COGECO CÂBLE DÉPASSE LA PLUPART DE SES PROJECTIONS FINANCIÈRES POUR L’EXERCICE 2010
PRESS RELEASE
For immediate release
Cogeco Cable surpasses most performance guidelines for fiscal 2010
Montréal, October 28, 2010 – Today, C ogeco Cable Inc. (TSX: CCA) (“Cogeco Cable” or the “Corporation”) announced
its financial results for the fourth quarter and fis c al year ended August 31, 2010.
For the fourth quarter and fiscal 2010:
• Fiscal 2010 fourth-quarter consolidated revenue improved by $16.5 million, or 5.4% to reach $324.3 million,
when com pared to the prior year. For the 2010 f iscal year, cons olidated re venue gre w by $63.5 m illion , or 5.2%
to reach $1,281.4 million;
• Fiscal 2010 fourth-quarter operating income before amortization
(1
)
decreased by $5.7 million, or 4%, to reach
$138.2 million, as a result of the favourable impact on operating costs, in fiscal 2009, of $19.8 million from the
settlement of the Part II licence fees payable to the Canadian Radio-television and Telecommunications
Commission (“CRTC”) for the 2007 to 2009 fiscal years (the “Part II licence fee favourable settlement
agreement”). For fiscal 2010, consolidated operating income before amortization grew by $2.2 million, or 0.4% to
reach $510.1 million;
• Consolid ated operating margin
(1)
decrease d to 42.6% f or the quar t er compar ed to 46.7%
(2
)
for the corresponding
period of the prior year, and decreased to 39.8% during fiscal 2010 compared to 41.7%
(2)
the year before;
• Fourth-quarter 2010 consolidated net income amounted to $39.7 million compared to $44.7 million for the
corresponding period of the prior year. Excluding the favourable impacts from the reduction of withholding and
stamp tax contingent liabilit ies in the amount of $5.2 m illion in Europe and from the $13.4 million, net of related
income taxes, with respect to the Part II licence fee favourable settlement agreement in Canada, fiscal 2009
fourth-quarter adjusted net incom e
(1)
would have amounted to $26.1 million. Net incom e in the fourth quarter of
fiscal 2010 represents an increase of $13.5 million, or 51.8% when compared to adjusted net income for the
prior year;
• Consolidated net income am ounted to $157.3 m illion for fiscal 2010 compared to a net loss of $258.2 million in
the prior year. Fiscal 2010 net income includes a favourable income tax adjustment of $29.8 million related to
the reduct ion of Ontario provinc ial corporate incom e tax rates f or the Canadian operati ons. Fiscal 2 009 net loss
included an impairment loss of $383.6 million related to Cabovisão – Televisão por Cabo, S.A. (“Cabovisão”),
net of related income taxes, and the favourable impacts from the reduction of withholding and stamp tax
contingent liabilities in the amount of $16.1 million in Europe and of $13.4 million, net of related income taxes,
from the Part II licence fee favourable settlement agreement in Canada, as well as an unfavourable impact of
$6.1 million from the utilization of Cabovisão’s pre-acquisition tax losses. Excluding the above adjustments for
both fiscal years, fiscal 2010 adjusted net income
would have amounted to $127.5 million compared to $102
million, representing an increase of $25.5 million, or 25%;
• Free cash flow
(1)
reached $19.2 million for the quarter, representing an increase of 30.3% over the prior year.
The incr ease in fr ee cash flo w is the result of an inc rease in cash f low fr om operations
(1)
outpac ing the increase
in capital expenditures. Free cash flow stands at $175.1 million for fiscal 2010, a significant increase of
$79.7 million, or 83.6% over fiscal 2009;
• Revenue-Generating Units (“RGU”)
(1
(1)
The indicated terms do not have standard definitions prescribed by Canadian Generally Accepted Accounting Principles (“GAAP”) and therefore, may not be
comparable to similar measures presented by other companies. For more details, please consult the “Non-GAAP financial measures” section of the Results
overview.
)
grew by 64,303 net additions in the quarter and 287,111 net additions in
the fiscal year, for a total of 3,179,349 RGU at August 31, 2010.
(2)
Includes the favourable impact from the Part II licence fee settlement agreement of $19.8 million.
