MONTREAL, QUEBEC--(Marketwire - July 10, 2009) - Today, Cogeco Cable Inc. (TSX:CCA) ("Cogeco Cable" or the "Corporation") announced its financial results for the third quarter and first nine months of fiscal 2009, ended May 31, 2009.
For the third quarter and first nine months of fiscal 2009:
- Consolidated revenue increased by 11.2% to reach $305.7 million, and by 14.9% to reach $910 million, respectively;
- Consolidated operating income before amortization(1) grew by 9.6% to reach $128.7 million, and by 15.6% to reach $373.9 million, respectively;
- In the first nine months of fiscal 2009, a $399.6 million non-cash impairment loss on the Corporation's investment in its Portuguese subsidiary, Cabovisao - Televisao por Cabo, S.A. ("Cabovisao") was recorded as a result of recurring competitive pressure resulting in subscriber losses that were more severe than originally anticipated. Net of related income taxes, the impairment loss amounted to $383.6 million;
- Third quarter consolidated net income amounted to $31.8 million compared to $31.1 million for the same period of the prior year. Excluding an unfavourable income tax adjustment of $6.1 million related to the utilization of pre-acquisition tax losses in Cabovisao and a $10.9 million favourable reduction of Cabovisao withholding and stamp tax contingent liabilities(1), consolidated net income would have amounted to $27 million, a decrease of $4.2 million, or 13.4% compared to $31.1 million for the third quarter of fiscal 2008;
- Consolidated net loss amounted to $303.2 million for the first nine months compared to net income of $101.4 million in the prior year. Excluding the impairment loss, the adjustments related to income taxes and withholding and stamp tax contingent liabilities described above for the current quarter, and the income tax adjustment of $24 million related to the reduction of Canadian federal income tax rates in the first nine months of the prior year(1), consolidated net income would have amounted to $75.6 million, a decrease of $1.8 million, or 2.4% compared to $77.4 million for the first nine months of fiscal 2008;
- Free cash flow(1) reached $31.9 million for the quarter, representing a decrease of 13.6% over the prior year, and $80.7 million for the first nine months, an increase of 3.6% over fiscal 2008;
- Operating margin(1) decreased to 42.1% for the quarter compared to 42.7% in the prior year, and increased to 41.1% from 40.8% for the first nine months of the fiscal year;
- Revenue-generating units ("RGU")(2) grew by 14,985 net additions in the quarter and 93,325 net additions in the first nine months, for a total of 2,810,199 RGU at May 31, 2009.
"Cogeco Cable's financial results are well aligned with the revised financial projections for fiscal 2009. We are pleased with our consolidated results for the third quarter, in particular the increases in revenue and operating income before amortization. For the nine month period, our Canadian operations are growing at a steady pace, as demonstrated by net additions of 140,215 RGU. In our European operations, the Digital Television service continues to grow in our markets with the addition of 20,976 new customers. We have recently realigned our short term strategic plan in order to curtail subscriber losses that continue to adversely affect the financial results of our Portuguese operations in the current difficult competitive environment", declared Louis Audet, President and CEO of Cogeco Cable.
(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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($000, except
percentages Quarters ended May 31, Six months ended May 31,
and per 2009 2008(1)Change 2009 2008(1)Change
share data) $ $ % $ $ %
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(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 305,672 274,944 11.2 910,030 791,879 14.9
Operating
income before
amortization
(2) 128,731 117,492 9.6 373,915 323,452 15.6
Operating
income 61,218 59,283 3.3 175,836 156,567 12.3
Impairment
of goodwill
and intangible
assets - - - 399,648 - -
Net income
(loss) 31,770 31,142 2.0 (303,248) 101,416 -
Net income
excluding
the impairment
loss and tax
adjustments(2) 26,982 31,142 (13.4) 75,594 77,414 (2.4)
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Cash flow from
operating
activities 102,736 112,799 (8.9) 249,650 249,135 0.2
Cash flow
from
operations(2) 94,810 95,829 (1.1) 285,506 260,855 9.5
Capital
expenditures
and increase
in deferred
charges 62,919 58,928 6.8 204,853 183,040 11.9
Free cash
flow(2) 31,891 36,901 (13.6) 80,653 77,815 3.6
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Earnings (loss)
per share
Basic 0.65 0.64 1.6 (6.25) 2.09 -
Diluted 0.65 0.64 1.6 (6.25) 2.08 -
Earnings per
share excluding
the impairment
loss and tax
adjustments(2)
Basic 0.56 0.64 (12.5) 1.56 1.60 (2.5)
Diluted 0.55 0.64 (14.1) 1.55 1.59 (2.5)
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.
(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 Cable'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 Cable 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 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 Corporation's expectations. It is impossible for Cogeco Cable to predict with certainty the impact that the current economic downturn 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 2008 annual Management's Discussion and Analysis (MD&A) that could cause actual results to differ materially from what Cogeco Cable 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.
