MONTREAL, QUEBEC--(Marketwire - April 9, 2009) - Today, COGECO Inc. (TSX:CGO) ("COGECO" or the "Company") announced its financial results for the second quarter and first six months of fiscal 2009, ended February 28, 2009.
For the second quarter and first six months of fiscal 2009:
- Consolidated revenue increased by 14.7% to $311.8 million, and by 16.5% to $620.2 million, respectively;
- Consolidated operating income from continuing operations before amortization(1) grew by 15.6% to reach $126.7 million, and by 19.9% to reach $251.4 million;
- In the second quarter of fiscal 2009, the cable subsidiary recorded a non-cash impairment loss of its investment in Cabovisao in the amount of $399.6 million as a result of recurring competitive pressure resulting in subscriber losses that are significantly more important than originally anticipated. Net of related income taxes and non- controlling interest, the impairment loss amounted to $124 million;
- Consolidated net loss amounted to $115.3 million in the second quarter, compared to net income of $15.9 million for the same period of the prior year. Excluding the impairment loss described above, and the $7.9 million income tax adjustment related to the reduction of federal enacted income tax rates, net of non- controlling interest, and a loss from discontinued operations of $0.4 million in the second quarter of the prior year(1) , consolidated net income would have amounted to $8.7 million for the second quarter of 2009, compared to $8.4 million in the prior year, an increase of $0.3 million, or 3%;
- Consolidated net loss amounted to $104.2 million for the first six months, compared to net income of $5.9 million in the prior year. Excluding the impairment loss described above, the $7.9 million income tax adjustment related to the reduction of federal enacted income tax rates, net of non-controlling interest, and a loss from discontinued operations of $18.1 million in the first six months of the prior year, consolidated net income would have amounted to $19.7 million for the first half of fiscal 2009, compared to $16.1 million in the prior year, an increase of $3.7 million, or 22.7%;
- Free cash flow(1) reached $32.1 million for the quarter and $53.9 million for the first six months, increases of 65.6% and 27.2% over the same periods of the prior year;
- In the cable sector, revenue-generating units ("RGU")(2) grew by 25,626 and 78,340 net additions in the quarter and first six months, for a total of 2,795,214 RGU at February 28, 2009.
"Our results in the second quarter rest on the solid performance of our Canadian operations both in radio and cable. We are very pleased with the performance of the radio activities of COGECO. RYTHME FM continues to lead in the Montreal market in the winter BBM survey and to grow in its other markets. In the Canadian cable operations, we have maintained our focus and increased the number of RGU by 47,577 units in the quarter, for total net additions of 113,040 RGU so far this year. Our commercial activities, the results of which are in line with our expectations, continue to constitute a wonderful growth opportunity for Cogeco Cable as shown by the 10-year, $39 million deal with the Toronto District School Board announced in December by Cogeco Data Services. However, in our European cable operations, Cabovisao's competitive position continued to deteriorate in the second quarter due to the unfavourable economic climate and recurring intense customer promotions and advertising initiatives from competitors in the Portuguese market during the latter part of the second quarter. In accordance with current accounting standards, management considers that this situation, as evidenced by the RGU and revenue decline, is more significant and persistent than expected, resulting in a decrease in the value of Cogeco Cable's investment in the Portuguese subsidiary. Consequently, Cogeco Cable recorded a non-cash impairment loss of $399.6 million on the net value of the assets acquired. Cogeco Cable is in the process of implementing new marketing and other operating initiatives to improve the results of the European operations", declared Louis Audet, President and CEO of COGECO.
(1) The indicated terms do not have standard definitions prescribed by
Canadian Generally Accepted Accounting Principles ("GAAP") and
therefore, may not be comparable to similar measures presented by other
companies. For more details, please consult the "Non-GAAP financial
measures" section of the Management's discussion and analysis.
(2) Represents the sum of Basic Cable, High Speed Internet (HSI), Digital
Television and Telephony service customers.
FINANCIAL HIGHLIGHTS
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Quarters ended Six months ended
($000, except February February February February
percentages 28, 29, 28, 29,
and per 2009 2008(1) Change 2009 2008(1) Change
share data) $ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 311,825 271,894 14.7 620,200 532,149 16.5
Operating
income from
continuing
operations
before
amorti-
zation(2) 126,663 109,523 15.6 251,367 209,697 19.9
Operating
income from
continuing
operations 59,878 53,177 12.6 120,519 100,312 20.1
Impairment of
goodwill and
intangible
assets 399,648 - - 399,648 - -
Income (loss)
from
continuing
operations (115,291) 16,315 - (104,238) 23,971 -
Loss from
discontinued
operations - (425) - - (18,057) -
Net income
(loss) (115,291) 15,890 - (104,238) 5,914 -
Net income
excluding the
impairment
loss, the
income tax
adjustment
and the
loss from
discontinued
operations(2) 8,660 8,406 3.0 19,713 16,0622 22.7
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Cash flow from
operating
activities
from
continuing
operations 120,480 92,942 29.6 150,950 139,546 8.2
Cash flow from
operations
from
continuing
operations(2) 100,351 85,374 17.5 195,977 166,751 17.5
Capital
expenditures
and increase
in deferred
charges 68,262 66,000 3.4 142,117 124,403 14.2
Free cash
flow(2) 32,089 19,374 65.6 53,860 42,348 27.2
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Earnings (loss)
per share
Basic
Income
(loss)
from
continuing
operations (6.89) 0.98 - (6.23) 1.44 -
Loss from
discontinued
operations - (0.03) - - (1.08) -
Net income
(loss) (6.89) 0.95 - (6.23) 0.35 -
Net income
excluding
the
impairment
loss, the
income tax
adjustment
and the
loss from
discontinued
operations(2) 0.52 0.50 4.0 1.18 0.96 22.9
Diluted
Income (loss)
from
continuing
operations (6.89) 0.97 - (6.23) 1.43 -
Loss from
discontinued
operations - (0.03) - - (1.08) -
Net income
(loss) (6.89) 0.95 - (6.23) 0.35 -
Net income
excluding the
impairment
loss, the
income tax
adjustment
and the loss
from
discontinued
operations(2) 0.52 0.50 4.0 1.18 0.96 22.9
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation. Financial information for the previous
year has been restated to reflect the presentation of foreign exchange
gains or losses as financial expense instead of operating costs.
