COGECO CABLE INC. Q2 2012
PRESS RELEASE
For immediate release
Cogeco Cable on track to meet 2012 objectives
Montréal, April 12, 2012 – Today, Cogeco Cable Inc. (TSX: CCA) (“Cogeco Cable” or the “Corporation”) announced its
financial results for the second quarter of fiscal 2012, ended February 29, 2012, in accordance with International Financial
Reporting Standards (“IFRS”).
For the second quarter and first six months of fiscal 2012:
•
Revenue increased by 8.3% to reach $ 31 7.7 million, and by 9% to reach $633.2 million;
•
Operating income before depreciation and amortization
(1)
increased by 10.2% to $143.7 million when compared to
the second quarter of fiscal 2011, and by 7.8% to $275.6 million when compared to the first half of the prior fiscal
year;
•
Operating margin
(1)
increased to 45.2% from 44.4% in the quarter and decreased to 43.5 % from 44% in the first si x
months when compared to the same peri ods of the prior year;
•
Profit for the period from continuing oper ations amounted to $31.1 million in the secon d quarter when compared t o
$41.3 million for the same period of the prev ious fiscal year. F or the first half of fiscal 2012, profit for the period from
continuing operations amounted to $70.7 mil lion when compared to $8 4.1 milli on for the fi rst half of fiscal 2011. This
variance is mostly attributable to the increase in depreciation and amortization expense due to the reduction of
depreciation period for certain property, plant and equipment, partly offset by the increase in operating income
before depreciation and amortization;
•
On February 2 9, 2012, the Corporation c ompleted the sale of its Portuguese subsidiar y, Cabovisão – Televisão por
Cabo, S.A. (“Cabovisão”), for a cash consideration of €45 m illion or approxi mately $59.3 million, which is subject to
adjustments for certain contingent claims. Operating results from European operations have therefore been
classified as discontinued operations. F or the second quarter and first six months of fiscal 2012, profit for the peri od
from discontinued operations amounted to $52 million and $55.4 million, respectively, compared to losses of
$9.2 million and $17.4 million, respectively, for the same periods of the prior year. Profit for the period from
discontinued operations in fiscal 2012 include the gain on disposal of $48.2 million recorded in th e second quarter of
fiscal 2012;
•
Profit for the period increased by $51 million to reach $83.1 million in the second quarter when compared to
$32.1 million for the same period of the previous fiscal year. For the first half of fiscal 2012, profit for the period
increased by $59.4 million to reach $126.1 million when compared to $66.7 for the first half of fiscal 2011. This
variance is mostly attributable to the g ain o n disp osal of Ca bovis ão, partly offset by the increase of depr eciation an d
amortization expense due to the reduction of depreciation period for certai n property, plant and equipment;
•
Free cash flow
(1)
reached $18.4 million for the quarter compared to $53.6 million in the comparable quarter of the
prior year. For the first six months, free cash flow amounted to $38.1 million, compared to $27.6 million in the first
half of fiscal 2011. This variance is mostly attributable to the difference in the recognition of current income tax
expense for bot h periods combined with the improvement of operating income before de pr eciation an d amortizatio n,
partly offset by the increase in acquisition of property, plant and equipment;
•
A quarterly dividend of $0.25 per share was paid to the holders of subordinate and multiple voting shares, an
increase of $0.08 per sh are, or 47.1%, when compared to a div idend of $0.17 per share paid in the second qu arter
of fiscal 2011. Dividend paym ents in the first six months totalled $0.50 p er share in fiscal 2012, compared to $0.34
per share in fiscal 2011;
(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 Management’s discussion and analysis.
• Primary service u nits (“PSU”)
(2)
grew by 12,280 net ad ditions in the quarter and 58,4 59 net additions in the first six
months, for a total of 1,955,928 PSU at February 29, 2012.
“We are satisfied with Cogeco Cable’s results for the second quarter of fiscal 2012. We are continuing to grow and our
performance indicators remain on target to our objectives. Revenue is up, which is a reflection of the constant efforts of our
teams to consistently satisfy our customers. The results confirm that we have reached our primary objective of sustained
corporate growth and continuous improvement of our networks and our processes in spite of the challenges and issues we
face in a highly comp etitive industr y. Whil e we see some signs of m aturit y in certa in lin es, we are c onfid ent we will achieve o ur
objectives, including those related to the increase of our PSU,” stated Louis Audet President and Chief Executive Officer of
Cogeco Cable.