- 2 -
“Despite the slow stabilization of the global economic environment in fiscal 2010, Cogeco Cable managed to achieve
strong results, surpassing nearly all of our key performance indicators, notably RGU growth, with more than 287,000
additions in Canada and Portugal. In Canada, we focused on improving our service offering with new packages, faster
speeds, expanded TV offering and technological deployments such as DOCSIS 3.0. In our European operations,
Cabovisão has managed to add 96,000 RGU, thanks to the acquisition and retention strategies implemented in the
second half of fiscal 2009. Cogeco Data Services Inc., our subsidiary serving large businesses, continues to gather
strength and contribute positively to our Corporation’s results. For fiscal 2011, we anticipate continued growth in most of
our performance indicators, including improved financial results at Cabovisão, mainly due to effective marketing
strategies, outstanding customer service and continued improvement of our product offering”, declared Louis Audet,
President and CEO of Cogec o Cable.
Fiscal 2011 Financial Guidelines
For fiscal 2011, Cogeco Cable maintains its preliminary projections issued on July 7, 2010. The Corporation expects to
achieve revenue of $1,340 million, representing growth of $59 million, or 4.6% when compared to fiscal 2010 results.
Operating i nc ome bef ore amor tization s hou ld amount to $530 million, a n inc re as e of $20 million, or 3.9%, wh en compar ed
to 2010 actuals. Capital expenditures and the increase in deferred charges should increase by $20 million, reaching
$340 million for the 2011 fiscal year. Fiscal 2011 free cash flow is expected to decline to $55 million. The decrease of
approxim ately $120 million, when com pared to the results for the 2010 fiscal year, is prim arily due to the projected fiscal
2011 inc ome tax payments of approx imately $65 m illion com pared to the fisc al 2010 income tax recoveries of $41 million
as a result of modifications to the corporate structure and to the increase of approximately $20 million in capital
expenditures. The $106 million variation in cash income taxes year over year combined with the increase in capital
expenditures will be partly offset by the growth in operating income before amortization. Please consult the “Fiscal 2011
financial guidelines” section of the Corporation’s 2010 Annual Report for further details.
(1)
Represents the sum of Basic Cable, High Speed Internet (“HSI”), Digital Television and Telephony service customers.
- 3 -
FINANCIAL HIGHLIGHTS
Quarters ended August 31, Years ended August 31,
($000, except percentages, RGU growth and per share
data)
2010 2009
(1)
Change 2010 2009
(1)
Change
$
$
%
$
$
%
(unaudited)
(unaudited)
(audited)
(audited)
Operations
Revenue 324,323 307,807 5.4 1,281,376 1,217,837 5.2
Operating income before amortization
(2)
138,177
143,892
(4.0)
510,096
507,876
0.4
Operating margin
(2)
42.6%
46.7%
–
39.8%
41.7%
–
Operating income
74,481
75,624
(1.5)
251,225
251,799
(0.2)
Impairment of goodwill and intangible assets
–
–
–
–
399,648
–
Net income (loss)
39,663
44,698
(11.3)
157,303
(258,228)
–
Adjusted net income
(2)
39,663
26,123
51.8
127,521
102,039
25.0
Cash Flow
Cash flow from operating activities
194,414
175,450
10.8
417,284
415,169
0.5
Cash flow from operations
(2)
127,024
108,631
16.9
494,814
384,206
28.8
Capital expenditures and increase in deferred charges
107,799
93,872
14.8
319,682
288,794
10.7
Free cash flow
(2)
19,225
14,759
30.3
175,132
95,412
83.6
Financial Condition
Total assets
–
–
–
2,702,819
2,630,912
2.7
Indebtedness
(3)
–
–
–
958,939
1,054,506
(9.1)
Shareholders’ equity
–
–
–
1,136,301
1,007,384
12.8
RGU growth
64,303
48,170
33.5
287,111
175,364
63.7
Per Share Data
(4)
Earnings (loss) per share
Basic 0.82 0.92 (10.9) 3.24 (5.32) –
Diluted
0.81
0.92
(12.0)
3.23
(5.32)
–
Adjusted earnings per share
(2)
Basic
0.82
0.54
51.9
2.63
2.10
25.2
Diluted
0.81
0.54
50.0
2.62
2.10
24.8
(1)
Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
applicati on of the Canadian Insti tute of Chartered Account ants (“CICA ”) Handbook Section 3064. Pl ease refer to t he “Critical accounti ng policies and estimates”
section of the Corporation’s 2010 Annual report for more details.
(2)
The indicated terms do not have standardized definitions prescribed by Canadian GAAP and therefore, may not be comparable to similar measures presented by
other companies. For more details, please consult the “Non-GAAP financial measures” section of the Results overview.
(3)
Indebtedness is defined as the total of bank indebtedness, principal on long-term debt and obligations under derivative financial instruments.
(4)
Per multiple and subordinate voting shares.
- 4 -
FORWARD-LOO KI NG ST AT EMENTS
Certain s tatements in th is press release may constit ute forw ard-look ing infor mation w ithin th e meanin g of s ecurities l aws.
