Cogeco 2013 Annual Report Download - page 69

68 COGECO CABLE INC. 2013 Consolidated financial statements
Year ended August 31, 2012
Canadian cable
services American cable services Enterprise services
Inter-segment
eliminations and
other Consolidated
(In thousands of Canadian dollars) $$$$$
Revenue(1) 1,188,717 — 89,831 (850) 1,277,698
Operating expenses 614,644 — 51,649 12,868 679,161
Management fees – COGECO Inc. — — — 9,485 9,485
Integration, restructuring and acquisition costs — 1,653 216 — 1,869
Depreciation and amortization 237,498 — 37,505 — 275,003
Operating income (loss) 336,575 (1,653) 461 (23,203) 312,180
Financial expense 64,007
Income taxes 78,656
Profit for the year from continuing operations 169,517
Profit for the year from discontinued operations 55,446
Profit for the year 224,963
Property, plant and equipment (1) 1,154,266 — 167,827 — 1,322,093
Intangible assets (1) 991,094 — 48,888 —1,039,982
Goodwill (1) 4,662 — 205,780 — 210,442
Acquisition of property, plant and equipment 300,526 — 59,055 — 359,581
Acquisition of intangible and other assets 12,087 — 3,700 — 15,787
(1) For the year ended August 31, 2012, revenue, property, plant and equipment, intangible assets and goodwill by geographic market were all in Canada.
5. BUSINESS COMBINATIONS
On November 30, 2012, the Corporation completed the acquisition of all the outstanding shares of Atlantic Broadband, an independent cable
system operator formed in 2003, serving about 485,000 primary service units and providing Analogue and Digital Television, as well as HSI
and Telephony services. The acquisition is an attractive entry point into the american market, providing a significant increase in Primary
Service Units base with further growth potential, a high quality network infrastructure and the ability for the Corporation’s management to
leverage its core knowledge and operational experience. The transaction, valued at US$1.36 billion, was financed through a combination of
cash on hand, a draw-down on the existing Term Revolving Facility of approximately US$588 million and US$660 million of borrowings under
a new committed non-recourse debt financing at Atlantic Broadband (see note 15 k)). Atlantic Broadband operates cable systems in Western
Pennsylvania, Southern Florida, Delaware/Maryland and South Carolina.
On January 31, 2013, the Corporation acquired approximately 96.57% of the issued and outstanding shares of Peer 1 Network Enterprises,
Inc. (“PEER 1”). The transaction, valued at approximately $649 million, was financed by new secured revolving credit facilities in the amount
of approximately $250 million as well as new secured term credit facilities in the amount of approximately $400 million both having a maturity
of four years (see note 15 b)). On April 3, 2013, Cogeco Cable Inc. completed the acquisition of the remaining 3.43% of the issued and
outstanding shares of PEER 1 pursuant to the compulsory acquisition provisions in Section 300 of the Business Corporations Act ("British
Columbia") for a cash consideration of $17 million. PEER 1 is one of the world's leading internet infrastructure providers, specializing in
managed hosting, dedicated servers, cloud services and colocation. This acquisition enhances Cogeco Cable's footprint and builds on its
strategic initiatives by increasing scale in an attractive industry segment with significant growth prospects in the state of the art data centre
platforms. The Corporation has the resources to serve additional businesses worldwide through 20 data centres and 56 points-of-presence
across North America and Europe. PEER 1's primary network centre and head office are located in Vancouver, Canada.
During the fourth quarter of fiscal 2013, the Corporation adjusted the preliminary allocation of the purchase price of Atlantic Broadband and
retroactively adjusted the fair value of assets acquired and liabilities assumed that had been recognized at acquisition date on November
30, 2012 to reflect new information obtained about facts and circumstances that existed as at the acquisition date and, if they had been known,
would have impacted the amounts recognized at that date. At August 31, 2013, the allocation of the purchase price remains preliminary
pending the final evaluation of certain intangible assets. The impact on the previous quarters are as follows:
Quarters ended
February 28, 2013 May 31, 2013
Three months Six months Three months Nine months
(In thousands of Canadian dollars) $$$$
Increase in depreciation of property, plant and equipment 5,059 5,059 5,126 10,185
Increase in amortization of intangible assets 2,850 2,850 2,936 5,786
Decrease in deferred income taxes (331) (331) (2,930)(3,261)
Net decrease on profit for the period 7,578 7,578 5,132 12,710
During the fourth quarter of fiscal 2013, Cogeco Cable also adjusted the preliminary allocation of the purchase price of PEER 1, which remains
preliminary pending to the completion of the valuation of the net assets acquired.