COGECO reports Q4 and fiscal 2012 financial results
PRESS RELEAS E
For immediate release
Cogeco Cable reports Q4 and Fiscal 2012 financial results
Achiev es increases of 8% of its revenue and operating income before depreciation and amortization
(1)
for
fiscal 2012;
Declares an increase of its quarterly dividend by 4%
Montréal, November 1, 2012 – Today, Cogeco Ca ble Inc. (TSX: CCA) (“ Cogeco Cable” or the “Corporation”) a nnounced
its financial results for the fourth quarter and fiscal year 2012, ended August 31, 2012, in accordance with International
Financial Reporting Standards (“IFRS”).
For the fourth quar ter and fiscal 2012:
Revenue increased by 6.2% to reach $324.8 mill ion, and by 7.9% to reach $ 1.278 billion;
Operating income before depreciation and amortization increased by 6.1% to $160.8 million compared to the
fourth quarter of fiscal 2011, and by 8% to $589.1 million compared to the prior fiscal year;
Operating margin
(1)
decreased in the quarter to 49.5% from 49.6% and increased in the year to 46.1% from
46% when compare d to the s ame per iods of the prior yea r;
Profit for the period from continuing operations amounted to $45.7 million in the fourth quarter when compared
to $62.7 million for the same period of the previous fiscal year. For fiscal 2012, profit for the year from
continuing operations amounted to $169.5 million when compared to $199.2 million for fiscal 2011. Profit
declined for the fourth quarter and fiscal 2012 and is mostly attributable to the increase in depreciation and
amortization expense due to the reduction of depreciation period for certain property plant and equipment
combined with the increase in income taxes from the change in the corporate income tax rate recently
announced by the Ontario government, partly offset by the increase in operating income before depreciation
and amortization;
Profit for the period amou nted to $45.7 million in the f ourth quarter when compar ed to $69 million for the same
period of the previous fiscal year. The decrease is mostly attributable to an increase in income tax expense
stemming primaril y from the inc reas e in income taxes fro m the ch ange in the c orpora te inc ome tax rate r ecent ly
announced by the Ontario government and the increase of depreciation and amortization expense due to the
reduction of th e depreciation period of certai n propert y, plant and equip ment. For fisca l 2012, profit f or the year
amounted to $225 million when compared to a loss of $45.6 million for the prior year. The increase is mostly
attributable to the write-off of t he Corporati on’s net in vestme nt in the Portuguese subsidiar y recorded through a
non-cash impairment loss in the amount of $225.9 million during the third quarter of fiscal 2011, the
improvement of operating income before depreciation and amortization and the gain on disposal of the
Portuguese subs idiary in fiscal 2012, par tl y offset b y the increas e of depr eciati on and a mor tizat ion ex pense du e
to the reduction of the depre c iat io n peri od of certai n property, plant and equipme n t;
Free ca sh flo w
(1)
reached $2 .6 million for the quarter compared to $24 million in the comp arable quarter of the
prior year. For fiscal 2012, free cash flow amounted to $6 6.3 million, compared to $114. 8 million in fisca l 2011.
Free cash flow decreased in both periods over the prior year due to an increase in acquisitions of property,
plant and equi pment an d in tangi ble and ot her assets co mbine d with the increas e in cu rr ent inc ome t ax e xpens e
stemming pri marily from the fi scal 2011 modifica tions to the corporat e structure, partl y offset by the increa se in
operating income before depreciation and amortization;
Primary service uni ts (“PSU”)
(2)
grew by 6,959 in the quarter and 71,664 in fiscal 2012, for a total of 1 ,969,133
PSU at August 31, 2012;
(1)
The indicated terms do not have standard definitions prescribed by IFRS and therefore, may not be comparable to similar measures
presented by other companies. For more details, please consult the “Non-IFRS financial measures” section of the Results overview.
(2)
R t th f T l i i Hi h S d I t t (“HSI”) d T
lh i t
A quarterly dividend of $0.25 per share was paid to the holders of subordinate and multiple voting shares, an
increase of $0. 05 per shar e, or 25 %, when compar ed to a div idend o f $0.20 per s hare pai d in the fo urth quar ter
of fiscal 2011. Dividend payments totalled $1 per share in fiscal 2012, compared to $0.71 per share in fiscal
2011, an increase of $0.29 per share, or 40.8%;
On November 1, 2012, Cogeco Cable declared an eligible dividend of $0.26 per share, an increase of 4% when
compared to the $0.25 dividend per share paid in the fourth quarter of fiscal 2012;
On July 18, 2012, the Corporation announced an agreement to acquire all of the shares of Atlantic Broadband
("Atlantic") an independe nt cable syste m operator for med in 2003 which, at August 31, 2012, was serving about
251,000 Television service customers providing Analogue and Digital Television, as well as High Speed
Internet (“HSI”) and Te lephon y services . Ranked the 13th-la rgest c able tel evision s ystem opera tor in the Un ited
States, Atlantic operates cable s ystems in Pennsylvania, Fl orida, Maryland, Dela ware and South Carolina.
