Cogeco 2015 Annual Report Download - page 99

98 COGECO CABLE INC. 2015 Consolidated financial statements
All financial instruments recognized at fair value on the consolidated statement of financial position must be measured based on the three
fair value hierarchy levels, which are as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as
prices) or indirectly (i.e., derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Corporation considers that its long-term debt and derivative financial instruments are classified as Level 2 under the fair value hierarchy.
The fair value of derivative financial instruments is estimated using valuation models that reflect projected future cash flows over contractual
terms of the derivative financial instruments and observable market data, such as interest and currency exchange rate curves.
C) CAPITAL MANAGEMENT
The Corporation’s objectives in managing capital are to ensure sufficient liquidity to support the capital requirements of its various businesses,
including growth opportunities. The Corporation manages its capital structure and makes adjustments in light of general economic conditions,
the risk characteristics of the underlying assets and the Corporation’s working capital requirements. Management of the capital structure
involves the issuance of new debt, the repayment of existing debt using cash generated by operations and the level of distribution to
shareholders.
The capital structure of the Corporation is composed of shareholders’ equity, cash and cash equivalents, bank indebtedness, long-term debt
and assets or liabilities related to derivative financial instruments.
The provisions of financing agreements provide for restrictions on the activities of the Corporation. Generally, the most significant restrictions
relate to permitted investments and dividends on multiple and subordinate voting shares, as well as the maintenance of certain financial
ratios primarily linked to the adjusted EBITDA, financial expense and total indebtedness. At August 31, 2015 and 2014 the Corporation was
in compliance with all of its debt covenants and was not subject to any other externally imposed capital requirements.
The following table summarizes certain of the key ratios used to monitor and manage the Corporation’s capital structure:
Years ended August 31, 2015 2014
Net senior indebtedness(1)(2) / adjusted EBITDA(3) 2.1 2.1
Net indebtedness(2)(4) / adjusted EBITDA(3) 3.0 2.9
Adjusted EBITDA(3) / financial expense(3) 6.3 6.8
(1) Net senior indebtedness is defined as the total of bank indebtedness, principal on long-term debt and obligations under derivative financial instruments,
less cash and cash equivalents and principal on Senior Unsecured Debenture and Senior Unsecured Notes.
(2) Excluding Atlantic Broadband and other non-significant unrestricted subsidiaries' cash and cash equivalents and non-recourse First Lien Credit Facilities.
(3) Calculation based on adjusted EBITDA and financial expense for the twelve-month period ended August 31, 2015 and 2014 excluding Atlantic
Broadband and other non-significant unrestricted subsidiaries.
(4) Net indebtedness is defined as the total of bank indebtedness, principal on long-term debt and obligations under derivative financial instruments, less
cash and cash equivalents.
D) CATEGORIES OF FINANCIAL INSTRUMENTS
At August 31, 2015 2014
(In thousands of Canadian dollars) $$
Financial assets
Loans and receivables 296,046 159,345
Derivative financial instruments in designated hedge accounting relationships 49,834 6,132
345,880 165,477
Financial liabilities
Other liabilities 3,567,656 3,032,074
3,567,656 3,032,074