FINANCIAL HIGHLIGHTS
Quarters ended Six months ended
February 29, February 28, February 29, February 28,
2012 2011 Change 2012 2011 Change
($000, except percentages and per share data) $ $ % $ $ %
(unaudited)
(unaudited)
(unaudited) (unaudited)
Operations
Revenue 317,735 293,457 8.3 633,159 580,661 9.0
Operating income before depreciation and amortizat i on
(1)
143,743 130,399 10.2 275,566 255,635 7.8
Operating margin
(1)
45.2% 44.4% – 43.5% 44.0% –
Operating income 59,491 80,426 (26.0) 126,490 156,143 (19.0)
Profit for the period from continuing operations 31,086 41,319 (24.8) 70,653 84,068 (16.0)
Profit (loss) for the period f rom discontinued operations 52,047 (9,223) – 55,446 (17,382) –
Profit for the period 83,133 32,096 – 126,099 66,686 89.1
Cash Flow
Cash flow from operating acti vities from continuing
operations 120,961 88,420 36.8 134,768 138,229 (2.5)
Cash flow from operations
(1)
104,622 114,682 (8.8) 201,665 146,745 37.4
A
cquisitions of property, plant and equipment and intangible
assets 86,234 61,079 41.2 163,517 119,096 37.3
Free cash flow
(1)
18,388 53,603 (65.7) 38,148 27,649 38.0
Financial Condition
(2)
Property, plant and equipment – – – 1,236,644 1,254,217 (1.4)
Total assets – – – 2,750,364 2,712,679 1.4
Indebtedness
(3)
– – – 1,070,012 981,214 9.0
Shareholders’ equity – – – 1,112,642 1,033,252 7.7
Primary service units
(4)
growth 12,280 26,490 (53.6) 58,459 68,266 (14.4)
Per Share Data
(5)
Earnings (loss) per share
From continuing and discontinued operations
Basic 1.71 0.66 – 2.59 1.37 89.1
Diluted 1.70 0.66 – 2.57 1.37 87.6
From continuing operations
Basic 0.64 0.85 (24.7) 1.45 1.73 (16.2)
Diluted 0.63 0.85 (25.9) 1.44 1.72 (16.3)
From discontinued operations
Basic 1.07 (0.19) – 1.14 (0.36) –
Diluted 1.06 (0.19) – 1.13 (0.36) –
(1)
The indicated terms do not have standardized definitions prescribed by International Financial Reporting Standards (“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 Management’s discussion and analysis.
(2)
At February 29, 2012 and August 31, 2011.
(3)
Indebtedness is defined as the total of bank indebtedness, principal on long-term debt, balance due on a business acquisition and obligations under derivative financial
instruments.
(4)
Represents the sum of Television, High Speed Internet (“HSI”) and Telephony service customers.
(5)
Per multiple and subordinate voting share.
(2)
Represents the sum of Television, High Speed Internet (“HSI ”) and Telephony service customers.
FORWARD-L O OKIN G STAT E M ENT S
Certain statements in this Management’s Discussion and Analysis (“MD&A”) 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 2011 annual 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 condensed interim consolidated financial statements for the three and six-month periods ended February 29,
2012, 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
condensed interim consolidated financial statements for the three and six-month periods ended February 29, 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 report should be read in conjunction with the Corporation’s
consolidated financial statements and MD&A for the fiscal year ended August 31, 2011 included in the Corporation’s 2011 Annual Report.
It should also be read in conjunction with the Corporation’s condensed interim consolidated financial statements and MD&A for the first
quarter of fiscal 2012 as well as the information on the adjustments to the fiscal 2011 financial figures upon adoption of IFRS, explained in
Note 16 of the condensed interim consolidated financial statements for the three and six-month periods ended February 29, 2012.
Corporate strategies and objectives
Cogeco Cable Inc.’s (“Cogeco Cable” or the “Corporation”) objectives are to improve profitability and create shareholder value. The
strategies for reaching those objectives are sustained growth through the diversification and the improvement of products, services,
clientele and territories, as well as the continuous improvement of networks and equipment and tight controls over costs and business
processes. The Corporation measures its performance, with regard to these objectives by monitoring operating income before
depreciation and amortization
(1)
, operating margin
(1)
, primary service units (“PSU”)
(2)
growth and free cash flow
(1)
.
During the first six months of fiscal 2012, the Corporation invested approximately $84.4 million in its network infrastructure and equipment
to upgrade its capacity, improve its robustness and extend its territories in order to better serve and increase its service offerings for new
and existing clientele.
