Cogeco 2002 Annual Report Download - page 17

Cogeco Cable Inc.
16
F o r w a rd-Looking Financial
E x p e c t a t i o n s
The forward-looking statements below involve risks and
uncertainties. Future results will be affected by a number
of factors pertaining to technology, markets, competition
and regulation, including those described in the
uncertainties and main risk factors section of this
management’s discussion and analysis. There f o re, actual
results may be materially different from those expressed
or implied by such forward-looking statements.
The loss in basic cable customers should be more modest
in fiscal year 2003, as Cogeco Cable will have complet-
ed its digital rollout in Quebec to 95% of homes passed
by the end of November 2002, from 85% of homes
passed as of August 31, 2002. Progressive improvements
to Cogeco Cable’s marketing strategy will also
contribute to lessen customer loss. The increased s u b-
scriptions for bundled services, as well as the upcoming
launch of VOD and iTV, will further improve customer
retention and make cable services a more competitive
o ffering as a whole. However, the strength of the
competition in the regions served by Cogeco Cable
could compromise the attainment of this objective.
Based on current demand, the Corporation forecasts
that it will add 55,000 high-speed Internet customers and
25,000 digital terminals by August 31, 2003.
In fiscal year 2003, the Corporation expects to achieve
internal revenue growth of 5%. Internal revenue growth
should stem mainly from the 2002 rate increases for the
high-speed Internet service and Quebec basic service,
from the growth in penetration of high-speed Internet
and digital services, and from the introduction of VOD
and iTV services. Cogeco Cable expects to achieve 6%
growth in operating income before depreciation and
amortization by maintaining tight control over expenses
and by continuing with its process improvement initiatives.
In fiscal year 2003, Cogeco Cable expects that
d e p r eciation of fixed assets and amortization of
d e f e r r ed charges will increase by 10% over fiscal
year 2002. This growth rate should be mainly the result of
the relatively rapid depreciation of deferred charg e s
related to customer subsidies, compared to other cate-
g o r i e s of fixed assets, and of the full-year impact of the
d e p reciation of fixed assets acquired during the 2002
fiscal year. The deferred charges mostly relate to digital
terminal subsidies as more customers are purchasing
digital terminals. In fiscal year 2003, management
expects that capital expenditures and deferred charges
will total $119 million, and that they will be financed by
Cash Flow. Free Cash Flow( 1 ) will be positive and gro w i n g
t h e re a f t e r.
Financial expense is expected to climb by 6% in fiscal year
2003 due to the following: the higher average interest rate
on Senior Secured Notes issued on November 1, 2001 and
the increases in interest rates on the Te rm Facility.
(1) The Corporation defines “Free Cash Flow” as excess of Cash Flow over the sum of capital expenditures and deferred charges.