Forward-looking information may relate to Cogeco Cable’s future outlook and anticipated events, business, operations,
financ ial performance, f inancial co ndition or r esults a nd, in some cas es, ca n be identifie d by termino logy suc h 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 Corpor at ion’s futur e op eratin g r esul ts and ec on om ic per for m ance and its ob je ctiv es and str at egi es are fo r war d-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 ex perienced over the past two year s m ake forward-lo oking informa tion and the u nderlying ass umptions 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 this current
economic environment m ay have on future res ul ts . Forward-lo oking i nfor m ati on is als o s u bject to c er t ain fact o rs , inclu din g
risks and uncertainties (described in the “Uncertainties and main risk factors” section of the Corporation’s 2010 annual
Management’s Discussion and Analysis (MD&A)) that could cause actual results to differ materially from what Cogeco
Cable curr ently expec ts. These f actors includ e technologica l changes, ch anges in mar ket and comp etition, gover nmental
or regulatory developments, general economic conditions, the development of new products and services, the
enhancem ent of existing produc ts and services , and the introduct ion of competin g products having tec hnological or ot her
advantages, many of which are beyond the Corporation’s control. Therefore, future events and results may vary
significan tly from w hat ma nagement current ly foresee. The reader shou ld not p lace undue importa nce on fo rward-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, except as required by Law.
This press release should be read in conjunction with the Corporation’s consolidated financial state ments, and the notes
thereto, prepared in accordance w ith Canadian GAAP and the MD&A included in the Corporation’s 2010 Annual Report.
Throughout this discussion, all amounts are in Canadian dollars unless otherwise indicated.
- 5 -
RESULTS OVERVIEW
This analysis should be read in conjunction with the Corporation’s 2010 Annual Report available on SEDAR at
www.sedar.com. Please refer to the Corporation’s 2010 Annual Report for more details on annual results.
CANADIAN OPERATIONS
CUSTOMER STATISTICS
Net additions (losses) % of Penetration
(1)
Quarters ended August 31, Years ended August 31, August 31,
August 31, 2010
2010
2009
2010
2009
2010
2009
RGU
2,350,577
43,707
27,740
190,714
167,955
Basic Cable service customers
874,505
433
(924)
9,700
7,711
HSI service customers
(2)
559,057
8,904
5,619
44,005
41,585
66.2
62.0
Digital Television service customers
559,418
17,472
9,674
61,020
56,652
64.8
58.5
Telephony service customers
(3)
357,597
16,898
13,371
75,989
62,007
44.4
36.1
(1)
As a percentage of Basic Cable service customers in areas served.
(2)
Customers s ubsc ribi ng to the High S peed Inte rnet ( “HSI”) service without the Bas ic Cable s ervi ce totalled 101,762 as at August 31, 2010 compar ed to 78,056 as
at August 31, 2009.
(3)
Customers subscribing to the Telephony service without the Basic Cable service totalled 39,804 as at August 31, 2010 compared to 24,698 as at
August 31, 2009.
In Canada, fiscal 2010 fourth-quarter RGU net additions was higher than in the comparable period of the prior year, and
the Canad ian operations c ontinue to generat e RGU growth des pite earl y signs of matur ation of some of its services. T he
net customer additions for Basic Cable service customers stood at 433 for the quarter, compared to a net customer loss of
924 in the fourth quarter of the prior year. In the quarter, Telephony service customers grew by 16,898 compared to
13,371 f or the s am e period last year, a nd the n um ber of net a dditi ons t o the H SI ser vice stood at 8,904 cus tom er s for the
quarter, compared to 5,619 customers for the same period last 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. The Digital Television service net additions stood at
17,472 cus tomers c om pared to 9, 6 74 c us tomer s f or the three m onth period of the pr ior year. Digita l T ele vis io n s erv ice net
additions are due t o target ed mark eting initi atives to im prove penetrat ion and to the conti nuing int erest for High Def inition
(“HD”) television service.
OPERATING RESULTS
Quarters ended August 31, Years ended August 31,
2010
2009
(1)
Change
2010
2009
(1)
Change
($000, except percentages)
$
$
%
$
$
%
(unaudited)
(unaudited)
(audited)
(audited)
Revenue
282,155
255,590
10.4
1,093,620
984,745
11.1
Operating costs
152,034
122,206
24.4
607,072 531,920 14.1
Management fees – COGECO Inc.
