Today, Cogeco Cable Inc. (TSX:CCA) ("Cogeco Cable" or the "Corporation")
announced 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 quarter and fiscal 2012:
-- Revenue increased by 6.2% to reach $324.8 million, 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 compared to the same
periods of the prior year;
-- 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 amounted to $45.7 million in the fourth quarter
when compared 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 primarily from the increase in income taxes from the
change in the corporate income tax rate recently announced by the
Ontario government and the increase of depreciation and amortization
expense due to the reduction of the depreciation period of certain
property, plant and equipment. For fiscal 2012, profit for 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
the Corporation's net investment in the Portuguese subsidiary 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 subsidiary in fiscal 2012, partly offset by the increase
of depreciation and amortization expense due to the reduction of the
depreciation period of certain property, plant and equipment;
-- Free cash flow (1) reached $2.6 million for the quarter compared to $24
million in the comparable quarter of the prior year. For fiscal 2012,
free cash flow amounted to $66.3 million, compared to $114.8 million in
fiscal 2011. Free cash flow decreased in both periods over the prior
year due to an increase in acquisitions of property, plant and equipment
and intangible and other assets combined with the increase in current
income tax expense stemming primarily from the fiscal 2011 modifications
to the corporate structure, partly offset by the increase in operating
income before depreciation and amortization;
-- Primary service units ("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;
-- 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 share,
or 25%, when compared to a dividend of $0.20 per share paid in the
fourth quarter 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 independent cable
system operator formed 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 Telephony
services. Ranked the 13th-largest cable television system operator in
the United States, Atlantic operates cable systems in Pennsylvania,
Florida, Maryland, Delaware and South Carolina. The transaction is
valued at US$1.36 billion and expected to be financed through a
combination of cash 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, Cabovisao - Televisao por Cabo, S.A.
("Cabovisao") for a cash consideration of EUR45 million, or
approximately $59.3 million. Operating results from European operations
have therefore been classified as discontinued operations.
(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) Represents the sum of Television, High Speed Internet ("HSI") and Telephony
service customers.
"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 Montreal-based MTO Telecom Inc. ("MTO"), both acquired in 2011.
Today, this sector enables us to anticipate highly satisfactory organic growth
of more than 10% annually over the coming years", declared Louis Audet,
President and Chief Executive Officer of Cogeco Cable.
Mr.Audet added, "Fiscal 2013 will be a time of North American expansion as
Cogeco Cable extends its operations south of the border as a result of the
upcoming closing of the acquisition of Atlantic, an independent cable system
operator serving about 251,000 television service customers and fully develops
its great potential. This acquisition offers substantial growth opportunities
for Cogeco Cable, including higher penetration among small and medium-sized
enterprises, as well as the potential to optimize the packaging of services in
the residential area. Following this transaction, Cogeco 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 financial guidelines, as issued on July
11, 2012. Fiscal 2013 financial guidelines will be revised once the recently
announced acquisition of Atlantic is concluded. Please consult the "Fiscal 2013
financial guidelines" section of the Corporation's 2012 Annual Report for
further details.
FINANCIAL HIGHLIGHTS
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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) $ $ % $ $ %
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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) -
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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
Acquisitions 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)
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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
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PSU(3)growth 6,959 19,740 (64.7) 71,664 106,310 (32.6)
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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) -
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(1) The indicated terms do not have standardized 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) 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
Quarter ended august 31, 2012
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Cable services Enterprise services
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Quarters ended
August 31, 2012 2011 Change 2012 2011 Change
(in thousands of
dollars, except
percentages) $ $ % $ $ %
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Revenue 301,992 286,457 5.4 23,133 19,354 19.5
Operating expenses 148,725 139,948 6.3 11,876 11,509 3.2
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Operating income
before depreciation
and amortization 153,267 146,509 4.6 11,257 7,845 43.5
Operating margin 50.8% 51.1% 48.7% 40.5%
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Inter-segment
eliminations and
other(1) Consolidated
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Quarters ended
August 31, 2012 2011 2012 2011 Change
(in thousands of
dollars, except
percentages) $ $ $ $ %
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Revenue (357) - 324,768 305,811 6.2
Operating expenses 3,342 2,775 163,943 154,232 6.3
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Operating income
before depreciation
and amortization (3,699) (2,775) 160,825 151,579 6.1
Operating margin - - 49.5% 49.6%
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(1) The inter-segment eliminations and other eliminate any intercompany
transactions included in each segment's results and include head office
activities.