(2) The indicated terms do not have standardized definitions prescribed by
Canadian Generally Accepted Accounting Principles ("GAAP") and
therefore, may not be comparable to similar measures presented by other
companies. For more details, please consult the "Non-GAAP financial
measures" section of the Management's discussion and analysis.
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 Company'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 Company, they may prove to be incorrect. The Company cautions the reader that the current adverse economic conditions make 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 Company's expectations. It is impossible for COGECO to predict with certainty the impact that the current economic downtown 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 Company's 2008 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 Company's control. Therefore, future events and results may vary significantly from what management currently foresees. 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 Company is under no obligation (and expressly disclaims any such obligation), and does not undertake to update or alter this information before the next quarter.
This analysis should be read in conjunction with the Company's consolidated financial statements, and the notes thereto, prepared in accordance with Canadian GAAP and the MD&A included in the Company's 2008 Annual Report. Throughout this discussion, all amounts are in Canadian dollars unless otherwise indicated.
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
CORPORATE STRATEGIES AND OBJECTIVES
COGECO Inc.'s ("COGECO" or the "Company") objectives are to maximize shareholder value by increasing profitability and ensuring continued growth. The strategies employed to reach these objectives, supported by tight controls over costs and business processes, are specific to each sector. For the cable sector, sustained corporate growth and the continuous improvement of networks and equipment are the main strategies used. The radio activities focus on continuous improvement of programming in order to increase market share, and, thereby, profitability. COGECO uses growth of revenue and operating income before amortization(1), free cash flow(1) and revenue-generating units ("RGU")(2) growth in order to measure its performance against these objectives for the cable sector. Below are the Company's recent achievements in furthering the corporate objectives.
(1) The indicated terms do not have standardized definitions prescribed by
Canadian Generally Accepted Accounting Principles ("GAAP") and
therefore, may not be comparable to similar measures presented by other
companies. For more details, please consult the "Non-GAAP financial
measures" section
(2) Represents the sum of Basic Cable, High Speed Internet (HSI), Digital
Television and Telephony service customers.
Tight control over costs and business processes
- For the first six months of fiscal 2009, the Company's operating costs increased over last year by 14.4% compared to a revenue growth of 16.5%;
- The Company's Portuguese subsidiary, Cabovisao, continued to improve its business processes, and at the end of the second quarter, reinforced controls over its doubtful accounts;
- The design of internal controls over financial reporting as per National Instrument 52-109 is still ongoing. As discussed in the 2008 annual MD&A, the Company had identified certain material weaknesses in the design of internal controls over financial reporting and has been working to improve the design and efficiency of internal controls on some significant processes during the quarter. The documentation and remediation of key internal controls are progressing normally.
Cable sector
Sustained corporate growth
Canadian operations
- Digital Television service:
- During the second quarter, the following Digital and High Definition
("HD") Television services were launched:
- TSN2 HD,Teletoon Retro and Sportsnet East HD in Quebec.
- Telephony service:
- During the second quarter, the Telephony service was launched in the
following cities:
- Callander, Ingleside, Long Sault and Lancaster, Ontario;
- Daveluyville, Chambord, Desbiens, Lac Bouchette, Metabetchouan,
Normandin, St-Ferdinand- d'Halifax, St-Gedeon, Tring Jonction, Amqui,
Batiscan, Causapscal, Lac-au-Saumon, St-Stanislas, St-Ulric, Ste-
Anne-de-la-Perade, Sayabec et Val-Brillant, Quebec.
- High Speed Internet service:
- Launch of a new High Speed Internet ("HSI") package, HSI Lite Plus, in
Ontario and in Quebec with download speeds of up to 3 Mbps and a
monthly load bit capacity of 20 GB.
- Cogeco Data Services:
- During the second quarter, announcement of a 10-year, $39 million
contract with the Toronto District School Board.
European operations
- Bundled offers:
- Cabovisao - Televisao por Cabo, S.A. ("Cabovisao") realigned some of
its bundle offers for certain customers and is currently assessing
improvements to its retention strategies;
- Digital Television service:
- Continued deployment of Cabovisao's Digital Television service;
- Launch of SET channel, Sony Entertainment, Animax, Benfica TV, Disney
Channel and Disney Cinemagic;
- Launch of a new HD Set Top Box with Digital Video recording
capabilities (HD + DVR).
- High Speed Internet service:
- During the second quarter, Cabovisao ceased charging for excess
consumption for HSI customers.
Continuous improvement of networks and equipment
- During the first six months of fiscal 2009, the Company invested
approximately $48.3 million in its cable infrastructure including head-
ends and upgrades and rebuilds.
Other
- Winter's BBM Canada survey conducted with the Portable People Meter
("PPM") shows that RYTHME FM has maintained its leadership position with
audiences in the adult and female categories in the Montreal market. The
other RYTHME FM stations and the 93.3 station in the Quebec City continue
to expand their audiences.
Discontinued Operations
In October 2007, the Board of Directors of TQS, an indirect subsidiary of the Company, engaged CIBC World Markets to advise on and assess strategic options for the TQS network in the face of financial difficulties. On December 18, 2007, the Quebec Superior Court issued an order under the Companies' Creditors Arrangement Act (Canada) protecting TQS, its subsidiaries and its parent 3947424 Canada Inc. ("TQS Group") from claims by their creditors. On June 26, 2008, the Canadian Radio-television and Telecommunications Commission ("CRTC") approved the proposed transfer of ownership and control of TQS to Remstar Corporation Inc. ("Remstar") and on August 29, 2008, the transfer of ownership and control of TQS to Remstar was completed, which allowed the new ownership group to pursue the broadcasting activities of TQS.
Effective December 18, 2007, the Company has ceased to consolidate the financial statements of the TQS Group. Accordingly, the results of operations and cash flows for the three and six month periods ended February 29, 2008, have been reclassified as discontinued operations.
