Cogeco 2008 Annual Report Download - page 35

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34 COGECO CABLE INC. 2008 Management’s Discussion and Analysis
Free cash flow is calculated as follows:
YEARS ENDED AUGUST 31, 2008 2007
(in thousands of dollars) $ $
CASH FLOW FROM OPERATIONS 360,402 284,565
ACQUISITION OF FIXED ASSETS (228,441) (220,882)
INCREASE IN DEFERRED CHARGES (27,596) (30,042)
ASSETS ACQUIRED UNDER CAPITAL LEASES — AS PER NOTE 16 B) ON PAGE 65 (5,475) (3,084)
FREE CASH FLOW 98,890 30,557
OPERATING INCOME BEFORE AMORTIZATION AND OPERATING MARGIN
Operating income before amortization is used by Cogeco Cable’s management and investors to assess the Corporation’s ability to
seize growth opportunities in a cost effective manner, to finance its ongoing operations and to service its debt. Operating income
before amortization is a proxy for cash flows from operations excluding the impact of the capital structure chosen, and is one of the
key metrics used by the financial community to value the business and its financial strength. Operating margin is a measure of the
proportion of the Corporation's revenue which is left over, before taxes, to pay for its fixed costs, such as interest on Indebtedness.
Operating margin is calculated by dividing operating income before amortization by revenue.
The most comparable Canadian GAAP financial measure is operating income. Operating income before amortization and operating
margin are calculated as follows:
YEARS ENDED AUGUST 31, 2008 2007
(in thousands of dollars, except percentages) $ $
OPERATING INCOME 217,125 181,430
AMORTIZATION 228,299 189,323
OPERATING INCOME BEFORE AMORTIZATION 445,424 370,753
REVENUE 1,076,787 938,880
OPERATING MARGIN 41.4% 39.5%