Cogeco 2015 Annual Report Download - page 22

MD&A COGECO CABLE INC. 2015 21
ADJUSTED EBITDA AND OPERATING MARGIN
Fiscal 2015 adjusted EBITDA increased by $37.1 million, or 4.2%, to reach $930.5 million as a result of the improvement from all our operating
segments combined with the favorable exchange rates compared to fiscal 2014.
Cogeco Cable’s operating margin slightly decreased to 45.5% from 45.9% for the prior year as a result of a reduction in the American cable
services segment combined with its higher proportion in the consolidated operating results, partly offset by an improvement in the Enterprise data
services segment and a stable margin 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.
3.2 FIXED CHARGES
Years ended August 31, 2015 2014 Change
(in thousands of dollars, except percentages) $$ %
Depreciation and amortization 466,715 460,282 1.4
Impairment on property, plant and equipment —35,493 (100.0)
Financial expense 142,062 130,221 9.1
Fiscal 2015 depreciation and amortization expense reached $466.7 million compared to $460.3 million in the prior year. The increase resulted
mainly from the appreciation of the US dollar and British Pound currency compared to the Canadian dollar and from additional acquisitions of
property, plant and equipment, partly offset by certain intangible assets being fully amortized since the end of fiscal 2014.
For fiscal 2015, financial expense increased by $11.8 million to reach $142.1 million, compared to $130.2 million in the prior year as a result of
the appreciation of the US dollar and British Pound currency compared to the Canadian dollar, partly offset by debt repayments.
During the third quarter of fiscal 2014, the Corporation's subsidiary, Cogeco Cable Canada, recognized an impairment of $32.2 million of property,
plant and equipment related to an Internet Protocol Television ("IPTV") project which had to be abandoned as a result of unexpected performance
issues encountered with the platform. In addition, during the fourth quarter of fiscal 2014, the Corporation recognized in its Enterprise data services
segment, an impairment of $3.3 million of property, plant and equipment related to the rationalization of its automation platforms with regard to
data centre operating activities.
3.3 SETTLEMENT OF A CLAIM WITH A SUPPLIER
On August 20, 2015, the Corporation's subsidiary, Cogeco Cable Canada concluded an agreement with a supplier to settle a claim that was
initiated in a previous year. The settlement amounted to $27.4 million, which will be paid partly in cash and partly in the form of credit notes
applicable on future purchases of property, plant and equipment.
3.4 INCOME TAXES
Fiscal 2015 income taxes amounted to $77.4 million, compared to $53.2 million in the prior year. The increase in fiscal 2015 is mostly attributable
to the improvement of adjusted EBITDA, the appreciation of the US dollar and British Pound currency compared to the Canadian dollar, the
settlement of a claim with a supplier, the impact of a higher proportion of Atlantic Broadband's profit on the consolidated operating results which
is taxed at a higher rate and last year's impairment of property, plant and equipment, partly offset by the increases in integration, restructuring
and acquisition costs and financial expense when compared to fiscal 2014.
3.5 PROFIT FOR THE YEAR
Fiscal 2015 profit for the year amounted to $257.8 million, or $5.27 per share compared to $209.4 million, or $4.30 per share for the prior year.
Profit progression for the year is mostly attributable to the improvement of adjusted EBITDA, the settlement of a claim with a supplier and last
year's impairment of property, plant and equipment, partly offset by the increases in integration, restructuring and acquisition costs, financial
expense and income taxes.
The Corporation obtained a return on equity(1) of 15.8% for the year ended August 31, 2015, compared to 14.7% for the prior year. The improvement
for fiscal 2015 is mainly due to increased profit for the year.
(1) Return on equity is defined as profit for the year divided by average shareholders' equity (computed on the basis of the beginning and ending balance for a
given fiscal year).