restructuring of our combined employee base.
NOTE 9: FINANCE COSTS
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||
| (In millions of dollars) | Note | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
Total interest on borrowings 1 | 522 | 362 | 915 | 607 | ||||||||||||||||
| Interest earned on restricted cash and cash equivalents | (3) | (31) | (149) | (34) | ||||||||||||||||
| Interest on borrowings, net | 519 | 331 | 766 | 573 | ||||||||||||||||
| Interest on lease liabilities | 17 | 27 | 18 | 50 | 37 | |||||||||||||||
| Interest on post-employment benefits liability | (5) | (1) | (7) | (1) | ||||||||||||||||
| (Gain) loss on foreign exchange | (141) | 69 | (127) | 19 | ||||||||||||||||
| Change in fair value of derivative instruments | 144 | (66) | 133 | (17) | ||||||||||||||||
| Capitalized interest | (9) | (6) | (17) | (13) | ||||||||||||||||
| Deferred transaction costs and other | 48 | 12 | 81 | 17 | ||||||||||||||||
| Total finance costs | 583 | 357 | 879 | 615 | ||||||||||||||||
1Interest on borrowings includes interest on short-term borrowings and on long-term debt.
NOTE 10: OTHER INCOME
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Income from associates and joint ventures | (6) | (6) | (20) | — | |||||||||||||
| Other investment income | (12) | (12) | (25) | (24) | |||||||||||||
| Total other income | (18) | (18) | (45) | (24) | |||||||||||||
| Rogers Communications Inc. | 17 | Second Quarter 2023 | ||||||
NOTE 11: EARNINGS PER SHARE
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars, except per share amounts) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Numerator (basic) - Net income for the period | 109 | 409 | 620 | 801 | |||||||||||||
| Denominator - Number of shares (in millions): | |||||||||||||||||
| Weighted average number of shares outstanding - basic | 529 | 505 | 517 | 505 | |||||||||||||
| Effect of dilutive securities (in millions): | |||||||||||||||||
| Employee stock options and restricted share units | 1 | 2 | 1 | 2 | |||||||||||||
| Weighted average number of shares outstanding - diluted | 530 | 507 | 518 | 507 | |||||||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $0.21 | $0.81 | $1.20 | $1.59 | |||||||||||||
| Diluted | $0.20 | $0.76 | $1.19 | $1.57 | |||||||||||||
For the three and six months ended June 30, 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 and six months ended June 30, 2023 was reduced by $4 million and $3 million (2022 - $25 million and $5 million), respectively, in the diluted earnings per share calculation.
A total of 8,709,807 and 6,518,272 options were out of the money for the three and six months ended June 30, 2023 (2022 - 5,225,207 and 1,042,625), respectively. These options were excluded from the calculation of the effect of dilutive securities because they were anti-dilutive.
NOTE 12: FINANCIAL INSTRUMENTS
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 15). 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.
| Rogers Communications Inc. | 18 | Second Quarter 2023 | ||||||
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 six months ended June 30, 2023 and 2022.
| Three months ended June 30, 2023 | Six months ended June 30, 2023 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| Credit facilities | |||||||||||||||||||||||
| Debt derivatives entered | 13,839 | 1.343 | 18,580 | 14,797 | 1.343 | 19,873 | |||||||||||||||||
| Debt derivatives settled | 9,558 | 1.339 | 12,795 | 9,831 | 1.339 | 13,161 | |||||||||||||||||
| Net cash paid on settlement | (90) | (95) | |||||||||||||||||||||
| US commercial paper program | |||||||||||||||||||||||
| Debt derivatives entered | — | — | — | 1,174 | 1.362 | 1,599 | |||||||||||||||||
| Debt derivatives settled | 681 | 1.344 | 915 | 1,332 | 1.348 | 1,795 | |||||||||||||||||
| Net cash paid on settlement | (16) | (18) | |||||||||||||||||||||
| Three months ended June 30, 2022 | Six months ended June 30, 2022 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| Credit facilities | |||||||||||||||||||||||
| Debt derivatives settled | — | — | — | 400 | 1.268 | 507 | |||||||||||||||||
| Net cash received on settlement | — | 9 | |||||||||||||||||||||
| US commercial paper program | |||||||||||||||||||||||
| Debt derivatives entered | 1,168 | 1.281 | 1,496 | 3,243 | 1.269 | 4,116 | |||||||||||||||||
| Debt derivatives settled | 1,236 | 1.283 | 1,586 | 3,299 | 1.271 | 4,194 | |||||||||||||||||
| Net cash received on settlement | 20 | 21 | |||||||||||||||||||||
As at June 30, 2023, we had US$4,966 million and nil notional amount of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2022 - nil and US$158 million) at an average rate of $1.332/US$ (December 31, 2022 - nil) and nil (December 31, 2022 - $1.352/US$), respectively.