The results of the discontinued operations were as follows:
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Quarters ended Six months ended
February February February February
28, 29, 28, 29,
2009 2008 2009 2008
($000) $ $ $ $
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue - 5,741 - 38,499
Operating costs - 5,865 - 35,822
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Operating income (loss)
before amortization - (124) - 2,677
Amortization - 248 - 1,364
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Operating income (loss) - (372) - 1,313
Financial expense - 53 - 291
Impairment of assets - - - 30,298
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Loss before income taxes
and the following items - (425) - (29,276)
Income taxes - - - -
Non-controlling interest - - - (11,219)
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Loss from discontinued operations - (425) - (18,057)
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The cash flows of the discontinued operations were as follows:
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Quarters ended Six months ended
February February February February
28, 29, 28, 29,
2009 2008 2009 2008
($000) $ $ $ $
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Cash flow from
operating activities - 1,770 - (3,973)
Cash flow from
investing activities - (48) - (133)
Cash flow from
financing activities - (1,722) - 4,106
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Cash flow from
discontinued operations - - - -
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Continuing Operations
RGU growth in the cable sector
During the first six months ended February 28, 2009, the consolidated number of RGU increased by 78,340, or 2.9%, to reach 2,795,214 RGU, on target to attain the Company's RGU growth projections of 100,000 net additions issued on October 29, 2008 and revised on April 8, 2009, which represents approximately 3.7%, for the fiscal year ending August 31, 2009. Please consult the "Fiscal 2009 financial guidelines" section for further details.
Revenue and operating income from continuing operations before amortization growth
For the second quarter of fiscal 2009, revenue increased by $39.9 million, or 14.7%, to reach $311.8 million while operating income before amortization from continuing operations grew by $17.1 million, or 15.6%, to reach $126.7 million. For the first six months of the year, revenue increased by $88.1 million, or 16.5%, to reach $620.2 million while operating income before amortization from continuing operations grew by $41.7 million, or 19.9%, to reach $251.4 million. Due to the difficult environment in the Portuguese cable market, management has revised its guidelines for fiscal 2009 and now expects that revenue should reach $1,238 million, a decrease of $5 million compared to its original guidelines and operating income before amortization should decrease by $8 million to reach $505 million. Please consult the "Fiscal 2009 financial guidelines" section for further details.
Free cash flow
In the second quarter of fiscal 2009, COGECO generated free cash flow of $32.1 million compared to $19.4 million for the same period last year. For the six month period ended February 28, 2009, COGECO generated free cash flow of $53.9 million compared to $42.3 million in the prior year. These free cash flow increases resulted mainly from the cable sector and are attributable to an increase in cash flow from operations, resulting primarily from the improvement of the Company's operating income before amortization, partly offset by an increase in capital expenditures and by the impact of the rapid appreciation of the US dollar over the Canadian dollar in the first six months of the year. Due to the difficult environment in the Portuguese market of the cable segment partly offset by the appreciation of the Euro currency over the Canadian dollar, management has revised downwards its guidelines for fiscal 2009, and now expects free cash flow to reach $85 million for fiscal 2009, a decrease of $10 million compared to the original guidelines issued. Please consult the "Fiscal 2009 financial guidelines" section for further details.
IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS
In the second quarter of fiscal 2009, the competitive position of Cogeco Cable's subsidiary Cabovisao in the Iberian Peninsula further deteriorated due to the continuing unfavourable economic climate and recurring intense customer promotions and advertising initiatives from competitors in the Portuguese market at the end of the second quarter. Please refer to the "Cable sector" section for further details. In accordance with current accounting standards, management considers that the continued RGU and local currency revenue decline are more significant and persistent than expected, resulting in a decrease in the value of Cogeco Cable's investment in the Portuguese subsidiary. As a result, Cogeco Cable tested goodwill and all long-lived assets for impairment at February 28, 2009.
Goodwill has to be tested for impairment using a two step approach. The first step consists of determining whether the fair value of the reporting unit exceeds the net carrying amount of that reporting unit, including goodwill. In the event that the net carrying amount exceeds the fair value, a second step is performed in order to determine the amount of the impairment loss. Cogeco Cable has completed its impairment tests on goodwill and has concluded that goodwill was impaired at February 28, 2009. As a result, a non-cash impairment loss of $339.2 million was recorded in the second quarter. Fair value of the reporting unit was determined using the discounted cash flow method. Future cash flows are based on internal forecasts and consequently, considerable management judgement is necessary to estimate future cash flows. Significant changes in assumptions could result in further impairments of goodwill.
Intangible assets with definite lives, such as customer relationships, must be tested for impairment by comparing the carrying amount of the asset or group of assets to the expected future undiscounted cash flow to be generated by the asset or group of assets. Accordingly, Cogeco Cable has completed its impairment test on customer relationships at February 28, 2009, and has determined that the carrying value of customer relationships exceeds its fair value. As a result, a non-cash impairment loss of $60.4 million was recorded in the second quarter.
The impairment loss affected the Company's goodwill and customer relationship assets balances as follows at February 28, 2009:
-------------------------------------------------
-------------------------------------------------
($000) $
-------------------------------------------------
(unaudited)
Goodwill 339,206
Customer relationships 60,442
Future income taxes (16,018)
-------------------------------------------------
Impairment loss net of
related income taxes 383,630
Non-controlling interest (259,679)
-------------------------------------------------
Impairment loss net of related income
taxes and non-controlling interest 123,951
-------------------------------------------------
-------------------------------------------------
OPERATING RESULTS - CONSOLIDATED OVERVIEW
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Quarters ended Six months ended
February February February February
28, 29, 28, 29,
($000, except 2009 2008(1) Change 2009 2008(1) Change
percentages) $ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 311,825 271,894 14.7 620,200 532,149 16.5
Operating
costs 185,162 162,371 14.0 368,833 322,452 14.4
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Operating
income from
continuing
operations
before
amortization 126,663 109,523 15.6 251,367 209,697 19.9
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Operating
margin(2) 40.6% 40.3% 40.5% 39.4%
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation. Financial information for the previous
year has been restated to reflect the presentation of foreign exchange
gains or losses as financial expense instead of operating costs.
