Cogeco 2011 Annual Report Download - page 44

Management’s Discussion and Analysis (MD&A) COGECO CABLE INC. 2011 43
Operating results
Canada Europe Consolidated
Quarters ended August 31, 2011 2010 2011 2010 2011 2010
(in thousands of dollars, except percentages) $ $ $ $ $ $
Revenue 306,862 282,155 43,306 42,168 350,168 324,323
Operating costs 155,352 152,034 36,718 34,112 192,070 186,146
Operating income before amortization 151,510 130,121 6,588 8,056 158,098 138,177
Operating margin 49.4% 46.1% 15.2% 19.1% 45.1% 42.6%
Fiscal 2011 fourth-quarter consolidated revenue improved by $25.8 million, or 8%, to reach $350.2 million, when compared to the prior year.
Driven by RGU growth combined with an increase in rentals of home terminal devices stemming from the strong growth in Digital Television
services and rate increases, fourth-quarter Canadian operations revenue went up by $24.7 million, or 8.8%, to reach $306.9 million. Fiscal
2011 fourth-quarter European operations revenue increased by $1.1 million, or 2.7%, at $43.3 million as a result of a higher average exchange
rate for the Euro when compared to the same quarter of the prior year, which offset the decline in the number of Basic Cable service customers
in the fourth quarter of fiscal 2011 compared to fiscal 2010. The average exchange rate prevailing during the fourth quarter of fiscal 2011 used
to convert the operating results of the European operations was $1.3932 per Euro compared to $1.3154 per Euro for the comparable period of
fiscal 2010. Revenue from the European operations in the local currency for the fourth quarter amounted to €31.1 million, a decrease of
€1 million, or 3.1% when compared to the prior year.
For the fourth quarter of fiscal 2011, operating costs increased by $5.9 million at $192.1 million, an increase of 3.2% when compared to the
prior year. The increase in operating costs is mainly attributable to servicing additional RGU, the launch of new HD channels and additional
marketing initiatives in the Canadian operations, combined with the impact in the European operations of the higher value of the Euro in
relation to the Canadian dollar.
Fiscal 2011 fourth-quarter operating income before amortization increased by $19.9 million, or 14.4%, to reach $158.1 million, as a result of the
growth in revenue exceeding the increase in operating costs. The operating margin in Canada increased to 49.4% from 46.1%, stemming from
rate increases and RGU growth. The European operating margin decreased to 15.2% from 19.1%. The consolidated operating margin for the
fourth quarter increased to 45.1% compared to 42.6% in the fourth quarter of fiscal 2010.
Cash flow analysis
Quarters ended August 31, 2011 2010
(in thousands of dollars) $ $
Operating activities
Cash flow from operations 153,351 127,024
Changes in non-cash operating items 66,158 67,390
219,509 194,414
Investing activities(1) (261,058) (107,776)
Financing activities(1) 755 (65,204)
Effect of exchange rate changes on cash and cash equivalents denominated in a foreign currency 150 402
Net change in cash and cash equivalents (40,644) 21,836
Cash and cash equivalents, beginning of period 96,091 14,006
Cash and cash equivalents, end of period 55,447 35,842
(1) Excludes assets acquired under capital leases.
During the fourth quarter of 2011, cash flow from operations reached $153.4 million, 20.7% higher than the comparable period last year,
primarily due to the growth in operating income before amortization and the increase in current income tax recovery stemming from the
modifications to the corporate structure which reduced the future income tax expense accordingly. Changes in non-cash operating items
generated cash inflows of $66.2 million, mainly as a result of increases in accounts payable and accrued liabilities, partly offset by a decrease
in income tax liabilities. In the fourth quarter of the prior year, cash inflows of $67.4 million mainly stemmed from an increase in accounts
payable and accrued liabilities.