–
–
–
9,019
9,019
–
Operating income before amortization
(2)
130,121
133,384
(2.4)
477,529 443,806 7.6
Operating margin
(2)
46.1%
52.2%
43.7%
45.1%
(1)
Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
applicati on of the CICA Handbook Section 3064. Pl ease refer to the “Criti cal accounti ng policies and esti mates” section of the Corporatio n’s 2010 Annual report
for more details.
(2)
The indicated terms do not have standardized definitions prescribed by Canadian GAAP and therefore, may not be comparable to similar measures presented by
other companies. For more details, please consult the “Non-GAAP financial measures” section.
Driven by increased RGU, the introduction of HSI usage billing, various rate increases implemented at the end of fiscal
2009 and in fiscal 2010, and the revenue related to the new levy amounting to 1.5% of gross Cable Television service
revenue im posed b y the CRTC in order t o finance the new Local Pro gram m ing Im provement F und (“LPIF” ), f ourth-quarter
Canadian operations revenue went up by $26.6 million, or 10.4% to reach $282.2 million. For the fourth quarter of fiscal
2010, operating costs increased by $29.8 million at $152 million, an increase of 24.4% compared to the prior year.
Operating c os ts have incr eas ed mainly as a r esult of servici ng ad dit ion al RG U, th e l aunc h of ne w HD c h an n els , a dd itional
- 6 -
marketing initiatives and the new levy amounting to 1.5% of gross Cable Television service revenue imposed by the
CRTC in order to finance the LPIF. Fiscal 2009 also included the impact of $19.8 million from the Part II licence fee
favourable settlement agreement. Fiscal 2010 fourth-quarter operating income before amortization decreased by
$3.3 million, or 2.4%, to reach $130.1 million, as a result of the increase in operating costs exceeding the growth in
revenue. Fiscal 2009 operating income before amortization included the $19.8 million favourable impact from the 2009
Part II licence fee favourable settlement agreement. The operating margin in Canada decreased to 46.1% from 52.2%.
Notwithstanding the Part II licence fee favourable settlement agreement, the operating margin increased year over year
as a result of the introducti on of H SI usage billing a nd vario us rat e increases im plem ented at the end of f iscal 2009 and in
fiscal 2010, partly offset by the launch of new services which generate lower margins, the migration of customers from
Analogue to Digital Television services and the revenue from the new LPIF which does not generate operating income
before amortization.
EUROPEAN OPERATIONS
CUSTOMER STATISTICS
Net additions (losses)
% of Penetration
(1)
Quarters ended August 31,
Years ended August 31,
August 31,
August 31, 2010
2010
2009
2010
2009
2010
2009
RGU
828,772
20,596
20,430
96,397
7,409
Basic Cable service customers
260,267
1,591
(5,318)
787
(36,655)
HSI service customers
(2)
163,187
2,778
1,430
19,573
(15,687)
62.7
55.3
Digital Television service customers
159,852
12,017
23,456
57,099
78,301
61.4
39.6
Telephony service customers
(3)
245,466
4,210
862
18,938
(18,550)
94.3
87.3
(1)
As a percentage of Basic Cable service customers in areas served.
(2)
Customers subscribing to the HSI service without the Basic Cable service totalled 6,921 as at August 31, 2010 compared to 7,554 as at August 31, 2009.
(3)
Customers subscribing to the Telephony service without the Basic Cable service totalled 8,006 as at August 31, 2010 compared to 8,160 as at August 31, 2009.
In Europe, fourth-quarter fiscal 2010 net additions show a return to customer growth for the Corporation’s European
operations, and the Basic Cable service customer base has begun to stabilize and reflect the benefits of Cabovisão’s
custom er retention and acq uisition strateg ies launched at the end of the 20 09 fiscal year i n order to reduc e the cus tomer
attrition bro ught on b y t he diff icult competit ive landsc ape in Portugal a nd the econom ic environm ent in Europe thr oughout
the prev ious fiscal year. In the f ourth quarter of fisc al 2010, the num ber of Bas ic Cable ser vice custom ers gre w b y 1,591
customers compared to a loss of 5,318 customers in the comparable period of the prior year. HSI service customers
increased by 2,778 customers for the quarter, compared to 1,430 customers in the fourth quarter of fiscal 2009. The
number of Digital Television service customers grew by 12,017 customers in the fourth quarter ended August 31, 2010,
compared to 23,456 customers in the comparable period of the previous fiscal year mainly due to the extensive Digital
roll-o ut period dur ing fisc al 2009. T he Telephon y servic e custom ers gained 4, 210 custom ers in the four th quart er of fis cal
2010, compared to 862 customers for the comparable period of the preceding year.
