Cogeco inc.

TSX : CGO


Cogeco inc.

November 01, 2012 22:08 ET

COGECO Reports Q4 and Fiscal 2012 Financial Results

- Achieves an increase of its revenue and operating income before depreciation and amortization(1) of 11% and 8%, respectively, for fiscal 2012;

- Declares an increase of its quarterly dividend by 6%

MONTRÉAL, QUÉBEC--(Marketwire - Nov. 1, 2012) - Today, COGECO Inc. (TSX:CGO) ("COGECO" or the "Corporation") announced its financial results for the fourth quarter of fiscal 2012 and fiscal year 2012, ended August 31, 2012, in accordance with the International Financial Reporting Standards ("IFRS").

For the fourth quarter and fiscal year 2012:

  • Revenue increased by 7.7% to reach $356.7 million, and by 11% to reach $1.406 billion;
  • Operating income before depreciation and amortization increased by 7.3% to $163.6 million compared to the fourth quarter of fiscal 2011, and by 8.4% to $606.8 million compared to prior fiscal year;
  • Profit for the period from continuing operations amounted to $44.9 million in the fourth quarter when compared to $63.9 million for the same period of the previous fiscal year. For fiscal 2012, profit for the year from continuing operations amounted to $174.2 million when compared to $197.9 million for fiscal 2011. Profit declined for the fourth quarter and fiscal 2012 and mostly attributable to the increase in depreciation and amortization expense due to the reduction of depreciation period for certain property plant and equipment combined with the increase in income taxes from the change in the corporate income tax rate recently announced by the Ontario government, partly offset by the increase in operating income before depreciation and amortization in the Cable sector;
  • Profit for the period amounted to $44.9 million in the fourth quarter when compared to $70.1 million for the same period of the previous fiscal year. The decrease is mostly attributable to the Cable sector and due to an increase in income taxes expense stemming primarily from the increase in income taxes from the change in the corporate income tax rate recently announced by the Ontario government and the increase of depreciation and amortization expense due to the reduction of the depreciation period of certain property, plant and equipment. For fiscal 2012, profit for the year amounted to $229.7 million when compared to a loss of $46.9 million for the prior year. The increase is mostly attributable to the write-off of the Cogeco Cable's net investment in the Portuguese subsidiary recorded through a non-cash impairment loss in the amount of $225.9 million during the third quarter of fiscal 2011 and the improvement of operating income before depreciation and amortization, partly offset by the increase of depreciation and amortization expense due to the reduction of the depreciation period of certain property, plant and equipment;
  • In the fourth quarter, negative free cash flow (1) of $5 million was generated compared to positive free cash flow of $25.8 million in the comparable quarter of the prior year. For fiscal 2012, free cash flow amounted to $68.7 million, compared to $111.5 million in fiscal 2011. Free cash flow decreased in both periods over the prior year due to an increase in acquisitions of property, plant and equipment, intangible and other assets combined with the increase in income tax expense stemming primarily from the fiscal 2011 modifications to the corporate structure, partly offset by the increase in operating income before depreciation and amortization;
  • A quarterly dividend of $0.18 per share was paid to the holders of subordinate and multiple voting shares, an increase of $0.04 per share, or 28.6%, when compared to a dividend of $0.14 per share paid in the fourth quarter of fiscal 2011. Dividend payments totalled $0.72 per share in fiscal 2012, compared to $0.50 per share in fiscal 2011, an increase of $0.22 per share, or 44%;
  • In the Cable sector, primary service units ("PSU")(2) grew by 6,959 in the quarter and 71,664 in fiscal 2012, for a total of 1,969,133 PSU at August 31, 2012;
  • On November 1, 2012, COGECO declared and eligible dividend of $0.19 per share, an increase of 5.6% when compared to the $0.18 dividend per share paid in the fourth quarter of fiscal 2012;
  • On July 18, 2012, the Corporation's subsidiary, Cogeco Cable Inc., announced an agreement to acquire all of the shares of Atlantic Broadband ("Atlantic") an independent cable system operator formed in 2003 which, at August 31, 2012, was serving about 251,000 Television service customers providing Analogue and Digital Television, as well as High Speed Internet ("HSI") and Telephony services. Ranked the 13th-largest cable television system operator in the United States, Atlantic operates cable systems in Pennsylvania, Florida, Maryland, Delaware and South Carolina. The transaction is valued at US$1.36 billion and expected to be financed through a combination of cash on hand, a draw-down on its existing Term Revolving Facility of approximately US$550 million and US$660 million of borrowings under a new committed non-recourse debt financing at Atlantic. The transaction is subject to usual closing conditions, including Hart-Scott-Rodino Antitrust Improvements Act approval, Federal Communications Commission ("FCC") approval, state and local regulatory approvals and other customary conditions. Cogeco Cable expects the transaction to close by the end of calendar 2012;
  • On February 29, 2012, Cogeco Cable completed the sale of its Portuguese subsidiary, Cabovisão - Televisão por Cabo, S.A. ("Cabovisão") for a cash consideration of EUR45 million or approximately $59.3 million. Operating results from European operations have therefore been classified as discontinued operations;
  • On January 19, 2012, the CRTC approved the sale of CJEC-FM and CFEL-FM which have been completed on January 30, 2012 and marked the end of the process established with the CRTC for the divestiture of these radio stations; and
  • On December 6, 2011, COGECO Inc. concluded an agreement to acquire Métromédia CMR Plus Inc. ("Métromédia"), subject to customary closing adjustments and conditions. Métromédia is a Québec company that operates an advertising representation house in the public transit sector. Métromédia represents over 100 public transit markets notably in Montréal, in other Québec regions as well as in major cities and numerous markets in the rest of Canada. The transaction was completed on December 26, 2011.
(1) The indicated terms do not have standard definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of the Results overview.
(2) Represents the sum of Television, High Speed Internet ("HSI") and Telephony service customers.