Senior and subordinated notes
We did not enter into any debt derivatives related to senior notes issued during the three and six months ended June 30, 2023. Below is a summary of the debt derivatives we entered into related to senior and subordinated notes during the three and six months June 30, 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.
| Rogers Communications Inc. | 19 | Second Quarter 2023 | ||||||
As at June 30, 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 hedged economically using debt derivatives, at an average rate of $1.247/US$ (December 31, 2022 - $1.233/US$).
During the six months ended June 30, 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 $43 million upon settlement.
Lease liabilities
Below is a summary of the debt derivatives we entered into and settled related to our outstanding lease liabilities for the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30, 2023 | Six months ended June 30, 2023 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| Debt derivatives entered | 51 | 1.314 | 67 | 86 | 1.337 | 115 | |||||||||||||||||
| Debt derivatives settled | 33 | 1.273 | 42 | 66 | 1.303 | 86 | |||||||||||||||||
| Three months ended June 30, 2022 | Six months ended June 30, 2022 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| Debt derivatives entered | 38 | 1.289 | 49 | 71 | 1.282 | 91 | |||||||||||||||||
| Debt derivatives settled | 31 | 1.258 | 39 | 58 | 1.293 | 75 | |||||||||||||||||
As at June 30, 2023, we had US$245 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 July 2023 to June 2026 (December 31, 2022 - January 2023 to December 2025) at an average rate of $1.318/US$ (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
•$500 million of bond forwards and $2.3 billion of interest rate swap derivatives and received $80 million upon settlement.
As at June 30, 2023 and 2022, we had no interest rate derivatives outstanding.
| Rogers Communications Inc. | 20 | Second Quarter 2023 | ||||||
Expenditure derivatives
We use foreign currency forward contracts (expenditure derivatives) to manage the foreign exchange risk in our operations, designating them as hedges for accounting purposes for certain of our forecast operational and capital expenditures.
The tables below summarize the expenditure derivatives we entered into and settled during the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30, 2023 | Six months ended June 30, 2023 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| Expenditure derivatives entered | 930 | 1.327 | 1,234 | 1,140 | 1.327 | 1,513 | |||||||||||||||||
| Expenditure derivatives acquired | 212 | 1.330 | 282 | 212 | 1.330 | 282 | |||||||||||||||||
| Expenditure derivatives settled | 315 | 1.260 | 397 | 540 | 1.254 | 677 | |||||||||||||||||
| Three months ended June 30, 2022 | Six months ended June 30, 2022 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| Expenditure derivatives entered | 474 | 1.253 | 594 | 852 | 1.251 | 1,066 | |||||||||||||||||
| Expenditure derivatives settled | 255 | 1.290 | 329 | 480 | 1.292 | 620 | |||||||||||||||||
As at June 30, 2023, we had US$1,772 million notional amount of expenditure derivatives outstanding (December 31, 2022 - US$960 million) with terms to maturity ranging from July 2023 to December 2024 (December 31, 2022 - January 2023 to December 2023) at an average rate of $1.307/US$ (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.
During the three months ended June 30, 2023, we entered into 0.5 million equity derivatives with a weighted average price of $58.14 as a result of the issuance of additional performance restricted share units in 2023 (see note 19).
As at June 30, 2023, we had equity derivatives outstanding for 6.0 million (December 31, 2022 - 5.5 million) Class B Non-Voting Shares with a weighted average price of $54.02 (December 31, 2022 - $53.65).
During the six months ended June 30, 2023, we executed extension agreements for our equity derivative contracts under substantially the same commitment terms and conditions with revised expiry dates to April 2024 (from April 2023).
| Rogers Communications Inc. | 21 | Second Quarter 2023 | ||||||
Cash settlements on debt derivatives and forward contracts
The tables below summarize the net proceeds (payments) on settlement of debt derivatives and forward contracts during the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30, 2023 | Six months ended June 30, 2023 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | US$ settlements | Exchange rate | Cdn$ settlements | US$ settlements | Exchange rate | Cdn$ settlements | |||||||||||||||||
| Credit facilities | (90) | (95) | |||||||||||||||||||||
| US commercial paper program | (16) | (18) | |||||||||||||||||||||
| Senior and subordinated notes | — | 234 | |||||||||||||||||||||
| Net (payments) proceeds on settlement of debt derivatives and forward contracts | (106) | 121 | |||||||||||||||||||||
| Three months ended June 30, 2022 | Six months ended June 30, 2022 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | US$ settlements | Exchange rate | Cdn$ settlements | US$ settlements | Exchange rate | Cdn$ settlements | |||||||||||||||||
| Credit facilities | — | 9 | |||||||||||||||||||||
| US commercial paper program | 20 | 21 | |||||||||||||||||||||
| Senior and subordinated notes | — | (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 | 20 | (54) | |||||||||||||||||||||
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. The carrying value of restricted cash and cash equivalents approximated its fair value because of the short-term nature of how the funds were invested. The carrying values of our financing receivables also approximate their fair values based on our recognition of an expected credit loss allowance.
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.
| Rogers Communications Inc. | 22 | Second Quarter 2023 | ||||||
There were no material financial instruments categorized in Level 3 as at June 30, 2023 or December 31, 2022 and there were no transfers between Level 1, Level 2, or Level 3 during the three or six months ended June 30, 2023 or 2022.