This analysis should be read in conjunction with the Corporation's consolidated financial statements, and the notes thereto, prepared in accordance with Canadian Generally Accepted Accounting Principles and the MD&A included in the Corporation'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 Cable Inc.'s ("Cogeco Cable" or the "Corporation") objectives are to improve profitability and create shareholder value. The strategies for reaching those objectives are sustained growth through the diversification and the improvement of products, services, clientele and territories, as well as the continuous improvement of networks and equipment and tight controls over costs and business processes. The Corporation measures its performance, with regard to these objectives by monitoring revenue growth, revenue-generating units ("RGU")(1) growth and free cash flow(2). Below are the recent achievements in furthering Cogeco Cable's objectives.
Continuous improvement of the service offering and expansion of the customer base
Canadian operations
- Digital Television service :
- On July 9, the following High Definition ("HD") Television services
were launched:
- Tele-Quebec HD, Canal Evasion HD, TV5 HD, PBS HD, Mystere HD, The
Score HD, National Geographic HD and Discovery HD in Quebec.
- Telephony service:
- During the third quarter, the Telephony service was launched in the
following cities:
- Brighton, Wyoming, Petrolia, Oil City, Napanee and Deseronto,
Ontario;
- North Hatley, Ayers Cliff, Gaspe, Forestville and St-Etienne-des-
Gres, Quebec.
European operations
- Bundled offers:
- Cabovisao - Televisao por Cabo, S.A. ("Cabovisao") realigned some of
its bundle offers to retain and attract customers.
- Television service:
- Continued deployment of Cabovisao's Digital Television service;
- Launch of Jim Jam, Luxe HD, MVM TV, Telesur, Regioes TV, TVGlobo and PFC
channels.
- High-speed Internet ("HSI") service:
- On July 7, announcement of the launch of Nitro 60 Mbps and Nitro 120
Mbps Internet services, the fastest available in the Portuguese market.
Continuous improvement of networks and equipment
- During the first nine months of fiscal 2009, the Corporation invested
approximately $76.9 million in its infrastructure including head-ends and
upgrades and rebuilds.
Tight control over costs and business processes
- For the first nine months of the 2009 fiscal year, consolidated operating
costs, excluding management fees payable to COGECO Inc., increased by
14.7% while revenue grew by 14.9% for the same period;
- During the quarter, the Corporation has implemented new processes and
software to track its home terminal devices from their initial purchase
to their return by customers, and has adjusted the carrying values of the
assets accordingly. The Corporation has continued its project to improve
the design and implementation of internal controls, and the project is
progressing according to management's plan. Please see the "Controls and
procedures" section for further details.
(1) Represents the sum of Basic Cable, HSI, Digital Television and
Telephony service customers.
(2) Free cash flow does not have a standardized definition 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.
Effective management of capital
- On June 9, 2009, the Corporation completed, pursuant to a public debt
offering, the issue of 5.95% Senior Secured Debentures Series 1
for $300 million maturing June 9, 2014. The Debentures were
priced at $99.881 per $100 principal amount for an effective yield of
5.98% per annum. The net proceeds of sale of the Debentures were used to
reimburse Cogeco Cable's existing indebtedness and for general corporate
purposes;
- On January 21, 2009, the Corporation 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 on July 28, 2011. The
notional value of the swap will decrease in line with the amortization
schedule of the Term Loans. In addition to this fixed interest rate,
Cogeco Cable will continue to pay the applicable margin on these Term
Loans in accordance with its Term Facility. At May 31, 2009,
approximately 80% of Cogeco Cable's debt was at fixed interest rates;
- On October 1, 2008, the Corporation completed, pursuant to a private
placement, the issue of 7.00% Senior Secured Notes Series A for US$190
million maturing October 1, 2015, and 7.60% Senior Secured Notes Series B
for $55 million maturing October 1, 2018. The Corporation also entered
into cross-currency swap agreements to fix the liability for interest and
principal payments on the total of its Senior Secured Notes Series A.
Interest on the Notes is payable semi-annually on April 1 and October 1
of each year commencing April 1, 2009. The aggregate gross proceeds from
the issuance of these Notes amounted to approximately $257 million. Net
proceeds of approximately $255 million, after underwriters' fees and
other expenses, were used to repay maturing debt and reduce bank
indebtedness.
RGU growth
During the first nine months ended May 31, 2009, the consolidated number of RGU increased by 93,325, or 3.4%, to reach 2,810,199 RGU, on target to attain the Corporation'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 revised projections in the "Fiscal 2010 preliminary financial guidelines" section for further details.
Revenue growth
Third-quarter revenue increased by $30.7 million, or 11.2%, when compared to the same period of the prior year, to reach $305.7 million. During the first nine months of 2009, revenue increased by $118.2 million, or 14.9%, to reach $910 million, and management expects to attain its revised guidelines of $1,205 million in revenue for the 2009 fiscal year, as issued on April 8, 2009. Please consult the fiscal 2009 revised projections in the "Fiscal 2010 preliminary financial guidelines" section for further details.