OPERATING RESULTS
Quarters ended August 31, Years ended August 31,
2010
2009
(1)
Change
2010
2009
(1)
Change
($000, except percentages)
$
$
%
$
$
%
(unaudited)
(unaudited)
(audited)
(audited)
Revenue 42,168 52,217 (19.2) 187,756 233,092 (19.4)
Operating costs 34,112 41,709 (18.2)
155,189
169,022 (8.2)
Operating income before amortization
8,056
10,508
(23.3)
32,567 64,070 (49.2)
Operating margin
19.1%
20.1%
17.3%
27.5%
(1)
Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
application of t he CICA Ha ndbook S ecti on 3064 . Please ref er to the “Criti c al ac counti ng p ol i ci es and es ti mates ” s ecti on of th e C orp orati on’ s 2010 Annual R epor t
for more details.
Fiscal 2010 fourth-quarter European operations revenue decreased by $10 m illion, or 19.2%, at $42.2 million as a result
of a lower average num ber of Basic Cable serv ice custom er throughout f iscal 2010 c ompared to f iscal 2009 despite R GU
growth, the impact of retention strategies implemented in the second half of fiscal 2009 in order to curtail customer
- 7 -
attrition, and the decline of the Euro in relation to the Canadian dollar. The average exchange rate prevailing during the
fourth quarter of fiscal 2010 used to convert the operating results of the European operations was $1.3154 per Euro
compared to $1.5701 per Euro for the comparable period of fiscal 2009. Revenue from the European operations in the
local curre ncy for the f ourth quar ter amounte d to €32.1 million, a decrease of €1.2 m illion, or 3.6% when com pared to the
prior year. F or the fourth quarter of fiscal 2010, operating costs decreased by $ 7.6 million, or 18.2%, and were f avourabl y
affected by the decline of the value of the Euro over the Canadian dollar, which surpassed increases in operating costs
related to additional marketing initiatives and the launch of new channels, net of the impact of cost reduction initiatives
implemented by Cabovisão in the European operations. The European operating margin decreased to 19.1% from 20.1%.
CA SH FLOW ANA LYSIS
Quarters ended August 31, Years ended August 31,
2010
2009
(1)
2010
2009
(1)
($000)
$
$
$
$
(unaudited)
(unaudited)
(audited)
(audited)
Operating activities
Cash flow from operations
(2)
127,024
108,631
494,814
384,206
Changes in non-cash operating items
67,390
66,819
(77,530)
30,963
194,414 175,450 417,284 415,169
Investing activities
(3)
(107,776)
(91,399)
(319,373)
(283,742)
Financing activities
(3)
(65,204) (87,651) (100,183) (128,348)
Effect of exchange rate changes on cash and cash equivalents denominated
in a foreign currency
402
546
(1,344)
8
Net change in cash and cash equivalents
21,836
(3,054)
(3,616)
3,087
Cash and cash equivalents, beginning of period
14,006
42,512
39,458
36,371
Cash and cash equivalents, end of period
35,842
39,458
35,842
39,458
(1)
Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
applicati on of t he CICA Handbook S ecti on 3064 . Please ref er to the “Criti c al ac counti ng p ol i ci es and es ti mates ” s ecti on of th e C orp orati on’ s 2010 Annual R epor t
for more details.
(2)
The indicated terms do not have standardized definitions prescribed by Canadian GAAP and therefore, may not be comparable to similar measures presented by
other companies. For more details, please consult the “Non-GAAP financial measures” section.
(3)
Excludes assets acquired under capital leases.
During the fourth quarter of 2010, cash flow from operations reached $127 million, 16.9% higher than the comparable
period last year, primarily due to the reduction in income tax payments stemming from modifications to the corporate
structur e. Changes i n non-cas h operating item s gener ated cash inflows of $67.4 m illion, mainl y as a result o f an increas e
in accounts payable and accrued liabilities. In the fourth quarter of the prior year, cash inflows of $66.8 million mainly
stemmed from increases in accounts payable and accrued liabilities which were partly offset by the Part II licence fee
favourable settlement agreement, an increase in income tax liabilities and a decrease in income taxes receivable.
Investin g activi ties in th e four th quarter of 2010 am ounted to $10 7.8 mill ion com pared to $91.4 m illion f or the sam e period
the year before. The increase of $16.4 million, or 17.9% is primarily due to an increase in customer premise equipment
spending required to support RGU growth partly offset by depreciation of the Euro over the Canadian dollar.
In the fourth quarter of 2010, Cogeco Cable generated free cash flow
(
of $19.2 million compared to $14.8 million in the
prior year. T he increase in free cash flow is the res ult of an incr ease in cash flow f rom operations out pacing the incre ase
in capital expenditures.
