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%
(firmenpresse) - MONTREAL, QUEBEC -- (Marketwire) -- 11/01/12 -- 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:
"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 Quebec radio market. Based on the success of our talk radio stations in Montreal and Quebec City, Cogeco Diffusion extended this promising format to Trois-Rivieres, Gatineau and Sherbrooke in August, creating Quebec's largest private network of talk radio stations. I am pleased to report that the integration of our new transit system advertising representation house, Metromedia, 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
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 . 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
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
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 Metromedia.
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 Metromedia.
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 Metromedia.
Cash flow analysis
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
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 Metromedia and the full year impact of the Quebec 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 Metromedia and the Quebec 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 Metromedia as well as the full year impact of the Quebec 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 Metromedia and the Quebec 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
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, Cabovisao, 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:
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:
The cash flows of the discontinued operations were as follows:
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:
Free cash flow is calculated as follows:
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:
Supplementary quarterly financial information
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-Rivieres 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 .
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 Quebec with complementary radio formats serving a wide range of audiences as well as Cogeco News, its news agency. Cogeco Diffusion also operates Metromedia, an advertising representation house specialized in the public transit sector that holds exclusive advertising rights in the Province of Quebec 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).
Cable segment customer statistics
Contacts:
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
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