The
transaction is v alued at US$1.36 billio n and expected to be financed throu gh a combination of cas h on hand, a
draw-down on its existing Term Revolving Facility of approximately US$550 million and US$660 million of
borrowings under a new committed non-recourse debt financing at Atlantic. The transaction is subject to usual
closing conditions, including Hart-Scott-Rodino Antitrust Improvements Act approval, Federal Communications
Commission (“FCC”) approval, state and local regulatory approvals and other customary conditions. The
Corporation expects the transaction to close by the end of calendar 2012; and
On February 29, 2012, the Corporation completed the sale of its Portuguese subsidiary, Cabovisão – Televisão
por Cabo, S.A. (“Cabovisão”) for a cash consideration of €45 million, or approximately $59.3 million. Operating
results from European operations have therefore been classified as discontinued operations.
“Cogeco Cable’s financial results for fiscal 2012 continue to reflect the vitality and growth for which your Corporation is
known. Driven to attain our corporate goals, we are proud of having met the great majority of those we set for ourselves
for this fiscal year 2012 as revised last July. In the residential services area, deployment of the DOCSIS 3.0 technology
continued and 83% of our customers now enjoy very high speed Internet service, among the fastest in the territories we
serve. In the commercial services area, Cogeco Cable continues to see strong growth among small and medium-sized
enterprises.
Cogeco Data Services (“CDS”), our Enterprise services subsidiary, moved ahead successfully in integrating the operations
of Toronto-based Quiettouch Inc. (“QTI”) and Montréal-based MTO Telecom Inc. (“MTO”), both acquired in 2011. Today,
this sector ena bles us to anticipa te highly satisfac tory organic growth of m ore than 10% annuall y over the coming years”,
declare d Louis Audet, President and Chief Ex e cut ive Officer of Cogeco Cable.
Mr.Audet adde d, “Fisc a l 2013 will be a time of North America n ex pansion as Cogeco Ca ble e xtends its operations south of
the border as a res ult of the u pcoming c losin g of t he acqu isition o f Atla ntic, an i ndepend ent c able s ystem op erator ser ving
about 251,000 tel evision servi ce custo mers and fu lly develo ps its grea t pot ential. This acquisi tion offers substan tial gro wth
opportunities for Cogeco Cable, including higher penetration among small and medium-sized enterprises, as well as the
potential to opt imize the packagin g of services in the res idential area. Follo wing this transaction, Cogec o Cable will serve
more than 1.1 million Television service customers in Canada and the United States.”
Fiscal 2013 Financial Guidelines
Cogeco Cable’s maintains its fiscal 2013 fin ancial guidelin es, as issued on July 11, 2012. Fiscal 2013 financ ial guideli nes
will be revised once the recently anno unced acquisition o f Atlantic is concluded . Please consult the “Fisc al 20 13 financial
guidelines” section of the Corporation’s 2012 Annual Report for further details.
FINANCIAL HIGHLIGHTS
Quarters ended August 31, Years ended August 31,
2012 2011 Change 2012 2011 Change
(in thousands of dollars, except percentages, PSU growth
and per share data) $ $ % $ $%
Operations
Revenue 324,768 305,811 6.2 1,277,698 1,184,683 7.9
Operating income before depreciation and amortization
(1)
160,825 151,579 6.1 589,052 545,361 8.0
Operating margin
(1)
49.5% 49.6%
–
46.1% 46.0%
–
Operating income 94,709 97,941 (3.3) 312,180 341,079 (8.5)
Profit for the year from continuing operations 45,705 62,745 (27.2) 169,517 199,165 (14.9)
Profit (loss) for the year from discontinued operations
–
6,219
–
55,446 (244,736)
–
Profit (loss) for the year 45,705 68,964 (33.7) 224,963 (45,571)
–
Cash Flow
Cash flow from operating activities 203,343 211,847 (4.0) 450,386 492,085 (8.5)
Cash flow from operations
(1)
126,946 144,699 (12.3) 441,686 417,367 5.8
A
cquisitions of property, plant and equipment, intangible and
other assets 124,392 120,663 3.1 375,368 302,541 24.1
Free cash flow
(1)
2,554 24,036 (89.4) 66,318 114,826 (42.2)
Financial Condition
Property, plant and equipment
–
–
–
1,322,093 1,254,217 5.4
Total assets
–
–
–
2,908,079 2,712,679 7.2
Indebtedness
(2)
–
–
–
1,069,112 981,214 9.0
Shareholders’ equity
–
–
–
1,188,431 1,033,252 15.0
PSU
(3)
growth 6,959 19,740 (64.7) 71,664 106,310 (32.6)
Per Share Data
(4)
Earnings (loss) per share
From continuing and discontinued operations
Basic 0.94 1.42 (33.8) 4.62 (0.94)
–
Diluted 0.93 1.42 (34.5) 4.60 (0.94)
–
From continuing operations
Basic 0.94 1.29 (27.1) 3.48 4.10 (15.1)
Diluted 0.93 1.29 (27.9) 3.46 4.10 (15.6)
From discontinued operations
Basic
–
0.13
–
1.14 (5.04)
–
Diluted
–
0.13
–
1.13 (5.04)
–
(1) The indicated terms do not have standardized definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by othe
r
companies. For more details, please consult the “Non-IFRS financial m easures” section of the Results overview.
