Cogeco 2007 Annual Report Download - page 39

Management’s Discussion and Analysis COGECO CABLE INC. 2007 37
Cogeco Cable’s revenue has consistently grown over the last eight quarters mainly as a result of improved penetration of
HSI, Telephony, Basic Cable and Digital Television services, rate increases and the acquisition of Cabovisão during the fourth
quarter of fi scal 2006. Furthermore, Cogeco Cable has focussed on improving its quarterly operating income before
amortization and cash fl ow from operations compared to prior year. Management believes that this kind of consistent
fi nancial performance quarter over quarter leads to strong shareholder value creation.
FISCAL 2007 FISCAL 2006(1)
QUARTERS ENDED(2) NOV. 30 FEB. 28 MAY 31 AUG. 31 NOV. 30 FEB. 28 MAY 31 AUG. 31(1)
(In thousands of dollars, except
percentages and per share data) $ $ $ $ $ $ $ $
REVENUE 222,002 231,952 240,612 244,314 143,413 147,757 153,956 174,875
OPERATING COSTS 133,900 141,033 142,738 141,888 83,243 85,232 88,145 102,011
MANAGEMENT FEES—COGECO INC. 4,440 4,128 — — 2,868 2,957 2,567 —
OPERATING INCOME
BEFORE AMORIZATION 83,662 86,791 97,874 102,426 57,302 59,568 63,244 72,864
OPERATING MARGIN 37.7% 37.4% 40.7% 41.9% 40.0% 40.3% 41.1% 41.7%
INCOME BEFORE INCOME TAXES 18,132 19,668 29,323 29,738 15,443 17,136 20,562 21,689
NET INCOME 12,535 15,407 20,381 36,368 8,998 10,200 12,371 33,987
CASH FLOW FROM OPERATIONS 62,060 62,264 76,416 83,825 43,389 44,940 49,696 56,714
NET INCOME PER SHARE
BASIC 0.31 0.37 0.45 0.79 0.23 0.26 0.31 0.85
DILUTED 0.31 0.37 0.45 0.78 0.22 0.25 0.31 0.85
(1) INCLUDE OPERATING RESULTS OF CABOVISÃO SINCE THE DATE OF ACQUISITION OF CONTROL ON AUGUST 1, 2006.
(2) THE ADDITION OF QUARTERLY INFORMATION MAY NOT CORRESPOND TO THE ANNUAL TOTAL GIVEN ROUNDING.
2007 VS 2006 FOURTH QUARTER OPERATING RESULTS
Consolidated revenue rose by $69.4 million, or 39.7%, of which $30.4 million, or 19.3%, relates to Canadian operations
and is mainly attributable to improved HSI, Telephony, Basic Cable and Digital Television service penetration and implemented
rate increases. The Portuguese subsidiary’s revenue amounted to $55.9 million in the quarter mainly as a result of RGU
growth and rate increases. See the “Revenue” section of the Canadian and the Portuguese operations on pages 33 and 35,
respectively, for further discussion on rate increases.
Operating costs increased by $39.9 million, or 39.1%, of which $16.8 million, or 18.6%, are generated by the Canadian
operations. The rise in costs directly related to service customers is largely attributable to the RGU growth of 14% in fi scal
2007. For the fourth quarter, Cabovisão’s operating costs amounted to $35 million.
The consolidated operating income before amortization for the fourth quarter 2007 increased by $29.6 million to reach
$102.4 million, an increase of 40.6% compared to the same period the year before. Cabovisão’s operating income before
amortization for the fourth quarter 2007 amounted to $20.8 million.
For the fourth quarter 2007, operating income before amortization from the Canadian operations rose by $13.7 million, or
20.2%, compared to the same period last year as the increase in revenue outpaced the rise in operating costs. Cogeco
Cable’s operating margin from the Canadian operations increased slightly from 43% to 43.3% in the fourth quarter of
fi scal 2007. The Portuguese operations generated an operating margin of 37.3% for fi scal 2007. As a result, Cogeco
Cable’s fourth quarter operating margin increased from 41.7% in fi scal 2006 to 41.9% in fi scal 2007.
During the fourth quarter 2007, cash fl ow from operations reached $83.8 million, 47.8% higher than the comparable
period last year, primarily due to the increase in operating income before amortization, partly offset by the increase in
fi nancial expenses. Changes in non-cash operating items generated lower cash infl ows than the same period last year,
mainly as a result of a decrease in accounts payable and accrued liabilities.