(2) Operating margin does not have a standardized definition prescribed by
Canadian GAAP and therefore, may not be comparable to similar measures
presented by other companies. For more details, please consult the
"Non-GAAP financial measures" section.
Revenue
Fiscal 2009 second-quarter revenue improved, mainly in its cable sector, by $39.9 million, or 14.7%, to reach $311.8 million, and for the six month period, by $88.1 million, or 16.5%, to reach $620.2 million. Cable revenue, driven by an increased number of RGU combined with rate increases and the acquisition of MaXess Networx(R), FibreWired Burlington Hydro Communications and Cogeco Data Services (the "recent acquisitions") in the second half of fiscal 2008 in Canadian operations, and by the appreciation of the Euro over the Canadian dollar in European operations, went up by $39.8 million, or 15%, and by $87.4 million, or 16.9%, respectively, in the second quarter and first six months of fiscal 2009.
Operating costs
Operating costs increased by $22.8 million, or 14%, to reach $185.2 million in the second quarter and by $46.4 million, or 14.4%, to reach $368.8 million in the first half of fiscal 2009 compared to the prior year. The increase in operating costs was mainly attributable to the cable sector, due to the servicing of additional RGU and the impact of the recent acquisitions in Canada, and in Europe due to the appreciation of the Euro over the Canadian dollar and an increase in the level of uncollectible customer accounts.
Operating income from continuing operations before amortization
Operating income from continuing operations before amortization grew, essentially by its cable segment, by $17.1 million, or 15.6%, to reach $126.7 million in the second quarter of fiscal 2009 compared to the corresponding period of the prior year, and for the six month period ended February 28, 2009, by $41.7 million, or 19.9%, to reach $251.4 million. The cable sector contributed to the growth by $16.8 million during the second quarter, and $39.2 million during the first half of the fiscal year.
FIXED CHARGES
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Quarters ended Six months ended
February February February February
28, 29, 28, 29,
($000, except 2009 2008(1) Change 2009 2008(1) Change
percentages) $ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Amortization 66,785 56,346 18.5 130,848 109,385 19.6
Financial
expense 18,028 17,550 2.7 41,806 33,883 23.4
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation. Financial information for the previous
year has been restated to reflect the presentation of foreign exchange
gains or losses as financial expense instead of operating costs.
Fiscal 2009 second quarter and first six-month period, amortization amounted to $66.8 million and $130.8 million, respectively, compared to $56.3 million and $109.4 million for the corresponding period the year before. The increase in amortization expense was mainly due the cable sector and attributable to additional capital expenditures arising from customer premise equipment acquisitions to sustain RGU growth, to the recent acquisitions in the Canadian operations and to the appreciation of the Euro currency over the Canadian dollar.
Second-quarter and first six-month period financial expense increased by $0.5 million and $7.9 million compared to the same periods in fiscal 2008 due to the rapid appreciation of the US dollar and the Euro over the Canadian dollar and the increase in the level of Indebtedness (defined as bank indebtedness, derivative financial instruments and long-term debt). More specifically, financial expense in the cable sector was adversely impacted by foreign exchange losses amounting to $0.6 million in the second quarter and $4.4 million in the first six months of fiscal 2009 as the majority of customer premise equipment is purchased and subsequently paid in US dollars. These losses were essentially due to the unusually high US dollar volatility, with the Bank of Canada closing rate fluctuating from CA$1.0620 per US dollar at August 31, 2008 to CA$1.2723 per US dollar at February 27, 2009, reaching a high of CA$1.2935 per US dollar on November 20, 2008. For the corresponding periods of the prior year, the cable subsidiary recorded a foreign exchange loss of $0.2 million and a foreign exchange gain of $0.9 million, respectively.
INCOME TAXES
Fiscal 2009 second-quarter income tax expense amounted to $0.2 million compared to a recovery of $14.4 million in fiscal 2008. For the first half of the year, income tax expense amounted to $10 million compared to a recovery of $5.1 million in the prior year. The income tax expenses for the current year include a future income tax recovery of $16 million related to the impairment loss recorded in the second quarter in the cable sector. Prior year income tax amounts include the impact of the reduction in corporate income tax rates announced on October 16, 2007 by the Canadian federal government in its Economic Statement and considered substantively enacted on December 14, 2007 (the "income tax adjustment"). The reduction of these corporate income tax rates reduced future income tax expense by $24.1 million in the second quarter and first six months of fiscal 2008. Excluding the effects of the impairment loss in the current year and the tax rate reductions in the prior year, income tax expense would have amounted to $16.2 million for the second quarter and $26 million for the first six months of fiscal 2009, compared to $9.7 million for the second quarter and $19 million for the first half of fiscal 2008. The increases in income tax expense for fiscal 2009 are mainly due to the increase in operating income before amortization surpassing that of the fixed charges.
NON-CONTROLLING INTEREST
The non-controlling interest represents a participation of approximately 67.7% in Cogeco Cable's results. During the second quarter of fiscal 2009 the loss attributable to non-controlling interest amounted to $242.7 million, and $226.8 million for the six months ended February 28, 2009, due to the impairment loss recorded in the cable sector. The income attributable to non-controlling interest for the comparable periods of the prior year amounted to $33.8 million and $47.5 million, respectively.