Free cash flow
In the third quarter and first nine months, Cogeco Cable generated free cash flows of $31.9 million and of $80.7 million compared to $36.9 million and $77.8 million, respectively, for the same periods last year, representing a decrease of 13.6% for the quarter, and an increase of 3.6% for the nine months ended May 31, 2009. The reduction in free cash flow for the quarter is mainly due to an increase in capital expenditures and the decrease in cash flow from operations, due to the increase in current income taxes. For the first nine months, the growth in free cash flow is essentially due to increases in cash flow from operations(1), resulting primarily from the improvement of the Corporation's operating income before amortization(1), partly offset by increases in capital expenditures. On April 8, 2009, management revised its guidelines for free cash flow to $80 million for the 2009 fiscal year. Due to the usual higher level of capital expenditures in the last quarter of the year, management expects to meet its free cash flow guidelines. Please consult the fiscal 2009 revised projections in the "Fiscal 2010 preliminary financial guidelines" section for further details.
IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS
In the second quarter of fiscal 2009, the competitive position of Cabovisao in the Iberian Peninsula further deteriorated due to the continuing difficult competitive environment and recurring intense customer promotions and advertising initiatives from competitors in the Portuguese market. Please refer to "European operations" section for further details. In accordance with current accounting standards, management considered that the continued RGU and local currency revenue decline were more severe and persistent than expected, resulting in a decrease in the value of the Corporation's investment in the Portuguese subsidiary. As a result, the Corporation tested goodwill and all long-lived assets for impairment at February 28, 2009.
Goodwill is 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. The Corporation completed its impairment tests on goodwill and 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 of the fiscal year. Fair value of the reporting unit was determined using the discounted cash flow method. Future cash flows were based on internal forecasts and consequently, considerable management judgement was 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, the Corporation completed its impairment test on customer relationships at February 28, 2009, and determined that the carrying value of customer relationships exceeded its fair value. As a result, a non-cash impairment loss of $60.4 million was recorded in the second quarter of fiscal 2009.
(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.
The impairment loss affected the Corporation's goodwill and customer
relationship asset balances as follows at February 28, 2009:
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($000) $
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(unaudited)
Goodwill 339,206
Customer relationships 60,442
Future income taxes (16,018)
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Impairment loss net of related income taxes 383,630
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OPERATING RESULTS - CONSOLIDATED OVERVIEW
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Quarters ended May 31, Nine months ended May 31,
($000, except 2009 2008(1)Change 2009 2008(1)Change
percentages $ $ % $ $ %
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(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 305,672 274,944 11.2 910,030 791,879 14.9
Operating
costs 176,941 157,452 12.4 527,096 459,713 14.7
Management
fees - COGECO
Inc. - - - 9,019 8,714 3.5
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Operating
income before
amortization
(2) 128,731 117,492 9.6 373,915 323,452 15.6
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Operating
margin(2) 42.1% 42.7% 41.1% 40.8%
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.
(2) 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.
Revenue
Fiscal 2009 third-quarter consolidated revenue improved by $30.7 million, or 11.2%, to reach $305.7 million, and first nine-month consolidated revenue by $118.2 million, or 14.9%, to reach $910 million, when compared to the prior year. Driven by increased 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, third-quarter Canadian operations revenue went up by $37.2 million, or 17.6%, and for the first nine months by $116.8 million, or 19.1%.
Fiscal 2009 third-quarter European operations revenue decreased by $6.4 million, or 10.1%, at $57.6 million, compared to the same period of the prior year, as a result of a net RGU loss in the quarter. First nine month revenue increased by $1.3 million, or 0.7%, to reach $180.9 million, due to the strength of the Euro against the Canadian dollar, despite a RGU loss in the first nine months of the year. Revenue from the European operations in the local currency for the third quarter amounted to EUR 35.7 million, a decrease of EUR 5.1 million, or 12.5%, and to EUR 113.5 million, a decrease of EUR 7.4 million, or 6.1%, for the first nine months.
Operating costs
For the third quarter and first nine months of fiscal 2009, operating costs, excluding management fees payable to COGECO Inc., increased by $19.5 million and $67.4 million to reach $176.9 million and $527.1 million, respectively, increases of 12.4% and 14.7% 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 income before amortization
Fiscal 2009 third quarter and first nine-month operating income before amortization increased by $11.2 million, or 9.6%, to reach $128.7 million, and by $50.5 million, or 15.6%, to reach $373.9 million, respectively, as a result of various rate increases, recent acquisitions, and RGU growth generating additional revenues which outpaced operating cost increases in the quarter and first nine months of the year. Cogeco Cable's third quarter operating margin decreased to 42.1% from 42.7% for the same period of the prior year. The operating margin in Canada improved to 45.9% from 44.3% which offset the decrease in the European operating margin to 25.9% from 37.6%.
For the first nine months of fiscal 2009, the consolidated operating margin improved to 41.1% from 40.8% with the Canadian operating margin improving to 43.9% from 42.5% and the European operating margin decreasing to 29.6% from 35.3% the year before.
RELATED PARTY TRANSACTIONS
Cogeco Cable is a subsidiary of COGECO Inc., which holds 32.3% of the Corporation's equity shares, representing 82.7% of the votes attached to the Corporation's voting shares. Under a management agreement, the Corporation pays COGECO Inc. monthly management fees equal to 2% of its total revenue for certain executive, administrative, legal, regulatory, strategic and financial planning and additional services. In 1997, management fees were capped at $7 million per year, subject to annual upward adjustment based on increases in the Consumer Price Index in Canada. Accordingly, for fiscal 2009, management fees have been set at a maximum of $9 million, which was reached in the second quarter. For fiscal 2008, management fees were set at a maximum of $8.7 million, and were fully paid in the first six months of the year.