Below is a summary of our financial instruments carried at fair value as at June 30, 2023 and December 31, 2022.
| Carrying value | Fair value (Level 1) | Fair value (Level 2) | ||||||||||||||||||
| As at June 30 | As at Dec. 31 | As at June 30 | As at Dec. 31 | As at June 30 | 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 | 1,089 | 1,200 | 1,089 | 1,200 | — | — | ||||||||||||||
| Derivatives: | ||||||||||||||||||||
| Debt derivatives accounted for as cash flow hedges | 974 | 1,330 | — | — | 974 | 1,330 | ||||||||||||||
| Debt derivatives not accounted for as hedges | 7 | 72 | — | — | 7 | 72 | ||||||||||||||
| Expenditure derivatives accounted for as cash flow hedges | 38 | 94 | — | — | 38 | 94 | ||||||||||||||
| Equity derivatives not accounted for as hedges | 38 | 54 | — | — | 38 | 54 | ||||||||||||||
| Total financial assets | 2,146 | 2,750 | 1,089 | 1,200 | 1,057 | 1,550 | ||||||||||||||
| Financial liabilities | ||||||||||||||||||||
| Derivatives: | ||||||||||||||||||||
| Debt derivatives accounted for as cash flow hedges | 662 | 414 | — | — | 662 | 414 | ||||||||||||||
| Debt derivatives not accounted for as hedges | 48 | — | — | — | 48 | — | ||||||||||||||
| Expenditure derivatives accounted for as cash flow hedges | 13 | — | — | — | 13 | — | ||||||||||||||
| Total financial liabilities | 723 | 414 | — | — | 723 | 414 | ||||||||||||||
Below is a summary of the fair value of our long-term debt as at June 30, 2023 and December 31, 2022.
| As at June 30, 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) | 41,136 | 38,905 | 31,733 | 29,355 | ||||||||||
1 Long-term debt (including current portion) is measured at Level 2 in the three-level fair value hierarchy.
NOTE 13: 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 June 30 | As at December 31 | |||||||
| (In millions of dollars) | 2023 | 2022 | ||||||
| Current financing receivables | 1,870 | 1,922 | ||||||
| Long-term financing receivables | 885 | 886 | ||||||
| Total financing receivables | 2,755 | 2,808 | ||||||
| Rogers Communications Inc. | 23 | Second Quarter 2023 | ||||||
NOTE 14: INVESTMENTS
| As at June 30 | As at December 31 | |||||||
| (In millions of dollars) | 2023 | 2022 | ||||||
| Investments in: | ||||||||
| Publicly traded companies | 1,089 | 1,200 | ||||||
| Private companies | 149 | 53 | ||||||
| Investments, measured at FVTOCI | 1,238 | 1,253 | ||||||
| Investments, associates and joint ventures | 873 | 835 | ||||||
| Total investments | 2,111 | 2,088 | ||||||
NOTE 15: SHORT-TERM BORROWINGS
| As at June 30 | As at December 31 | |||||||
| (In millions of dollars) | 2023 | 2022 | ||||||
| Receivables securitization program | 1,600 | 2,400 | ||||||
| US commercial paper program (net of the discount on issuance) | — | 214 | ||||||
| Non-revolving credit facility borrowings (net of the discount on issuance) | 983 | 371 | ||||||
| Total short-term borrowings | 2,583 | 2,985 | ||||||
The tables below summarize the activity relating to our short-term borrowings for the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30, 2023 | Six months ended June 30, 2023 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| Repayment of receivables securitization | (1,000) | (1,000) | |||||||||||||||||||||
| Net repayment of receivables securitization | (1,000) | (1,000) | |||||||||||||||||||||
| Proceeds received from US commercial paper | — | — | — | 1,174 | 1.362 | 1,599 | |||||||||||||||||
| Repayment of US commercial paper | (687) | 1.345 | (924) | (1,341) | 1.348 | (1,807) | |||||||||||||||||
| Net repayment of US commercial paper | (924) | (208) | |||||||||||||||||||||
Proceeds received from non-revolving credit facilities (Cdn$) 1 | — | 375 | |||||||||||||||||||||
| Proceeds received from non-revolving credit facilities (US$) | 460 | 1.357 | 624 | 1,198 | 1.349 | 1,616 | |||||||||||||||||
| Total proceeds received from non-revolving credit facilities | 624 | 1,991 | |||||||||||||||||||||
Repayment of non-revolving credit facilities (Cdn$) 1 | (4) | (379) | |||||||||||||||||||||
| Repayment of non-revolving credit facilities (US$) | (465) | 1.348 | (627) | (738) | 1.346 | (993) | |||||||||||||||||
| Total repayment of non-revolving credit facilities | (631) | (1,372) | |||||||||||||||||||||
| Net (repayment of) proceeds received from non-revolving credit facilities | (7) | 619 | |||||||||||||||||||||
| Net repayment of short-term borrowings | (1,931) | (589) | |||||||||||||||||||||
1 Borrowings under our non-revolving facility mature and are reissued regularly, such that until repaid, we maintain net outstanding borrowings equivalent to $1 billion on the reissue dates.
