Cogeco 2011 Annual Report Download - page 46

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Management’s Discussion and Analysis (MD&A) COGECO CABLE INC. 2011 45
Cogeco Cable expects the amortization of capital assets and deferred charges to decrease by $12 million for fiscal 2012, mainly from the
impairment loss in the third quarter of fiscal 2011 in the European operations, partly offset by capital expenditures and deferred charges related
to RGU growth and other initiatives of fiscal 2012 in the Canadian operations, by the full year impact of those of fiscal 2011 and by the recent
acquisitions of Quiettouch and MTO. Cash flows from operations should finance capital expenditures and the increase in deferred charges
amounting to $360 million, an increase of $23 million over fiscal 2011. Capital expenditures projected for the 2012 fiscal year are mainly due to
customer premise equipment required to support RGU growth, scalable infrastructure for product enhancements and the deployment of new
technologies, line extensions to expand existing territories, and support capital to improve business information systems and support facility
requirements.
Fiscal 2012 free cash flow is expected to amount to $100 million, $4 million, or 3.8%, lower than the free cash flow of $104 million in 2011,
resulting from the increases in capital expenditures and increase in deferred charges and in current income tax expense, which are expected to
offset the growth in operating income before amortization. Generated free cash flow should be used primarily to reduce Indebtedness, thus
improving the Corporation’s leverage ratios. Financial expense will be reduced to $65 million from $72 million in fiscal 2011, as a result of an
anticipated decrease in Indebtedness and the one-time make-whole premium on the early repayment, in fiscal 2011, of the Senior Secured
Notes Series B, partly offset by a slight increase in the Corporation’s cost of debt reflecting current market conditions. As a result, net income of
approximately $225 million should be achieved compared to a net loss of $48 million in fiscal 2011. Fiscal 2012 projected net income
represents an increase of $47 million when compared to the adjusted net income of $178 million in fiscal 2011, which excludes the impact of
the non-cash impairment loss of $226 million in the European operations.
Consolidated
Projections
Fiscal 2012
Preliminary
Projections
July 6, 2011
Fiscal 2012
Actual
Fiscal 2011
(in millions of dollars, except percentages and RGU growth) $ $ $
Financial guidelines
Revenue 1,455 1,420 1,361
Operating income before amortization 600 580 566
Operating margin 41.2% 40.8% 41.6%
A
mortization 235 220 247
Financial expense 65 60 72
Current income taxes 75 75 63
Net income (loss) 225 225 (48)
Capital expenditures and increase in deferred charges 360 350 337
Free cash flow 100 95 104
Net customer addition guidelines
RGU growth 225,000 225,000 228,111
Non-GAAP financial measures
This section describes non-GAAP financial measures used by Cogeco Cable throughout this MD&A. It also provides reconciliations between
these non-GAAP measures and the most comparable GAAP financial measures. These financial measures do not have standard definitions
prescribed by Canadian GAAP and therefore, may not be comparable to similar measures presented by other companies. These measures
include “cash flow from operations”, “free cash flow”, “operating income before amortization”, “operating margin”, “adjusted net income” and
“adjusted earnings per share”.