"The 2012 fiscal year was indelibly marked by major integration and consolidation activities in all our sectors. Results of our focus on effectively responding to our customers constantly growing expectations. Despite the considerable challenges we face in a highly competitive industry, Cogeco Cable reached most of its objectives including PSU growth along with the continuous improvement of our networks and processes", stated Louis Audet, President and Chief Executive Officer of COGECO Inc.

"Regarding radio, our media subsidiary, Cogeco Diffusion Inc., was very successful in consolidating its leadership position in the Québec radio market. Based on the success of our talk radio stations in Montréal and Québec City, Cogeco Diffusion extended this promising format to Trois-Rivières, Gatineau and Sherbrooke in August, creating Québec's largest private network of talk radio stations. I am pleased to report that the integration of our new transit system advertising representation house, Métromédia, is well on its way. With our new radio-transit advertising offering, COGECO is well positioned to fulfill the needs of its advertising partners."

"For fiscal 2013, our primary focus will be to continue to improve our processes, strengthen our competitive positioning and integrate Atlantic, the acquisition of which marks our entry in the United States. We look foward to the closing of this transaction, so that COGECO can put its expertise to work for Atlantic's 251,000 Television service customers and fully develops its great potential", added Mr. Audet.

Fiscal 2013 Financial Guidelines

COGECO's confirms its fiscal 2013 financial guidelines, as issued on July 11, 2012. Fiscal 2013 financial guidelines will be revised once the recently announced acquisition of Atlantic is concluded in the Cable sector. Please consult the "Fiscal 2013 financial guidelines" section of the Corporation's 2012 Annual Report for further details.