In the f ourth quar ter of 201 0, Indebt ednes s af fecting c ash decr ease d b y $53.4 mill ion main ly du e to the inflo ws gener ated
by changes in non-cash operating items of $67.4 million and the free cash flow of $19.2 million, partly offset by the
increase in cas h an d c as h equ ivale nts of $2 1.8 m illion and the pa yment of di vide nds tot al ling $6.8 million de s c ribed b elo w
and an increase in deferred transaction costs of $5.2 million. Indebtedness reduced mainly through a decrease of
$44.7 million in bank indebtedness and net repayments on the Corporation’s term and revolving loans of $7.6 million.
During the fourth quarter of 2009, Indebtedness affecting cash decreased by $81.8 million mainly due to the increase in
non-cash operating items of $66.8 million, the free cash flows of $14.8 m illion and the decreas e in cash and cash
- 8 -
equivalents of $3.1 million, net of the dividend payment of $5.8 million described below. Indebtedness mainly decreased
through the ne t r epayments on the Cor poration’s t erm and revol ving l oans of $175 .4 m illion, the r e payment of $150 million
Senior Secured Debentures Series 1 at maturity on June 4, 2009, and by a decrease of $52.2 million in bank
indebtedness, partly offset by the issuance on June 9, 2009 of Senior Secured Debentures Series 1 for $300 million
maturing June 9, 2014.
During the fourth quarter of fiscal 2010, a dividend of $0.14 per share was paid to the holders of subordinate and multiple
voting shares, totalling $6.8 million, compared to a dividend of $0.12 per share, or $5.8 million the year before.
NON-GAAP FINANCIAL MEASURES
This section describes non-GAAP financial measures used by Cogeco Cable throughout this Press release. It also
provides rec onciliations bet ween these non-G AAP measures and the most com par able GAAP financi al m easures. Thes e
financia l measures do not have s ta ndard d ef initio ns pres c ribed by Canadi an GA A P and therefore, m a y not be com parable
to similar measures pr esent ed by other companies . T hes e measur es include “cas h flow fr om operat ions ”, “fr ee cash f lo w”,
“operating income before amortization”, “operating margin”, “adjusted net income” and “adjusted earnings per share”.
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 items. This allows the Corporation to isolate
the cash flow from operating activities from the impact of cash management decisions. Cash flow from operations is
subsequently used in calculating the non-GAAP 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 Can adi an G A AP f inanc i al measur e is c as h f lo w fr om operating ac ti vities . C as h f lo w fr om operat ions
is calculated as follows:
Quarters ended August 31, Years ended August 31,
2010 2009
(1)
2010 2009
(1)
($000)
$
$
$
$
(unaudited)
(unaudited)
(audited)
(audited)
Cash flow from operating activities 194,414 175,450 417,284 415,169
Changes in non-cash operating items
(67,390)
(66,819)
77,530
(30,963)
Cash flow from ope rations
127,024
108,631
494,814
384,206
(1)
Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
applicati on of t he CICA Handbook S ecti on 3064 . Please ref er to the “Criti c al ac counti ng p ol i ci es and es ti mates ” s ecti on of th e C orp orati on’ s 2010 A nnual Repor t
for more details.
Free cash flow is calculated as follows:
Quarters ended August 31, Years ended August 31,
2010
2009
(1)
2010
2009
(1)
($000)
$
$
$
$
(unaudited)
(unaudited)
(audited)
(audited)
Cash flow from operations
127,024
108,631
494,814
384,206
Acquisition of fixed assets
(105,219)
(89,069)
(308,908)
(273,360)
Increase in deferred charges
(2,580)
(2,462)
(10,633)
(10,773)
Assets acquired under capital leases
–
(2,341)
(141)
(4,661)
Free cash flow
19,225
14,759
175,132
95,412
(1)
Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
applicati on of t he CICA Handbook S ecti on 3064 . Please ref er to the “Criti c al ac counti ng p ol i ci es and es ti mates ” s ecti on of th e C orp orati on’ s 2010 Annual R epor t
for more details.
- 9 -
Operating income before amortization and operating margin
Operating inc ome bef ore amor tization is used by Cogec o Cable’s m anagem ent and investors to as sess the Corporation’s
ability to seize growth opportunities in a cost effective manner, to finance its ongoing operations and to service its debt.
Operating inc ome bef ore amort ization is a pr oxy for cash f low fr om operations ex clud ing t he impact of the capital str uc ture
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 left over, before income taxes, to
pay for its fixed costs, such as interest on Indebtedness. Operating margin is calculated by dividing operating income
before amortization by revenue.
