Cogeco 2012 Annual Report Download - page 26

Management’s Discussion and Analysis (MD&A) COGECO CABLE INC. 2012 25
ACQUISITIONS OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE AND OTHER ASSETS
Investing activities, including acquisition of property, plant and equipment segmented according to the National Cable Television Association
(“NCTA”) standard reporting categories, are as follows:
Years ended August 31, 2012 2011
(in thousands of dollars) $$
Customer premise equipment(1) 93,186 89,452
Scalable infrastructure(2) 131,228 72,549
Line extensions 18,073 14,993
Upgrade / Rebuild 24,039 41,090
Support capital 34,000 35,693
A
cquisition of property, plant and equipment - Cable services 300,526 253,777
A
cquisition of property, plant and equipment - Enterprise services 59,055 37,892
A
cquisitions of property, plant and equipment 359,581 291,669
A
cquisition of intangible and other assets - Cable services 12,087 10,872
A
cquisition of intangible and other assets - Enterprise services 3,700 
A
cquisitions of intangible and other assets 15,787 10,872
(1) Includes mainly home terminal devices as well as new and replacement drops.
(2) Includes mainly head-end equipment, digital video and telephony transport as well as HSI equipment.
Fiscal 2012 acquisition of property, plant and equipment amounted to $359.6 million, an increase of 23.3% when compared to $291.7 million in
the prior year. In the Cable services, acquisition of property, plant and equipment amounted to $300.5 million, an increase of 18.4% when
compared to $253.8 million in the prior year. The increases in the Cable services segment included mainly the following factors:
 An increase in customer premise equipment to support PSU and Digital Television growth including the conversion of customer
service from analogue to digital;
 An increase in scalable infrastructure to extend and improve network capacity and to deploy advanced technologies such as
DOCSIS 3.0 and SDV in existing areas served;
 An increase in line extensions to extend territories and reach new customers;
 A decrease in network upgrades and rebuilds reflecting the timing of initiatives; and
 Support capital remained essentially at the same level of spending stemming from the construction and acquisition of new facilities.
Fiscal 2012 acquisition of property, plant and equipment in the Enterprise services amounted to $59.1 million, an increase of 55.9% when
compared to $37.9 million in the prior year. The increases included the capital expenditures from the recent acquisitions of QTI and MTO as
well as capital expenditures in data centre facilities and expansion of territories in order to serve potential new customers.
Acquisition of intangible and other assets are mainly attributable to reconnect and additional service activation costs as well as other customer
acquisition costs. For fiscal 2012, the acquisition of intangible and other assets amounted to $15.8 million compared to $10.9 million for 2011
fiscal year.
FREE CASH FLOW AND FINANCING ACTIVITIES
For fiscal 2012, free cash flow amounted to $66.3 million, $48.5 million or 42.2% lower than in fiscal 2011. The decline in free cash flow when
compared to fiscal 2011 is mostly due to an increase of $72.8 million in acquisitions of property, plant and equipment, intangible and other
assets and the increase of $22.7 million in current income tax expense stemming primarily from the fiscal 2011 modifications to the corporate
structure, partly offset by the increase of $43.7 million in operating income before depreciation and amortization in the current fiscal year.
During fiscal 2012, higher Indebtedness level provided for a cash increase of $85.7 million, mainly due to the issuance, on February 14, 2012,
of $200 million Senior Secured Debentures Series 3 (“Fiscal 2012 debentures”) for net proceeds of $198.1 million which was used to repay the
$110 million Term Revolving Facility.
During fiscal 2011, higher Indebtedness level provided a cash increase of $4.3 million, through the repayment of the $175 million Senior
Secured Notes Series B and the related make-whole premium on early repayment, combined with net repayment of $16.2 million on the
Corporation’s Term Revolving Facility. The Senior Secured Notes Series B were repaid from the net proceeds of $198.3 million as a result of
the issuance, on November 16, 2010, of Senior Secured Debentures Series 2.
In fiscal 2012, quarterly dividends of $0.25 per share, totalling $1 per share were paid, for a total of $48.7 million. In fiscal 2011, total dividends
of $0.71 per share comprised of quarterly dividends of $0.17 per share in the first three quarters of the year and a dividend of $0.20 per share
in the last quarter were paid, for a total of $34.5 million. The 40.8% per share increase in the total dividends in fiscal 2012 reflects the
progression of the Corporation’s financial results.