Furthermore, Cogeco Cable granted 29,711 stock options to COGECO Inc.'s employees during the first nine months of fiscal 2009, compared to 22,683 for the same period last year. During the third quarter Cogeco Cable charged COGECO Inc. an amount of $0.1 million with regards to Cogeco Cable's options granted to COGECO Inc.'s employees, for a total charge of $0.2 million in the first nine months of the year, compared to $0.1 million and $0.3 million for the same periods of the prior year. Details regarding the management agreement and stock options granted to COGECO Inc.'s employees are provided in the MD&A of the Corporation's 2008 Annual Report. There were no other material related party transactions during the quarter.
FIXED CHARGES
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Quarters ended May 31, Nine months ended May 31,
($000, except 2009 2008(1)Change 2009 2008(1)Change
percentages $ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Amortization 67,513 58,209 16.0 198,079 166,885 18.7
Financial
expense 14,206 17,374 (18.2) 55,588 50,387 10.3
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.
The third-quarter and first nine months of 2009 amortization amounted to $67.5 million and $198.1 million, respectively, compared to $58.2 million and $166.9 million for the same periods the year before. The increase is mainly due to additional capital expenditures arising from customer premise equipment acquisitions to sustain RGU growth, to the recent acquisitions in Canada and to the appreciation of the Euro currency over the Canadian dollar.
Third-quarter financial expense decreased by $3.2 million compared to the prior year mainly due to a foreign exchange gain on unhedged long-term debt and the reduction of interest rates during the quarter, partly offset by the increase in Indebtedness (defined as bank indebtedness, derivative financial instruments and long-term debt). In the first nine months of the year, financial expense increased by $5.2 million due to the rapid appreciation of the US dollar and the Euro over the Canadian dollar and the increase in the level of Indebtedness, partly offset by interest rate reductions. More specifically, financial expense was adversely impacted by foreign exchange losses of $2.7 million in the first nine months of fiscal 2009, despite the favourable impact of foreign exchange gains of $1.7 million in the quarter, mainly on unhedged long-term debt, as the majority of customer premise equipment is purchased and subsequently paid in US dollars. The losses in the first nine months of the year were essentially due to the unusually high US dollar volatility with the Bank of Canada closing rate fluctuating from $1.0620 per US dollar at August 31, 2008 to $1.0917 per US dollar at May 31, 2009, reaching a high of $1.2991 per US dollar on March 9, 2009. For the corresponding periods of the prior year, the Corporation recorded no foreign exchange gains or losses in the quarter and foreign exchange gains of $0.9 million in the first nine months.
REDUCTION OF WITHHOLDING AND STAMP TAX CONTINGENT LIABILITIES
The Portuguese subsidiary, Cabovisao, had recorded contingent liabilities for withholding and stamp taxes relating to fiscal years prior to its acquisition by Cogeco Cable. At the date of acquisition, the amount accrued represented management's best estimate based on the available information. Management reviews its estimate periodically to take into consideration payments made relating to these contingencies as well as newly available information which would allow the Corporation to improve its previous estimate. During the third quarter of fiscal 2009, Cabovisao received a preliminary report from the Portuguese tax authorities with respect to some of the items included in the contingent liabilities. Accordingly, management has reviewed its estimate of the contingent liabilities to reflect the new information available in this preliminary report, and has determined that a reduction of EUR 7 million, equivalent to $10.9 million, of the amount previously accrued was required at May 31, 2009, in order to reflect management's best estimate.
INCOME TAXES
Fiscal 2009 third-quarter income tax expense amounted to $26.2 million compared to $10.8 million in fiscal 2008. The income tax expense for the quarter and first nine months was unfavourably impacted by a non-cash income tax expense of $6.1 million resulting from the recognition and subsequent utilization of Cabovisao's pre-acquisition income tax losses following the receipt of preliminary tax audit reports for those fiscal years. Excluding this amount, income tax expense for the quarter would have amounted to $20 million compared to $10.8 million in the prior year. For the first nine months, the income tax expense amounted to $34.8 million compared to $4.8 million in the prior year. The income tax expense for the first nine months of fiscal 2009 includes a future income tax recovery of $16 million related to the impairment loss recorded in the second quarter and an unfavourable impact of $6.1 million from the utilization of Cabovisao's pre-acquisition tax losses described above. The income tax expense for the comparable period of the prior year includes 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 "reduction of Canadian federal income tax rates"). The reduction of these corporate income tax rates reduced future income tax expense by $24 million in the first nine months of fiscal 2008. Excluding the effect of these items, income tax expense would have amounted to $44.7 million for the first nine months of fiscal 2009, compared to $28.8 million for the first nine months of fiscal 2008. The increases in income tax expense in fiscal 2009 are mainly due to the increase in operating income before amortization surpassing that of the fixed charges in the Canadian operations.