NET INCOME (LOSS)
Fiscal 2009 second-quarter net loss amounted to $115.3 million, or $6.89 per share, compared to net income of $15.9 million, or $0.95 per share, for the same period last year. Net loss in the first six month period of fiscal 2009 amounted to $104.2 million, or $6.23 per share, compared to net income of $5.9 million, or $0.35 per share, for the same period last year. Fiscal 2009 net losses in the second quarter and first six months are due to the impairment loss of $399.6 million recorded in the second quarter of the year, as described in the "Impairment of goodwill and intangible assets" section. Net of related income taxes and non-controlling interest, the impairment loss reduced net income for the quarter and first six months by $124 million. The net income amounts of the 2008 fiscal year included an income tax recovery of $24.1 million resulting from the reduction of corporate income tax rates in the second quarter of fiscal 2008 as described in the "Income taxes" section, net of non-controlling interest of $16.2 million, for a net impact on income of $7.9 million, and losses from discontinued operations of $0.4 million and $18.1 million for the quarter and first six months of fiscal 2008 respectively. Excluding the effect of the above items(1), net income would have amounted to $8.7 million, or $0.52 per share(1), and $19.7 million, or $1.18 per share, for the quarter and first six months ended February 28, 2009, respectively, compared to $8.4 million, or $0.50 per share, representing increases of 3% and 4%, and $16.1 million, or $0.96 per share, representing increases of 22.7% and 22.9%, respectively, for the second quarter and first six months of the 2008 fiscal year. Net income progression has resulted mainly from the growth in the cable sector of operating income before amortization exceeding that of fixed charges from the Canadian operations, partly offset by the reduction in operating income before amortization, the increase in fixed charges and the unfavourable impact of the Euro currency over the Canadian dollar for the European operations in the cable sector.
(1) The indicated terms do not have standardized definitions prescribed by
Canadian GAAP and therefore, may not be comparable to similar measures
presented by other companies. For more details, please consult the
"Non-GAAP financial measures" section.
CASH FLOW AND LIQUIDITY
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Quarters ended Six months ended
February February February February
28, 29, 28, 29,
2009 2008 2009 2008
($000) $ $ $ $
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Operating activities
from continuing operations
Cash flow from operations(1) 100,351 85,374 195,977 166,751
Changes in non-cash
operating items 20,129 7,568 (45,027) (27,205)
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120,480 92,942 150,950 139,546
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Investing activities from
continuing operations(2)
(67,895) (64,743) (140,795) (123,072)
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Financing activities from
continuing operations(2) (36,365) (22,329) 2,411 (58,586)
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Effect of exchange rate
changes on cash and cash
equivalents denominated
in foreign currencies 641 355 1,328 202
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Net change in cash and
cash equivalents from
continuing operations 16,861 6,225 13,984 (41,910)
Net change in cash and
cash equivalents from
discontinued operations - - - -
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Cash and cash equivalents,
beginning of period 34,505 18,144 37,472 66,279
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Cash and cash equivalents,
end of period 51,366 24,369 51,366 24,369
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(1) Cash flow from operations does not have a standardized definition
prescribed by Canadian GAAP and therefore, may not be comparable to
similar measures presented by other companies. For more details,
please consult the "Non-GAAP financial measures" section.
(2) Excludes assets acquired under capital leases.
Fiscal 2009 second quarter cash flow from operations reached $100.4 million, 17.5% higher than the comparable period last year, primarily due to the increase in operating income before amortization. Changes in non-cash operating items generated greater cash inflows compared to the same period last year, mainly as a result of increases in accounts payable and accrued liabilities, and a slight decrease in accounts receivable in the second quarter of fiscal 2009 compared to an increase in accounts receivable in the second quarter of the prior year, partly offset by an increase in income taxes receivable.
In the first six months of fiscal 2009, cash flow from operations reached $196 million, 17.5% higher than the comparable period last year, primarily due to the increase in operating income before amortization, partly offset by the increase in financial expense and current income taxes. Changes in non-cash operating items generated greater cash outflows compared to the same period last year, mainly as a result of a decrease in income tax liabilities in the current year compared to an increase in the prior year and a higher increase in income taxes receivable in the first half of the year compared to the prior year, partly offset by a lower decrease in accounts payable and accrued liabilities and an increase in accounts receivable in the prior year.
In the second quarter of fiscal 2009, investing activities from continuing operations including assets acquired under capital leases stood at $67.9 million due to capital expenditures of $62.5 million and from an increase of $5.7 million in deferred charges and others in the cable sector. The capital expenditures, stemming essentially from the cable sector, increased compared to the same period last year due to the following factors:
- An increase in support capital spending due to improvements in the information systems to sustain the business activities and the acquisition of a new facility in the Canadian operations;
- An increase in scalable infrastructure capital spending mainly due to the timing of the expansion and head-end improvements, system powering and equipment reliability to sustain increased customer demand for HSI and Telephony services in Canada;
- An increase in line extensions due to the expansion of the networks in Canada;
- An increase from the appreciation of the US dollar and the Euro over the Canadian dollar;
- These increases were partly offset by a decrease in customer premise equipment spending which reflect lower RGU growth in Canadian operations and net RGU losses in European operations;
- A decrease in capital expenditures associated with network upgrades and rebuilds due to the timing of these initiatives.
In the first six months of fiscal 2009, investing activities from continuing operations including assets acquired under capital leases stood at $140.8 million due to capital expenditures of $129.1 million and from an increase of $12.9 million in deferred charges and others in the cable sector. The capital expenditures, stemming essentially from the cable sector, increased compared to the same period last year due to the following factors:
- An increase in support capital spending due to improvements in the information systems to sustain the business activities and the acquisition of a new facility in the Canadian operations, and to the acquisition of a power generator for Cogeco Data Services in the first quarter of the year;
- An increase in customer premise equipment capital spending resulting from RGU growth in Canadian operations fuelled in part by continued interest for the HD Television service, combined with the deployment of Digital Television in Portugal, net of RGU losses in the other services in European operations;
- An increase in scalable infrastructure capital spending mainly due to the timing of the expansion and head-end improvements, system powering and equipment reliability to sustain increased customer demand for HSI and Telephony services in Canada;
- An increase in line extensions due to the expansion of the networks in Canada;
- An increase from the appreciation of the US dollar and the Euro over the Canadian dollar;
- Partly offsetting these increases, capital expenditures associated with network upgrades and rebuilds decreased due to the timing of these initiatives.
Deferred charges and others are mainly attributable to reconnect costs in the cable sector. The increase in deferred charges and others for the second quarter amounted to $5.7 million compared to $6.2 million for the same period the year before, and to $12.9 million compared to $13.7 million for the first six months of the year. Slower RGU growth explained the lower increases recorded in fiscal 2009.
