Cogeco 2005 Annual Report Download - page 25

CASH FLOW ANALYSIS
Years ended August 31, 2005 2004
(in thousands of dollars) $$
Operating activities
Cash flow from operations 170,938 144,778
Net changes in non-cash
operating items 23,657 4,302
194,595 149,080
Investing activities
(1)
(123,703) (98,602)
Financing activities (70,831) (50,478)
Net change in cash
and cash equivalents and cash
and cash equivalents at end 61 —
(1)
Excludes assets acquired under capital leases.
Operating Activities
Cash flow from operations was greater than last year by $26.2 million
or 18.1%, mainly due to the growth in Operating Income and to
a decline in the financial expense.
The impact of changes in non-cash operating items amounted to
a cash inflow of $23.7 million in fiscal 2005, compared to a cash
inflow of $4.3 million in fiscal 2004. The increased cash inflow from
non-cash operating items is mainly related to an increase in accounts
payable and accrued liabilities of $15.7 million as a result of the
capital expenditure program completed late in fiscal 2005 compared
to a decline of $0.2 million in fiscal 2004. On a per share basis,
cash flow from operations increased from $3.63 in fiscal 2004
to $4.28 in fiscal 2005, mainly as a result of improved Operating
Income and to a decline in the financial expense.
Investing Activities
Investing activities related to capital expenditures and deferred
charges increased from $101.2 million in fiscal 2004 to $125.7 million
in fiscal 2005. Of these amounts, assets acquired under capital
leases amounted to $1.9 million in fiscal 2005 and $2.6 million
in fiscal 2004.
Capital Expenditures
Capital expenditures, segmented according to the National Cable
Television Association (NCTA) standard reporting categories,
are as follows:
Years ended August 31, 2006 2005 2004
(in thousands of dollars) Guidelines
(1)
$$$
Customer premise equipment
(2)
34,200 44,526 27,988
Scalable infrastructure
(3)
23,000 19,363 16,415
Line extensions 11,500 10,416 10,157
Upgrade/rebuild 40,100 34,096 20,893
Support capital 10,500 3,888 5,769
Total capital expenditures
(4)
119,300 112,289 81,222
(1)
See “Fiscal 2006 Financial Guidelines” section for further discussion on page 28.
(2)
Includes mainly new and replacement drops but also digital terminals,
cable modems and multimedia terminal adapters for telephony.
(3)
Includes headend equipment and expenditures related to telephony transport.
(4)
Includes capital leases that are excluded in the statements of cash flow.
In fiscal 2005, the variances related to capital expenditures are mainly
attributable to the following factors:
• Expenditures associated with the network upgrade and rebuild
program rose by $13.2 million due to the acceleration of
the program to expand the bandwidth to 750 MHz and 550 MHz
for the Ontario and Québec networks, respectively, and to
improvements in network reliability. An increase in the number
of households with access to two-way service was also a factor.
The percentage of customers with access to two-way service rose
from 87% as of August 31, 2004 to 89% as of August 31, 2005.
• The increase in customer premise equipment mainly results from
a rise in expenditures related to digital terminals and to telephony
equipment. The number of digital terminals rented to customers
increased as a result of an attractive rental plan launched during
the fourth quarter of fiscal 2004 and a greater number of terminals
purchased at year-end.
The increase in capital expenditures during fiscal 2006 will stem
mainly from a $11.5 million increase in expenditures related to
digital telephony (compared to $4.8 million in fiscal 2005) and
from a $4.5 million increase (excluding telephony expenditures)
in support capital mainly for improvements in information systems.
These increases should be partially offset by a $10.4 million decline
in expenditures as a result of a greater number of digital terminals
purchased at the end of fiscal year 2005.
In the coming years, capital expenditures and subsidies related to
cable modems and digital terminals are expected to decrease as unit
prices continue to decline and as such devices are increasingly
integrated in Consumer Electronics products such as PCs, television
sets and DVDs.
Cogeco Cable Inc. 2005
23
Management’s Discussion and Analysis