| Rogers Communications Inc. | 24 | Second Quarter 2023 | ||||||
| Three months ended June 30, 2022 | Six months ended June 30, 2022 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| Proceeds received from receivables securitization | 200 | 1,200 | |||||||||||||||||||||
| Net proceeds received from receivables securitization | 200 | 1,200 | |||||||||||||||||||||
| Proceeds received from US commercial paper | 1,169 | 1.280 | 1,496 | 3,243 | 1.269 | 4,116 | |||||||||||||||||
| Repayment of US commercial paper | (1,238) | 1.283 | (1,588) | (3,302) | 1.271 | (4,198) | |||||||||||||||||
| Net repayment of US commercial paper | (92) | (82) | |||||||||||||||||||||
| Proceeds received from non-revolving credit facilities (Cdn$) | — | 495 | |||||||||||||||||||||
| Total proceeds received from non-revolving credit facilities | — | 495 | |||||||||||||||||||||
| Repayment of non-revolving credit facilities (Cdn$) | — | (495) | |||||||||||||||||||||
| Repayment of non-revolving credit facilities (US$) | — | — | — | (400) | 1.268 | (507) | |||||||||||||||||
| Total repayment of non-revolving credit facilities | — | (1,002) | |||||||||||||||||||||
| Net repayment of non-revolving credit facilities | — | (507) | |||||||||||||||||||||
| Net proceeds received from short-term borrowings | 108 | 611 | |||||||||||||||||||||
Receivables Securitization Program
Below is a summary of our receivables securitization program as at June 30, 2023 and December 31, 2022.
| As at June 30 | As at December 31 | |||||||
| (In millions of dollars) | 2023 | 2022 | ||||||
| Receivables sold to buyer as security | 3,038 | 2,914 | ||||||
| Short-term borrowings from buyer | (1,600) | (2,400) | ||||||
| Overcollateralization | 1,438 | 514 | ||||||
Below is a summary of the activity related to our receivables securitization program for the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Receivables securitization program, beginning of period | 2,400 | 1,800 | 2,400 | 800 | |||||||||||||
| Receivables securitization program assumed | 200 | — | 200 | — | |||||||||||||
| Net (repayment of) proceeds received from receivables securitization | (1,000) | 200 | (1,000) | 1,200 | |||||||||||||
| Receivables securitization program, end of period | 1,600 | 2,000 | 1,600 | 2,000 | |||||||||||||
In April 2023, we repaid the outstanding $200 million of borrowings under Shaw's legacy accounts receivable securitization program, subsequent to which the program was terminated. This repayment is included in "net repayment of receivables securitization" above.
| Rogers Communications Inc. | 25 | Second Quarter 2023 | ||||||
US Commercial Paper Program
The tables below summarize the activity relating to our US CP program for the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30, 2023 | Six months ended June 30, 2023 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| US commercial paper program, beginning of period | 680 | 1.356 | 922 | 158 | 1.354 | 214 | |||||||||||||||||
| Net repayment of US commercial paper | (687) | 1.345 | (924) | (167) | 1.246 | (208) | |||||||||||||||||
Discounts on issuance 1 | 7 | 1.286 | 9 | 9 | 1.333 | 12 | |||||||||||||||||
Gain on foreign exchange 1 | (7) | (18) | |||||||||||||||||||||
| US commercial paper program, end of period | — | — | — | — | — | — | |||||||||||||||||
1 Included in finance costs.
| Three months ended June 30, 2022 | Six months ended June 30, 2022 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| US commercial paper program, beginning of period | 715 | 1.252 | 895 | 704 | 1.268 | 893 | |||||||||||||||||
| Net repayment of US commercial paper | (69) | 1.333 | (92) | (59) | 1.390 | (82) | |||||||||||||||||
Discounts on issuance 1 | 3 | n/m | 3 | 4 | n/m | 4 | |||||||||||||||||
Loss on foreign exchange 1 | 30 | 21 | |||||||||||||||||||||
| US commercial paper program, end of period | 649 | 1.288 | 836 | 649 | 1.288 | 836 | |||||||||||||||||
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 12). 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 and six months ended June 30, 2023 and 2022.
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Non-revolving credit facility, beginning of period | 1,001 | — | 371 | 507 | |||||||||||||
| Net (repayment of) proceeds received from non-revolving credit facility | (7) | — | 619 | (507) | |||||||||||||
Discounts on issuance 1 | 7 | — | 7 | — | |||||||||||||
Gain on foreign exchange 1 | (18) | — | (14) | — | |||||||||||||
| Non-revolving credit facility, end of period | 983 | — | 983 | — | |||||||||||||
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.