FINANCIAL HIGHLIGHTS

Quarters ended August 31, Years ended August 31,
2012 2011 Change 2012 2011 Change
(in thousands of dollars, PSU growth andper share data) $ $ % $ $ %
Operations
Revenue 356,685 331,045 7.7 1,406,353 1,267,286 11.0
Operating income before depreciation and amortization(1) 163,617 152,434 7.3 606,842 559,595 8.4
Operating income 95,943 101,304 (5.3 ) 324,989 343,471 (5.4 )
Profit for the period from continuing operations 44,900 63,870 (29.7 ) 174,246 197,864 (11.9 )
Profit (loss) for the period from discontinued operations - 6,219 - 55,446 (244,736 ) -
Profit (loss) for the period 44,900 70,089 (35.9 ) 229,692 (46,872 ) -
Profit (loss) for the period attributable to owners of the Corporation 13,889 23,317 (40.4 ) 77,051 (15,961 ) -
Cash Flow
Cash flow from operating activities 203,193 217,792 (6.7 ) 448,764 502,167 (10.6 )
Cash flow from operations(1) 119,612 148,228 (19.3 ) 447,110 418,983 6.7
Acquisitions of property, plant and equipment, intangible and other assets 124,638 122,441 1.8 378,369 307,490 23.1
Free cash flow(1) (5,026 ) 25,787 - 68,741 111,493 (38.3 )
Financial Condition
Property, plant and equipment - - - 1,343,904 1,272,251 5.6
Total assets - - - 3,103,919 2,871,648 8.1
Indebtedness(2) - - - 1,180,971 1,056,214 11.8
Equity attributable to owners of the Corporation - - - 397,799 342,525 16.1
PSU(3)growth 6,959 19,740 (64.7 ) 71,664 106,310 (32.6 )
Per Share Data(4)
Earnings (loss) per share attributable to owners of the Corporation
From continuing and discontinued operations
Basic 0.83 1.39 (40.3 ) 4.61 (0.95 ) -
Diluted 0.83 1.39 (40.3 ) 4.58 (0.95 ) -
From continuing operations
Basic 0.83 1.27 (34.6 ) 3.54 3.75 (5.6 )
Diluted 0.83 1.27 (34.6 ) 3.52 3.75 (6.1 )
From discontinued operations
Basic - 0.12 - 1.07 (4.71 ) -
Diluted - 0.12 - 1.06 (4.71 ) -
(1) The indicated terms do not have standardized definitions prescribed by International Financial Reporting Standards ("IFRS") and therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of the Results overview.
(2) Indebtedness is defined as the total of bank indebtedness, promissory note payable, principal on long-term debt, balance due on business acquisitions and obligations under derivative financial instruments.
(3) Represents the sum of Television, HSI and Telephony service customers.
(4) Per multiple and subordinate voting share.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to COGECO's future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee", "ensure" or other similar expressions concerning matters that are not historical facts. In particular, statements regarding the Corporation's future operating results and economic performance and its objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities, which COGECO believes are reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently available to the Corporation, they may prove to be incorrect. The Corporation cautions the reader that the economic downturn experienced over the past few years makes forward-looking information and the underlying assumptions subject to greater uncertainty and that, consequently, they may not materialize, or the results may significantly differ from the Corporation's expectations. It is impossible for COGECO to predict with certainty the impact that the current economic uncertainties may have on future results. Forward-looking information is also subject to certain factors, including risks and uncertainties (described in the "Uncertainties and main risk factors" section of the Corporation's 2012 annual Management's Discussion and Analysis ("MD&A")) that could cause actual results to differ materially from what COGECO currently expects. These factors include technological changes, changes in market and competition, governmental or regulatory developments, general economic conditions, the development of new products and services, the enhancement of existing products and services, and the introduction of competing products having technological or other advantages, many of which are beyond the Corporation's control. Therefore, future events and results may vary significantly from what management currently foresee. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While management may elect to, the Corporation is under no obligation (and expressly disclaims any such obligation), and does not undertake to update or alter this information before the next quarter.

As described in note 1 to the consolidated financial statements of the 2012 Annual Report, Canadian Generally Accepted Accounting Principles ("GAAP"), which were previously used in preparing the consolidated financial statements, were replaced on the adoption of International Financial Reporting Standards ("IFRS") on January 1, 2011. The Corporation's consolidated financial statements for the year ended August 31, 2012 have therefore been prepared in accordance with IFRS. Comparative figures for 2011 have also been restated.

All amounts are stated in Canadian dollars unless otherwise indicated. This press release should be read in conjunction with the MD&A included in the Corporation's 2012 Annual Report, the Corporation's consolidated financial statements and the notes thereto as well as the information on the adjustments to the fiscal 2011 financial figures upon adoption of IFRS, explained in Note 28 of the consolidated financial statements for year ended August 31, 2012.

RESULTS OVERVIEW

This analysis should be read in conjunction with the Corporation's 2012 Annual Report available on SEDAR at www.sedar.com. Please refer to the Corporation's 2012 Annual Report for more details on annual results.

Operating results

Quarter ended august 31, 2012

Cable sector customer statistics

Net additions (losses)
Quarters ended August 31,
2012 2011
PSU 6,959 19,740
Television service customers(1) (5,758 ) (1,369 )
HSI service customers 5,682 7,746
Telephony service customers 7,035 13,363
(1) The net losses of Television service customers includes net additions of 5,918 Digital Television service customers.

