Cogeco 2012 Annual Report Download - page 35

34 COGECO CABLE INC. 2012 Management’s Discussion and Analysis (MD&A)
FOURTH-QUARTER OPERATING RESULTS
OPERATING RESULTS
Cable services Enterprise services
Inter-segment
eliminations and
other(1) Consolidated
Quarters ended August 31, 2012 2011 Change 2012 2011 Change 2012 2011 2012 2011 Change
(in thousands of dollars, except percentages) $$% $$%$$$ $
%
Revenue 301,992 286,457 5.4 23,133 19,354 19.5 (357) –324,768 305,811 6.2
Operating expenses 148,725 139,948 6.3 11,876 11,509 3.2 3,342 2,775 163,943 154,232 6.3
Operating income before depreciation and
amortization 153,267 146,509 4.6 11,257 7,845 43.5 (3,699) (2,775) 160,825 151,579 6.1
Operating margin 50.8% 51.1% 48.7% 40.5% – –49.5% 49.6%
(1) The inter-segment eliminations and other eliminate any intercompany transactions included in each segment’s results and include head office activities.
Fiscal 2012 fourth-quarter consolidated revenue improved by $19 million, or 6.2%, to reach $324.8 million, when compared to the prior year.
For the fourth-quarter ended August 31, 2012, consolidated operating expenses increased by $9.7 million, or 6.3%, at $163.9 million. As a
result, consolidated operating income before depreciation and amortization increased by $9.2 million, or 6.1%, to reach $160.8 million and
consolidated operating margin slightly decreased to 49.5% compared to 49.6% in the fourth quarter of fiscal 2011.
CABLE SERVICES
Customer statistics
Net additions (losses)
Quarters ended August 31,
2012 2011
PSU 6,959 19,740
Television service customers(1) (5,758) (1,369)
HSI service customers 5,682 7,746
Telephony service customers 7,035 13,363
(1) The net losses of Television service customers includes net additions of 5,918 Digital Television service customers.
Fiscal 2012 fourth-quarter PSU net additions were lower than in the comparable period of the prior year mainly as a result of category maturity,
competitive offers and tightening of our credit controls and processes. Fourth quarter net customer losses for Television service customers
stood at 5,758 when compared to 1,369 for the same period of the prior year due to the end of the school year for college and university
students as well as the intense competition driving the telecommunications industry. Telephony service customers grew by 7,035 compared to
13,363 for the same period last year, and the number of net additions to the HSI service stood at 5,682 compared to 7,746 customers for the
same period of the prior year. HSI and Telephony net additions continue to stem from the enhancement of the product offering, the impact of
the bundled offer (Cogeco Complete Connection) of Television, HSI and Telephony services, and promotional activities. Additions to the Digital
Television service which are included in the Television service customers, stood at 5,918 compared to 29,464 for the comparable period of the
prior year. Digital Television service net additions are due to the deployment of Digital Terminal Adapters technology to migrate customers from
analogue to digital services, the targeted marketing initiatives to improve penetration, the launch of new HD channels and the continuing
interest for HD television service.
Operating results
Driven by PSU growth combined with rate increases in June and July 2012, fourth-quarter revenue went up by $15.5 million, or 5.4%, to reach
$302 million.
Fiscal 2012 fourth-quarter operating expenses increased by $8.8 million, or 6.3%, at $148.7 million mainly attributable to the PSU growth, the
launch of new HD channels, additional programming costs and deployment and support costs related to the migration of Television service
customers from analogue to digital.
The operating income before depreciation and amortization increased by $6.8 million, or 4.6%, and the operating margin decreased to 50.8%
from 51.1%.