NET INCOME (LOSS)
Fiscal 2009 third quarter net income amounted to $31.8 million, or $0.65 per share, compared to $31.1 million, or $0.64 per share, for the same period in 2008. Net income for the third quarter of fiscal 2009 includes an unfavourable impact of $6.1 million from the utilization of Cabovisao's pre-acquisition tax losses and a favourable impact from the reduction of withholding and stamp tax contingent liabilities in the amount of $10.9 million described above, also in Cabovisao. Excluding the impact of these items(2), net income would have amounted to $27 million, or $0.56 per share(1), compared to $31.1 million, or $0.64 per share in the prior year, representing decreases of 13.4% and 12.5%, respectively. For the first nine months of fiscal 2009, net loss amounted to $303.2 million, or $6.25 per share, compared to a net income of $101.4 million, or $2.09 per share. In addition to the impacts described above for the third quarter, the net loss in the first nine months of fiscal 2009 was affected by the impairment loss net of related income taxes of $383.6 million recorded in the second quarter of the year, as described in the "Impairment of goodwill and intangible assets" section. Furthermore, 2008 first nine months net income included an income tax adjustment of $24 million described above. Excluding the effect of these items, net income would have amounted to $75.6 million, or $1.56 per share for the first nine months ended May 31, 2009, decreases of 2.4% and 2.5% when compared to $77.4 million, or $1.60 per share in the prior year. Please consult the "Non-GAAP financial measures" section for further details. Net income reduction for the quarter and first nine months has resulted from the decline of the financial results of the European operations due to the net RGU loss and the increase in income tax expense described in the "Income taxes" section above, partly offset by the improvement of the Canadian operations and the appreciation of the Euro currency compared to the Canadian dollar during the majority of the first nine months of the year.
(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 May 31, Nine months ended May 31,
2009 2008 2009 2008
($000) $ $ $ $
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(unaudited) (unaudited) (unaudited) (unaudited)
Operating
activities
Cash flow from
operations(1) 94,810 95,829 285,506 260,855
Changes in
non-cash
operating items 7,926 16,970 (35,856) (11,720)
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102,736 112,799 249,650 249,135
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Investing
activities(2) (61,559) (74,014) (202,274) (196,655)
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Financing
activities(2) (45,494) 17,957 (40,697) (36,466)
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Effect of exchange
rate changes on
cash and cash
equivalents
denominated in
foreign currencies (1,866) 1,063 (538) 1,265
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Net change in cash
and cash
equivalents (6,183) 57,805 6,141 17,279
Cash and cash
equivalents,
beginning of period 48,695 23,682 36,371 64,208
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Cash and cash
equivalents, end
of period 42,512 81,487 42,512 81,487
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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 third quarter cash flow from operations reached $94.8 million, 1.1% lower than the comparable period last year, due to the increase in current income tax expense, partly offset by the increase in operating income before amortization and the decrease in financial expense. Changes in non-cash operating items generated cash inflows of $7.9 million, mainly as a result of an increase in income tax liabilities, partly offset by a decrease in accounts payable and accrued liabilities in the third quarter of fiscal 2009. In the prior year, the cash inflows of $17 million were mainly a result of an increase in accounts payable and accrued liabilities and in income tax liabilities.
For the first nine months of fiscal 2009, cash flow from operations reached $285.5 million, 9.5% higher than in the prior year, primarily due to the increase in operating income before amortization, partly offset by the increases in current income tax expense and financial expense. Changes in non-cash operating items generated cash outflows of $35.9 million, mainly as a result of a decrease in accounts payable and accrued liabilities and an increase in income taxes receivable, partly offset by an increase in income tax liabilities. The cash outflows of $11.7 million in the prior year were mainly due to a decrease in accounts payable and accrued liabilities in the first nine months of the year, partly offset by an increase in income tax liabilities.
Investing activities, including capital expenditures segmented according to the National Cable Television Association ("NCTA") standard reporting categories, are as follows:
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Quarters ended May 31, Nine months ended May 31,
2009 2008 2009 2008
($000) $ $ $ $
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Customer premise
equipment (1) 19,948 20,238 75,080 70,477
Scalable
infrastructure 15,734 8,627 43,326 30,726
Line extensions 5,002 2,160 14,579 7,738
Upgrade/Rebuild 12,853 15,498 33,541 41,105
Support capital 4,126 5,355 20,085 12,433
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Total capital
expenditures(2) 57,663 51,878 186,611 162,479
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Increase in deferred
charges and others 5,058 7,002 17,983 20,488
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Business acquisition - 16,105 - 16,105
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Total investing
activities(2) 62,721 74,985 204,594 199,072
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(1) Includes mainly new and replacement drops as well as home terminal
devices.
(2) Includes capital leases, which are excluded from the statements of cash
flows.
Fiscal 2009 third quarter total capital expenditures amounted to $57.7 million, an increase of 11.2%, when compared to the corresponding period of last year, due to the following factors:
- 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 Euro and the US dollar over the Canadian dollar;
- A decrease in capital expenditures associated with network upgrades and rebuilds due to the timing of these initiatives;
- A decrease in customer premise equipment spending which reflect lower RGU growth in Canadian operations and net RGU losses in European operations.
