/FIRST AND FINAL ADD - TO009 - ROGERS COMMUNICATIONS EARNINGS/

Share Name	Share Symbol	Market	Type
Rogers Commun CL B	NYSE:RG	NYSE	Ordinary Share

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

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