(2) Indebtedness is defined as the total of principal on long-term debt, balance due on a business acquisition and obligations under derivative financial instruments.
(3) Represents the sum of Television, HSI and Telephony service customers.
(4) Per multiple and subordinate voting share.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release may constitute forward-looking information within the meaning of securities laws. Forward-looking
information may relate to Cogeco Cable’s future outlook and anticipated events, business, operations, financial performance, financial
condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate";
"believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee", "ensure" or other similar expressions concerning matters that
are not historical facts. In particular, statements regarding the Corporation’s future operating results and economic performance and its
objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including
expected growth, results of operations, performance and business prospects and opportunities, which Cogeco Cable believes are
reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently
available to the Corporation, they may prove to be incorrect. The Corporation cautions the reader that the economic downturn
experienced over the past few years makes forward-looking information and the underlying assumptions subject to greater uncertainty
and that, consequently, they may not materialize, or the results may significantly differ from the Corporation’s expectations. It is
impossible for Cogeco Cable to predict with certainty the impact that the current economic uncertainties may have on future results.
Forward-looking information is also subject to certain factors, including risks and uncertainties (described in the “Uncertainties and main
risk factors” section of the Corporation’s 2012 annual Management’s Discussion and Analysis (“MD&A”) ) that could cause actual results
to differ materially from what Cogeco Cable currently expects. These factors include technological changes, changes in market and
competition, governmental or regulatory developments, general economic conditions, the development of new products and services, the
enhancement of existing products and services, and the introduction of competing products having technological or other advantages,
many of which are beyond the Corporation’s control. Therefore, future events and results may vary significantly from what management
currently foresee. The reader should not place undue importance on forward-looking information and should not rely upon this information
as of any other date. While management may elect to, the Corporation is under no obligation (and expressly disclaims any such
obligation), and does not undertake to update or alter this information before the next quarter.
As described in note 1 to the consolidated financial statements of the 2012 Annual Report, Canadian Generally Accepted Accounting
Principles (“GAAP”), which were previously used in preparing the consolidated financial statements, were replaced on the adoption of
International Financial Reporting Standards (“IFRS”) on January 1, 2011. The Corporation’s consolidated financial statements for the year
ended August 31, 2012 have therefore been prepared in accordance with IFRS. Comparative figures for 2011 have also been restated.
All amounts are stated in Canadian dollars unless otherwise indicated. This press release should be read in conjunction with the MD&A
included in the Corporation’s 2012 Annual Report, the Corporation’s consolidated financial statements and the notes thereto as well as
the information on the adjustments to the fiscal 2011 financial figures upon adoption of IFRS, explained in Note 26 of the consolidated
financial statements for year ended August 31, 2012.
RESULTS OVERVIEW
This analysis should be read in conjunction with the Corporation’s 2012 Annual Report available on SEDAR at www.sedar.com. Please
refer to the Corporation’s 2012 Annual Report for more details on annual results.
OPERATING RESULTS
QUARTE R ENDED AUGUST 31, 2012
Fiscal 2012 fourth-quarter consolidated revenue improved by $19 million, or 6.2%, to reach $324.8 million, when compared to the prior
year. For the fourth-quarter ended August 31, 2012, consolidated operating expenses increased by $9.7 million, or 6.3%, at
$163.9 million. As a result, consolidated operating income before depreciation and amortization increased by $9.2 million, or 6.1%, to
reach $160.8 million and consolidated operating margin slightly decreased to 49.5% compared to 49.6% in the fourth quarter of fiscal
2011.