In the second quarter and first six months, the Company generated free cash flows amounting to $32.1 million and $53.9 million, respectively, compared to $19.4 million and $42.3 million for the same periods of the preceding year. These free cash flow increases over the comparable periods of the prior year are mainly due to the cable sector and attributable to an increase in cash flow from operations, resulting primarily from the improvement of the cable sudsidiary's operating income before amortization, partly offset by an increase in capital expenditures. The aggregate amount of total capital expenditures and deferred charges increased by $2.3 million for the quarter ended February 28, 2009, and by $17.7 million for the first half of fiscal 2009 compared to the corresponding periods of the prior year due to the factors explained above.
In the second quarter of 2009, Indebtedness affecting cash decreased by $31.5 million due to the free cash flow of $32.1 million and the increase of non-cash operating items of $20.1 million, net of the increase in cash and cash equivalents of $16.9 million and the dividend payment of $1.3 million described below. For the same period of the prior year, Indebtedness affecting cash decreased by $18.2 million due to the free cash flow of $19.4 million, partly offset by a $1.2 million dividend payment described below.
During the second quarter of fiscal 2009, dividends of $0.08 per share for subordinate and multiple voting shares, totalling $1.3 million, were paid by the Company, compared to $0.07 per share, totalling $1.2 million in the second quarter of fiscal 2008. Dividends paid by a subsidiary to non-controlling interests amounted to $3.9 million during the second quarter of fiscal 2009, for consolidated dividend payments of $5.3 million.
In the first half of fiscal 2009, Indebtedness affecting cash increased by $12.3 million due to the reduction of non-cash operating items of $45 million, the increase in cash and cash equivalents of $13.9 million and the payment of dividends totalling $2.7 million, partly offset by the free cash flow of $53.9 million. Indebtedness was increased through the issuance on October 1, 2008, in the cable sector, of Senior Secured Notes, Series A and B and by an increase of $28.1 million in bank indebtedness, net of the repayment of US$150 million Senior Secured Notes Series A and the related derivative financial instrument of $56.2 million, both maturing on October 31, 2008, for a total of $238.7 million, and of net repayments on the cable subsidiary's revolving loans of $23 million. For the same period of the prior year, Indebtedness affecting cash decreased by $52.6 million mainly due to the free cash flow of $42.3 million, the reduction of $41.9 million in cash and cash equivalents partly used to offset the $27.2 million reduction in non-cash operating items, partly offset by the dividend payment of $2.3 million described below.
During the first six months of fiscal 2009, quarterly dividends of $0.08 per share for subordinate and multiple voting shares, totalling $2.7 million, were paid by the Company, compared to quarterly dividends of $0.07 per share, totalling $2.3 million in the first half of the prior year. Dividends paid by a subsidiary to non-controlling interests amounted to $7.9 million, for consolidated dividend payments of $10.6 million in the six month period ended February 28, 2009.
At February 28, 2009, the Company had a working capital deficiency of $348.8 million compared to $611.8 million as at August 31, 2008. The decrease in the deficiency is mainly attributable to the cable sector and is due to the repayment of the US$150 million Senior Secured Notes, Series A and the related derivative financial instrument for a total of $238.7 million on October 31, 2008 using the proceeds of issuance of the Senior Secured Notes, Series A and B. As part of the usual conduct of its cable business, COGECO maintains a working capital deficiency due to a low level of accounts receivable as a large portion of the cable subsidiary's customers pay before their services are rendered, unlike accounts payable and accrued liabilities, which are paid after products are delivered or services are rendered, thus enabling Cogeco Cable to use cash and cash equivalents to reduce Indebtedness.
At February 28, 2009, Cogeco Cable had used $476.8 million of its $885 million Term Facility for a remaining availability of $408.2 million and the Company had drawn $12.3 million of its $50 million Term Facility, for a remaining availability of $37.7 million.
The assumptions used in the actuarial valuations performed for the year ended August 31, 2008 were adjusted to reflect the current rates of return and market conditions, and accordingly, the Company expects the payments required to fund the actuarial deficit of its defined benefit pension plans to be higher in fiscal 2009 than in fiscal 2008. Based on the August 31, 2008 actuarial valuation, the Company expects these payments to be approximately $1 million for the 2009 fiscal year.
Transfers of funds from non-wholly owned subsidiaries to COGECO are subject to approval by the subsidiaries' Board of Directors and may also be restricted under the terms and conditions of certain debt instruments. In accordance with applicable corporate and securities laws, significant transfers of funds from COGECO may be subject to approval by minority shareholders.
FINANCIAL POSITION
Since August 31, 2008, there have been major changes to the balances of "fixed assets", "intangible assets", "goodwill", "accounts payable and accrued liabilities", "future income tax assets" "income taxes receivable", "income tax liabilities", "future income tax liabilities", "cash and cash equivalents", "Indebtedness" and "non-controlling interest".
The $28.1 million increase in fixed assets is mainly related to increases in capital expenditures to sustain RGU growth, to the recent acquisitions in Canada and to the appreciation of the Euro and the US dollar over the Canadian dollar in the cable sector. The $66.2 million and $326.1 million reductions in intangible assets and goodwill and the $14.2 million decrease in future income tax liabilities are due to the impairment loss recorded on the cable subsidiary's investment in Cabovisao in the second quarter of the year as described in the "Impairment of goodwill and intangible assets" section, net of the appreciation of the Euro over the Canadian dollar. The $25.9 million decrease in accounts payable and accrued liabilities and the $13.9 million increase in cash and cash equivalents are related to the timing of payments made to suppliers and to the fluctuations of the Euro over the Canadian dollar in the cable sector. The $5.7 million reduction in future income tax assets is due to the utilization of Ontario minimum tax credits and tax loss carry forwards to reduce current income taxes in the cable sector. The $6.6 million increase in income taxes receivable and the $9.6 million decrease in income tax liabilities are due to income tax payments relating to fiscal 2008 that were made by the cable subsidiary in the first quarter of fiscal 2009. Indebtedness has increased by $32.1 million as a result of the factors previously discussed in the "Cash Flow and Liquidity" section and the unfavourable impact of the appreciation of the US dollar and the Euro over the Canadian dollar, partly offset by the increase of $34.3 million in the fair value of the cross-currency swaps related to the Senior Secured Notes Series A issued on October 1, 2008. The $228.2 million decrease in non-controlling interest is due to the impairment loss recorded on the cable subsidiary's investment in Cabovisao in the second quarter of the year as described in the "Impairment of goodwill and intangible assets" section, net of improvements in the cable subsidiary's operating results excluding the impairment loss.
