KEY PERFORMANCE INDICATORS
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND OPERATING MARGIN
First-quarter operating income before depreciation and amortization increased by 11.6% when compared to the same period of fiscal 2012 to reach $147.1 million and operating margin increased to 44.9% from 41.8%. As a result of the acquisition of Atlantic Broadband ("ABB"), management revised upwards its November 1, 2012 projections for fiscal 2013. Operating income before depreciation and amortization is now expected to reach $735 million from $614 million and operating margin should increase to 46.2% from 45.5%. For further details, please consult the fiscal 2013 revised projections in the "Fiscal 2013 financial guidelines" section.
FREE CASH FLOW
For the three-month period ended November 30, 2012, Cogeco Cable reports free cash flow of $17 million, compared to $19.8 million for the first three months of the previous fiscal year, representing a decrease of $2.7 million. This variance is mostly attributable to the increase in current income tax expense, the acquisition costs related to Atlantic Broadband ("ABB") acquisition as well as the increase in acquisition of property, plant and equipment, partly offset by the improvement of operating income before depreciation and amortization. Giving effect to the acquisition of ABB, the revised guidelines of operating income before depreciation and amortization and the reduction in acquisition of property, plant and equipment in Canada, management also revised its free cash flow projections from $105 million to $170 million. For further details, please consult the fiscal 2013 revised projections in the "Fiscal 2013 financial guidelines" section.
PSU GROWTH AND PENETRATION OF SERVICE OFFERINGS
During the three-month period ended November 30, 2012, PSU reach 2,478,887 of which 494,674 comes from the recently completed acquisition of ABB. In the Cable Services segment in Canada, PSU increased at a lower pace to 15,080, mainly as a result of a more competitive environment and tightening of customer credit controls, thus containing collection and bad debt expenses. Cogeco Cable maintains targeted marketing initiatives to increase the penetration level of its services and still benefits from the continuing interest for high definition ("HD") television service. Consequently, and combined with the acquisition of ABB, Cogeco Cable revised downwards its guidelines from 50,000 PSU, as issued on November 1, 2012, to 35,000 PSU. PSU growth is expected to stem primarily from HSI and Telephony services, the continued strong interest in Digital Television services, enhanced service offerings, and through promotional activities. For further details, please consult the fiscal 2013 revised projections in the "Fiscal 2013 financial guidelines" section.
On December 21, 2012, Cogeco Cable announced an agreement to acquire all of the issued and outstanding shares of PEER 1 Network Enterprises Inc. ("PEER 1") by way of takeover bid (the "offer") valued at approximately $635 million. The offer is supported by a committed financing from the National Bank of Canada in the amount of $650 million. PEER 1 is one of the world's leading internet infrastructure providers, specializing in managed hosting, dedicated servers, cloud services and co-location. This acquisition combined with Cogeco Cable's existing data centre facilities will increase the scale and scope by adding the capability to serve approximately 10,000 additional businesses worldwide through 19 data centres and 21 points-of-presence across North America and Europe. PEER 1's primary network centre and head office are located in Vancouver. The offer will be subject to usual closing conditions and the Corporation expects the transaction to be completed in the second quarter of fiscal 2013.
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