Cogeco 2009 Annual Report Download - page 25

24 COGECO CABLE INC. 2009 Management’s discussion and analysis
PERFORMANCE HIGHLIGHTS
FINANCIAL RESULTS AND CASH FLOWS
For the 2009 fiscal year, Cogeco Cable achieved consolidated revenue growth of $141.1 million, or 13.1%, to attain $1,217.8 million.
The Canadian operations revenue rose by 18.2%, reaching $984.7 million, primarily due to increased RGU combined with rate
increases and the recent acquisitions in the second half of fiscal 2008. Revenue from the European operations amounted to
$233.1 million, representing a decline of 4.3% over the prior year due to the impact of retention strategies implemented to reduce
customer attrition despite the favourable impact of the appreciation of the Euro over the Canadian dollar. In the local currency,
revenue from the European operations fell by €14.6 million, or 9.1% when compared to the 2008 fiscal year. The average exchange
rate prevailing during fiscal 2009 was $1.5889 per Euro compared to $1.5098 per Euro during fiscal 2008. The fiscal 2009
consolidated revenue growth of 13.1% to attain $1,217.8 million surpasses the revised projection, issued on April 8, 2009, of
$1,205 million, which represented 11.9% revenue growth.
Consolidated operating income before amortization rose by $78.9 million, or 17.7% to reach $524.4 million. Operating income before
amortization from Canadian operations increased by $103.2 million, or 28.9%, reaching $460.3 million. These results are attributable
to RGU growth that surpassed the revised projections, various rate increases generating additional revenues in the Canadian
operations, and to the favourable impact of $19.8 million from the Part II licence fee settlement agreement described in the
“Operating and financial results” section on page 25, all of which outpaced other operating cost increases. The impact of the recent
acquisitions has also contributed to the increase in operating income before amortization in the Canadian operations. European
operations’ operating income before amortization amounted to $64.1 million, a decrease of $24.2 million or 27.4% when compared
to fiscal 2008. Operating income before amortization in the local currency for European operations amounted to €40.4 million,
representing a decline of €18.3 million, or 31.2% when compared to the prior year. Retention strategies combined with higher
promotional offers to meet competition and additional marketing efforts explained the lower operating income before amortization of
European operations. The consolidated fiscal 2009 operating income before amortization of $524.4 million surpasses the revised
projection of $500 million issued on April 8, 2009
Amortization expense increased by $42.1 million to reach $270.4 million, mainly due to additional capital expenditures arising from
customer premise equipment acquisitions to sustain RGU growth, to the recent acquisitions in Canada and to the appreciation of the
Euro currency over the Canadian dollar. Amortization expense for the 2009 fiscal year was in line with the Corporation’s revised
projections of $270 million.
Financial expense increased by $0.6 million to reach $69.7 million, mainly due to the recent acquisitions, partly offset by interest rate
reductions and free cash flow generated that was used to reduce Indebtedness. Financial expense for the 2009 fiscal year was in
line with management’s revised guideline of $70 million.
During the fiscal year, the Corporation recorded a $399.6 million non-cash impairment loss on its investment in Cabovisão as a
result of recurring competitive pressure resulting in subscriber losses that were more severe than originally anticipated.
Cogeco Cable reports a net loss of $256.7 million, primarily due to the impairment loss of $383.6 million net of related income taxes.
The net loss for fiscal 2009 was also affected by an unfavourable impact of $6.1 million from the utilization of Cabovisão’s pre-
acquisition tax losses and a favourable impact from reduction of withholding and stamp tax contingent liabilities in the amount of
$16.1 million, both in Cabovisão, and a favourable impact of $13.4 million from the Part II licence fee settlement agreement net of
related income taxes. Excluding the impact of these items, adjusted net income
(1)
would have amounted to $103.6 million for the
year. The fiscal 2009 net loss of $256.7 million compares favourably to the revised projection issued on April 8, 2009 of a net loss of
$275 million.
Capital expenditures, including assets acquired under capital leases, and the increase in deferred charges amounted to
$305.3 million, were primarily the result of RGU growth driven by increased interest for HD technology in Canada, the continued
deployment of Digital Television in Portugal and expansions and improvements to the network infrastructure during the year. Capital
expenditures and the increase in deferred charges for the current year were slightly above the revised projections of $300 million.
Free cash flows of $95.4 million were generated as a result of an increase in operating income before amortization, partly offset by
an increase in capital expenditures to support RGU growth. Fiscal 2009 free cash flow was $15.4 million higher than the $80 million
revised target issued on April 8, 2009.
(1) ADJUSTED NET INCOME DOES NOT HAVE A STANDARDIZED DEFINITION PRESCRIBED BY CANADIAN GAAP AND THEREFORE, MAY NOT BE COMPARABLE TO SIMILAR
MEASURES PRESENTED BY OTHER COMPANIES. FOR FURTHER DETAILS, PLEASE CONSULT THE “NON-GAAP FINANCIAL MEASURES” SECTION ON PAGE 37.