Cogeco 2011 Annual Report Download - page 38

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Management’s Discussion and Analysis (MD&A) COGECO CABLE INC. 2011 37
The following table shows the Canadian dollar equivalents of the Euro-denominated results of operations. Based on the Corporation’s
fiscal 2011 results of operations, a 10% change in the average exchange rate of the Euro currency into Canadian dollars would increase or
decrease the full-year results by the following amounts:
Year ended August 31, 2011 As reported
Exchange rate
impact
(in thousands of dollars) $ $
Revenue 172,277 17,228
Operating income before amortization 21,015 2,102
Impairment of goodwill and fixed assets 225,873 22,587
Net loss 244,736 24,474
Commitments and guarantees
Cogeco Cable’s contractual obligations as at August 31, 2011 are shown in the table below:
Years ended August 31, 2012 2013 2014 2015 2016 Thereafte
r
Total
(in thousands of dollars) $ $ $ $ $$$
Long-term debt(1) – – 410,000 – 201,875 355,000 966,875
Balance due on a business acquisition – 11,400 – – – – 11,400
Capital lease obligations(2) 2,251 871 7 – – – 3,129
Operating lease agreements and other
long-term contracts 26,670 24,286 18,294 17,260 16,961 29,945 133,416
Other long-term obligations(3) – – – – – – 4,302
Total contractual obligations(4) 28,921 36,557 428,301 17,260 218,836 384,945 1,119,122
(1) Includes principal repayments and the impact of cross-currency swap agreements but excludes capital lease obligations.
(2) Includes principal repayments and financial expense.
(3) Other long-term obligations reflected on Cogeco Cable’s balance sheet include pension plan liabilities and accrued employee benefits. The nature of those
obligations prevents the Corporation from estimating an annual breakdown.
(4) Annual breakdown excludes other long-term obligations.
In the normal course of business, Cogeco Cable enters into agreements containing features that meet the criteria for a guarantee.
In connection with the acquisition or sale of businesses or assets, in addition to possible indemnification relating to failure to perform covenants
and breach of representations and warranties, the Corporation has agreed to indemnify the seller or the purchaser against claims related to
events that occurred prior to the date of acquisition or sale. The term and amount of such indemnification will sometimes be limited by the
agreement. The nature of these indemnification agreements prevents the Corporation from estimating the maximum potential liability required
to be paid to guaranteed parties. In management’s opinion, the likelihood that a significant liability will be incurred under these obligations is
low. The Corporation has purchased directors and officers’ liability insurance with a deductible per loss. As at August 31, 2011 and 2010, no
liability associated with these indemnifications has been recorded.
Under the terms of the Senior Secured Notes, Cogeco Cable has agreed to indemnify the other parties against changes in regulation relative to
withholding taxes and costs incurred by the lenders due to changes in laws. These indemnifications extend for the term of the related
financings and do not provide any limit on the maximum potential liability. The nature of the indemnification agreement prevents the
Corporation from estimating the maximum potential liability it could be required to pay. As at August 31, 2011 and 2010, no liability associated
with these indemnifications has been recorded.
During fiscal 2008, 2010, and 2011, the Corporation issued letters of credit amounting to €1.7 million, €2.2 million, and €6.8 million to
guarantee the payment by Cabovisão of stamp taxes for the 2000 through 2002 years and stamp taxes and withholding taxes for the year 2005
and 2006 assessed by the Portuguese tax authorities, which are all currently being challenged by Cabovisão. Even though the principal
amounts in dispute are recorded as necessary in the books of its subsidiary Cabovisão, the Corporation may be required to pay the amounts
following final judgements, up to a maximum aggregate amount of €10.6 million ($15 million), should Cabovisão fail to pay such required
amounts.