Cogeco 2009 Annual Report Download - page 29

28 COGECO CABLE INC. 2009 Management’s discussion and analysis
share
(1)
, compared to $109.3 million, or $2.25 per share in 2008, decreases of 5.2% and 5.3%, respectively. Please consult the
“Non-GAAP financial measures” section for further details. Net income reduction has resulted from the decline of the European
operations’ financial results, partly offset by the growth in the Canadian operations’ financial results.
In fiscal 2009, the Corporation obtained a negative return on equity
(2)
of 22% due to the impairment loss recorded on the
Corporation’s investment in Cabovisão as a result of recurring competitive pressure resulting in subscriber losses in Portugal that
were more severe than originally anticipated. On the basis of fiscal 2009 adjusted net income, return on equity would have
amounted to 7.7%.
CASH FLOW ANALYSIS
YEARS ENDED AUGUST 31, 2009 2008
(in thousands of dollars) $ $
OPERATING ACTIVITIES
CASH FLOW FROM OPERATIONS 400,725 360,402
CHANGES IN NON-CASH OPERATING ITEMS
30,963 32,481
431,688 392,883
INVESTING ACTIVITIES(1)
(300,261) (485,663)
FINANCING ACTIVITIES(1)
(128,348) 63,672
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS DENOMINATED IN FOREIGN CURRENCIES
8 1,271
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,087 (27,837)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 36,371 64,208
CASH AND CASH EQUIVALENTS, END OF YEAR 39,458 36,371
(1) EXCLUDES ASSETS ACQUIRED UNDER CAPITAL LEASES.
OPERATING ACTIVITIES
Cash flow from operations was greater than fiscal 2008 by $40.3 million, or 11.2%, to reach $400.7 million primarily due to the
growth in operating income before amortization, partly offset by the growth in current income tax expense. Changes in non-cash
operating items resulted in cash inflows of $31 million for fiscal 2009, mainly as a result of an increase in accounts payable and
accrued liabilities which was offset by the Part II licence fee settlement agreement, and an increase in income tax liabilities. The
cash inflows of $32.5 million in the prior year were mainly due to increases in accounts payable and accrued liabilities and in income
tax liabilities.
INVESTING ACTIVITIES
FISCAL 2009 ADJUSTMENTS RELATED TO A FISCAL 2008 BUSINESS ACQUISITION
In fiscal 2009, management has finalized the purchase price allocation for the acquisition of CDS. The final allocation resulted in an
increase in future income tax assets of $0.4 million as well as a decrease in future income tax liabilities of $0.3 million. The net
impact of these adjustments combined with an increase in acquisition costs of $0.1 million, reduced goodwill by $0.6 million at
August 31, 2009.
BUSINESS ACQUISITIONS IN FISCAL 2008
On March 31, 2008, the Corporation completed the acquisition of all the assets of MaXess Networx®, ENWIN Energy Ltd.’s (City of
Windsor’s energy company) telecommunications division for a total consideration of $15.6 million. MaXess Networx® operates a
broadband network equipped with next generation ATM and Ethernet technology and provides organizations in south-western
(1) ADJUSTED EARNINGS PER SHARE 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.
(2) RETURN ON EQUITY IS DEFINED AS NET INCOME DIVIDED BY AVERAGE SHAREHOLDERS’ EQUITY (COMPUTED ON THE BASIS OF THE BEGINNING AND ENDING BALANCE
FOR A GIVEN FISCAL YEAR).