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
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Net additions (losses)
Quarters ended August 31,
2012 2011
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PSU 6,959 19,740
Television service customers(1) (5,758) (1,369)
HSI service customers 5,682 7,746
Telephony service customers 7,035 13,363
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(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
same period of 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. 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%.
Enterprise services
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 project development as well as the acquisitions of QTI and MTO.
Cash flow analysis
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Quarters ended August 31, 2012 2011
(in thousands of dollars) $ $
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Operating activities
Cash flow from operations 126,946 144,699
Changes in non-cash operating activities 75,065 70,760
Amortization 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
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203,343 211,847
Investing activities (124,480) (251,695)
Financing activities (12,803) 755
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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
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Cash and cash equivalents from continuing and
discontinued operations, end of period 215,391 55,447
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(1) For further details on the Corporation's cash flows attributable to
discontinued operations, 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% lower 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
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Cable services Enterprise services
Years ended August
31, 2012 2011 Change 2012 2011 Change
(in thousands of
dollars, except
percentages) $ $ % $ $ %
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Revenue 1,188,717 1,123,652 5.8 89,831 61,031 47.2
Operating expenses 614,644 581,489 5.7 51,649 35,754 44.5
Management fees -
COGECO Inc. - - - - - -
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Operating income
before
depreciation and
amortization 574,073 542,163 5.9 38,182 25,277 51.1
Operating margin 48.3% 48.3% 42.5% 41.4%
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Inter-segment
eliminations and
other(1) Consolidated
Years ended August
31, 2012 2011 2012 2011
(in thousands of
dollars, except
percentages) $ $ $ $
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Revenue (850) - 1,277,698 1,184,683
Operating expenses 12,868 12,907 679,161 630,150
Management fees -
COGECO Inc. 9,485 9,172 9,485 9,172
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Operating income
before
depreciation and
amortization (23,203) (22,079) 589,052 545,361
Operating margin - - 46.1% 46.0%
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(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
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Net additions (losses) % of penetration(1)
August 31, Years ended August 31, August 31,
2012 2012 2011 2012 2011
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PSU 1,969,133 71,664 106,310
Television 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
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(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, 2012, 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 related to the
migration of Television service customers from analogue to digital.
Operating income before depreciation and amortization and operating margin
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 services
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 and operating 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.
Disposal of subsidiary and discontinued operations
On February 29, 2012, the Corporation completed the sale of its Portuguese
subsidiary, Cabovisao for a cash consideration of EUR45 million ($59.3 million).
The selling price has been reduced by selling fees of approximately EUR8.5
million ($11.2 million) and contingent claims assumed up to a maximum amount of
EUR5 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:
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(In thousands of dollars) $
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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)
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(6,688)
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As a result of the sale and in accordance with IFRS 5 - Non-Current Assets Held
for Sale and Discontinued Operations, 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:
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Quarters ended August 31, Years ended August, 31
2012 2011 2012 2011
(In thousands of
dollars) $ $ $ $
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Revenue - 43,306 80,546 172,277
Operating expenses - 36,718 70,247 151,262
Depreciation and
amortization - 347 2,814 40,415
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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 -
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Profit (loss) before
income taxes - 6,230 55,855 (245,199)
Income taxes - 11 409 (463)
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Profit (loss) for the
period - 6,219 55,446 (244,736)
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The cash flows of the discontinued operations were as follows:
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Quarters ended August 31, Years ended August, 31
2012 2011 2012 2011
(In thousands of
dollars) $ $ $ $
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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
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Net increase
(decrease) in cash
and cash equivalents - (1,551) 49,597 (11,337)
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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 amortization" 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:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Quarters ended August 31, Years ended 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)
Amortization 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)
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Cash flow from
operations 126,946 144,699 441,686 417,367
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----------------------------------------------------------------------------
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
Acquisition of property,
plant and equipment (119,175) (118,326) (359,581) (291,669)
Acquisition of
intangible and other
assets (5,217) (2,337) (15,787) (10,872)
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Free cash flow 2,554 24,036 66,318 114,826
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Operating income before depreciation and amortization 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.