The m ost comparable Ca nadian GA AP financia l measure is oper ating incom e. Oper ating incom e befor e amortization and
operating margin are calculated as follows:
Quarters ended August 31, Years ended August 31,
2010
2009
(1)
2010
2009
(1)
($000, except percentages)
$
$
$
$
(unaudited)
(unaudited)
(audited)
(audited)
Operating income
74,481
75,624
251,225
251,799
Amortization
63,696
68,268
258,871
256,077
Operating income before amortization 138,177 143,892 510,096 507,876
Revenue
324,323
307,807
1,281,376
1,217,837
Operating Margin 42.6% 46.7% 39.8% 41.7%
(1)
Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
applicati on of t he CICA Handbook S ecti on 3064 . Please ref er to the “Criti c al ac counti ng p ol i ci es and es ti mates ” s ecti on of th e C orp orati on’ s 2010 Annual R epor t
for more details.
- 10 -
Adjusted net income and adjusted earni n g s per share
Adjusted net income and adjusted earnings per share are used by Cogeco Cable’s management and investors to
evaluate what would have been the net income and earnings per share excluding the impairment of goodwill and
intangible assets, non-rec urring tax adjus tments and the Part II l icence fee favourable sett lement agre ement. T his allows
the Corporation to isolate the unusual adjustm ents in order to evaluate net income and earnings per share from ongoing
activities.
The most comparable Canadian GAAP financial measures are net income and earnings per share. Adjusted net income
and adjusted earnings per share are calculated as follows:
Quarters ended August 31,
Years ended August 31,
2010
2009
(1)
2010
2009
(1)
($000, except number of shares and per share data)
$
$
$
$
(unaudited)
(unaudited)
(audited)
(audited)
Net income (loss)
39,663
44,698
157,303
(258,228)
Adjustments:
Impairment of goodwill and intangible assets net of related income
taxes
–
–
–
383,630
Non-recurring tax adjustments:
Reduction of Ontario provincial income tax rates
–
–
(29,782)
–
Reduction of withholding and stamp tax contingent liabilities
–
(5,200)
–
(16,130)
Utilization of pre-acquisition tax losses
–
–
–
6,142
Part II licence fee favourable settlement agreement net of related
income taxes
–
(13,375)
–
(13,375)
Adjusted net income
39,663
26,123
127,521
102,039
Weighted average number of multiple voting and subordinate voting
shares outstanding
48,513,705
48,558,526
48, 520,183
48,545,296
Effect of dilutive stock options
136,172
53,138
133,994
125,326
Effect of dilutive subordinate voting shares held in trust under the
Incentive Share Unit Plan
58,219
–
45,163
–
Weighted average number of diluted multiple voting and subordinate
voting shares outstanding
48,708,096
48,611,664
48,699,340
48,670,622
Adjusted earnings per share
Basic
0.82
0.54
2.63
2.10
Diluted
0.81
0.54
2.62
2.10
(1)
Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
applicati on of t he CICA Handbook S ecti on 3064 . Please ref er to the “Criti c al ac counti ng p ol i ci es and es ti mates ” s ecti on of th e C orp orati on’ s 2010 Annual R epor t
for more details.
- 11 -
ADDITIONAL INFORMATION
Additional information relating to the Corporation, including its 2010 Annual Report and Annual Information Form, is
availab le on SEDAR at w ww.se dar .com.
ABOUT COGECO CABLE
Cogeco Ca ble (www.cog eco.ca) is a telecomm unications c ompany, the s econd lar gest hybrid fibr e coaxial cabl e operator
in Ontario, Québec and Portugal. Through its two-way broadband cable networks, Cogeco Cable provides its residential
customers with Audio, Analogue and Digital Television, as well as HSI and Telephony services. Cogeco Cable also
provides, to its commercial customers, data networking, e-business applications, video conferencing, hosting services,
Ethernet, private line, Voice over Internet Protocol (“VoIP”), HSI access, dark fibre, data storage, data security and co-
location 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
Alex Tessier
Vice President and Treasurer
Tel.: 514-764-4700
Analyst Conference Call: Thursday, October 28, 2010 at 11:00 A.M. (EDT)
Media representatives may attend as listeners only.