A description of COGECO's share data as at March 31, 2009 is presented in the table below:
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Number of shares/options Amount
($000)
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Common shares
Multiple voting shares 1,842,860 12
Subordinate voting shares 14,898,762 120,058
Options to purchase subordinate
voting shares
Outstanding options 123,358
Exercisable options 123,358
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In the normal course of business, COGECO has incurred financial obligations, primarily in the form of long-term debt, operating and capital leases and guarantees. COGECO's obligations, discussed in the 2008 annual MD&A, have not materially changed since August 31, 2008, except for the new financing in the cable sector discussed in the "Cash Flow and Liquidity" section.
DIVIDEND DECLARATION
At its April 8, 2009 meeting, the Board of Directors of COGECO declared a quarterly eligible dividend of $0.08 per share for subordinate and multiple voting shares, payable on May 6, 2009, to shareholders of record on April 22, 2009. The declaration, amount and date of any future dividend will continue to be considered and approved by the Board of Directors of the Company based upon the Company's financial condition, results of operations, capital requirements and such other factors as the Board of Directors, at its sole discretion, deems relevant. There is therefore no assurance that dividends will be declared, and if declared, their amount and periodicity may vary.
FINANCIAL MANAGEMENT
On January 22, 2009, the Company's cable subsidiary, Cogeco Cable, entered into a swap agreement with a financial institution to fix the floating benchmark interest rate with respect to the Euro-denominated Term Loan facilities for a notional amount of EUR 111.5 million. The interest rate swap to hedge the Term Loans has been fixed at 2.08% until their maturity at July 28, 2011. The notional value of the swap will decrease in line with the amortization schedule of the Term Loans. In addition to the interest rate swap of 2.08%, Cogeco Cable will continue to pay the applicable margin on these Term Loans in accordance with its Term Facility. Since the issuance on January 22, 2009, the fair value of interest rate swap liability increased by $1.3 million, which is recorded as a decrease of other comprehensive income net of income taxes of $0.4 million and non-controlling interest of $0.6 million.
On October 1, 2008, Cogeco Cable entered into cross-currency swap agreements to set the liability for interest and principal payments on its US$190 million Senior Secured Notes, Series A maturing in October 1, 2015. These agreements have the effect of converting the U.S. interest coupon rate of 7.00% per annum to an average Canadian dollar interest rate of 7.24% per annum. The exchange rate applicable to the principal portion of the debt has been fixed at CA$1.0625 per US dollar. Since the issuance on October 1, 2008, amounts due under the US$190 million Senior Secured Notes Series A increased by $39.9 million due to the US dollar's appreciation over the Canadian dollar. The fair value of cross-currency swaps increased by a net amount of $35.5 million, of which $39.9 million offsets the foreign exchange loss on the debt denominated in US dollars. The difference of $4.3 million was recorded as a decrease of other comprehensive income, net of income taxes of $1.2 million and non-controlling interest of $2.1 million.
Cogeco Cable's net investment in the self-sustaining foreign subsidiary, Cabovisao, is exposed to market risk attributable to fluctuations in foreign currency exchange rates, primarily changes in the value of the Canadian dollar versus the Euro. This risk is mitigated since the major part of the purchase price for Cabovisao was borrowed directly in Euros. This debt is designated as a hedge of net investments in self-sustaining foreign subsidiaries and, accordingly, Cogeco Cable realized a foreign exchange gain of $11.4 million in the first six months of fiscal 2009, which is presented net of non-controlling interest of $7.7 million in other comprehensive income. The exchange rate used to convert the Euro into Canadian dollars for the balance sheet accounts as at February 28, 2009 was $1.6129 per Euro compared to $1.5580 per Euro as at August 31, 2008. The average exchange rates prevailing during the second quarter and first six months used to convert the operating results of the European operations were $1.6265 and $1.5864 per Euro, respectively, compared to $1.4741 and $1.4430 per Euro for the same periods of the 2008 fiscal year.
The following table shows the Canadian dollar impact of a 10% change in the average exchange rate of the Euro currency into Canadian dollars on European operating results in the cable sector for the first six months ended February 28, 2009:
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Exchange rate
Six months ended February 28, 2009 As reported impact
($000) $ $
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(unaudited) (unaudited)
Revenue 123,304 12,330
Operating income before amortization 38,678 3,868
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The Company is also impacted by foreign currency exchange rates, primarily changes in the values of the US dollar relative to the Canadian dollar with regards to purchases of equipment, as the majority of customer premise equipment in the cable sector is purchased and subsequently paid in US dollars. Please consult the "Fixed charges" section of this MD&A and the Foreign Exchange Risk section in note 14 of the consolidated financial statements for further details.
CABLE SECTOR
CUSTOMER STATISTICS
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Net additions (losses) % of
Penetration(1)
Quarters ended Years ended
February February February February February February February
28, 28, 29, 28, 29, 28, 29,
2009 2009 2008 2009 2008 2009 2008
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RGU 2,795,214 25,626 56,196 78,340 139,220 - -
Basic
Cable
service
custom-
mers 1,144,074 (9,953) 4,593 (9,155) 17,590 - -
HIS
service
custom-
mers(2) 650,098 3,030 17,154 17,330 46,254 58.8 56.1
Digital
Tele-
vision
service
custom-
mers 514,917 25,102 17,879 48,719 34,132 45.5 49.1
Telephony
service
custom-
mers(3) 486,125 7,447 16,570 21,446 41,244 46.5 43.1
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(1) As a percentage of Basic Cable service customers in areas served.
(2) Customers subscribing to the HSI service without the Basic Cable
service totalled 85,487 as at February 28, 2009 compared to 81,745 at
February 29, 2008.
(3) Customers subscribing to the Telephony service without the Basic Cable
service totalled 31,109 as at February 28, 2009 compared to 22,054 at
February 29, 2008.