In February 2022, we repaid the outstanding US$400 million and terminated the June 2021 facility.
| Rogers Communications Inc. | 26 | Second Quarter 2023 | ||||||
NOTE 16: LONG-TERM DEBT
Principal amount | Interest rate | As at June 30 | As at December 31 | |||||||||||||||||
| (In millions of dollars, except interest rates) | Due date | 2023 | 2022 | |||||||||||||||||
| Term loan facility | 6,000 | Floating | 5,966 | — | ||||||||||||||||
| Senior notes | 2023 | US | 500 | 3.000 | % | — | 677 | |||||||||||||
Senior notes 1 | 2023 | 500 | 3.800 | % | 500 | — | ||||||||||||||
| Senior notes | 2023 | US | 850 | 4.100 | % | 1,125 | 1,151 | |||||||||||||
| Senior notes | 2024 | 600 | 4.000 | % | 600 | 600 | ||||||||||||||
Senior notes 1 | 2024 | 500 | 4.350 | % | 500 | — | ||||||||||||||
Senior notes 2 | 2025 | US | 1,000 | 2.950 | % | 1,324 | 1,354 | |||||||||||||
Senior notes 2 | 2025 | 1,250 | 3.100 | % | 1,250 | 1,250 | ||||||||||||||
| Senior notes | 2025 | US | 700 | 3.625 | % | 927 | 948 | |||||||||||||
| Senior notes | 2026 | US | 500 | 2.900 | % | 662 | 677 | |||||||||||||
| Senior notes | 2027 | 1,500 | 3.650 | % | 1,500 | 1,500 | ||||||||||||||
Senior notes 1 | 2027 | 300 | 3.800 | % | 300 | — | ||||||||||||||
Senior notes 2 | 2027 | US | 1,300 | 3.200 | % | 1,721 | 1,761 | |||||||||||||
Senior notes 1 | 2028 | 500 | 4.400 | % | 500 | — | ||||||||||||||
Senior notes 1 | 2029 | 500 | 3.300 | % | 500 | — | ||||||||||||||
Senior notes 2 | 2029 | 1,000 | 3.750 | % | 1,000 | 1,000 | ||||||||||||||
| Senior notes | 2029 | 1,000 | 3.250 | % | 1,000 | 1,000 | ||||||||||||||
Senior notes 1 | 2030 | 500 | 2.900 | % | 500 | — | ||||||||||||||
Senior notes 2 | 2032 | US | 2,000 | 3.800 | % | 2,648 | 2,709 | |||||||||||||
Senior notes 2 | 2032 | 1,000 | 4.250 | % | 1,000 | 1,000 | ||||||||||||||
Senior debentures 3 | 2032 | US | 200 | 8.750 | % | 265 | 271 | |||||||||||||
| Senior notes | 2038 | US | 350 | 7.500 | % | 463 | 474 | |||||||||||||
| Senior notes | 2039 | 500 | 6.680 | % | 500 | 500 | ||||||||||||||
Senior notes 1 | 2039 | 1,450 | 6.750 | % | 1,450 | — | ||||||||||||||
| Senior notes | 2040 | 800 | 6.110 | % | 800 | 800 | ||||||||||||||
| Senior notes | 2041 | 400 | 6.560 | % | 400 | 400 | ||||||||||||||
Senior notes 2 | 2042 | US | 750 | 4.500 | % | 993 | 1,016 | |||||||||||||
| Senior notes | 2043 | US | 500 | 4.500 | % | 662 | 677 | |||||||||||||
| Senior notes | 2043 | US | 650 | 5.450 | % | 861 | 880 | |||||||||||||
| Senior notes | 2044 | US | 1,050 | 5.000 | % | 1,390 | 1,422 | |||||||||||||
| Senior notes | 2048 | US | 750 | 4.300 | % | 993 | 1,016 | |||||||||||||
Senior notes 1 | 2049 | 300 | 4.250 | % | 300 | — | ||||||||||||||
| Senior notes | 2049 | US | 1,250 | 4.350 | % | 1,655 | 1,693 | |||||||||||||
| Senior notes | 2049 | US | 1,000 | 3.700 | % | 1,324 | 1,354 | |||||||||||||
Senior notes 2 | 2052 | US | 2,000 | 4.550 | % | 2,648 | 2,709 | |||||||||||||
Senior notes 2 | 2052 | 1,000 | 5.250 | % | 1,000 | 1,000 | ||||||||||||||
Subordinated notes 4 | 2081 | 2,000 | 5.000 | % | 2,000 | 2,000 | ||||||||||||||
Subordinated notes 4 | 2082 | US | 750 | 5.250 | % | 993 | 1,016 | |||||||||||||
| 42,220 | 32,855 | |||||||||||||||||||
| Deferred transaction costs and discounts | (1,084) | (1,122) | ||||||||||||||||||
| Less current portion | (2,725) | (1,828) | ||||||||||||||||||
| Total long-term debt | 38,411 | 29,905 | ||||||||||||||||||
1 Senior notes originally issued by Shaw Communications Inc. which are unsecured obligations of RCI and for which RCCI was an unsecured guarantor as at June 30, 2023, see note 3.
2 Included in Shaw senior note financing.
3 Senior debentures originally issued by Rogers Cable Inc. which are unsecured obligations of RCI and for which RCCI was an unsecured guarantor as at June 30, 2023 and December 31, 2022.