First nine months total capital expenditures amounted to $186.6 million, an increase of 14.9%, when compared to the corresponding period of last year, due to the following factors:
- 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 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;
- An increase in line extensions due to the expansion of the networks in Canada;
- An increase from the appreciation of the Euro and the US dollar over the Canadian dollar;
- A decrease in capital expenditures associated with network upgrades and rebuilds due to the timing of these initiatives.
Deferred charges and others are mainly attributable to reconnect costs. For the third quarter, the increase in deferred charges and others amounted to $5.1 million compared to $7 million for the same period of the prior year. For the first nine months of fiscal 2009, the increase in deferred charges and others amounted to $18 million compared to $20.5 million the year before. Slower RGU growth explained the lower increases recorded in fiscal 2009.
In the third quarter and first nine months, Cogeco Cable generated free cash flows of $31.9 million and of $80.7 million compared to $36.9 million and $77.8 million, respectively, for the same periods last year, representing a decrease of 13.6% for the quarter, and an increase of 3.6% for the nine months ended May 31, 2009. The reduction in free cash flow for the quarter is mainly due to an increase in capital expenditures and the decrease in cash flow from operations. For the first nine months, the growth in free cash flow is essentially due to increases in cash flow from operations, partly offset by increases in capital expenditures. The aggregate amount of total capital expenditures and deferred charges and others increased by $3.8 million for the quarter ended May 31, 2009, and by $21.6 million for the first nine months of fiscal 2009 compared to the corresponding periods of the prior year due to the factors explained above.
In the third quarter of 2009, Indebtedness affecting cash decreased by $39.7 million mainly due to the free cash flow of $31.9 million, the increase in non-cash operating items of $7.9 million, and the decrease in cash and cash equivalents of $6.2 million, net of the dividend payment of $5.8 million described below. Indebtedness mainly decreased through the net repayments on the Corporation's revolving loans of $56.5 million, net of an increase of $17.7 million in bank indebtedness. During the third quarter of fiscal 2008, the level of Indebtedness affecting cash increased by $22.7 million, primarily due to the issuance by the Corporation on March 5, 2008 of a $100 million senior unsecured debenture by way of a private placement, the proceeds of which were used in part to reimburse the bank indebtedness of $17.7 million and to finance the acquisition of MaXess Networx(R) for $16.1 million, partly offset by repayments on the revolving credit facility of $58.6 million from the generated free cash flow of $36.9 million and the increase in non-cash operating items of $17 million.
During the third quarter of fiscal 2009, a dividend of $0.12 per share was paid to the holders of subordinate and multiple voting shares, totalling $5.8 million, compared to a dividend of $0.10 per share, or $4.9 million the year before.
For the first nine months of fiscal 2009, Indebtedness affecting cash decreased by $24.2 million mainly due to the free cash flow of $80.7 million, partly offset by the reduction of non-cash operating items of $35.9 million, the payment of dividends totalling $17.5 million described below and the increase in cash and cash equivalents of $6.1 million. Indebtedness decreased through 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 Corporation's revolving loans of $79.5 million, net of the issuance on October 1, 2008 of Senior Secured Notes, Series A and Series B, maturing October 1, 2015 and October 1, 2018, respectively, for net proceeds of approximately $255 million, and by an increase of $41.9 million in bank indebtedness. During the first nine months of fiscal 2008, the level of Indebtedness affecting cash decreased by $25.3 million, mainly due to a net reduction of $123.1 million on the revolving credit facility, partly offset by the issuance of a senior unsecured debenture as discussed above.
During the first nine months of fiscal 2009, quarterly dividends of $0.12 per share were paid to the holders of subordinate and multiple voting shares, totalling $17.5 million, compared to quarterly dividends of $0.10 per share, or $14.5 million the year before.
As at May 31, 2009, the Corporation had a working capital deficiency of $360.7 million compared to $607.8 million as at August 31, 2008. The decrease in the deficiency is mainly attributable 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 business, Cogeco Cable maintains a working capital deficiency due to a low level of accounts receivable as a large portion of the Corporation'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 the Corporation to use cash and cash equivalents to reduce Indebtedness.
At May 31, 2009, the Corporation had used $425.4 million of its $885 million Term Facility for a remaining availability of $459.6 million.
On October 1, 2008, the Corporation completed, pursuant to a private placement, the issuance of US$190 million Senior Secured Notes Series A maturing October 1, 2015, and $55 million Senior Secured Notes Series B maturing October 1, 2018. The Senior Secured Notes Series B bear interest at the coupon rate of 7.60% per annum, payable semi-annually. The Corporation has entered into cross-currency swap agreements to fix the liability for interest and principal payments on the Senior Secured Notes Series A in the amount of US$190 million, which bear interest at the coupon rate of 7.00% per annum, payable semi-annually. Taking into account these agreements, the effective interest rate on the Senior Secured Notes Series A is 7.24% and the exchange rate applicable to the principal portion of the US dollar-denominated debt has been fixed at $1.0625 per US dollar.
