Cogeco 2007 Annual Report Download - page 34

32 COGECO CABLE INC. 2007 Management’s Discussion and Analysis
Under the terms of the Term Facility and the Senior Secured Notes, Cogeco Cable has agreed to indemnify the other parties
against changes in regulation relative to withholding taxes and costs incurred by the lenders due to changes in laws. These
indemnifi cations extend for the term of the related fi nancings and do not provide any limit on the maximum potential
liability. The nature of the indemnifi cation agreement prevents the Corporation from estimating the maximum potential
liability it could be required to pay. As at August 31, 2007 and 2006, no liability associated with these indemnifi cations
has been recorded.
Furthermore, during fi scal 2007, the Corporation has guaranteed the payment by Cabovisão of certain taxes for municipal
rights of way assessed by the Municipality of Seixal in Portugal for the years 2004 and 2005, totalling ¤5.7 million (the Tax
Amounts), which are currently being challenged by Cabovisão. Trustworthy fi nancial guarantees were required under
applicable
Portuguese law in order for Cabovisão to challenge the Tax Amounts and withhold payment thereof until a fi nal
judgement, no longer subject to appeal, is rendered by the Portuguese courts having jurisdiction in this matter. As a result,
the Corporation may be required to pay, upon written demand by the Municipality of Seixal, the required amounts following
fi nal judgement, up to a maximum aggregate amount of ¤5.7 million, should Cabovisão fail to pay such required amounts.
Supplementary information on guarantees is presented in Note 17 on page 69.
Cogeco Cable’s contractual obligations as at August 31, 2007 are shown in the table below:
YEARS ENDED AUGUST 31, 2008 2009 2010 2011 2012 THERE- TOTAL
AFTER
(in thousands of dollars) $ $ $ $ $ $ $
LONG-TERM DEBT(1) 15,000 411,150 37,500 383,516 175,000 — 1,022,166
CAPITAL LEASE OBLIGATIONS(2) 2,648 2,052 1,312 387 — — 6,399
OPERATING LEASES AND OTHERS 19,835 18,549 13,218 10,723 10,165 18,441 90,931
OTHER LONG-TERM OBLIGATIONS(3) — — — — — — 279,461
TOTAL CONTRACTUAL OBLIGATIONS(4) 37,483 431,751 52,030 394,626 185,165 18,441 1,398,957
(1) INCLUDES PRINCIPAL REPAYMENTS AND THE IMPACT OF CROSS-CURRENCY SWAP AGREEMENTS, BUT EXCLUDES CAPITAL LEASES.
(2) INCLUDES PRINCIPAL REPAYMENTS AND FINANCIAL EXPENSE.
(3) OTHER LONG-TERM LIABILITIES REFLECTED ON COGECO CABLE’S BALANCE SHEET INCLUDE DEFERRED AND PREPAID INCOME, PENSION PLAN LIABILITIES AND
ACCRUED EMPLOYEE BENEFITS AND FUTURE INCOME TAX LIABILITIES. THE NATURE OF THOSE OBLIGATIONS PREVENTS THE CORPORATION FROM ESTIMATING AN
ANNUAL BREAKDOWN.
(4) ANNUAL BREAKDOWN EXCLUDES OTHER LONG-TERM OBLIGATIONS.
CANADIAN OPERATIONS
CUSTOMER STATISTICS
NET ADDITIONS % OF PENETRATION(1)
2007 2006 AUGUST 31
AUGUST 31, INITIAL
2007 ACTUAL GUIDANCE(2) ACTUAL 2007 2006
RGUs(3) 1,788,508 232,572 138,000 – 156,000 208,203 NA NA
BASIC CABLE SERVICE CUSTOMERS 849,157 15,980 3,000 – 6,000 11,744 NA NA
HSI SERVICE CUSTOMERS(4) 415,836 72,756 35,000 – 40,000 65,432 52.2 44.3
DIGITAL TELEVISION SERVICE CUSTOMERS 379,879 52,515 55,000 – 60,000 80,160 45.8 40.0
TELEPHONY SERVICE CUSTOMERS 143,636 91,321 45,000 – 50,000 50,867 21.7 10.4
(1) AS A PERCENTAGE OF BASIC CABLE SERVICE IN AREAS SERVED.
(2) ACCORDING TO THE FISCAL 2006 ANNUAL REPORT.
(3) REPRESENT THE SUM OF BASIC CABLE, DIGITAL TELEVISION, HSI AND TELEPHONY SERVICE CUSTOMERS.
(4) CUSTOMERS SUBSCRIBING ONLY TO HSI OR TELEPHONY SERVICES AMOUNTED TO 68,367 AS AT AUGUST 31, 2007 COMPARED TO 61,208 AS AT AUGUST 31, 2006.