Fiscal 2012 fourth-quarter PSU net additions were lower than in the comparable period of the prior year mainly as a result of category maturity, competitive offers and tightening of our credit controls and processes. Fourth quarter net customer losses for Television service customers stood at 5,758 when compared to 1,369 for the same period of the prior year due to the end of the school year for college and university students as well as the intense competition driving the telecommunications industry. Telephony service customers grew by 7,035 compared to 13,363 for the same period last year, and the number of net additions to the HSI service stood at 5,682 compared to 7,746 customers for the same period of the prior year. HSI and Telephony net additions continue to stem from the enhancement of the product offering, the impact of the bundled offer (Cogeco Complete Connection) of Television, HSI and Telephony services, and promotional activities. Additions to the Digital Television service which are included in the Television service customers, stood at 5,918 compared to 29,464 for the comparable period of the prior year. Digital Television service net additions are due to the deployment of Digital Terminal Adapters technology to migrate customers from analogue to digital services, the targeted marketing initiatives to improve penetration, the launch of new HD channels and the continuing interest for HD television service.

Consolidated operating results

Quarters ended August 31, 2012 2011 Change
(in thousands of dollars, except percentages) $ $ %
Revenue 356,685 331,045 7.7
Operating expenses 193,068 178,611 8.1
Operating income before depreciation and amortization 163,617 152,434 7.3

Fiscal 2012 fourth-quarter consolidated revenue improved by $25.6 million, or 7.7%, to reach $356.7 million, when compared to the prior year. In the Cable segment, fourth-quarter revenue improved by $19 million, or 6.2%, as a result of PSU growth, rate increases in June and July 2012 as well as the acquisitions of QTI and MTO during the fourth quarter of fiscal 2011. In the fourth quarter of fiscal 2012, revenue from the radio and advertising representation house activities improved by $6.7 million, or 26.5%, mainly as a result of the recent acquisition of Métromédia.

For the fourth-quarter ended August 31, 2012, consolidated operating expenses increased by $14.5 million, or 8.1%, at $193.1 million. In the Cable segment, fourth-quarter operating expenses increased by $9.7 million, or 6.3%, mainly attributable to the PSU growth, the launch of new HD channels, additional programming costs and deployment and support costs related to the migration of Television service customers from analogue to digital. The increase is also due to the acquisition of QTI and MTO and to servicing new customers, partly offset by additional expenses in fiscal 2011 related to a one-time project development. Operating expenses from the radio, advertising representation house and head office activities grew by $4.7 million, or 19.5%, in the fourth quarter mainly as a result of the recent acquisition of Métromédia.

Fiscal 2012 fourth-quarter consolidated operating income before depreciation and amortization increased by $11.2 million, or 7.3%, to reach $163.6 million as a result of the Cable segment's operating results and the recent acquisition of Métromédia.

Cash flow analysis

Quarters ended August 31, 2012 2011
(in thousands of dollars) $ $
Operating activities
Cash flow from operations 119,612 148,228
Changes in non-cash operating activities 81,809 73,089
Amortization of deferred transaction costs and discounts on long-term debt (6 ) (857 )
Income taxes paid (15,700 ) (238 )
Current income tax expense (recovery) 15,798 (7,290 )
Financial expense paid (15,738 ) (10,770 )
Financial expense 17,418 15,630
203,193 217,792
Investing activities (124,726 ) (253,473 )
Financing activities (16,041 ) 1,714
Net change in cash and cash equivalents from continuing operations 62,426 (33,967 )
Net change in cash and cash equivalents from discontinued operations(1) - (1,551 )
Cash and cash equivalents from continuing and discontinued operations, beginning of period 153,097 90,734
Cash and cash equivalents from continuing and discontinued operations, end of period 215,523 55,216
(1) For further details on the Corporation's cash flows attributable to discontinued operations, please refer to the "Disposal of subsidiary and discontinued operations" section.

During the fourth quarter of 2012, cash flow from operations reached $119.6 million, 19.3% lower than the comparable period last year, primarily due to the increase in current income tax expense and defined benefit pension plans contributions, partly offset by the increase in operating income before depreciation and amortization. Changes in non-cash operating items generated cash inflows of $81.8 million compared to $73.1 million for the same period in fiscal 2011, mainly as a result of a higher increase in trade and other payables, partly offset by a decrease in provision compared to an increase in prior year.