PSU growth and penetration of service offering s
During the six-month period ended February 29, 2012, the number of PSU increased by 58,459 or 3.1%, to reach 1,955,928, mainly as a
result of target ed marke ting i nitia tives and of the contin uing in terest for high defini tion (“H D”) tele vision s ervic e. As of fiscal 2012, Cogeco
Cable has modified its key performance indicator for growth to a PSU concept instead of a revenue-generating units (“RGU”) concept. As
a result of the sale of its Portuguese subsidiary as described below in the second quarter of fiscal 2012, Cogeco Cable has reduced its
guidelines for PSU progression to 80,000 from the 90,000 for the fiscal 2012 year. The 90,000 original projections were presented in
terms of RGU of 225,000 net additions in the Fiscal 2012 financial guidelines of the 2011 Annual Report. For further details, pleaseconsult
thefiscal2012revisedprojectionsinthe“Fiscal2012financialguidelines”section.
Operating income before deprecia tion and amortization and operating margin
First six months operating income before depreciation and amortization increased by 7.8% when compared to the same period of fiscal
2011 to reach $275.6 million and operating margin decreased to 43.5% from 44%. The decrease is mainly attributable to additional
programming costs, deployment and support costs related to the migration of Television service customers from analog to digital and the
acquisitions of MTO Telecom Inc. (“MTO”) and Quiettouch Inc. (“QTI”).
Free cash flow
For the six-month period ended February 29, 2012, Cogeco Cable reports positive free cash flow of $38.1 million, compared to
$27.6 million for the first half of the previous fiscal year, representing an increase of $10.5 million. This variance is mostly attributable to
the difference in the recognition of current income tax expense for both periods combined with the improvement of operating income
before depreciation and amortization, partly offset by the increase in acquisition of property, plant and equipment.
Disposal of subsidiary and discontinued operations
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, which is subject to adjustments for certain contingent
claims. Operating results from European operations have therefore been classified as discontinued operations. For further details on the
European’s operating results, please refer to the “Disposal of subsidiary and discontinued operations” section.
OPERATING RE SULTS FR OM CONTI NUING OPER ATIONS
Quarters ended Six months ended
February
29,
February
28,
February
29,
February
28,
2012 2011 Change 2012 2011 Change
($000, except percentages) $ $ % $ $ %
(unaudited)
(unaudited)
(unaudited) (unaudited)
Revenue 317,735
293,457
8.3
633,159 580,661
9.0
Operating costs
(1)
171,649 160,530 6.9 348,108 315,854 10.2
Management fees - COGECO Inc. 2,343 2,528 (7.3)
9,485 9,172 3.4
Operating income before depreciation and amortization 143,743 130,399 10.2 275,566 255,635 7.8
Operating margin 45.2% 44.4% 43.5% 44.0%
(1) Represents th e sum of salaries, employee benefits and outsource d services as well as other external purchases included in the interim consolidated state ments
of prof i t o r l oss.
(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.
(2)
Represents the sum of Television, High Speed Internet (“HSI”) and Telephony service customers.
Revenue
Fiscal 2012 second-quarter revenue rose by $24.3 million, or 8.3%, to reach $317.7 million, when compared to the prior year. For the first
six months, revenue amounted to $633.2 million, an increase of $52.5 million, or 9% when compared to the first six months of fiscal 2011.
The increase in revenue was driven by PSU growth, rate increases implemented in April and October 2011 combined with the
acquisitions of MTO and QTI during the second half of fiscal 2011.
Operating costs
For the second quarter of fiscal 2012, operating costs, excluding management fees payable to COGECO Inc., increased by $11.1 million,
to reach $171.6 million, an increase of 6.9% compared to prior year. For the first half of the fiscal year, operating costs, excluding
management fees payable to COGECO Inc., amounted to $348.1 million, an increase of $32.3 million, or 10.2%, when compared to the
same period of fiscal 2011. The increase in operating costs is mainly attributable to servicing additional PSU, the launch of new HD
channels, additional programming costs, deployment and support costs related to the migration of Television service customers from
analog to digital and the acquisitions of MTO and QTI.
Operating income before deprecia tion and amortization and operating margin
Fiscal 2012 second-quarter operating income before depreciation and amortization increased by $13.3 million, or 10.2% to reach
$143.7 million, and by $19.9 million, or 7.8%, in the first six months to reach $275.6 million. Cogeco Cable’s second-quarter operating
margin increased to 45.2% from 44.4% in the comparable period of the prior year. For the first six months, the operating margin
decreased to 43.5% from 44% in the first half of fiscal 2011.