On June 9, 2009, the Corporation completed, pursuant to a public debt offering, the issue of 5.95% Senior Secured Debentures Series 1 for $300 million maturing June 9, 2014. The Debentures were priced at $99.881 per $100 principal amount for an effective yield of 5.98% per annum. The net proceeds of sale of the Debentures were used to reimburse Cogeco Cable's existing indebtedness and for general corporate purposes.
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" and "Indebtedness".
The $12.4 million increase in fixed assets is mainly related to increases in capital expenditures to sustain RGU growth and to the recent acquisitions in Canada, partly offset by the depreciation of the Euro compared to the Canadian dollar since August 31, 2008. The $67.4 million and $334.1 million reductions in intangible assets and goodwill are due to the impairment loss recorded on the Corporation's investment in Cabovisao in the second quarter of this fiscal year. The $12.4 million decrease in future income tax liabilities is mainly due to the impairment loss described above. The $46.7 million decrease in accounts payable and accrued liabilities is related to the timing of payments made to suppliers, the reduction of withhold and stamp tax contingent liabilities, and the fluctuations of the Euro currency over the Canadian dollar. The $6.4 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. The $8.4 million increase in income taxes receivable is due to income tax payments relating to fiscal 2008. The $6.7 million increase in income tax liabilities is a result of the increase in operating income before amortization surpassing that of the fixed charges. Indebtedness has decreased by $14.6 million and cash and cash equivalents has increased by $6.1 million as a result of the factors previously discussed in the "Cash Flow and Liquidity" section.
A description of Cogeco Cable's share data as of June 30, 2009 is presented in the table below:
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Number of shares/options Amount
($000)
-------------------------------------------------------------------------
Common shares
Multiple voting shares 15,691,100 98,346
Subordinate voting shares 32,867,426 891,715
Options to purchase Subordinate voting shares
Outstanding options 716,745
Exercisable options 430,243
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On April 6, 2009, the Corporation cancelled 206,180 options which had been conditionally granted in relation with the acquisition of Cabovisao, at a price of $26.63 per share, subject to performance criteria of Cabovisao being met. Of these options, 93,518 were exercisable.
In the normal course of business, Cogeco Cable has incurred financial obligations, primarily in the form of long-term debt, operating and capital leases and guarantees. Cogeco Cable's obligations, as discussed in the 2008 annual MD&A, have not materially changed since August 31, 2008 except for the new financings discussed in the "Cash Flow and Liquidity" section.
DIVIDEND DECLARATION
At its July 9, 2009 meeting, the Board of Directors of Cogeco Cable declared a quarterly eligible dividend of $0.12 per share for subordinate and multiple voting shares, payable on August 6, 2009, to shareholders of record on July 23, 2009. The declaration, amount and date of any future dividend will continue to be considered and approved by the Board of Directors of the Corporation based upon the Corporation'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, the amount and frequency may vary.
FINANCIAL MANAGEMENT
On January 21, 2009, the Corporation 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 21, 2009, the fair value of interest rate swap decreased by $2 million, which is recorded as a decrease of other comprehensive income net of income taxes 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 $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 $5.5 million due to the US dollar's appreciation over the Canadian dollar. The fair value of cross-currency swaps decreased by a net amount of $0.3 million, of which an increase of $5.5 million offsets the foreign exchange loss on the debt denominated in US dollars. The difference of $5.8 million was recorded as a decrease of other comprehensive income, net of income taxes of $0.2 million.
The Corporation'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 values 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 the net investment in self-sustaining foreign subsidiaries and accordingly, the Corporation realized a foreign exchange gain of $9.6 million in the first nine months of fiscal 2009 which is presented in other comprehensive income. The exchange rate used to convert the Euro into Canadian dollars for the balance sheet accounts at May 31, 2009 was $1.5433 per Euro compared to $1.5580 per Euro at August 31, 2008. The average exchange rates prevailing during the third quarter and first nine months used to convert the operating results of the European operations were $1.6126 per Euro and $1.5951 per Euro, respectively, compared to $1.5694 and $1.4851 per Euro for the same periods of the prior 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 for the first nine months ended May 31, 2009:
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Exchange rate
Nine months ended May 31, 2009 As reported impact
($000) $ $
-------------------------------------------------------------------------
(unaudited) (unaudited)
Revenue 180,875 18,088
Operating income before amortization 53,617 5,362
Net loss (387,952) (38,795)
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The Corporation 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 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 15 of the consolidated financial statements for further details.
CANADIAN OPERATIONS
CUSTOMER STATISTICS
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Net additions (losses) % of
Penetration(1)
Quarters ended Nine months ended
May 31, May 31, May 31,
-----------------------------------
May 31, 2009 2009 2008 2009 2008 2009 2008
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RGU 2,132,123 27,175 36,658 140,215 160,491 - -
Basic Cable
service
customers 865,729 (2,153) (520) 8,635 9,413 - -
HSI service
customers(2) 509,433 5,939 8,480 35,966 48,832 61.6 57.5
Digital
Television
service
customers 488,724 10,065 11,585 46,978 45,717 57.3 50.4
Telephony
service
customers(3) 268,237 13,324 17,113 48,636 56,529 34.3 28.1
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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 78,947 as at May 31, 2009 compared to 74,434 as at May
31, 2008.