Fiscal 2012 fourth-quarter investing activities amounted to $124.7 million, a decrease of 50.8% when compared to $253.5 million in the fourth quarter of the prior year. Fiscal 2011 fourth-quarter investing activities included the acquisitions, by Cogeco Cable, of QTI and MTO for a total of $131.2 million. The remaining increase in investing activities is mainly composed of acquisitions of property, plant and equipment, intangible and other assets in the Cable segment. Acquisition of intangible and other assets and others are mainly attributable to reconnect and additional service activation costs as well as other customer acquisition costs. For fiscal 2012 fourth-quarter, the acquisition of property, plant and equipment amounted to $119.4 million and acquisitions of intangible and other assets amounted to $5.2 million compared to $120.1 million and $2.3 million, respectively, for the same period of prior year.

In the fourth quarter of 2012, the Corporation generated negative free cash flows of $5 million compared to positive free cash flow of $25.8 million in the prior year. The decrease in free cash flow over the prior year is due to the difference in the recognition of current income tax expense compared to income tax recovery in prior year and the defined benefit pension plans contributions, partly offset by the increase of operating income before depreciation and amortization.

During the fourth quarter of fiscal 2012, the Corporation paid a dividend of $0.18 per share to the holders of subordinate and multiple voting shares totalling $3 million, compared to a quarterly dividend of $0.14 per share totalling $2.3 million in fiscal 2011. In addition, dividends paid by a subsidiary to non-controlling interest in the fourth quarter of fiscal 2012 amounted to $8.2 million compared to $6.6 million in the fourth quarter of the prior year.

Year ended august 31, 2012

Operating results

Years ended August 31, 2012 2011 Change
(in thousands of dollars, except percentages) $ $ %
Revenue 1,406,353 1,267,286 11.0
Operating expenses 799,511 707,691 13.0
Operating income before depreciation and amortization 606,842 559,595 8.4

Revenue

For the 2012 fiscal year, consolidated revenue increased by $139.1 million, or 11%, to reach $1.406 billion, when compared to the same period last year, primarily due to the Cable segment, the recent acquisition of Métromédia and the full year impact of the Québec Radio Stations Acquisition.

Cable segment revenue increased by $93 million, or 7.9%, when compared to last year, primarily by PSU growth, rate increases as well as the acquisitions of MTO and QTI during the fourth quarter of fiscal 2011. For further details on Cogeco Cable's revenue, please refer to the "Cable segment" section.

Revenue from the radio and advertising representation house activities improved by $46.1 million, or 55.8%, when compared to last year, mainly as a result of the recent acquisition of Métromédia and the Québec Radio Stations Acquisition.

Operating expenses

Fiscal 2012 consolidated operating expenses increased by $91.8 million, to reach $799.5 million, an increase of 13% compared to prior year. The increase in operating expenses is mainly attributable to the Cable segment, the recent acquisition of Métromédia as well as the full year impact of the Québec Radio Stations Acquisition.

Cable segment operating expenses increased by $49 million, or 7.8%, when compared to last year. The increase in operating expenses is mainly attributable to servicing additional PSU, the launch of new HD channels, additional programming costs, deployment and support costs related to the migration of Television service customers from analogue to digital and the acquisitions of MTO and QTI. For further details on the Cogeco Cable's operating expenses, please refer to the "Cable segment" section.

Operating expenses from the radio, advertising representation house and head office activities grew by $42.8 million, or 55.2%, when compared to prior year. The increase in operating expenses is mainly attributable to the recent acquisition of Métromédia and the Québec Radio Stations Acquisition.

Operating income before depreciation and amortization

Fiscal 2012 consolidated operating income before depreciation and amortization increased by $47.2 million, or 8.4% to reach $606.8 million. The Cable segment contributed $43.7 million to the consolidated increase. For further details on the Cogeco Cable's operating income before depreciation and amortization, please refer to the "Cable segment" section.

