Rogers 2007 Annual Report Download - page 48

44 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Media Operating Revenue
The increase in Media revenue in 2007 compared to 2006 reflects
growth across all of Media’s divisions. Rogers Publishing revenue in
2007 was positively impacted by increased advertising and circula-
tion revenue, which was partially offset by a decrease in revenue
related to the closure of certain publications. Rogers Radio revenue
increased due to a combination of organic growth and the acquisi-
tion of five radio stations in Alberta in January 2007. The growth
in Rogers Sports Entertainment
revenue was primarily due to
increases in admissions, corpo-
rate sponsorships and broadcast
revenue. Rogers Sportsnet rev-
enue increased over the prior
year due to higher advertising
revenue and subscriber fees.
Rogers television operations
generated strong increases in
national advertising for the year,
and the acquisition of Citytv,
which closed on October 31,
2007, contributed $28 million
to the increase in revenue. The
Shopping Chann el revenue
remained fairly consistent with
the prior year.
Media Operating Expenses
The increase in Media operating expenses, excluding the impact of
the one-time non-cash charge resulting from the introduction of
a cash settlement feature for employee stock options and stock-
based compensation expense in 2007 compared to 2006, is primarily
due to operating costs of Citytv and the five Alberta radio stations,
higher Blue Jays payroll costs at Rogers Sports Entertainment, and
higher production costs at Rogers Sportsnet resulting from addi-
tional NFL and NHL broadcasts. These increases were partially
offset by lower general and administrative costs and by the elimina-
tion of CRTC Part II fees. For further details, see the section entitled
“Government Regulation and Regulatory Developments”.
Media Adjusted Operating
Profit
The growth in Media’s adjusted
operating profit compared to
2006 reflects growth across most
of Media’s divisions, as well as
the impact of the elimination of
CRTC Part II fees, partially offset
by a decrease in adjusted oper-
ating profit at Rogers Sports
Entertainment. Excluding Rogers
Sports Entertainment, Media’s
adjusted operating profit mar-
gins would have been 16.9%
and 16.7% for the years ended
December 31, 2007 and 2006,
respectively.
Media Additions to PP&E
Additions to PP&E in 2007 primarily reflect building improvements
related to the relocation of Rogers Sportsnet and building improve-
ments to the Rogers Centre. In 2006, PP&E additions mainly related
to enhancements and renovations at the Rogers Centre.
3. CONSOLIDATED LIQUIDITY AND FINANCING
LIQUIDIT Y AND C APITAL RESOURCES
Operations
For 2007, cash generated from operations before changes in non-cash
operating working capital items, which is calculated by eliminat-
ing the effect of all non-cash items from net income, increased
to $3,135 million from $2,386 million in 2006. The $749 million
increase is primarily the result of a $761 million increase in adjusted
operating profit.
Taking into account the changes in non-cash operating working
capital items for the year ended December 31, 2007, cash generated
from operations was $2,825 million, compared to $2,449 million
in 2006.
The cash flow generated from operations of $2,825 million, together
with the following items, resulted in total net funds of approxi-
mately $3,932 million raised in the year ended December 31, 2007:
• receiptof$1,080millionaggregatenetadvancesborrowedunder
our bank credit facilities; and
• receiptof$27millionfromtheissuanceofClassBNon-Voting
shares under the exercise of employee stock options.
Net funds used during 2007 totalled approximately $3,974 million,
the details of which include:
• additions to PP&E of $1,816 million, including $20 million of
related changes in non-cash working capital;
• therepaymentatmaturityinFebruaryofCable’s$450million
Senior Notes due 2007;
• theredemptioninMayofWireless’US$550millionFloatingRate
Notes due 2010 ($609 million aggregate principal amount and
$12 million premium);
• theredemptioninJuneofWireless’US$155million9.75%Senior
Debentures due 2016 ($166 million aggregate principal amount
and $47 million premium);
• theaggregatenetpaymentof$35millionincurredonthesettle-
ment of two cross-currency interest rate exchange agreements
and forward contracts in conjunction with the redemption of
Wireless’ US$550 million Floating Rate Senior Notes due 2010 in
May 2007 and the redemption of Wireless’ US$155 million 9.75%
Senior Debentures due 2016 in June 2007;
• thepaymentofquarterlydividendsaggregating$211millionon
our Class A Voting and Class B Non-Voting shares;
• acquisitionsandothernetinvestmentsaggregating$555million,
including the October 2007 acquisition of five Citytv television
stations for $405 million including acquisition costs, the June 2007
acquisition of Futureway Communications Inc. for $86 million and
the January 2007 acquisition of five Alberta radio stations for
$43 million;
20072006
$1,317$1,210$1,097
MEDIA
REVENUE
(In millions of dollars)
2006
2007
2005
20072006
$176$156$131
MEDIA ADJUSTED
OPERATING PROFIT
(In millions of dollars)
200
6
2007
2005