Cogeco 2009 Annual Report Download - page 80

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Consolidated financial statements COGECO CABLE INC. 2009 79
B) CAPITAL MANAGEMENT
The Corporation’s objectives in managing capital are to ensure sufficient liquidity to support the capital requirements of its various
businesses, including growth opportunities. The Corporation manages its capital structure and makes adjustments in light of general
economic conditions, the risk characteristics of the underlying assets and the Corporation’s working capital requirements.
Management of the capital structure involves the issuance of new debt, the repayment of existing debts using cash generated by
operations and the level of distribution to shareholders.
The capital structure of the Corporation is composed of shareholders’ equity, bank indebtedness, long-term debt and assets or
liabilities related to derivative financial instruments.
The provisions under the Term Facility provide for restrictions on the operations and activities of the Corporation. Generally, the
most significant restrictions relate to permitted investments and dividends on multiple and subordinate voting shares, as well as
incurrence and maintenance of certain financial ratios primarily linked to the operating income before amortization, financial expense
and total indebtedness. At August 31, 2009 and 2008, the Corporation was in compliance with all of its debt covenants and was not
subject to any other externally imposed capital requirements.
The following table summarizes certain of the key ratios used by management to monitor and manage the Corporation’s capital
structure:
11
2009 2008
1 1
NET INDEBTEDNESS(1) / SHAREHOLDERS’ EQUITY
1
1.0 0.9
NET INDEBTEDNESS(1) / OPERATING INCOME BEFORE AMORTIZATION
1
1.9 2.5
OPERATING INCOME BEFORE AMORTIZATION / FINANCIAL EXPENSE
1
7.5 6.4
1
(1) NET INDEBTEDNESS IS DEFINED AS THE TOTAL OF BANK INDEBTEDNESS, PRINCIPAL ON LONG-TERM DEBT AND OBLIGATIONS UNDER DERIVATIVE FINANCIAL
INSTRUMENTS, LESS CASH AND CASH EQUIVALENTS.
20. COMMITMENTS, CONTINGENCIES AND GUARANTEES
COMMITMENTS
As at August 31, 2009, the Corporation and its subsidiaries are committed under lease agreements and other long-term contracts to
make annual payments as follows:
(in thousands of dollars)
2010
$
2011
$
2012
$
2013
$
2014
$
2015 AND
THEREAFTER
$
LEASE AGREEMENTS
14,922
14,275
12,693
11,553
11,671
19,293
OTHER LONG-TERM CONTRACTS
4,982
1,068
697
680
754
3,750
19,904
15,343
13,390
12,233
12,425
23,043
CONTINGENCIES
The Corporation and its subsidiaries are involved in matters involving litigation arising out of the ordinary course and conduct of its
business. Although such matters cannot be predicted with certainty, management does not consider the Corporation’s exposure to
litigation to be significant to these financial statements.
GUARANTEES
In the normal course of business, the Corporation enters into agreements containing features that meet the criteria of a guarantee
including the following:
Stamp taxes and withholding taxes
During fiscal 2008, the Corporation issued letters of credit amounting to €1.7 million and €2 million to guarantee the payment by
Cabovisão of stamp taxes for the 2000 through 2002 years and withholding taxes for the 2004 year assessed by the Portuguese tax