CABLE SERVICES
Customer statistics
Net additions (losses)
Quarters ended August 31,
2012 2011
PSU 6,959 19,740
Televisio n service customers
(1)
(5,758) (1,369)
HSI service customers 5,682 7,746
Telephony service customers 7,035 13,363
(1) The net losses of Television service customers includes net additions of 5,918 Digital Television service customers.
Fiscal 2012 fourth-quarter PSU net additions were lower than in the comparable period of the prior year mainly as a result of category
maturity, competitive offers and tightening of our credit controls and processes. Fourth quarter net customer losses for Television service
customers stood at 5,758 when compared to 1,369 for the same period of the prior year due to the end of the school year for college and
university students as well as the intense competition driving the telecommunications industry. Telephony service customers grew by
7,035 compared to 13,363 for the same period last year, and the number of net additions to the HSI service stood at 5,682 compared to
7,746 customers for the sam e period of the prior year. HSI and Telephony net ad ditions continue to stem fr om the enhancement of the
product offering, the impact of the bundled offer (Cogeco Complete Connection) of Television, HSI and Telephony services, and
promotional activities. Additions to the Digital Television service which are included in the Television service customers, stood at 5,918
compared to 29,464 for the comparable period of the prior year. Digital Television service net additions are due to the deployment of
Digital Terminal Adapters technology to migrate customers from analogue to digital services, the targeted marketing initiatives to improve
penetration, the launch of new HD channels and the continuing interest for HD television service.
Operating results
Driven by PSU growth combined with rate increases in June and July 2012, fourth-quarter revenue went up by $15.5 million, or 5.4%, to
reach $302 million.
Fiscal 2012 fourth-quarter operating expenses increased by $8.8 million, or 6.3%, at $148.7 million mainly attributable to the PSU growth,
the launch of new HD channels, additional programming costs and deployment and support costs related to the migration of Television
service customers from analogue to digital.
The operating income before depreciation and amortization increased by $6.8 million, or 4.6%, and the operating margin decreased to
50.8% from 51.1%.
Cable services Enterprise services
Inter-segment
eliminations and
other
(1)
Consolidated
Quarters ended August 31, 2012 2011 Change 2012 2011 Change 2012 2011 2012 2011
Change
(in thousands of dollars, except
percentages) $$% $ $%$ $ $ $
%
Revenue 301,992 286,457 5.4 23,133 19,354 19.5 (357)
–
324,768 305,811
6.2
Operating expenses 148,725 139,948 6.3 11,876 11,509 3.2 3,342 2,775 163,943 154,232
6.3
Operating income before depreciation and
amortization 153,267 146,509 4.6 11,257 7,845 43.5 (3,699) (2,775) 160,825 151,579
6.1
Operating margin 50.8% 51.1% 48.7% 40.5%
–
–
49.5% 49.6%
(1) The inter-segment eliminations and other eliminate any interc ompany transactions included in each segment’s results and include head office activities.
ENTERPRISE SERVIC ES
Operating results
Fiscal 2012 fourth-quarter revenue increased by $3.8 million, or 19.5%, at $23.1 million mainly as a result of the acquisitions of QTI and
MTO during the fourth quarter of fiscal 2011 combined with an increase of 8.8% related to organic growth, partly offset by non-recurring
revenue in fiscal 2011 related to a one-time project development.
Fiscal 2012 fourth-quarter operating expenses increased by $0.4 million, or 3.2%, at $11.9 million mainly attributable to the acquisition of
QTI and MTO and to servicing new customers, partly offset by additional expenses in fiscal 2011 related to a one-time project
development.
The operating income before depreciation and amortization increased by 43.5% of which 27.7% comes from organic growth. The
operating margin increased to 48.7% from 40.5%, mainly attributable to additional expenses in fiscal 2011 related to a one time proj ect
development as well as the acquisitions of QTI and MTO.
CASH FLOW ANALYSIS
Quarters ended August 31, 2012 2011
(in thousands of dollars) $ $
Operating activities
Cash flow from operations 126,946 144,699
Changes in non-cash operating activities 75,065 70,760
A
mortization of deferred transaction costs and discounts on long-term debt (747) (659)
Income taxes paid (15,090) (91)
Current income tax expense (recovery) 15,476 (7,509)
Financial expense paid (14,324) (9,836)
Financial expense 16,017 14,483
203,343 211,847
Investing activities (124,480) (251,695)
Financing activities (12,803) 755
Net change in cash and cash equivalents from continuing operations 66,060 (39,093)
Net change in cash and cash equivalents from discontinued operations
(1)
–
(1,551)
Cash and cash equivalents from continuing and discontinued operations, beginning of period 149,331 96,091
Cash and cash equivalents from continuing and discontinued operations, end of period
215,391 55,447
(1) For further details on t he Corporation’s cash flows attributable to discontinued operat ions, please refer to the “Disposal of subsidiary and discontinued
operations” section.