4 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. | 27 | Second Quarter 2023 | ||||||
The tables below summarize the activity relating to our long-term debt for the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30, 2023 | Six months ended June 30, 2023 | ||||||||||||||||||||||
| (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 | |||||||||||||||||
| Credit facility repayments (US$) | (220) | 1.336 | (294) | (220) | 1.336 | (294) | |||||||||||||||||
| Net (repayments) borrowings under credit facilities | (294) | 7 | |||||||||||||||||||||
Term loan facility net borrowings (US$) 1 | 4,506 | 1.350 | 6,082 | 4,506 | 1.350 | 6,082 | |||||||||||||||||
| Net borrowings under term loan facility | 6,082 | 6,082 | |||||||||||||||||||||
| Senior note repayments (US$) | — | — | — | (500) | 1.378 | (689) | |||||||||||||||||
| Net repayment of senior notes | — | (689) | |||||||||||||||||||||
| Net issuance of long-term debt | 5,788 | 5,400 | |||||||||||||||||||||
1 Borrowings under our term loan facility mature and are reissued regularly, such that until repaid, we maintain net outstanding borrowings equivalent to $6 billion on the reissue dates.
| Three months ended June 30, 2022 | Six months ended June 30, 2022 | ||||||||||||||||||||||
| (In millions of dollars, except exchange rates) | Notional (US$) | Exchange rate | Notional (Cdn$) | Notional (US$) | Exchange rate | Notional (Cdn$) | |||||||||||||||||
| Senior note issuances (Cdn$) | — | 4,250 | |||||||||||||||||||||
| Senior note issuances (US$) | — | — | — | 7,050 | 1.284 | 9,054 | |||||||||||||||||
| Total issuances of senior notes | — | 13,304 | |||||||||||||||||||||
| Senior note repayments (Cdn$) | (600) | (600) | |||||||||||||||||||||
| Senior note repayments (US$) | — | — | — | (750) | 1.259 | (944) | |||||||||||||||||
| Total senior notes repayments | (600) | (1,544) | |||||||||||||||||||||
| Net (repayment) issuance of senior notes | (600) | 11,760 | |||||||||||||||||||||
| Subordinated note issuances (US$) | — | — | — | 750 | 1.268 | 951 | |||||||||||||||||
| Net (repayment) issuance of long-term debt | (600) | 12,711 | |||||||||||||||||||||
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Long-term debt net of transaction costs, beginning of period | 31,364 | 31,420 | 31,733 | 18,688 | |||||||||||||
| Net issuance (repayment) of long-term debt | 5,788 | (600) | 5,400 | 12,711 | |||||||||||||
| Long-term debt assumed | 4,526 | — | 4,526 | — | |||||||||||||
| (Gain) loss on foreign exchange | (577) | 627 | (585) | 212 | |||||||||||||
| Deferred transaction costs incurred | (1) | — | (4) | (169) | |||||||||||||
| Amortization of deferred transaction costs | 36 | 9 | 66 | 14 | |||||||||||||
| Long-term debt net of transaction costs, end of period | 41,136 | 31,456 | 41,136 | 31,456 | |||||||||||||
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 3), 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. | 28 | Second Quarter 2023 | ||||||
In April 2023, we also assumed $4.55 billion principal amount of Shaw's senior notes upon closing the Shaw Transaction (see note 3).
Senior and Subordinated Notes
Issuance of senior and subordinated notes and related debt derivatives
We did not issue senior or subordinated notes during three and six months ended June 30, 2023. Below is a summary of the senior and subordinated notes we issued during the three and six months ended June 30, 2022.
| (In millions of dollars, except interest rates and discounts) | Transaction costs and discounts 2 (Cdn$) | |||||||||||||||||||||||||
| Date issued | Principal amount | Due date | Interest rate | Discount/ premium at issuance | Total gross proceeds 1 (Cdn$) | 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 | 35 | ||||||||||||||||
| 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 | 56 | ||||||||||||||||
| March 11, 2022 (senior) | 1,000 | 2029 | 3.750 | % | 99.891 | % | 1,000 | 7 | 39 | |||||||||||||||||
| March 11, 2022 (senior) | US | 2,000 | 2032 | 3.800 | % | 99.777 | % | 2,567 | 27 | 112 | ||||||||||||||||
| March 11, 2022 (senior) | 1,000 | 2032 | 4.250 | % | 99.987 | % | 1,000 | 6 | 40 | |||||||||||||||||
| March 11, 2022 (senior) | US | 750 | 2042 | 4.500 | % | 98.997 | % | 966 | 20 | 64 | ||||||||||||||||
| March 11, 2022 (senior) | US | 2,000 | 2052 | 4.550 | % | 98.917 | % | 2,564 | 55 | 168 | ||||||||||||||||
| March 11, 2022 (senior) | 1,000 | 2052 | 5.250 | % | 99.483 | % | 1,000 | 12 | 43 | |||||||||||||||||
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.
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 3). 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".
