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EXHIBIT 12.3
ROGERS CABLE INC.
COMPUTATION OF FINANCIAL RATIOS (1)
As at
As at December 31, September 30,
1999 2000 2001 2002 2003 2004
----------- ---------- ---------- ---------- ---------- -------------
(in thousands of Canadian dollars, except ratio information)
AMOUNTS UNDER CANADIAN GAAP
Operating profit (2) (a) $ 388,049 $ 431,833 $ 488,024 $ 531,735 $ 628,089 $ 488,877
Interest expense (4) (7) (b) $ 292,993 $ 192,025 $ 174,626 $ 213,332 $ 240,670 $ 181,863
Senior debt (3) (7) (c) $1,226,133 $1,560,741 $1,615,415 $2,238,016 $2,326,619 $2,398,993
Total debt (3) (7) (d) $1,956,546 $1,748,266 $2,300,090 $2,622,077 $2,473,533 $2,542,667
Total debt to operating profit (2)
(3) (7) (d) / (a) 5.04 4.05 4.71 4.93 3.94 3.90
Senior debt to operating profit (2)
(3) (7) (c) / (a) 3.16 3.61 3.31 4.21 3.70 3.68
Operating profit to total interest
expense (2) (4) (6) (a) / (b) 1.62 2.25 2.79 2.49 2.61 2.69
Footnote references:
(1) We believe that operating profit as defined below, together with the
related total debt, senior debt and interest expense ratios, are measures
that are commonly reported and widely used by analysts, investors and
other interested parties in the cable industry. Accordingly, this
information has been disclosed herein to permit a more complete
comparative analysis of our operating performance and capitalization
relative to other companies in our industry. These indicators should not
be considered as a substitute or alternative for net income or cash flow
in accordance with Canadian or U.S. GAAP.
(2) We define operating profit as net income before depreciation and
amortization, interest expense, income taxes and non-operating items,
which include dividend income and foreign exchange gains (losses), change
in the fair value of derivative instruments, and other non-operating items
included in other expense (income), which include loss on repayment of
long-term debt, writedown of investments, gains on sales of subsidiaries
and investments, and other income and the 2002 workforce reduction costs
as well as the 2000 and 2001 cable system integration and At Home
Corporation (At Home) termination costs. In the case of operating profit
for each of the cable and video segments, we exclude management fees from
the calculation. Operating profit is a standard measure used in the cable
and communications industry to assist in understanding and comparing
operating results and is often referred to by our competitors as earnings
before interest, taxes, depreciation and amortization (EBITDA) or
operating income before depreciation and amortization (OIBDA). We believe
this is an important measure because it allows us to assess our ongoing
businesses without the impact of depreciation or amortization expenses as
well as non-operating and other factors.
It is intended to indicate our ability to incur or service debt, invest in
property, plant and equipment and allows us to compare our company to our
competitors who have different capital or organizational structures. This
measure is not a defined term under Canadian or U.S. GAAP. For purposes of
calculating these financial ratios as at September 30, 2004, operating
profit and interest expense have been annualized for the nine months ended
September 30, 2004.
(3) Senior debt includes secured long term debt and operating bank loans but
does not include subordinated debt, inter-company subordinated debt or
inter-company deeply subordinated debt. Total debt includes the senior
debt described above together with inter-company subordinated debt and
subordinated debt but does not include inter-company deeply subordinated
debt. Inter-company deeply subordinated debt (all of which was owed to
RCI) has been excluded from total debt because, under the terms of our
various credit facilities, all payments on such debt are restricted
payments treated in the same manner as dividends on our common shares. For
a more complete discussion, see the section entitled "Description of Other
Indebtedness -- Inter-Company Debt".