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
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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%
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Supplementary quartely financial information
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fiscal 2012
Quarters ended(1) Nov. 30 Feb. 29 May 31 Aug. 31
(in thousands of dollars,
except percentages and per
share data) $ $ $ $
-------------------------------------------------------------------------
Revenue 315,424 317,735 319,771 324,768
Operating income before
depreciation and
amortization 131,823 143,743 152,661 160,825
Operating margin 41.8% 45.2% 47.7% 49.5%
Operating income 66,999 59,491 90,981 94,709
Income taxes 10,603 13,617 21,449 32,987
Profit for the period from
continuing operations 39,567 31,086 53,159 45,705
Profit (loss) for the period
from discontinued operations 3,399 52,047 - -
Profit (loss) for the period 42,966 83,133 53,159 45,705
Cash flow from operating
activities 13,807 120,961 112,275 203,343
Cash flow from operations 97,043 104,622 113,075 126,946
Acquisitions of property,
plant and equipment,
intangible and other assets 77,283 86,234 87,459 124,392
Free cash flow 19,760 18,388 25,616 2,554
Earnings (loss) per share(2)
From continuing and
discontinued operations
Basic 0.88 1.71 1.09 0.94
Diluted 0.88 1.70 1.09 0.93
From continuing operations
Basic 0.81 0.64 1.09 0.94
Diluted 0.81 0.63 1.09 0.93
From discontinued
operations
Basic 0.07 1.07 - -
Diluted 0.07 1.06 - -
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----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fiscal 2011
Quarters ended(1) Nov. 30 Feb. 28 May 31 Aug. 31
(in thousands of dollars,
except percentages and per
share data) $ $ $ $
----------------------------------------------------------------------------
Revenue 287,204 293,457 298,211 305,811
Operating income before
depreciation and
amortization 125,236 130,399 138,147 151,579
Operating margin 43.6% 44.4% 46.3% 49.6%
Operating income 75,717 80,426 86,995 97,941
Income taxes 16,285 15,007 18,747 20,713
Profit for the period from
continuing operations 42,749 41,319 52,352 62,745
Profit (loss) for the period
from discontinued operations (8,159) (9,223) (233,573) 6,219
Profit (loss) for the period 34,590 32,096 (181,221) 68,964
Cash flow from operating
activities 49,809 88,420 142,009 211,847
Cash flow from operations 32,063 114,682 125,923 144,699
Acquisitions of property,
plant and equipment,
intangible and other assets 58,017 61,079 62,782 120,663
Free cash flow (25,954) 53,603 63,141 24,036
Earnings (loss) per share(2)
From continuing and
discontinued operations
Basic 0.71 0.66 (3.73) 1.42
Diluted 0.71 0.66 (3.73) 1.42
From continuing operations
Basic 0.88 0.85 1.08 1.29
Diluted 0.88 0.85 1.08 1.29
From discontinued
operations
Basic (0.17) (0.19) (4.80) 0.13
Diluted (0.17) (0.19) (4.80) 0.13
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(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
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-Rivieres 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 Quebec.
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).
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 Access 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 statistics
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----------------------------------------------------------------------------
2012 2011 2010
----------------------------------------------------------------------------
Primary service units(1) 1,969,133 1,897,469 1,791,159
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Television service customers 863,115 877,985 874,505
Penetration as a percentage of homes passed 52.4% 54.1% 54.9%
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Digital Television service customers 771,503 678,326 559,418
Penetration as a percentage of homes passed 46.8% 41.8% 35.1%
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Analogue Television service customers 91,612 199,659 315,087
Penetration as a percentage of homes passed 5.6% 12.3% 19.8%
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High Speed Internet service customers 634,534 601,214 559,057
Penetration as a percentage of homes passed 38.5% 37.1% 35.1%
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Telephony service customers 471,484 418,270 357,597
Penetration as a percentage of homes passed 28.6% 25.8% 22.4%
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(1) Represents the sum of Television, High Speed Internet ("HSI") and
Telephony service customers.
FOR FURTHER INFORMATION PLEASE CONTACT:
Source:
Cogeco Cable Inc.
Pierre Gagne
Senior Vice President and Chief Financial Officer
514-764-4700
Information:
Media
Rene Guimond
Vice-President, Public Affairs and Communications
514-764-4700