Concurrent with the Shaw senior note financing, we terminated certain derivatives (see note 12) 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.
In July 2023, we completed an offer to exchange the US$7.05 billion of senior notes (Restricted Notes), which were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (Securities Act), for an equal principal amount of new notes registered under the Securities Act (Exchange Notes). The terms of the Exchange Notes are substantially identical to the terms of the corresponding Restricted Notes,
| Rogers Communications Inc. | 29 | Second Quarter 2023 | ||||||
except that the Exchange Notes are registered under the Securities Act and the transfer restrictions, registration rights, and additional interest provisions applicable to the Restricted Notes do not apply to the Exchange Notes. The Exchange Notes represent the same debt as the Restricted Notes and they were issued under the same indenture that governed the applicable series of Restricted Notes.
Repayment of senior notes and related derivative settlements
During the six months ended June 30, 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 received on settlement of the associated debt derivatives.
During the three months ended June 30, 2022, we repaid the entire outstanding principal amount of our $600 million 4.00% senior notes at maturity. There were no derivatives associated with these senior notes.
During the six months ended June 30, 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 17: LEASES
Below is a summary of the activity related to our lease liabilities for the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Lease liabilities, beginning of period | 2,048 | 1,988 | 2,028 | 1,957 | |||||||||||||
| Net additions | 172 | 85 | 272 | 192 | |||||||||||||
| Lease liabilities assumed | 327 | — | 327 | — | |||||||||||||
| Interest on lease liabilities | 27 | 18 | 50 | 37 | |||||||||||||
| Interest payments on lease liabilities | (23) | (18) | (45) | (36) | |||||||||||||
| Principal payments of lease liabilities | (84) | (76) | (165) | (153) | |||||||||||||
| Lease liabilities, end of period | 2,467 | 1,997 | 2,467 | 1,997 | |||||||||||||
NOTE 18: 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 | ||||||
| April 25, 2023 | July 5, 2023 | 0.50 | ||||||
| 1.00 | ||||||||
| 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 3, 2023, we issued 23.6 million Class B Non-Voting Shares as partial consideration for the Shaw Transaction (see note 3).
On July 25, 2023, a dividend was declared of $0.50 per Class A Share and Class B Non-Voting Share to be paid on October 3, 2023 to shareholders of record on September 8, 2023.
| Rogers Communications Inc. | 30 | Second Quarter 2023 | ||||||
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.
NOTE 19: STOCK-BASED COMPENSATION
Below is a summary of our stock-based compensation expense, which is included in net income, for the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Stock options | (6) | (21) | 10 | 14 | |||||||||||||
| Restricted share units | 6 | 2 | 12 | 27 | |||||||||||||
| Deferred share units | — | (9) | — | 6 | |||||||||||||
| Equity derivative effect, net of interest receipt | 15 | 47 | 14 | (14) | |||||||||||||
| Total stock-based compensation expense | 15 | 19 | 36 | 33 | |||||||||||||
As at June 30, 2023, we had a total liability recognized at its fair value of $183 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 and six months ended June 30, 2023, we paid $16 million and $67 million (2022 - $3 million and $56 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 six months ended June 30, 2023 and 2022.
| Three months ended June 30, 2023 | Six months ended June 30, 2023 | ||||||||||||||||
| (In number of units, except prices) | Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | |||||||||||||
| Outstanding, beginning of period | 11,268,107 | $63.87 | 9,860,208 | $63.58 | |||||||||||||
| Granted | 126,980 | $60.60 | 1,594,879 | $64.86 | |||||||||||||
| Exercised | (269,877) | $56.31 | (329,877) | $54.90 | |||||||||||||
| Forfeited | (437,002) | $67.44 | (437,002) | $67.44 | |||||||||||||
| Outstanding, end of period | 10,688,208 | $63.88 | 10,688,208 | $63.88 | |||||||||||||
| Exercisable, end of period | 4,337,296 | $63.25 | 4,337,296 | $63.25 | |||||||||||||
| Three months ended June 30, 2022 | Six months ended June 30, 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 | 10,476,427 | $63.44 | 6,494,001 | $61.62 | |||||||||||||
| Granted | — | — | 4,234,288 | $65.73 | |||||||||||||
| Exercised | (90,000) | $48.56 | (270,027) | $51.13 | |||||||||||||
| Forfeited | (103,656) | $64.05 | (175,491) | $62.88 | |||||||||||||
| Outstanding, end of period | 10,282,771 | $63.57 | 10,282,771 | $63.57 | |||||||||||||
| Exercisable, end of period | 3,052,733 | $62.09 | 3,052,733 | $62.09 | |||||||||||||
We did not grant any performance options to certain key executives during the three and six months ended June 30, 2023 (2022 - nil and 2,469,014), respectively. These performance options have certain non-market vesting conditions related to the Shaw Transaction.
| Rogers Communications Inc. | 31 | Second Quarter 2023 | ||||||
Unrecognized stock-based compensation expense related to stock option plans was $20 million as at June 30, 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.