Please use the following dial-in number to have access to the conference call by dialing
ten minutes before the start of the conference:
Canada/USA Access Number: 1 888 300-0053
International Access Number: + 1 647 427-3420
Confirmation Code: 97583458
A rebroadcast of the conference call will be available until November 4, by dialing:
Canada and US Access Number: 1 800 642-1687
International Access Number: + 1 706 645-9291
Confirmation code: 97583458
- 12 -
Supplementar y Quarterly Financial Information
(unaudited)
Fiscal 2010
Fiscal 2009
Quarters ended
(1)
Nov. 30
Feb. 28
May 31
Aug. 31
Nov. 30
(2)
Feb. 28
(2)
May 31
(2)
Aug. 31
(2)
($000, except percentages and per share data)
$
$
$
$
$
$
$
$
Revenue
317,365
320,397
319,291
324,323
299,438
304,920
305,672
307,807
Operating income before amortization
(3)
122,606
122,613
126,700
138,177
115,730
122,303
125,951
143,892
Operating margin
(3)
38.6%
38.3%
39.7%
42.6%
38.6%
40.1%
41.2%
46.7%
Operating income
57,041
56,774
62,929
74,481
54,984
59,105
62,086
75,624
Impairment of goodwill and intangible assets
–
–
–
–
–
399,648
–
–
Income taxes
(15,766)
11,952
15,060
17,772
8,645
(207)
26,357
22,005
Net income (loss)
56,666
29,789
31,185
39,663
22,945
(358,324)
32,453
44,698
Adjusted net income
(3)
26,884
29,789
31,185
39,663
22,945
25,306
27,665
26,123
Cash flow from operating activities
(3,618)
114,037
112,451
194,414
24,481
115,282
99,956
175,450
Cash flow from operations
(3)
130,229
118,318
119,243
127,024
87,617
95,928
92,030
108,631
Capital expenditures and increase in deferred charges
68,221
74,379
69,283
107,799
69,820
64,963
60,139
93,872
Free cash flow
(3)
62,008
43,939
49,960
19,225
17,797
30,965
31,891
14,759
Earnings (loss) per share
(4)
Basic
1.17
0.61
0.64
0.82
0.47
(7.38)
0.67
0.92
Diluted
1.16
0.61
0.64
0.81
0.47
(7.38)
0.67
0.92
Adjusted earnings per share
(3)(4)
Basic
0.55
0.61
0.64
0.82
0.47
0.52
0.57
0.54
Diluted
0.55
0.61
0.64
0.81
0.47
0.52
0.57
0.54
(1)
The addition of quarterly information may not correspond to the annual total given rounding.
(2)
Certain compar ative f igures have been recl assi fied to confo rm to t he curr ent year’s p resentati on. F inancial information has bee n resta ted to refl ect the appl icati on
of the CICA Handbook Section 3064. Please refer to the “Critical accounting policies and estimates” section of the Corporation’s 2010 Annual Report for more
details.
(3)
The indic ated terms do n ot have s ta ndardized definit ions prescri bed by C anadian GA AP and th erefore, may n ot be com parable to s imil ar measure s presente d by
other companies. For more details, please consult the “Non-GAAP financial measures” section of the Results overview.
(4)
Per multiple and subordinate voting share.
SEASONAL VAR IATIONS
Cogeco Cable’s operating results are not generally subject to material seasonal fluctuations. However, the customer
growth in the Basic Cable and HSI service are generally lower in the second half of the fiscal year as a result of a
decrease in econom ic ac tivity due to t he begi nning of the vacati on per iod, the en d of the televisi on seaso ns, and s tudents
leaving their campuses 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, and
Aveiro, Covilhã, Evora, Guarda and Coimbra in Portugal. 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 equ al t o 2% of its total rev enu e s ubj ect t o a maximum am ount. Since t h e m axim um am ount was re ac hed i n the
second quarters of fiscal 2010 and
2009, Cogeco Cable has paid no management fees in the second halves of either
fisc al year.
- 13 -
Customer Statistics
(unaudited)
August 31, 2010 August 31, 2009
Homes Passed
Canada 1,593,743 1,565,145
Portugal
(1)
905,359
905,129
Total
2,499,102
2,470,274
Homes Connected
(2)
Canada
979,590
944,634
Portugal 269,194 269,022
Total
1,248,784
1,213,656
RGU
Canada
2,350,577
2,159,863
Portugal
828,772
732,375
Total
3,179,349
2,892,238
Basic Cable service customers
Canada
874,505
864,805
Portugal
260,267
259,480
Total
1,134,772
1,124,285
HSI service customers
Canada 559,057 515,052
Portugal
163,187
143,614
Total
722,244
658,666
Digital Television service customers
Canada
559,418
498,398
Portugal 159,852 102,753
Total
719,270
601,151
Telephony service customers
Canada
357,597
281,608
Portugal
245,466
226,528
Total 603,063 508,136
(1)
The Corporation is currently assessing the number of homes passed.
(2)
Represents the sum of Basic Cable service customer and HSI and Telephony service customers who do not subscribe to the Basic Cable service.