Cable segment

Operating results

Years ended August 31, 2012 2011 Change
(in thousands of dollars, except percentages) $ $ %
Revenue 1,277,698 1,184,683 7.9
Operating expenses 679,161 630,150 7.8
Management fees - COGECO Inc. 9,485 9,172 3.4
Operating income before depreciation and amortization 589,052 545,361 8.0
Operating margin 46.1 % 46.0 %

Revenue

For the 2012 fiscal year, consolidated revenue increased by $93 million, or 7.9%, to reach $1.278 billion, when compared to the same period last year, primarily by PSU growth, rate increases implemented in April and October 2011 and June and July 2012 combined with the acquisitions of QTI and MTO during the fourth quarter of fiscal 2011.

Operating expenses and management fees

Fiscal 2012 consolidated operating expenses increased by $49 million, to reach $679.2 million, an increase of 7.8% compared to prior year. The increase in operating expenses is mainly attributable to servicing additional PSU, the launch of new HD channels, additional programming costs, deployment and support costs related to the migration of Television service customers from analogue to digital and the acquisitions of QTI and MTO.

Management fees paid to COGECO Inc. amounted to $9.5 million, 3.4% higher when compared to $9.2 million in fiscal 2011.

Operating income before depreciation and amortization and operating margin

Fiscal 2012 consolidated operating income before depreciation and amortization increased by $43.7 million, or 8% to reach $589.1 million as a result of the higher growth from revenue than operating expenses. Fiscal 2012 consolidated operating margin increased to 46.1% from 46% in the comparable period of the prior year.

Disposal of subsidiary and discontinued operations

On February 29, 2012, Cogeco Cable completed the sale of its Portuguese subsidiary, Cabovisão, for a cash consideration of EUR45 million ($59.3 million). The selling price has been reduced by selling fees of approximately EUR8.5 million ($11.2 million) and contingent claims assumed up to a maximum amount of EUR5 million ($6.6 million). The carrying value of the net liabilities disposed of on February 29, 2012 was $6.7 million resulting in a gain of $48.2 million recorded in the consolidated statements of profit or loss.

The carrying value of assets and liabilities disposed were as follows:

(In thousands of dollars) $
Cash and cash equivalents 13,041
Trade and other receivables 7,693
Income taxes receivable 277
Prepaid expenses and other 2,777
Property, plant and equipment 38,931
Trade and other payables (42,514 )
Provisions (6,665 )
Deferred and prepaid revenue (411 )
Foreign currency translation adjustment (19,817 )
(6,688 )

As a result of the sale and in accordance with IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations, Cogeco Cable reclassified the current and prior year results and cash flows of the European operations, up to the date of disposal, as discontinued operations. The assets and liabilities of the discontinued operations have not been reclassified in the statements of financial position at August 31, 2011 and September 1, 2010.

The profit or loss of the discontinued operations were as follows:

Quarters ended August 31, Years ended August 31,
2012 2011 2012 2011
(In thousands of dollars) $ $ $ $
Revenue - 43,306 80,546 172,277
Operating expenses - 36,718 70,247 151,262
Depreciation and amortization - 347 2,814 40,415
Operating income (loss) - 6,241 7,485 (19,400 )
Financial expense (income) - 11 (155 ) (74 )
Impairment of goodwill - - - 29,344
Impairment of property, plant and equipment - - - 196,529
Gain on disposal - - 48,215 -
Profit (loss) before income taxes - 6,230 55,855 (245,199 )
Income taxes - 11 409 (463 )
Profit (loss) for the period - 6,219 55,446 (244,736 )

The cash flows of the discontinued operations were as follows:

Quarters ended August 31, Years ended August 31,
2012 2011 2012 2011
(In thousands of dollars) $ $ $ $
Net cash flows from operating activities - 6,818
13,637
22,667
Net cash flows from investing activities - (8,519 ) 36,826 (34,592 )
Effect of exchange rate changes on cash and cash equivalents denominated in a foreign currency - 150 (866 ) 588
Net increase (decrease) in cash and cash equivalents - (1,551 ) 49,597 (11,337 )

Non-ifrs financial measures

This section describes non-IFRS financial measures used by COGECO throughout this press release. It also provides reconciliations between these non-IFRS measures and the most comparable IFRS financial measures. These financial measures do not have standard definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. These measures include "cash flow from operations", "free cash flow" and "operating income before depreciation and amortization".