In the cable sector, second-quarter and first six months RGU net additions were lower than for the same periods last year and reflect an early sign of maturation in some services for the Canadian operations and the difficult economic environment in Portugal. The number of net losses for Basic Cable stood at 9,953 customers for the quarter and 9,155 customers for the first six months, compared to net additions of 4,593 and 17,590 customers, respectively, for the same periods of the prior year. This decrease is due to net customer losses in the European operations reflecting a continuing unfavourable economic environment in the Iberian Peninsula, recurring intense customer promotions and advertising initiatives from competitors for their new respective third leg of the triple-play service during the latter part of the second quarter in the Portuguese market, net of increases in Canadian operations stemming from continuous improvements to the service offering, targeted marketing activities and an upswing in subscription activity in border markets due to the impending over-the-air digital conversion in the United States. The number of net additions to HSI service stood at 3,030 customers for the quarter and 17,330 customers for the first six months, compared to 17,154 and 46,254 customers, respectively, for the same periods last year. The growth in HSI customer net additions continues 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 in Canadian operations offset by net customer losses in European operations due to the factors mentioned above. The Digital Television service net additions stood at 25,102 and 48,719 customers, for the quarter and first six months ended February 28, 2009, respectively, compared to 17,879 and 34,132 customers for the same periods in the prior year due to targeted marketing initiatives in the second half of fiscal 2008 and in 2009 to improve market penetration and to the continuing strong interest for the HD Television service in Canadian operations, as well as the launch of the Digital Television service in Portugal in the third quarter of fiscal 2008. In the quarter and first six months, Telephony customers grew by 7,447 and 21,446 customers to reach 486,125 at February 28, 2009, compared to a growth of 16,570 and 41,244 customers for the same periods of the prior year. The lower growth is mostly attributable to the increased penetration in areas where the service is already offered and to fewer new areas where the service was launched in Canadian operations offset by net customer losses in European operations due to the unfavourable economic environment. Telephony service coverage in Canada, as a percentage of homes passed, has now reached 89% compared to 80% at February 29, 2008. The service is offered in all of the Company's territories in Portugal.
In addition to the launch of new channels and retention strategies during the quarter in the European operations, new marketing and other operating initiatives are in the process of being implemented, the result of which should help in reducing customer attrition in the upcoming quarters.
OPERATING RESULTS
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Quarters ended Six months ended
February February February February
28, 29, 28, 29,
($000, except 2009 2008(1) Change 2009 2008(1) Change
percentages) $ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 304,920 265,102 15.0 604,358 516,935 16.9
Operating
costs 176,421 152,765 15.5 350,155 302,261 15.8
Management
fees -
COGECO Inc. 3,038 3,679 (17.4) 9,019 8,714 3.5
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Operating
income from
continuing
operations
before
amortization 125,461 108,658 15.5 245,184 205,960 19.0
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Operating
margin 41.1% 41.0% 40.6% 39.8%
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation. Financial information for the previous
year has been restated to reflect the presentation of foreign exchange
gains or losses as financial expense instead of operating costs.
Revenue
Fiscal 2009 second-quarter consolidated revenue improved by $39.8 million, or 15%, to reach $304.9 million, and first six month consolidated revenue by $87.4 million, or 16.9%, to reach $604.4 million, when compared to the prior year. Driven by an increased number of RGU combined with rate increases and the acquisition of MaXess Networx(R), FibreWired Burlington Hydro Communications and Cogeco Data Services (the "recent acquisitions") in the second half of fiscal 2008, second-quarter Canadian operations revenue went up by $38.5 million, or 18.8%, and for the first six months by $79.6 million, or 19.8% .
Fiscal 2009 second-quarter European operations revenue increased by $1.3 million, or 2.2%, to reach $61.2 million, and first six month revenue by $7.8 million, or 6.7%, to reach $123.3 million, compared to the same period last year. The increase is due to the strength of the Euro against the Canadian dollar, despite a RGU loss in the first six months of the year. Revenue from the European operations in the local currency for the second quarter amounted to EUR 37.6 million, a decrease of EUR 3 million, or 7.4%, and to EUR 77.8 million, a decrease of EUR 2.3 million, or 2.8% for the first six months.
Operating costs
For the second quarter and first six months of fiscal 2009, operating costs, excluding management fees payable to COGECO Inc., increased by $23.7 million and $47.9 million to reach $176.4 million and $350.2 million, respectively, increases of 15.5% and 15.8% compared to the prior year. Operating costs increased due to the servicing of additional RGU and the impact of the recent acquisitions in Canada, and in Europe due to the appreciation of the Euro over the Canadian dollar and an increase in the level of uncollectible customer accounts. Operating costs of the European operations in local current amounted to EUR 26.7 million for the second quarter and EUR 53.3 million for the first six months, increases of EUR 0.9 million, or 3.5%, and EUR 0.5 million, or 0.9% over the comparable periods of the prior year.
Operating income before amortization
Fiscal 2009 second quarter and first six-month operating income before amortization increased by $16.8 million, or 15.5%, to reach $125.5 million, and by $39.2 million, or 19%, to reach $245.2 million, respectively, mainly as a result of various rate increases, recent acquisitions, and RGU growth generating additional revenues in the Canadian operations which outpaced operating cost increases. Operating income before amortization for the Canadian operations rose by $20.9 million, or 24.1%, to reach $107.6 million in the second quarter, and by $39.9 million, or 23.9%, to reach $206.5 million in the first six months of fiscal 2009. Operating income before amortization for the European operations decreased to $17.8 million from $21.9 million, and to $38.7 million from $39.3 million in the first six months of fiscal 2009, representing decreases of 18.7% and 1.6%, respectively, and in the local currency, amounted to EUR 10.9 million for the second quarter, a decrease of EUR 3.9 million or 26.4%, and to EUR 24.4 million, a decrease of EUR 2.7 million, or 10.1% for the first half of the year.
Cogeco Cable's second quarter operating margin remained essentially the same at 41.1% compared to 41% for the same period of the prior year. The operating margin in Canada improved to 44.2% from 42.3% which offset the decrease in the European operating margin to 29.1% from 36.6%.
