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ROGERS WIRELESS INC. Exhibit 12.3
COMPUTATION OF FINANCIAL RATIOS (UNDER CANADIAN GAAP) (1)
(in thousands of Canadian dollars)
Pro Forma Nine
Year Ended December 31, Months Ended
2001 2002 2003 September 30, 2004
--------- ---------- --------- ------------------
Operating profit (2) A 401,261 516,681 716,289 794,343
Interest expense B 184,330 195,150 193,607 321,278
Senior debt (3) C 2,134,040 2,194,908 1,841,696 4,689,802
Total debt (3) D 2,526,449 2,527,783 2,073,139 5,195,362
Total debt to operating profit D/A 6.30 4.89 2.89 (4) 5.45
Senior debt to operating profit C/A 5.32 4.25 2.57 (4) 4.92
Operating profit to total interest expense A/B 2.18 2.65 3.70 2.47
(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 wireless communications industry.
Accordingly, this information has been disclosed herein to permit a more
complete comparative 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 GAAP 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 foreign exchange gains (losses), loss on repayment of
long-term debt, change in fair value of derivative instruments and
investment and other income (expense) and the 2002 net recovery related to
the change in estimates of sales tax and Canadian Radio-television and
Telecommunications Commission contribution liabilities. Operating profit
is a standard measure used in the communications industry to assist in
understanding and comparing operating results and is often referred to by
our competitors as EBITDA (earnings before interest, taxes, depreciation
and amortization) or OIBDA (operating income before depreciation and
amortization). We believe this is an important measure as it allows us to
assess our ongoing businesses without the impact of depreciation and
amortization expenses as well as non-operating 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 organization structures. This measure is not a
defined term under Canadian GAAP or U.S. GAAP.
(3) Total debt includes long-term debt and all inter-company subordinated debt
but does not include inter-company deeply subordinated debt. The following
table sets forth, for the periods indicated, our outstanding inter-company
subordinated debt owing to RCI and RWCI:
Pro Forma
Year Ended December 31, Nine Months Ended
2001 2002 2003 September 30, 2004
------ ------ ---- ------------------
Inter-company subordinated debt owing to RCI - - - -
Inter-company subordinated debt owing to RWCI 50,000 50,000 - -
------ ------ ---- ------------------
Total inter-company debt 50,000 50,000 - -
====== ====== ==== ==================
In July 2003, we issued 10 Class A Common shares to RWCI for consideration
of $91.2 million, comprised of the set-off of the $50.0 million
inter-company subordinated debt owing to RWCI, the set-off of an aggregate
$32.9 million on inter-company amounts payable to RWCI and $8.3 million
paid in cash. Our inter-company deeply subordinated debt, all of which was
owed to RWCI, is excluded from total debt because under the terms of our
outstanding indebtedness all payments on inter-company deeply
sub-ordinated debt are restricted payments, treated in the same manner as
dividends on our common shares.
Pro Forma Nine
Year Ended December 31, Months Ended
2001 2002 2003 September 30, 2004
--------- --------- --------- ------------------
Long-term debt 2,476,449 2,477,783 2,073,139 5,195,362
Inter-company subordinated debt 50,000 50,000 - -
--------- --------- --------- ------------------
Total debt 2,526,449 2,527,783 2,073,139 5,195,362
Inter-company subordinated debt (50,000) (50,000) - -
Senior subordinated notes (342,409) (282,875) (231,443) (505,560)
--------- --------- --------- ------------------
Senior debt 2,134,040 2,194,908 1,841,696 4,689,802
========= ========= ========= ==================
Effective January 1, 2004, total debt excludes the effect of our
cross-currency interest rate exchange agreements. For comparison purposes,
all prior periods have been reclassified.
(4) For purposes of calculating these ratios on a pro forma basis at September
30, 2004, operating profit of $954.0 million is based on the twelve months
ended September 30, 2004.