Cogeco 2014 Annual Report Download - page 20

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MD&A COGECO CABLE INC. 2014 19
CAPITAL INTENSITY AND ACQUISITIONS OF PROPERTY, PLANT AND
EQUIPMENT, INTANGIBLE AND OTHER ASSETS
The capital intensity ratio is defined as amount spent for acquisitions of property, plant and equipment and intangible assets divided by revenue
generated for the comparable period. The capital intensity ratio measures the Corporation's investment in capital expenditures in order to support
a certain level of revenue. For fiscal 2014, the Corporation reached acquisitions of property, plant and equipment, intangible and other assets of
$415 million and revenue close to $1.9 billion for a capital intensity of 21% compared to 22% as projected, thus achieving its revised guidelines.
Capital intensity decreased from 24% in fiscal 2013 to 21% in fiscal 2014 as a result of lower acquisitions of property, plant and intangible assets
and other assets than expected as explained above. The Corporation expects to use the increased free cash flow to reduce its indebtedness and
further invest where appropriate.
OPERATING AND FINANCIAL RESULTS
OPERATING RESULTS
Years ended August 31, 2014 2013 (1) Change
(in thousands of dollars, except percentages) $$ %
Revenue 1,947,591 1,692,466 15.1
Operating expenses 1,044,560 902,174 15.8
Management fees – COGECO Inc. 9,674 9,569 1.1
Adjusted EBITDA 893,357 780,723 14.4
Operating margin 45.9% 46.1%
(1) Comparative figures have been adjusted to comply with the adoption of IAS 19 Employee Benefits. For further details, please refer to Note 3 of the consolidated
financial statements.
REVENUE
Fiscal 2014 revenue amounted to $1.95 billion, an increase of $255.1 million, or 15.1% compared to fiscal 2013 driven by a growth of 2.4% in
the Canadian cable services segment, of 46.3% in the American cable services segment and of 51.4% in the Enterprise data services segment.
Revenue increased mainly attributable to the full year impact of the recent acquisitions which both occurred during fiscal 2013 combined with the
organic growth from all of our operating segments and favorable foreign exchange rates in our foreign operations. For further details on the
Corporation’s revenue, please refer to the “Segmented operating results” sections.
OPERATING EXPENSES AND MANAGEMENT FEES
For fiscal 2014, operating expenses amounted to over $1.04 billion, an increase of $142.4 million, or 15.8%, compared to the same period of
fiscal 2013. These additional operating expenses are mostly attributable to the full year impact of the recent acquisitions and the appreciation of
the US dollar and British Pound currency compared to the Canadian dollar, partly offset by cost reduction initiatives and restructuring activities
in the Canadian cable services segment. For further details on the Corporation’s operating expenses, please refer to the “Segmented operating
results” sections.
Management fees paid to COGECO Inc. amounted to $9.7 million compared to $9.6 million in fiscal 2013, and are discussed in detail in the
“Related party transactions” section.
ADJUSTED EBITDA AND OPERATING MARGIN
Fiscal 2014 adjusted EBITDA increased by $112.6 million, or 14.4%, to reach $893.4 million as a result of the improvement from all our operating
segments, the favorable foreign exchange rates for our foreign operations compared to fiscal 2013 as well as the full year impact of the recent
acquisitions. Cogeco Cable’s operating margin slightly decreased to 45.9% when compared to 46.1% for the prior year essentially due to lower
margin business activities from the Enterprise data services segment, partly offset by the improvement in the Canadian cable services segment.
For further details on the Corporation’s adjusted EBITDA and operating margin, please refer to the “Segmented operating results” sections.
FIXED CHARGES
Years ended August 31, 2014 2013 (1) Change
(in thousands of dollars, except percentages) $$ %
Depreciation and amortization 460,282 382,714 20.3
Financial expense 130,221 128,770 1.1
(1) Comparative figures have been adjusted to comply with the adoption of IAS 19 Employee Benefits. For further details, please refer to Note 3 of the consolidated
financial statements.