CUSTOMER STATISTICS
Net additions (losses) % of Penetration
(1)
Quarters ended Six months ended
February 29, February 29,
February 28,
February 29,
February 28, February 29,
February 28 ,
2012 2012
2011
2012
2011 2012
2011
PSU 1,955,928 12,280 26,490 58,459 68,266
Television service customer s
(2)
873,326 (9,111) (788) (4,659) 6,250 53.5 54.9
HSI servic e cu stomers 626,017 7,518 10,550 24,803 27,422 38.3 36.5
Telephony service customers 456,585 13,873 16,728 38,315 34,594 27.9 24.4
(1) As a percentage of Homes Passed.
(2)
The number of Television service customers includes 752,642 Digital Television service customers.
Fiscal 2012 second-quarter and first six months, 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 second quarter and the first six
months net customer losses for Television service customers stood at 9,111 and 4,659, respectively, compared to 788 and net additions
of 6,250 for the same periods of the prior year. Television service customer net losses in the second quarter and the first six months of
fiscal 2012 are mainly due to the competitive promotional offers for the video service combined with the tightening of our credit controls
and processes. In the quarter, Telephony service customers grew by 13,873 compared to 16,728 for the same period last year, and the
number of net additions to the HSI service stood at 7,518 customers compared to 10,550 customers in the second quarter 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. For the three and six-month
periods en ded F eb ru ar y 29 , 20 12, addi ti on s to t he Di gi t al Televisi on s er v ic e whi ch a r e inc luded in the Te l e vi s i on se rv ice c u s to mers, stood
at 25,423 and 74,316 compared to 26,450 and 55,364 for the comparable periods of the prior year. Digital Television service net additions
are due to targeted marketing initiatives to improve penetration, the launch of new HD channels, the continuing interest for HD television
service and the deployment of Digital Terminal Adapters technology to migrate customers from analog to digital services.
PROFIT FOR THE PERIOD FR OM CONTINUING OPERATIONS
For the three and six-month periods ended February 29, 2012, profit for the period from continuing operations amounted to $31.1 million,
or $0.64 per share, and $70.7 million, or $1.45 per share, respectively. For the comparable periods of fiscal 2011, profit for the period
from continuing operations amounted to $41.3 million, or $0.85 per share in the quarter, and $84.1 million, or $1.73 per share in the first
six months. This variance is mostly attributable to the increase of depreciation and amortization expense due to the reduction of
depreciation period of certain property, plant and equipment, partly offset by the increase in operating income before depreciation and
amortization and the decrease in financial expense.
PROFIT FOR THE PERIOD FROM DISCONTINUED OPERATIONS
For the three and six-month periods ended February 29, 2012, profit for the period from discontinued operations amounted to $52 million
and $55.4 million, respectively, compared to losses of $9.2 million and $17.4 million, respectively, for the same periods of the prior year.
Profit for the period from discontinued operations in fiscal 2012 include the gain on disposal of $48.2 million recorded in the second
quarter of fiscal 2012. For further details on the European operating results, please refer to the “Disposal of subsidiary and discontinued
operations” section.
PROFIT FOR THE PERIOD
For the three and six-month periods ended February 29, 2012, profit for the period amounted to $83.1 million, or $1.71 per share, and
$126.1 million, or $2.59 pe r share, respectively. For the comparable periods of fiscal 2011, profit for the period amounted to $32.1 million,
or $0.66 per share in the quarter, and $66.7 million, or $1.37 per share in the first six months. Profit progression for the period has
resulted mainly from the gain on disposal of the Portuguese subsidiary and the operating income before depreciation and amortization
improvement, partly offset by the increase of depreciation and amortization expense due to the reduction of the depreciation period of
certain property, plant and equipment.
FINANCIN G ACTIVI TIES
In the normal course of business, Cogeco Cable has incurred financial obligations, primarily in the form of long-term debt, operating and
finance leases and guarantees. Cogeco Cable’s obligations, as discussed i n the 2011 Annual Report, have not materially changed since
August 31, 2011, except as mentioned below.
As a result of the sale of its Portuguese subsidiary, the letters of credits which were issued to guarantee the payment by Cabovisão of
stamp taxes and withholding taxes have been released.
