HispanicBusiness

ADJUSTED FUNDS FROM OPERATIONS (AFFO)

AFFO from continuing operations was $26.8 million ($0.312 per basic share) in the 2012 fourth quarter. Excluding the $11.4 million increase in prior years' reserves recorded in the 2011 fourth quarter, AFFO from continuing operations that quarter was $22.4 million ($0.268 per basic share). This resulted in an improvement of $4.4 million between quarters. Excluding a $0.4 million negative effect of a stronger Canadian dollar, AFFO from continuing operations improved by $4.8 million, primarily due to the increase in EBITDA of $2.2 million, together with lower current income taxes and net interest costs, partially offset by higher facility maintenance capital expenditures. Excluding the impact of foreign exchange, net interest costs were lower by $3.3 million as a result of our debt refinancing. Current income taxes for the 2012 fourth quarter were a recovery of $2.4 million, and were favourably impacted by book-to-file adjustments of approximately $4.0 million. Excluding the 2012 fourth quarter book-to-file adjustments, current income taxes represented 5.2% of pre-tax funds from operations (FFO) this quarter compared to 13.4% in the 2011 fourth quarter. The 2012 effective current tax rate on FFO was favourably impacted by the proportion of earnings between taxable and non-taxable entities, particularly the impact of the lower level of reserves recorded in our non-taxable captive this year, and the utilization this year of non-capital loss carryforwards in Canada.

AFFO in the 2012 third quarter was $11.2 million ($0.130 per basic share), or $22.2 million ($0.260 per basic share) excluding the $11.0 million increase in prior years' reserves. In comparison, AFFO this quarter of $26.8 million was higher by $4.6 million. This improvement was primarily due to the increase in EBITDA of $4.6 million and a reduction in current income taxes, partially offset by an increase in facility maintenance capital expenditures. Excluding the $4.0 million favourable book-to-file adjustment recorded this quarter, current income taxes represented 5.2% of pre-tax FFO this quarter compared to 21.9% in the 2012 third quarter, and reflected the impact of the change in prior years' reserves as well as changes in deferred tax timing differences. Facility maintenance capital expenditures were higher by $6.2 million, and are typically at their lowest in the first quarter and ramp up during the year.

For the year ended December 31, 2012, AFFO from continuing operations was $84.6 million ($0.994 per basic share), compared to $64.8 million ($0.777 per basic share) in 2011. Excluding the increase in prior years' reserves of $16.6 million and $42.8 million, respectively, AFFO from continuing operations was $101.2 million ($1.190 per basic share) this year compared to $107.6 million ($1.290 per basic share) in 2011. Excluding a $0.7 million positive effect of a weaker Canadian dollar, AFFO from continuing operations declined by $7.1 million between years. This decrease was primarily due to the decline in EBITDA of $44.5 million and higher facility maintenance capital expenditures, partially offset by lower net interest costs and current income taxes. Excluding the impact of foreign exchange, net interest costs were lower by $17.5 million as a result of our debt refinancing. Current income taxes represented 7.3% of pre-tax FFO in 2012, which was below the previously estimated range of 14% to 18% because of favourable book-to-file adjustments recorded in the 2012 fourth quarter and changes in estimates of timing differences. In comparison to the FFO effective tax rate reported in 2011 of 34.7%, our effective tax rate this year was favourably impacted by the proportion of earnings between taxable and non-taxable entities, particularly the impact of the lower level of reserves recorded in our non-taxable captive this year, the utilization of non-capital loss carryforwards in Canada and favourable changes in timing differences between years.