Rogers 2007 Annual Report Download - page 27

ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 23
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our consolidated revenue was $10,123 million in 2007, an increase of
$1,285 million, or 15%, from $8,838 million in 2006. Of the increase,
Wireless contributed $923 million, Cable $357 million, and Media
$107 million, offset by an increase in corporate items and elimina-
tions of $102 million.
Our consolidated adjusted operating profit was $3,703 million, an
increase of $761 million, or 26%, from $2,942 million in 2006. Of
this increase, Wireless contributed $602 million, Cable contributed
$100 million, and Media contributed $20 million. On a consolidated
basis, we recorded net income of $637 million for the year ended
December 31, 2007, compared to net income of $622 million in 2006.
Refer to the respective individual segment discussions for details of
the revenue, operating expenses, operating profit and additions to
PP&E of Wireless, Cable and Media.
2007 Performance Against Targets
The following table sets forth the guidance ranges for selected full
year financial and operating metrics that we provided for 2007, as
revised during the year, versus the actual results we achieved for the
year. Certain of the measures included below are not defined under
Canadian GAAP. See the sections entitled “Key Performance Indica-
tors and non-GAAP Measures” and “Supplementary Information:
Non-GAAP Calculations” for further details.
Our actual 2007 revenue and adjusted operating profit compared
favourably to our annual 2007 guidance, largely reflecting strong
performances across each of our three segments, including strong
average revenue per user (“ARPU”) growth in Wireless, higher than
expected net additions to our Wireless subscriber base and strong
additions to Cable’s RGUs. PP&E additions exceeded our guidance
partially in order to support the higher than expected level of sub-
scriber growth as well as investments in future growth initiatives.
Stock-based Compensation Expense
On May 28, 2007, our employee stock option plans were amended
to attach cash settled share appreciation rights (“SARs”) to all new
and previously granted options. The SAR feature allows the option
holder to elect to receive in cash an amount equal to the intrinsic
value, being the excess market price of the Class B Non-Voting
share over the exercise price of the option, instead of exercising
the option and acquiring Class B Non-Voting shares. All outstand-
ing stock options are now classified as liabilities and are carried at
their intrinsic value, as adjusted for vesting, measured as the differ-
ence between the current stock price and the option exercise price.
Original 2007 Guidance Updated from Original 2007
(Millions of dollars, except subscribers) (At February 15, 2007) Guidance (At July 31, 2007) Actual
Consolidated
Revenue $ 9,700 to $ 10,000 $ 9,700 to $ 10,100 $ 10,123
Adjusted operating profit (1) 3,250 to 3,400 3,250 to 3,585 3,703
PP&E expenditures 1,625 to 1,750 1,625 to 1,750 1,796
Free cash flow (2) 800 to 1,000 800 to 1,150 1,290
Revenue
Wireless (network revenue) $ 4,900 to $ 5,000 $ 4,900 to $ 5,150 $ 5,154
Cable (3) 3,515 to 3,600 3,515 to 3,600 3,558
Media 1,275 to 1,325 1,275 to 1,325 1,317
Adjusted operating profit (1)
Wireless (4) $ 2,250 to $ 2,350 $ 2,250 to $ 2,535 $ 2,620
Cable 935 to 975 935 to 975 1,016
Media 150 to 160 150 to 160 176
Additions to PP&E
Wireless (4) $ 675 to $ 725 $ 675 to $ 725 $ 807
Cable (5) 815 to 880 815 to 880 803
Media 85 to 95 85 to 95 77
Net subscriber additions (000s)
Retail wireless postpaid and prepaid (6) 500 to 600 500 to 600 651
Residential cable revenue generating units (RGUs) (7) 625 to 725 625 to 725 655
(1) Excludes the impact of the introduction of a cash settlement feature for employee stock options, including the one-time non-cash charge upon adoption of $452 million recorded in the second quarter
of 2007 and the ongoing impact of stock-based compensation expense. Also excludes integration and restructuring related expenditures and the impact of a one-time charge resulting from the
renegotiation of an Internet-related services agreement.
(2) Free cash flow is defined as adjusted operating profit less integration and restructuring expenses, PP&E expenditures and interest expense and is not a term defined under Canadian GAAP.
(3) Original 2007 Cable revenue guidance was revised to reflect the reclassification from revenue to cost of sales of approximately $100 million of intercompany wireless equipment subsidies received by
Rogers Retail. This reclassification had no impact on reported consolidated revenue, consolidated operating profit or Cable operating profit.
(4) Excludes operating losses and PP&E expenditures related to the Inukshuk fixed wireless initiative of $31 million and $15 million, in 2007, respectively.
(5) Excludes PP&E expenditures related to the acquisition of Call-Net of $11 million in 2007.
(6) Wireless subscriber net additions exclude adjustments associated with the Time Division Multiple Access (“TDMA”) and analog network decommissioning and the revision of certain aspects of subscriber
reporting for data-only subscribers.
(7) Residential cable RGUs are comprised of basic cable subscribers, digital cable households, residential high-speed Internet subscribers and residential cable and circuit-switched telephony subscribers.