On February 14, 2012, the Corporation completed pursuant to a public debt offering, the issue of $200 million Senior Secured Debentures
Series 3. These Debentures mature on February 14, 2022 and bear interest at 4.925% per annum payable semi-annually. These
debentures are indirectly secured by a first priority fixed and floating charge and a security interest on substantially all present and future
real and personal property and undertaking of every nature and kind of the Corporation.
On November 22, 2011, the Corporation renewed its credit agreement for a $750 million credit facility, with an option to increase to a total
amount of up to $1 billion, subject to lenders’ participation, in the form of a five year Term Revolving Facility. The renewed Term
Revolving Facility was arranged by a group of financial institutions. The renewed Term Revolving Facility will mature on November 22,
2016, but may be extended by additional one-year periods on an annual basis, subject to lenders’ approval. The Term Revolving Facility
is indirectly secured by a first priority fixed and floating charge on substantially all present and future real and personal property and
undertaking of every nature and kind of the Corporation and certain of its subsidiaries, and provides for certain permitted encumbrances,
including purchased money obligations, existing funded obligations and charges granted by any subsidiary prior to the date when it
becomes a subsidiary, subject to a maximum amount.
DIVIDEND DE CLARATIO N
At its April 11, 2012 meeting, the Board of Directors of Cogeco Cable declared a quarterly eligible dividend of $0.25 per share for multiple
voting and subordinate voting shares, payable on May 9, 2012, to shareholders of record on April 25, 2012. The declaration, amount and
date of any future dividend will continue to be considered and approved by the Board of Directors of the Corporation based upon the
Corporation’s financial condition, results of operations, capital requirements and such other factors as the Board of Directors, at its sol e
discretion, deems relevant. There is therefore no assurance that dividends will be declared, and if declared, the amount and frequency
may vary.
DISPOSAL OF S UBSIDIARY AND DISCONTINUED OPERATIONS
On February 29, 2012, the Corporation completed the sale of its Portuguese subsidiary 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 on disposal of $48.2 million recorded in the interim consolidated statements of profit or loss.
The details of the assets and liabilities disposed of are as follows:
($000) $
(unaudited)
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 – Non-Curr ent Assets He ld for Sale a nd Disc ontinued Op eration s, the Corporation
reclassified the current and prior year results and cash flows of the European operations, up to the date of the disposal, as discontinued
operations
.
Profit (lo ss ) for the pe r iod fr o m di sco n ti nued operations
(1) Represents th e sum of salaries, employee benefits and outsourced s ervices as well as other exte rnal purc hases as described in Note 14 in the con densed interim
consoli d ated financial statements.
Revenue
Fiscal 2012 second-quarter and first six months revenue decreased by $3 million and $4.8 million, at $39 million and $80.5 million,
respectively, compared to the same periods of prior year as a result of a decreased demand for services. Revenue from the European
operations in the local currency for the 2012 second quarter and the first six months amounted to €29.5 million and €59.4 million,
respectively, compared to €31.5 million and €62.7 million for the same periods of fiscal 2011.
Operating costs
Fiscal 2012 second-quarter and first six months operating costs decreased by $4.4 million and $6.7 million, at $33.5 million and $70.2
million, respectively, compared to the same periods of prior year as a result of PSU losses and lower marketing initiatives. Operating
costs of the European operations for the 2012 second quarter and the first six months in the local currency amounted to €25.3 million and
€51.7 million, respectively, compared to €28.4 million and €56.5 million for the same periods of fiscal 2011.
Quarters ended Six months ended
February 29, February 28, February 29, February 28,
2012 2011 2012 2011
($000) $ $ $ $
(unaudited)
(unaudited) (unaudited)
(unaudited)
Revenue 39,031 42,061
80,546 85,324
Operating costs
(1)
33,480 37,915 70,247 76,907
Depreciation and amortization 1,526 14,116 2,814 26,428
Operating i ncome (loss) 4,025 (9,970) 7,485 (18,011)
Financial income 44 52 155 78
Gain on disposal 48,215 – 48,215 –
Profit (loss) before income taxes 52,284 (9,918) 55,855 (17,933)
Income taxes 237 (695) 409 (551)
Profit (loss) for the period 52,047 (9,223) 55,446 (17,382)
FISCAL 2012 FINANCIAL GUIDELINES
Consolidated
Giving effect to the sale of its Portuguese subsidiary in the second quarter of fiscal 2012 and to the accelerated depreciation of certain
property, plant and equipment, the Corporation revised its guidelines for the 2012 fiscal year. Other Canadian operations guidelines were
essentially maintained as initially projected, except for the free cash flow described below. Management currently expects revenue to
reach $1,285 million, a reduction of $170 million from the projections issued on October 25, 2011. PSU progression should reduce to
80,000 from the 90,000 original projection. Operating income before amortization should decrease by $20 million to reach $580 million.