Cash flow from operations and free cash flow

Cash flow from operations is used by COGECO's management and investors to evaluate cash flows generated by operating activities, excluding the impact of changes in non-cash operating activities, amortization of deferred transaction costs and discounts on long-term debt, income taxes paid or received, current income tax expense or recovery, financial expense paid and financial expense. This allows the Corporation to isolate the cash flows from operating activities from the impact of cash management decisions. Cash flow from operations is subsequently used in calculating the non-IFRS measure, "free cash flow". Free cash flow is used, by COGECO's management and investors, to measure its ability to repay debt, distribute capital to its shareholders and finance its growth.

The most comparable IFRS financial measure is cash flow from operating activities. Cash flow from operations is calculated as follows:

Quarters ended August 31, Years ended August 31,
2012 2011 2012 2011
(in thousands of dollars) $ $ $ $
Cash flow from operating activities 203,193 217,792 448,764 502,167
Changes in non-cash operating activities (81,809 ) (73,089 ) 3,479 (17,041 )
Amortization of deferred transaction costs and discounts on long-term debt 6 857 3,363 3,759
Income taxes paid (received) 15,700 238 83,411 (1,457 )
Current income tax recovery (expense) (15,798 ) 7,290 (88,104 ) (65,907 )
Financial expense paid 15,738 10,770 65,325 71,075
Financial expense (17,418 ) (15,630 ) (69,128 ) (73,613 )
Cash flow from operations 119,612 148,228 447,110 418,983

Free cash flow is calculated as follows:

Quarters ended August 31, Years ended August 31,
2012 2011 2012 2011
(in thousands of dollars) $ $ $ $
Cash flow from operations 119,612 148,228 447,110 418,983
Acquisition of property, plant and equipment (119,421 ) (120,104 ) (362,582 ) (296,618 )
Acquisition of intangible and other assets (5,217 ) (2,337 ) (15,787 ) (10,872 )
Free cash flow (5,026 ) 25,787 68,741 111,493

Operating income before depreciation and amortization

Operating income before depreciation and amortization is used by COGECO's management and investors to assess the Corporation's ability to seize growth opportunities in a cost effective manner, to finance its ongoing operations and to service its debt. Operating income before depreciation and amortization is a proxy for cash flows from operations excluding the impact of the capital structure chosen, and is one of the key metrics used by the financial community to value the business and its financial strength.

The most comparable IFRS financial measure is operating income. Operating income before depreciation and amortization is calculated as follows:

Quarters ended August 31, Years ended August 31,
2012 2011 2012 2011
(in thousands of dollars) $ $ $ $
Operating income 95,943 101,304 324,989 343,471
Depreciation and amortization 65,699 52,020 279,770 203,792
Integration, restructuring and acquisitions costs 1,975 (890 ) 2,083 12,332
Operating income before depreciation and amortization 163,617 152,434 606,842 559,595

Supplementary quarterly financial information

Fiscal 2012 Fiscal 2011
Quarters ended(1) Nov. 30 Feb. 29 May 31 Aug. 31 Nov. 30 Feb. 28 May 31 Aug. 31
(in thousands of dollars and per share data) $ $ $ $ $ $ $ $
Revenue 346,023 345,613 358,032 356,685 298,451 307,532 330,258 331,045
Operating income before depreciation and amortization 140,261 144,518 158,446 163,617 132,996 132,140 142,025 152,434
Operating income 74,642 58,931 95,473 95,943 83,328 68,597 90,242 101,304
Income taxes 12,340 13,372 22,278 33,625 18,473 12,465 19,252 21,804
Profit for the period from continuing operations 44,524 29,449 55,373 44,900 47,967 31,656 54,371 63,870
Profit (loss) for the period from discontinued operations 3,399 52,047 - - (8,159 ) (9,223 ) (233,573 ) 6,219
Profit (loss) for the period 47,923 81,496 55,373 44,900 39,808 22,433 (179,202 ) 70,089
Profit (loss) for the period attributable to owners of the Corporation 18,770 25,089 19,303 13,889 16,391 634 (56,303 ) 23,317
Cash flow from operating activities 9,570 126,455 109,546 203,193 52,378 90,891 141,106 217,792
Cash flow from operations 104,739 105,153 117,606 119,612 38,119 103,309 129,327 148,228
Acquisitions of property, plant and equipment, intangible and other assets 78,404 87,186 88,141 124,638 58,369 62,873 63,807 122,441
Free cash flow 26,335 17,967 29,465 (5,026 ) (20,250 ) 40,436 65,520 25,787
Earnings (loss) per share(2) attributable to owners of the Corporation
From continuing and discontinued operations
Basic 1.12 1.50 1.15 0.83 0.98 0.04 (3.36 ) 1.39
Diluted 1.11 1.49 1.15 0.83 0.97 0.04 (3.36 ) 1.39
From continuing operations
Basic 1.06 0.50 1.15 0.83 1.14 0.22 1.13 1.27
Diluted 1.05 0.50 1.15 0.83 1.13 0.21 1.13 1.27
From discontinued operations
Basic 0.07 1.00 - - (0.16 ) (0.18 ) (4.49 ) 0.12
Diluted 0.06 0.99 - - (0.16 ) (0.18 ) (4.49 ) 0.12
(1) The addition of quarterly information may not correspond to the annual total due to rounding.
(2) Per multiple and subordinate voting share.

