Virgin Media 2007 Annual Report Download - page 69

interest expense, foreign exchange losses and loss on extinguishment of debt partially offset by
increased income from those acquisitions during the year.
Cumulative effect of changes in accounting principle
In June 2005, the Financial Accounting Standards Board issued FASB Staff Position
(‘‘FSP’’) 143-1, Accounting for Electronic Waste Obligations, or FSP 143-1, addressing the accounting for
certain obligations associated with the Waste Electrical and Electronic Equipment Directive adopted by
the European Union. FSP 143-1 requires that the commercial user should apply its provisions to certain
obligations associated with historical waste (as defined by the Directive), since this type of obligation is
an asset retirement obligation. The Directive was adopted by the U.K. on December 12, 2006, and was
effective January 2, 2007. Management reviewed their obligations under the law and concluded that an
obligation existed for certain of our customer premises equipment. As a result we recognized a
retirement obligation of £58.2 million and fixed assets of £24.4 million on the balance sheet and a
cumulative effect change in accounting principle of £33.8 million in the consolidated statement of
operations.
Loss from continuing operations per share
Basic and diluted loss from continuing operations per common share for the year ended
December 31, 2006 was £1.74 compared to £1.13 for the year ended December 31, 2005. Basic and
diluted loss from continuing operations per share was computed using a weighted average of
292.9 million shares issued in the year ended December 31, 2006 and a weighted average of
213.8 million shares issued for the same period in 2005. Options and warrants to purchase shares along
with shares of restricted stock held in escrow outstanding at December 31, 2006 and 2005, were
excluded from the calculation of diluted net loss per share since the inclusion of such options, warrants
and restricted stock are anti-dilutive.
Segmental Results of Operations for the Years Ended December 31, 2006 and 2005
A description of the products and services, as well as year-to-date financial data, for each segment
can be found in note 19 to Virgin Media’s consolidated financial statements. The segment results for
the year ended December 31, 2006 included in our consolidated financial statements were reported on
an actual basis and included the results of Telewest from March 3, 2006 and the results of Virgin
Mobile from July 4, 2006.
The results of operations of each of our Cable and Content segments for the years ended
December 31, 2006 and 2005 are reported in this section on a pro forma combined basis as if the
reverse acquisition of Telewest had occurred at the beginning of the periods presented and combine
Telewest’s historical Content and sit-up segments into the combined company’s Content segment. The
pro forma data has been calculated on a basis consistent with the pro forma financial information filed
with the Securities and Exchange Commission under our Form 8-K/A on May 10, 2006. We believe that
a pro forma comparison of these segments is more relevant than a historic comparison as: (a) in
respect of our Cable segment, the size of the acquired legacy Telewest cable business would obscure
any meaningful discussion of changes in our Cable segment if viewed on a historical basis; and (b) we
did not have a Content segment prior to March 3, 2006. Comparative pro forma results of our Mobile
segment have not been presented.
The reportable segments disclosed in this Form 10-K are based on our management organizational
structure as of December 31, 2006. Future changes to this organizational structure may result in
changes to the reportable segments disclosed.
Segment operating income before depreciation, amortization and other charges, which we refer to
as Segment OCF, is management’s measure of segment profit as permitted under FAS 131, Disclosures
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