Cogeco 2010 Annual Report Download - page 42

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Management’s Discussion and Analysis (MD&A) COGECO CABLE INC. 2010 41
Free cash flow is calculated as follows:
Quarters ended August 31, Years ended August 31,
2010 2009
(1)
2010 2009
(1)
(in thousands of dollars) $ $ $ $
Cash flow from operations 127,024 108,631 494,814 384,206
A
cquisition of fixed assets (105,219) (89,069) (308,908) (273,360)
Increase in deferred charges (2,580) (2,462) (10,633) (10,773)
A
ssets acquired under capital leases – as per note 16 B) on page 66 – (2,341) (141) (4,661)
Free cash flow 19,225 14,759 175,132 95,412
(1) Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
application of the CICA Handbook Section 3064. Please refer to the “Critical accounting policies and estimates” section on page 11 for more details.
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 flow 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 income 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:
Quarters ended August 31, Years ended August 31,
2010 2009
(1)
2010 2009
(1)
(in thousands of dollars, except percentages) $ $ $ $
Operating income 74,481 75,624 251,225 251,799
A
mortization 63,696 68,268 258,871 256,077
Operating income before amortization 138,177 143,892 510,096 507,876
Revenue 324,323 307,807 1,281,376 1,217,837
Operating margin 42.6% 46.7% 39.8% 41.7%
(1) Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
application of the CICA Handbook Section 3064. Please refer to the “Critical accounting policies and estimates” section on page 11 for more details.
Adjusted net income and adjusted earnings per share
Adjusted net income and adjusted earnings per share are used by Cogeco Cable’s management and investors to evaluate what would have
been the net income and earnings per share excluding the impairment of goodwill and intangible assets, non-recurring tax adjustments and the
Part II licence fee favourable settlement agreement. This allows the Corporation to isolate the unusual adjustments in order to evaluate net
income and earnings per share from ongoing activities.