During the fourth quarter of 2012, cash flow from operations reached $126.9 million, 12.3% lo wer than the comparable period last year,
primarily due to the increase in current income tax expense, partly offset by the increase in operating income before depreciation and
amortization. Changes in non-cash operating items generated cash inflows of $75.1 million compared to $70.8 million for the same period
in fiscal 2011, mainly as a result of a higher increase in trade and other payables, partly offset by a decrease in provision compared to an
increase in prior year and an increase in trade and other receivables compared to a decrease in prior year.
Fiscal 2012 fourth-quarter investing activities amounted to $124.5 million, a decrease of 50.5% when compared to $251.7 million in the
fourth quarter of the prior year. The decrease is primarily due to the acquisitions of QTI and MTO for a total of $131.2 million, included in
fiscal 2011 fourth-quarter. Except for the business combinations, investing activities are mainly composed of acquisitions of property,
plant and equipment, intangible and other assets. Acquisition of intangible and other assets are mainly attributable to reconnect and
additional service activation costs as well as other customer acquisition costs. For fiscal 2012 fourth-quarter, the acquisition of property,
plant and equipment amounted to $119.2 million and acquisitions of intangible and other assets amounted to $5.2 million compared to
$118.3 million and $2.3 million, respectively, for the same period of prior year.
In the fourth quarter of 2012, the Corporation generated free cash flows of $2.6 million compared to $24 million in the prior year. The
decrease in free cash flow over the prior year is due to the difference in the recognition of current income tax expense compared to
income tax recovery in prior year, partly offset by the increase of operating income before depreciation and amortization.
In the fourth quarter of 2012, Indebtedness affecting cash remained essentially the same. In the fourth quarter of 2011, Indebtedness
affecting cash decreased by $10.6 million mainly through net repayments on the Corporation’s Term Revolving Facility of $11.2 million.
During the fourth quarter of fiscal 2012, a dividend of $0.25 per share was paid to the holders of subordinate and multiple voting shares,
totalling $12.2 million, 25% higher than the dividend of $0.20 per share, or $9.7 million the year before.
YEAR ENDED AUGUST 31, 2012
Cable services Enterprise services
Inter-segment
eliminations and
other
(1)
Consolidated
Years ended August 31, 2012 2011
Chang
e 2012 2011 Change 2012 2011 2012 2011
(in thousands of dollars, except
percentages) $ $% $ $%$ $ $ $
Revenue 1,188,717 1,123,652 5.8 89,831 61,031 47.2 (850) 1,277,698 1,184,683
Operating expenses 614,644 581,489 5.7 51,649 35,754 44.5 12,868 12,907 679,161 630,150
Management fees – COGECO Inc.
9,485 9,172 9,485 9,172
Operating income before depreciation and
amortization 574,073 542,163 5.9 38,182 25,277 51.1 (23,203)
(22,07
9) 589,052 545,361
Operating margin 48.3% 48.3% 42.5% 41.4%
46.1% 46.0%
(1) The inter-segment eliminations and other eliminate any intercompany transactions included in each segment’s results and include head office
activities.
CABLE SERVICES
Customer statistics
Net additions (losses) % of penetration
(1)
August 31, Years ended August 31, August 31,
2012 2012 2011 2012 2011
PSU 1,969,133 71,664 106,310
Televisio n service customers
(2)
863,115 (14,870) 3,480 52.4 54.1
HSI service customers 634,534 33,320 42,157 38.5 37.1
Telephony service customers 471,484 53,214 60,673 28.6 25.8
(1) As a percentage of homes passed.
(2) The number of Television service customers includes 771,503 Digital Television service customers.
During fiscal 2012, PSU net additions were lower than in the comparable period of the prior year mainly as a result of category maturity,
competitive offers and tightening of our credit controls and processes. For the year ended August 31, 2012, net customer losses for
Television service customers stood at 14,870 compared to 3,480 net additions for the prior year. Television service customer net losses
are mainly due to the competitive promotional offers for the video service combined with the tightening of our credit controls. For the year
ended August 31, 2012, Telephony service customers grew by 53,214 compared to 60,673 last year, and the number of net additions to
the HSI service stood at 33,320 customers compared to 42,157 customers for the prior year. HSI and Telephony net additions continue to
stem from the enhancement of the product offering, the impact of the bundled offer (Cogeco Complete Connection) of Television, HSI and
Telephony services, and promotional activities. For the year ended August 31, 2012, additions to the Digital Television service which are
included in the Television service customers, stood at 93,177 compared to 118,908 for the comparable period of the prior year. Digital
Television service net additions are due to the deployment of Digital Terminal Adapters technology to migrate customers from analogue to
digital services, the targeted marketing initiatives to improve penetration, the launch of new HD channels and the continuing interest for
HD television service.