(3) Customers subscribing to the Telephony service without the Basic Cable
service totalled 23,439 as at May 31, 2009 compared to 15,258 as at May
31, 2008.
Fiscal 2009 third quarter and first nine-month RGU net additions were lower than for the same periods last year and reflect an early sign of maturation in some services. The number of net losses for Basic Cable stood at 2,153 customers for the quarter and net additions of 8,635 customers for the first nine months, compared to a loss of 520 customers and customer additions of 9,413, respectively, for the same periods of the prior year. Third quarter Basic Cable service customer losses are usual and due to the end of the school year for college and university students. In the quarter, Telephony customers grew by 13,324 compared to 17,113 for the same period last year. For the first nine months, Telephony customers grew by 48,636 compared to 56,529 for the first nine months 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. Telephony service coverage, as a percentage of homes passed, is now above 90% compared to 83% at May 31, 2008. The number of net additions to HSI service stood at 5,939 customers for the quarter and 35,966 customers for the first nine months of fiscal 2009, compared to 8,480 and 48,832 customers 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. The Digital Television service net additions stood at 10,065 customers compared to 11,585 customers for the third quarter, and at 46,978 customers compared to 45,717 customers for the first nine months of the prior year, due to targeted marketing initiatives in the second half of fiscal 2008 and in 2009 to improve penetration and to the continuing strong interest for the HD Television service.
OPERATING RESULTS
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Quarters ended May 31, Nine months ended May 31,
($000, except 2009 2008(1)Change 2009 2008(1)Change
percentages $ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue 248,101 210,928 17.6 729,155 612,337 19.1
Operating
costs 134,309 117,512 14.3 399,838 343,566 16.4
Management
fees - COGECO
Inc. - - - 9,019 8,714 3.5
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Operating
income before
amortization 113,792 93,416 21.8 320,298 260,057 23.2
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Operating
margin 45.9% 44.3% 43.9% 42.5%
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.
Revenue
Third-quarter revenue rose by $37.2 million, or 17.6%, to reach $248.1 million, and first nine month revenue increased by $116.8 million, or 19.1%, to reach $729.2 million mainly due to the RGU growth, combined with the impact of the recent acquisitions as well as the various rate increases implemented by the Corporation during fiscal 2008. These rate increases represent an average of approximately $1.60 per Basic Cable service customer.
Operating costs
2009 third-quarter and first nine month operating costs, excluding management fees payable to COGECO Inc., increased by $16.8 million, or 14.3%, to reach $134.3 million, and by $56.3 million, or 16.4%, to reach $399.8 million, respectively. The increase in operating costs is mainly attributable to servicing additional RGU and to the impact of the recent acquisitions.
Operating income before amortization
Operating income before amortization rose by $20.4 million, or 21.8%, to reach $113.8 million in the third quarter, and by $60.2 million, or 23.2%, to reach $320.3 million in the first nine months of fiscal 2009. The operating income before amortization has risen due to the increased revenue outpacing the operating costs growth including the impact of the recent acquisitions. Cogeco Cable's Canadian operations' third-quarter operating margin increased to 45.9% compared to 44.3% for the same period in the prior year, and to 43.9% from 42.5% for the first nine months.
EUROPEAN OPERATIONS
CUSTOMER STATISTICS
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Net additions (losses) % of
Penetration(1)
Quarters ended Nine months ended
May 31, May 31, May 31,
May 31, 2009 2009 2008 2009 2008 2009 2008
--------------------------------------------------------------------------
RGU 678,076 (12,190) 14,231 (46,890) 29,618 - -
Basic Cable
service
customers 264,798 (11,394) (1,069) (31,337) 6,588 - -
HSI service
customers(2) 142,184 (4,420) (1,615) (17,117) 4,287 53.7 54.7
Digital
Television
service
customers(3) 45,428 9,170 14,470 20,976 14,470 17.2 4.8
Telephony
service
customers(4) 225,666 (5,546) 2,445 (19,412) 4,273 85.2 82.3
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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 7,940 as at May 31, 2009 compared to 8,346 as at May
31, 2008.
(3) The Digital Television service was launched in the third quarter of
fiscal 2008.
(4) Customers subscribing to the Telephony service without the Basic Cable
service totalled 8,335 as at May 31, 2009 compared to 10,043 as at May
31, 2008.
Fiscal 2009 third quarter and first nine months were marked by a continuing difficult competitive 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 in the Portuguese market. These factors were the main contributors to net customer losses in the Basic Cable, HSI and Telephony services compared to the same periods of the prior year. The Digital Television service was launched during the third quarter of 2008, with net additions in fiscal 2009 of 9,170 customers in the third quarter and 20,976 customers in the first nine months. Fiscal 2009 third quarter and first nine month period Basic Cable service customers decreased by 11,394 and 31,337 customers, respectively, compared to a decrease of 1,069 customers and a growth of 6,588 customers in the comparable periods of the prior year.