The following table sets forth, for the periods indicated, a
reconciliation of long-term debt to total and senior debt:
RECONCILIATION OF LONG-TERM DEBT TO TOTAL AND SENIOR DEBT
As at December 31, As at September 30,
---------------------------------------------------------------- -------------------
1999 2000 2001 2002 2003 2004
---------- ----------- ----------- ----------- ---------- -------------------
(in thousands of Canadian dollars)
Long-term debt (7) $1,406,546 $ 1,748,266 $ 1,814,490 $ 2,417,577 $2,473,533 $ 2,542,667
Inter-company subordinated
debt as discussed below 550,000 - 485,600 204,500 - -
---------- ----------- ----------- ----------- ---------- -----------
Total debt (7) 1,956,546 1,748,266 2,300,090 2,622,077 2,473,533 2,542,667
Inter-company subordinated debt (550,000) - (485,600) (204,500) - -
Subordinated debt (180,413) (187,525) (199,075) (179,561) (146,914) (143,674)
---------- ----------- ----------- ----------- ---------- -----------
Senior debt (7) $1,226,133 $ 1,560,741 $ 1,615,415 $ 2,238,016 $2,326,619 $ 2,398,993
========== =========== =========== =========== ========== ===========
In 1999, we issued net $890,358,000 of additional inter-company
subordinated debt to RCI and amended $100,000,000 of inter-company
subordinated debt owing to RCI into $100,000,000 of inter-company deeply
subordinated debt owing to RCI. We then converted $603,358,000 of
outstanding inter-company subordinated debt owing to RCI into Class B
Common Shares which were issued by us to RCI. As a result of all of the
above, a total of $550,000,000 of inter-company subordinated debt owing to
RCI was outstanding at December 31, 1999. During 2000, we issued net
$82,100,000 of additional inter-company subordinated debt owing to RCI and
converted the total outstanding $632,100,000 of inter-company subordinated
debt owing to RCI into Class B Common Shares issued by us to RCI. During
2001, we issued net $485,600,000 of additional inter-company subordinated
debt owing to RCI, all of which was repaid in 2002. We subsequently issued
net $204,500,000 of additional inter-company subordinated debt owing to
RCI in 2002. During the year ended December 31, 2003, we made a net
repayment to RCI of $204,500,000 of inter-company subordinated debt, so
that the ending balance at December 31, 2003 was nil.
For a more complete discussion, see the section entitled "Description of
Other Indebtedness -- Inter-Company Debt" and Note 11 to our audited
consolidated financial statements.
(4) Consolidated interest expense under Canadian GAAP for each of the five
years ended December 31, 2003 and the nine months ended September 30, 2004
is comprised as follows:
Nine Months Ended
Year ended December 31, September 30,
--------------------------------------------------------------- -------------------
1999 2000 2001 2002 2003 2004
--------- ---------- ---------- ---------- --------- -------------------
(in thousands of Canadian dollars)
Interest expense on inter-company
deeply subordinated debt $ 53,558 $ - $ - $ - $ - $ -
Interest expense on inter-company
subordinated debt 55,895 33,901 12,036 4,687 2,867 21
Third party interest expense 183,540 158,124 162,590 208,645 237,803 181,842
--------- ---------- ---------- ---------- --------- ----------
Consolidated interest expense $ 292,993 $ 192,025 $ 174,626 $ 213,332 $ 240,670 $ 181,863
========= ========== ========== ========== ========= ==========
(5) During 1999, we issued an additional $23,558,000 of inter-company deeply
subordinated debt owing to RCI in consideration for the payment of accrued
interest owing on account of inter-company deeply subordinated debt. Also
during 1999, the aggregate outstanding $733,261,000 of inter-company
deeply subordinated debt owing to RCI was converted into Class B Common
Shares that we issued to RCI. For a more complete discussion, see the
section entitled "Description of Other Indebtedness -- Inter-Company
Debt".
(6) For purposes of this ratio, interest expense excludes interest expense on
inter-company deeply subordinated debt.
(7) As a result of our adoption of new Canadian GAAP for hedge accounting,
effective January 1, 2004, we no longer treat the impact of cross-currency
interest rate exchange agreements (swaps) as a component of long-term
debt. For comparison purposes, all prior periods have been reclassified.
Accordingly, our total debt and senior debt at each period end under
Canadian and U.S. GAAP are presented at the balance sheet rate of
exchange, and do not include the effect of our swaps.