Operating results
Revenue
For the 2012 fiscal year, revenue increased by $65.1 million, or 5.8%, to reach $1.189 billion, when compared to the same period last
year, primarily due to the PSU growth and rate increases implemented in April and October 2011 and in June and July 2012.
Operating expenses
For the year ended August 31, 20 12, operating expenses increased by $33.2 million, or 5.7%, at $614.6 million The increase in operating
expenses is mainly attributable to servicing additional PSU, the launch of new HD channels, additional programming costs and the
deployment and support costs r elated to the migration of Television service customers from analogue to digital.
Operating income before depreciation and amortization a nd operating margi n
As a result of revenue growth slightly exceeding the increase in operating expenses, fiscal 2012 operating income before depreciation
and amortization amounted to $574.1 million, or 5.9%, higher than in the prior year, and operating margin was the same at 48.3%.
ENTERPRISE SERVIC ES
Operating results
Revenue
For the 2012 fiscal year, revenue increased by $28.8 million, or 47.2%, to reach $89.8 million, when compared to the same period last
year, primarily due to the acquisitions of QTI and MTO during the fourth quarter fiscal 2011 combined with an increase of 7.9% related to
organic growth.
Operating expenses
For the year ended August 31, 2012, operating expenses increased by $15.9 million, or 44.5%, to $51.6 million. The increase in operating
expenses is mainly attributable to the acquisitions of QTI and MTO and to servicing new customers .
Operating income before depreciation and amortization a nd operat ing margin
As a result of revenue growth exceeding the increase in operating expenses, fiscal 2012 operating income before depreciation and
amortization amounted to $38.2 million, or 51.1%, higher than in the prior year of which 12.6% comes from organic growth. Operating
margin increased to 42.5% from 41.4% when compared to fiscal 2011.
D
ISPOSAL OF SUBSIDIARY AND DISCONTINUED OPER ATIONS
On February 29, 2012, the Corporation completed the sale of its Portuguese subsidiary, Cabovisão for a cash consideration of €45 million
($59.3 million). The selling price has been reduced by selling fees of approximately €8.5 million ($11.2 million) and contingent claims
assumed up to a maximum amount of €5 million ($6.6 million). The carrying value of the net liabilities disposed of on February 29, 2012
was $6.7 million resulting in a gain of $48.2 million recorded in the consolidated statements of profit or loss.
The carrying value of assets and liabilities disposed were as follows:
(In thousands of dollars) $
Cash and cash equivalents 13,041
Trade and other receivables 7,693
Income taxes receivable 277
Prepaid expenses and other 2,777
Property, plant and equipment 38,931
Trade and other payables (42,514)
Provisions (6,665)
Deferred and prepaid revenue (411)
Foreign currency translation adjustment (19,817)
(6,688)
As a result of the sale and in accordance with IFRS 5 – No n-Current Assets Hel d for Sale and Discont inued Oper ations , the Corporation
reclassified the current and prior year results and cash flows of the European operations, up to the date of disposal, as discontinued
operations. The assets and liabilities of the discontinued operations have not been reclassified in the statements of financial position at
August 31, 2011 and September 1, 2010.
The profit or loss of the discontinued operations were as follows:
Quarters ended August 31, Years ended August, 31
2012 2011 2012 2011
(In thousands of dollars) $ $ $ $
Revenue
43,306 80,546 172,277
Operating expenses
36,718 70,247 151,262
Depreciation and amortization
347 2,814 40,415
Operating income (loss)
6,241 7,485 (19,400)
Financial expense (income)
11 (155 ) (74)
Impairment of goodwill
29,344
Impairment of property, plant and equipment
196,529
Gain on disposal
48,215
Profit (loss) before income taxes
6,230 55,855 (245,199)
Income taxes
11 409 (463)
Profit (loss) for the period
6,219 55,446 (244,736)
The cash flows of the discontinued operations were as follows:
Quarters ended August 31, Years ended August, 31
2012 2011 2012 2011
(In thousands of dollars) $ $ $ $
Net cash flows from operating activities
6,818
13,637 22,667
Net cash flows from investing activities
(8,519) 36,826 (34,592)
Effect of exchange rate changes on cash and cash equivalents denominated in
a foreign currency
150 (866 ) 588
Net increase (decrease) in cash and cash equivalents
(1,551) 49,597 (11,337)
NON-IFRS FINANCIAL MEASURES
This section describes non-IFRS financial measures used by Cogeco Cable throughout this press release. It also provides reconciliations
between these non-IFRS measures and the most comparable IFRS financial measures. These financial measures do not have standard
definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. These
measures include “cash flow from operations”, “free cash flow”, “operating income before depreciation and amortiz ation” and “operating
margin”.
