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34 COGECO CABLE INC. 2006 Management’s Discussion and Analysis
FISCAL 2006 FISCAL 2005
QUARTERS ENDED(1) NOV. 30 FEB. 28 MAY 31 AUG. 31 NOV. 30 FEB. 28 MAY 31 AUG. 31
(in thousands of dollars, except
percentage and per share data) $ $ $ $ $ $ $ $
REVENUE 143,413 147,757 153,956 174,875 135,766 138,389 140,071 140,178
OPERATING COSTS 83,243 85,232 88,145 102,011 79,857 80,328 79,061 79,458
MANAGEMENT FEES –
COGECO INC. 2,868 2,957 2,567 — 2,715 2,764 2,700 —)
OPERATING INCOME
BEFORE AMORTIZATION 57,302 59,568 63,244 72,864 53,194 55,297 58,310 60,720
OPERATING MARGIN 40.0)% 40.3)% 41.1)% 41.7)% 39.2)% 40.0)% 41.6)% 43.3)%
INCOME BEFORE INCOME TAXES 15,443 17,136 20,562 21,689 7,056 9,469 12,960 17,256
NET INCOME 8,998 10,200 12,371 33,987 3,827 5,613 8,245 11,036
CASH FLOW FROM OPERATIONS 43,389 44,940 49,696 56,714 39,192 41,675 43,562 46,509
NET INCOME PER SHARE
BASIC 0.23 0.26 0.31 0.85 0.10 0.14 0.21 0.28
DILUTED 0.22 0.25 0.31 0.85 0.10 0.14 0.21 0.27
(1) THE ADDITION OF QUARTERLY INFORMATION MAY NOT CORRESPOND TO THE ANNUAL TOTAL GIVEN ROUNDING.
2006 VS 2005 FOURTH QUARTER OPERATING RESULTS
Consolidated revenue rose by $34.7 million, or 24.8%, of which $17.8 million or 12.7% relates to Canadian operations and
is mainly attributable to improved HSI, Digital Telephony, basic cable and Digital Television service penetration and implemented
rate increases. See the “Revenue” section on page 23 for further discussion on rate increases. The Portuguese subsidiary’s
one-month revenue amounted to $16.9 million in the quarter.
Operating costs increased by $22.6 million, or 28.4%, of which $10.7 million, or 13.4%, are for the Canadian operations.
The rise in customer care and technical operations expenses are largely attributable to the RGU growth of more than 15%
in fi scal 2006. On the other hand, costs of sales for equipment sold and IP transport costs for HSI services have declined.
For the fourth quarter, Cabovisão’s one-month operating costs amounted to $11.9 million.
The consolidated operating income before amortization for the fourth quarter 2006 increased by $12.1 million compared
to fi scal 2005. Cabovisão’s operating income before amortization for the fourth quarter 2006 amounted to $5 million.
For the fourth quarter 2006, operating income before amortization for the Canadian operations rose by 11.8%, compared
to the same period last year as the increase in revenue outpaced the rise in operating costs. Cogeco Cable’s operating
margin for the Canadian operations decreased slightly from 43.3% to 43% in the fourth quarter of fi scal 2006, as a result
of the roll-out of the Digital Telephony service. The Portuguese operations generated an operating margin of 29.5% in
August 2006. As a result, Cogeco Cable’s fourth quarter operating margin declined from 43.3% in fi scal 2005 to 41.7%
in fi scal 2006.
During the fourth quarter 2006, cash fl ow from operations reached $56.7 million, 21.9% higher than the comparable
period last year, primarily due to the increase in operating income before amortization. Changes in non-cash operating
items generated greater cash infl ows than the same period last year, mainly as a result of an increase in accounts payable
and accrued liabilities resulting from an increase in capital expenditures.