Cogeco 2014 Annual Report Download - page 24

MD&A COGECO CABLE INC. 2014 23
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, 2014 2013
(in thousands of dollars) $$
Customer premise equipment(1) 111,828 72,333
Scalable infrastructure(2) 90,190 101,569
Line extensions 28,507 22,939
Upgrade / Rebuild 26,560 44,169
Support capital 28,954 23,311
Acquisition of property, plant and equipment - Canadian and American cable services 286,039 264,321
Acquisition of property, plant and equipment - Enterprise data services(3) 114,807 125,314
Acquisitions of property, plant and equipment 400,846 389,635
Acquisition of intangible and other assets - Canadian and American cable services 11,348 15,703
Acquisition of intangible and other assets - Enterprise data services 3,278 2,864
Acquisitions of intangible and other assets 14,626 18,567
415,472 408,202
(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.
(3) Fiscal 2013 includes assets acquired under finance lease of $0.9 million that are excluded from the statement of cash flows.
For the year ended August 31, 2014, acquisition of property, plant and equipment in the Canadian and American cable services segments
amounted to $286.0 million compared to $264.3 million for fiscal 2013 of which $214.4 million came from the Canadian cable services segment
compared to $216.0 million for fiscal 2013 and $71.7 million from the American cable services segment compared to $48.3 million for fiscal 2013
which represented nine months of operations since Atlantic Broadband was acquired at the end of the first quarter of fiscal 2013. The increase
in the cable services segment are mainly attributable to the following factors:
• An increase in customer premise equipment mainly due to the launch in fiscal 2014 of TiVo's digital advanced television and the PSU
growth in the American cable services segment as well as to the acquisition of additional customer premise equipment in the fourth
quarter of fiscal 2014 in the Canadian cable services segment in view of the launch of TiVo digital advanced television services planned
for November 3, 2014 in Ontario and in Spring of fiscal 2015 in Québec; and
• A decrease in scalable infrastructure and network upgrades and rebuild due to the deployment in fiscal 2012 and early fiscal 2013 of
advanced technologies such as DOCSIS 3.0 and SDV in existing areas served.
Fiscal 2014 acquisition of property, plant and equipment in the Enterprise data services segment, amounted to $114.8 million compared to $125.3
million in fiscal 2013. The decrease is mainly due to the construction of a new data centre facility in Barrie (north of Toronto), Canada, in fiscal
2013, partly offset by the initial construction by Cogeco Data Services in fiscal 2014 of all remaining pods (pods 2, 3, 4) at the Barrie data centre
as well as the expansion of Portsmouth, United Kingdom, data centre facility.
Acquisition of intangible and other assets are mainly attributable to reconnect and additional service activation costs as well as other customer
acquisition costs. Fiscal 2014 acquisition of intangible and other assets amounted to $14.6 million compared to $18.6 million for last year as a
result of lower reconnect activities in the Canadian cable services segment.
FREE CASH FLOW AND FINANCING ACTIVITIES
Fiscal 2014 free cash flow amounted to $274.7 million, $125.3 million higher than last year. Free cash flow increase over the prior year is due to
the improvement of $112.6 million of adjusted EBITDA and the decrease of $16.8 million in integration, restructuring and acquisition costs, partly
offset by additional acquisitions of property, plant and equipment, intangible and other assets of $7.3 million.
During fiscal 2014, lower Indebtedness level provided for a cash decrease of $261.0 million, mainly due to the following:
• the decrease of $13.2 million in bank indebtedness;
• the repayments under the revolving facilities of $368.5 million and of $68.9 million of long long-term debt; and
• the issuance, on August 27, 2014, of a private placement of $27.2 million (US$25 million) Senior Secured Notes Series A for net
proceeds of $27.1 million, net of transaction costs of $0.1 million and of $163.4 million (US$150 million) Senior Secured Notes Series
B for net proceeds of $162.5 million, net of transaction costs of $0.9 million.
During fiscal 2013, Indebtedness affecting cash increased by $1.8 billion mainly due to to the following long-term debt issuances and draw-downs
on existing Term Revolving Facilities:
• on June 27, 2013, of a private placement of $225.3 million (US$215 million) Senior Secured Notes for net proceeds of $223.8 million,
net of transaction costs of $1.5 million;