Cash flow from operations and free cash flow
Cash flow from operations is used by Cogeco Cable’s management and investors to evaluate cash flows generated by operating
activities, excluding the impact of changes in non-cash operating activities, amortization of deferred transaction costs and discounts on
long-term debt, income taxes paid or received, current income tax expense or recovery, financial expense paid and financial expense.
This allows the Corporation to isolate the cash flows from operating activities from the impact of cash management decisions. Cash flow
from operations is subsequently used in calculating the non-IFRS measure, “free cash flow”. Free cash flow is used, by Cogeco Cable’s
management and investors, to measure its ability to repay debt, distribute capital to its shareholders and finance its growth.
The most comparable IFRS measure is cash flow from operating activities. Cash flow from operations is calculated as follows:
Free cash flow is calculated as follows:
Quarters ended August 31, Years ended August 31,
2012 2011 2012 2011
(in thousands of dollars) $ $ $ $
Cash flow from operations 126,946 144,699 441,686 417,367
A
cquisition of property, plant and equipment (119,175) (118,326) (359,581) (291,669)
A
cquisition of intangible and other assets (5,217) (2,337) (15,787) (10,872)
Free cash flow 2,554 24,036 66,318 114,826
Operating income before depreciation and am ortization and operating margin
Operating income before depreciation and amortization is used by Cogeco Cable’s management and investors to assess the
Corporation’s ability to seize growth opportunities in a cost effective manner, to finance its ongoing operations and to service its debt.
Operating income before depreciation and amortization is a proxy for cash flows from operations excluding the impact of the capital
structure chosen, and is one of the key metrics used by the financial community to value the business and its financial strength. Operating
margin is a measure of the proportion of the Corporation's revenue which is available, before income taxes, to pay for its fixed costs, such
as interest on Indebtedness. Operating margin is calculated by dividing operating income before depreciation and amortization by
revenue.
Quarters ended August 31, Years ende d August 31,
2012 2011 2012 2011
(in thousands of dollars) $ $ $ $
Cash flow from operating activities 203,343 211,847 450,386 492,085
Changes in non-cash operating activities (75,065) (70,760) (3,493) (10,409)
A
mortization of deferred transaction costs and discounts on long-term debt 747 659 2,817 2,913
Income taxes paid (received) 15,090 91 79,728 (3,067)
Current income tax recovery (expense) (15,476) 7,509 (85,216) (62,495)
Financial expense paid 14,324 9,836 61,471 69,502
Financial expense (16,017) (14,483) (64,007) (71,162)
Cash flow from operations 126,946 144,699 441,686 417,367
The most comparable IFRS financial measure is operating income. Operating income before depreciation and amortization and operating
margin are calculated as follows:
Quarters ended August 31, Years ended August 31,
2012 2011 2012 2011
(in thousands of dollars, except percentages) $ $ $ $
Operating income 94,709 97,941 312,180 341,079
Depreciation and amortization 64,247 51,314 275,003 201,958
Integration, restructuring and acquisitions costs 1,869 2,324 1,869 2,324
Operating income before depreciation and amortization 160,825 151,579 589,052 545,361
Revenue 324,768 305,811 1,277,698 1,184,683
Operating margin 49.5% 49.6% 46.1% 46.0%
SUPPLEMENTARY QUARTELY FINANCIAL INFORMATION
Fiscal 2012 Fiscal 2011
Quarters ended
(1)
Nov. 30 Feb. 29 May 31
A
ug. 31 Nov. 30 Feb. 28 May 31 Aug. 31
(in thousands of dollars, except percentages and per
share data) $ $ $ $ $ $ $ $
Revenue 315,424 317,735 319,771 324,768 287,204 293,457 298,211 305,811
Operating income before depreciation and amortization 131,823 143,743 152,661 160,825 125,236 130,399 138,147 151,579
Operating margin 41.8% 45.2% 47.7% 49.5% 43.6% 44.4% 46.3% 49.6%
Operating income 66,999 59,491 90,981 94,709 75,717 80,426 86,995 97,941
Income tax e s 10,603 13,617 21,449 32,987 16,285 15,007 18,747 20,713
Profit for the period from continuing opera tions 39,567 31,086 53,159 45,705 42,749 41,319 52,352 62,745
Profit (loss) for the period from discontinued operations 3,399 52,047
–
–
(8,159) (9,223) (233,573) 6,219
Profit (loss) for the period 42,966 83,133 53,159 45,705 34,590 32,096 (181,221) 68,964
Cash flow from operating activities 13,807 120,961 112,275 203,343 49,809 88,420 142,009 211,847
Cash flow from operations 97,043 104,622 113,075 126,946 32,063 114,682 125,923 144,699
A
cquisitions of property, plant and equipment, intangible
and other assets 77,283 86,234 87,459 124,392 58,017 61,079 62,782 120,663
Free cash flow 19,760 18,388 25,616 2,554 (25,954) 53,603 63,141 24,036
Earnings (loss) per share
(2)
From continuing and discontinued operations
Basic 0.88 1.71 1.09 0.94 0.71 0.66 (3.73) 1.42
Diluted 0.88 1.70 1.09 0.93 0.71 0.66 (3.73) 1.42
From continuing operations
Basic 0.81 0.64 1.09 0.94 0.88 0.85 1.08 1.29
Diluted 0.81 0.63 1.09 0.93 0.88 0.85 1.08 1.29
From discontinued operations
Basic 0.07 1.07
–
–
(0.17) (0.19) (4.80) 0.13
Diluted 0.07 1.06
–
–
(0.17) (0.19) (4.80) 0.13
(1) The addition of quarterly information may not correspond to the annual total due to rounding.