Operating margin should increase from 41.2% to 45.2%. Depreciation and amortization expense should increase from $235 million to
$270 million to take into consideration the accelerated depreciation of property, plant and equipment, partly offset by the sale of the
Portuguese subsidiary. Acquisitions of property, plant and equipment should be reduced by approximately $20 million and projected profit
for the year is expected to increase by $10 million to stand at approximately $235 million. Free cash flow should decrease by
approximately $15 million due to the impact of the 2011 federal budget measures limiting the tax deferrals resulting in an additional cash
outflow for the Corporation.
Revised
projections
Projections
April 11, 2012 Octobe r 25, 20 11
Fiscal 2012 Fiscal 2012
(in millions of dollars, except net customer additions and operating margin) $ $
Financial guidel ines
Revenue 1,285 1,455
Operating income before depreciation and amortization 580 600
Operating mar gin 45.2% 41.2%
Depreciation and amortization 270 235
Financial expense 65 65
Current income taxes expense 90 75
Profit for the year 235 225
Acquisitions of property, plant and equipment and intangible assets 340 360
Free cash flow 85 100
Net customer additions guidelines
PSU 80,000 90,000
(1)
(1) The PSU net additions projections amounts in terms of RGU to 225,000 net additions as presented in the Fiscal 2012 financial guidelines of the 2011 Annual
Report.
NON-IFRS FIN ANCI AL ME ASURES
This section describes non-IFRS financial measures from continuing operations used by Cogeco Cable throughout this MD&A. 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, 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 Six months end ed,
February 29,
February 28, February 29, February 28,
2012
2011 2012 2011
($000) $
$
$ $
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Cash flow from operating activities 120,961 88,420 134,768 138,229
Changes in non-cash operating activities (3,179) 23,712 59,489 82,358
Amortization of deferred transaction costs and disco unts on long-term debt 682 865 1,357 1,596
Income ta xe s pa id (received) 17,635 94 53,817 (2,736)
Current income tax recovery (ex pe nse) (26,206) 5,577 (45,696) (72,419)
Financial expense paid 9,517 20,114 29,547 40,500
Financial expense (14,788) (24,100)
(31,617) (40,783)
Cash flow from operations 104,622 114,682 201,665 146,745
Free cash flow is calculated as follows:
Quarters ended Six months end ed
February 29, Februa ry 28, February 29, February 28,
2012 2011 2012 2011
($000) $
$
$ $
(unaudited)
(unaudited)
(unaudited) (unaudited)
Cash flow from operations 104,622 114,682 201,665 146,745
Acquisition of property, plant and equipment (83,588)
(58,563)
(156,927) (113,342)
Acquisition of intangible assets (2,646)
(2,516)
(6,590) (5,754)
Free cash flow 18,388 53,603 38,148 27,649
Operating income before depreciation and a mortization 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 ar e calculated as follows:
Quarters ended Six month s ended
February 29,
February 28,
February 29, February 28,
2012
2011
2012 2011
($000, except percentages) $
$
$ $
(unaudited)
(unaudited)
(unaudited) (unaudited)
Operating income 59,491 80,426 126,490 156,143
Depreciation and amor tization 84,252 49,973 149,076 99,492
Operating income before depreciation and amortization 143,743 130,399 275,566 255,635
Revenue 317,735 293,457 633,159 580,661
Operating margin 45.2% 44.4% 43.5% 44.0%
ABOUT COGECO CABL E
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 Audio,
Analogue and Digital Television, as well as 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).
ADDITIONAL INFORMATION
For additional information relating to the Corporation, including its Annual Information Form, and for a detailed analysis of Cogeco Cable's
results for the second quarter of 2012, please refer to the Management Discussion and Analysis and condensed consolidated financial
statements of Cogeco Cable, available on the SEDAR website at www.sedar.com.
– 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: Thursday, April 12, 2012 at 11:00 a.m. (Eastern Da ylight 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: 1-866-321-8231
International Access Numbe r: 1-416-642-5213
Confirmation Code: 4637099
By Internet at www.cogeco.ca/investors
A rebroadcast of the conference call will be available until July 11, by dialling:
Canada and US access number: 1 888-203-1112
International access numbe r: + 1 647-436-0148
Confirmation code: 4637099