Seasonal variations

Cogeco Cable's operating results are not generally subject to material seasonal fluctuations except as follows. The customer growth in the Television service customers and HSI service are generally lower in the second half of the fiscal year as a result of a decrease in economic activity due to the beginning of the vacation period, the end of the television seasons, and students leaving their campuses at the end of the school year. Cogeco Cable offers its services in several university and college towns such as Kingston, Windsor, St.Catharines, Hamilton, Peterborough, Trois-Rivières and Rimouski in Canada.

Additional information

Additional information relating to the Corporation, including its 2012 Annual Report and Annual Information Form, is available on SEDAR at www.sedar.com.

ABOUT COGECO

COGECO is a diversified communications corporation. Through its Cogeco Cable subsidiary, COGECO provides its residential customers with Analogue and Digital Television, HSI and Telephony services using its two-way broadband cable networks. Cogeco Cable also provides, to its commercial customers, through its subsidiary Cogeco Data Services, data networking, e-business applications, video conferencing, hosting services, Ethernet, private line, VoIP, HSI access, data storage, co-location services, managed IT services, cloud services and other advanced communication solutions. Through its subsidiary, Cogeco Diffusion, COGECO owns and operates 13 radio stations across most of Québec with complementary radio formats serving a wide range of audiences as well as Cogeco News, its news agency. Cogeco Diffusion also operates Métromédia, an advertising representation house specialized in the public transit sector that holds exclusive advertising rights in the Province of Québec where it also represents its business partners active across other Canadian markets. COGECO's subordinate voting shares are listed on the Toronto Stock Exchange (TSX:CGO). The subordinate voting shares of Cogeco Cable are also listed on the Toronto Stock Exchange (TSX:CCA).

Analyst Conference Call: Friday, November 2, 2012 at 11:00 a.m. (Eastern Daylight Time)
Media representatives may attend as listeners only.
Please use the following dial-in number to have access to the conference call by dialling five minutes before the start of the conference:
Canada/USA Access Number: 1-800-820-0231
International Access Number: 1-416-640-5926
Confirmation Code: 7187134
By Internet at www.cogeco.ca/investors
A rebroadcast of the conference call will be available until November 10, by dialling:
Canada and US access number: 1 888-203-1112
International access number: + 1 647-436-0148
Confirmation code: 7187134

Cable segment customer statistics

2012 2011 2010
Primary service units(1) 1,969,133 1,897,469 1,791,159
Television service customers 863,115 877,985 874,505
Penetration as a percentage of homes passed 52.4 % 54.1 % 54.9 %
Digital Television service customers 771,503 678,326 559,418
Penetration as a percentage of homes passed 46.8 % 41.8 % 35.1 %
Analogue Television service customers 91,612 199,659 315,087
Penetration as a percentage of homes passed 5.6 % 12.3 % 19.8 %
High Speed Internet service customers 634,534 601,214 559,057
Penetration as a percentage of homes passed 38.5 % 37.1 % 35.1 %
Telephony service customers 471,484 418,270 357,597
Penetration as a percentage of homes passed 28.6 % 25.8 % 22.4 %
(1) Represents the sum of Television, High Speed Internet ("HSI") and Telephony service customers.

Contact Information

  • Source: COGECO Inc.
    Pierre Gagne
    Senior Vice President and Chief Financial Officer
    Tel.: 514-764-4700

    Information: Media
    Rene Guimond
    Vice-President, Public Affairs and Communications
    Tel.: 514-764-4700