(2) Per multiple and subordinate voting share.
SEASONAL VARIATIONS
Cogeco Cable’s operating results are not generally subject to material seasonal fluctuations except as follows. The customer growth in
the Television service customers and HSI service are generally lower in the second half of the fiscal year as a result of a decrease in
economic activity due to the beginning of the vacation period, the end of the television seasons, and students leaving their campus es at
the end of the school year. Cogeco Cable offers its services in several university and college towns such as Kingston, Windsor,
St.Catharines, Hamilton, Peterborough, Trois-Rivières and Rimouski in Canada. Furthermore, the third and fourth quarter’s operating
margin is usually higher as no management fees are paid to COGECO Inc. Under the Management Agreement, Cogeco Cable pays a fee
equal to 2% of its total revenue subject to a maximum amount. As the maximum amount has been reached in the second quarters of
fiscal 2012 and fiscal 2011, Cogeco Cable did not pay management fees in the second halves of either year.
ADDITIONAL INFORMATION
Additional information relating to the Corporation, including its 2012 Annual Report and Annual Information Form, is available on SEDAR
at www.sedar.com.
ABOUT COGECO CABLE
Cogeco Cable (www.cogeco.ca) is a telecommunications corporation and is the second largest hybrid fibre coaxial cable operator in
Ontario, and Québec. Through its two-way broadband cable networks, Cogeco Cable provides its residential customers with Analogue
and Digital Television, HSI and Telephony services. Cogeco Cable also provides to its commercial customers, through its subsidiary
Cogeco Data Services, data networking, e-business applications, video conferencing, hosting services, Ethernet, private line, VoIP, HSI
access, data storage, data security, co-location services, managed IT services, cloud services and other advanced communication
solutions. Cogeco Cable’s subordinate voting shares are listed on the Toronto Stock Exchange (TSX: CCA).
– 30 –
Source: Cogeco Cable Inc.
Pierre Gagné
Senior Vice President and Chief Financial Officer
Tel.: 514-764-4700
Information: Media
René Guimond
Vice-President, Public Affairs and Communications
Tel.: 514-764-4700
Analyst Conference Call: Friday, November 2, 2012 at 11:00 a.m. (Eastern Daylight Time)
Media representatives may attend as listeners only.
Please use the following dial-in number to have access to the conference call by dialling five
minutes before the start of the conference:
Canada/USA Ac cess Number: 1-800-820-0231
International Access Number: 1-416-640-5926
Confirmation Code: 7187134
By Internet at www.cogeco.ca/investors
A rebroadcast of the conference call will be available until November 10, by dialling:
Canada and US access number: 1 888-203-1112
International access number: + 1 647-436-0148
Confirmation code: 7187134
CUSTOMER S TATISTICS
2012 2011 2010
Primary service units
(1)
1,969,133 1,897,469 1,791,159
Television service customers 863,115 877,985 874,505
Penetration as a percentage of homes passed 52.4% 54.1% 54.9%
Digital Television service customers 771,503 678,326 559,418
Penetration as a percentage of homes passed 46.8% 41.8% 35.1%
Analogue Television service customers 91,612 199,659 315,087
Penetration as a percentage of homes passed 5.6% 12.3% 19.8%
High Speed Internet service customers 634,534 601,214 559,057
Penetration as a percentage of homes passed 38.5% 37.1% 35.1%
Telephony service customers 471,484 418,270 357,597
Penetration as a percentage of homes passed 28.6% 25.8% 22.4%
(1) Represents the sum of Television, High Speed Internet (“HSI”) and Telephony service customers.