Restricted Share Units
Summary of RSUs
Below is a summary of the activity related to RSUs outstanding, including performance RSUs, for the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In number of units) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Outstanding, beginning of period | 2,231,412 | 2,904,711 | 2,402,489 | 2,691,288 | |||||||||||||
| Granted and reinvested dividends | 643,390 | 27,664 | 1,341,264 | 935,906 | |||||||||||||
| Exercised | (84,670) | (24,058) | (793,118) | (609,319) | |||||||||||||
| Forfeited | (157,616) | (184,344) | (318,119) | (293,902) | |||||||||||||
| Outstanding, end of period | 2,632,516 | 2,723,973 | 2,632,516 | 2,723,973 | |||||||||||||
Included in the above table are grants of 509,475 and 593,895 performance RSUs to certain key employees during the three and six months ended June 30, 2023 (2022 - nil and 206,719), respectively. The performance RSUs granted in 2023 have certain non-market vesting conditions related to the Shaw Transaction.
Unrecognized stock-based compensation expense related to these RSUs was $75 million as at June 30, 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 and six months ended June 30, 2023 and 2022.
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In number of units) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Outstanding, beginning of period | 1,045,407 | 1,266,434 | 1,139,885 | 1,421,342 | |||||||||||||
| Granted and reinvested dividends | 39,236 | 12,820 | 52,515 | 25,138 | |||||||||||||
| Exercised | (76,989) | (29,691) | (183,982) | (196,401) | |||||||||||||
| Forfeited | (157) | — | (921) | (516) | |||||||||||||
| Outstanding, end of period | 1,007,497 | 1,249,563 | 1,007,497 | 1,249,563 | |||||||||||||
Included in the above table are grants of 1,436 and 2,888 performance DSUs to certain key executives during the three and six months ended June 30, 2023 (2022 - nil).
There was no unrecognized stock-based compensation expenses related to these DSUs as at June 30, 2023 or December 31, 2022. All DSUs granted are fully vested.
NOTE 20: 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 six months ended June 30, 2023 and 2022 were less than $1 million, respectively.
| Rogers Communications Inc. | 32 | Second Quarter 2023 | ||||||
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 and six months ended June 30, 2023 and 2022.
During the three months ended June 30, 2023, Vancouver Professional Baseball LLP ceased being a related party to us as John C. Kerr no longer controls the entity. There were no transactions with this related party during that period.
On closing of the Shaw Transaction, we entered into an advisory agreement with Brad Shaw, pursuant to which he will be paid $20 million for a two-year period following closing in exchange for performing certain services related to the transition and integration of Shaw.
We have normal course business transactions between our Cable business and Corus Entertainment Inc. (Corus), a Canadian-based integrated media and content company, pursuant to which we purchase programming content from Corus, including through arrangements existing prior to closing the Shaw Transaction. In connection with the Shaw Transaction, we also assumed existing programming agreements between Shaw and Corus. We also provide Corus with advertising and other services. Brad Shaw, a director of RCI, holds joint control of Corus. Below is a summary of the related party activity for the business transactions described above for the period since the Shaw Transaction closed.
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Programming fees | 38 | — | 38 | — | |||||||||||||
| Advertising, wireless, and cable services | (3) | — | (3) | — | |||||||||||||
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.
NOTE 21: CONTINGENT LIABILITIES
Videotron Ltd.
On April 3, 2023, Rogers and Videotron settled the lawsuit arising on October 29, 2021, when 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. Rogers remains committed to serving our customers through continued investment in the joint network.
NOTE 22: SUPPLEMENTAL CASH FLOW INFORMATION
Change in Net Operating Assets and Liabilities
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Accounts receivable, excluding financing receivables | 9 | (103) | 6 | 82 | |||||||||||||
| Financing receivables | 66 | 97 | 89 | 207 | |||||||||||||
| Contract assets | (8) | — | (14) | 3 | |||||||||||||
| Inventories | 24 | 90 | (93) | 85 | |||||||||||||
| Other current assets | 82 | 106 | (15) | (12) | |||||||||||||
| Accounts payable and accrued liabilities | 108 | 59 | (450) | (471) | |||||||||||||
| Contract and other liabilities | (20) | (33) | 34 | 1 | |||||||||||||
| Total change in net operating assets and liabilities | 261 | 216 | (443) | (105) | |||||||||||||
| Rogers Communications Inc. | 33 | Second Quarter 2023 | ||||||
Capital Expenditures
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
| (In millions of dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Capital expenditures before proceeds on disposition | 1,097 | 778 | 1,989 | 1,427 | |||||||||||||
| Proceeds on disposition | (18) | — | (18) | — | |||||||||||||
| Capital expenditures | 1,079 | 778 | 1,971 | 1,427 | |||||||||||||
NOTE 23: SUBSEQUENT EVENT
Voluntary Departure Program
In July 2023, we offered a voluntary departure program to a group of eligible employees as part of a total business transformation initiative. In connection with the restructuring, we expect to incur costs of $100 million to $125 million in the third quarter of 2023.
| Rogers Communications Inc. | 34 | Second Quarter 2023 | ||||||
