Cogeco 2012 Annual Report Download - page 82

Consolidated financial statements COGECO CABLE INC. 2012 81
Acquisition of Atlantic Broadband
On July 18, 2012, the Corporation announced an agreement to acquire all of the shares of Atlantic Broadband ("Atlantic") an independent
cable system operator formed in 2003 which, at August 31, 2012, was serving about 251,000 Television service customers providing
Analogue and Digital Television, as well as HSI and Telephony services. The transaction is valued at US$1.36 billion and expected to be
financed through a combination of cash on hand, a draw-down on its existing Term Revolving Facility of approximately US$550 million and
US$660 million of borrowings under a new committed non-recourse debt financing at Atlantic Broadband. At August 31, 2012, Atlantic is
ranked as the 13th largest cable carrier in the United States and provides services in Pennsylvania, Florida, Maryland, Delaware and South
Carolina. The transaction is subject to usual closing conditions, including Hart-Scott-Rodino approval (antitrust), Federal Communications
Commission (“FCC”) approval, state and local regulatory approvals and other customary conditions. The Corporation expects the
transaction to be completed by the end of calendar 2012.
B. CONTINGENCIES
The Corporation and its subsidiaries are involved in matters involving litigation arising out of the ordinary course and conduct of its
business. Although such matters cannot be predicted with certainty, management does not consider the Corporation’s exposure to
litigation to be significant to these financial statements.
C. GUARANTEES
In the normal course of business, the Corporation enters into agreements containing features that meet the criteria of a guarantee
including the following:
Business acquisitions and asset disposals
In connection with the acquisition or sale of a business 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. At
August 31, 2012 and 2011, no liability has been recorded associated with these indemnifications.
Long-term debt
Under the terms of the Senior Secured Notes, the Corporation has agreed to indemnify the other parties against changes in regulations
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. At August 31, 2012 and 2011, no liability has
been recorded associated with these indemnifications.
24. GOVERNMENT ASSISTANCE
In 2012, the Corporation recorded tax credits related to research and development costs in the amount of $1,144,000 ($790,000 in 2011).
These credits were accounted for as a reduction of the property, plant and equipment for an amount of $382,000 ($246,000 in 2011) and
as a reduction of operating expenses for an amount of $762,000 ($544,000 in 2011).
25. SUBSEQUENT EVENT
On October 26, 2012, the Corporation amended its Term Revolving Facility. Under the term of the amendment, the maturity will be
extended by an additional year and consequently, the Term Revolving Facility will mature on November 22, 2017.