Cogeco Câble inc.
TSX : CCA

January 12, 2006 23:59 ET

Cogeco Cable reports strong customer additions and strong earnings growth

MONTREAL, Jan. 12 /CNW Telbec/ - Today, Cogeco Cable Inc. (TSX: CCA.SV)
announced its financial results for the first quarter ended November 30, 2005.

Strong increase in the number of customers in all services

For the first quarter of 2006, Cogeco Cable reports strong increases in
customer numbers in all services. Net additions of basic customers were
approximately 10,900 for the first quarter compared to about 7,700 for the
same period last year. The sustained appetite for digital video and HSI
services continues to prevail as shown by over 21,000 digital video customer
additions and close to 23,000 high-speed Internet (HSI) customer additions
during the quarter. As for digital telephony, this service was extended to the
majority of residents of Hamilton, Windsor, Burlington, Oakville and Kingston
in Ontario and those of Trois-Rivières, Drummondville and St-Hyacinthe in
Québec whether they already subscribe to a Cogeco Cable service or not. At the
end of the first quarter, 6,900 clients subscribed to this new service, and
2,200 installations were pending.

Enhanced video-on-demand (VOD) offering

During the first quarter, Cogeco Cable signed an agreement with Warner
Bros. International Television Distribution to bolster Cogeco Cable's VOD
offering by adding current and classic movie titles from this major movie
distributor. With this agreement, Cogeco Cable's VOD subscribers enjoy access
to movies representing about 60% of domestic box office receipts. "This
service is gaining in popularity as our clients slowly migrate from on-
schedule television to on-demand television," stated Mr. Louis Audet,
President and Chief Executive Officer of Cogeco Cable.

Continued improvement in financial performance

Cogeco Cable's financial performance continues to improve. Net income
more than doubled to reach $9 million, mainly as a result of operating income
before amortization growth of 7.7% fuelled by strong service sales, tight cost
controls in a telephony launch environment coupled with the reduction of
amortization expense.

"Internal growth is key to creating shareholder value. This first quarter
showed strong marks in attracting customers and improving financial results.
Demand for products and services continue to prevail in our markets as
customers show increasing interest for our triple-play bundled offer,"
explained Mr. Audet.


FINANCIAL HIGHLIGHTS

Quarters ended November 30,
(unaudited)

($000s, except percentages 2005 2004 %
and per share data) Change
------------- ------------- -------------

Revenue $ 143,413 $ 135,766 5.6
Operating income before
amortization 57,302 53,194 7.7

Net income 8,998 3,827 -

Cash flow from operations 43,389 39,192 10.7
Less:
Capital expenditures and
increase in deferred charges 33,678 23,779 41.6
------ ------
Free Cash Flow (1) 9,711 15,413 (37.0)

Per share data
Basic net income $ 0.23 $ 0.10 -
Cash flow from operations 1.09 0.98 11.2

(1) Free Cash Flow is defined as cash flow from operations less capital
expenditures and increase in deferred charges. Free Cash Flow is not
a defined term under Canadian Generally Accepted Accounting
Principles (GAAP) and should be treated accordingly.


MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

Certain statements in this press release may constitute forward-looking
information within the meaning of securities laws. Forward-looking information
may relate to our future outlook and anticipated events, our business, our
operations, our financial performance, our financial condition or our 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" or other similar expressions
concerning matters that are not historical facts. In particular, statements
regarding our future operating results and economic performance and our
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 we
believe are reasonable as of the current date. While we consider these
assumptions to be reasonable based on information currently available to us,
they may prove to be incorrect. Forward-looking information is also subject to
certain factors, including risks and uncertainties (described in "Uncertainty
and main risk factors" of the Corporation's 2005 annual MD&A) that could cause
actual results to differ materially from what we currently expect. 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 our control. Therefore, future
events and results may vary significantly from what we currently foresee. You
should not place undue importance on forward-looking information and should
not rely upon this information as of any other date. While we may elect to, we
are under no obligation (and expressly disclaim any such obligation) and do
not undertake to update or alter this information before next quarter.
This analysis should be read in conjunction with the Corporation's
financial statements and the notes thereto prepared in accordance with
Canadian GAAP and the MD&A included in the Corporation's Annual Report.
Throughout this discussion, all amounts are in Canadian dollars unless
otherwise indicated.



CUSTOMER STATISTICS

Net additions % Penetration(1)
Quarters ended
November 30, November 30,
------------------- -------------------
November 30,
2005 2005 2004 2005 2004
------------- --------- --------- --------- ---------
Revenue-
generating
units (2) 1,408,503 60,770 42,359
Basic service
customers 832,336 10,903 7,743
HSI service
customers (3) 300,641 22,993 17,397 39.9 35.5
Digital video
service
customers (4) 268,619 21,415 17,219 32.9 27.0
Digital telephony
service customers 6,907 5,459 - 2.7 -
Digital terminals (5) 334,869 30,985 21,842 41.0 32.2

(1) As a percentage of basic service customers in areas served.
(2) Including basic service, digital video service, Internet service and
digital telephony service customers.
(3) The number of Internet customers in fiscal 2005 has been restated to
reflect the number of customers based on the billing dates, which are
distributed throughout the month, instead of the number of customers
as at the end of the quarter. This change produces a downward
adjustment of approximately 4,800 customers as at November 30, 2004.
Customers subscribing only to Internet services amounted to 57,051 as
at November 30, 2005 compared to 55,057 as at August 31, 2005.
(4) In fiscal 2005, the number of digital video service customers has
been restated to reflect changes brought about by our billing
improvement program, which has allowed us to identify digital video
service customer accounts that were not cancelled when they became
inactive. This change resulted in a downward adjustment of
approximately 6,200 customers as at November 30, 2004 and did not
affect the number of digital terminals.
(5) 64% of terminals as at November 30, 2005 were purchased compared to
77% one year earlier.


All services generated higher growth in the first quarter compared to the
same period last year. The number of net additions of basic service and HSI
service customers were higher by 40.8% and 32.2%, respectively, in the first
quarter of 2006, compared to the same quarter last year. This result is mainly
attributable to winback over satellite competition due to anti-piracy measures
and to additional marketing initiatives such as outbound telemarketing and
promotional activities as well as digital telephony up-sell activities and the
triple-play bundled offer.

The increase in the number of digital video service customers stems from
Cogeco Cable's attractive promotional offer in Québec and from the growing
interest for this technology among customers.

By the end of the first quarter of fiscal 2006, 6,907 customers were
subscribing to digital telephony while pending orders reached 2,208. During
the quarter, Cogeco Cable launched its digital telephony service in Kingston
and Hamilton, Ontario and rolled it out to all residents in its service areas,
whether or not they were Cogeco Cable customers. The digital telephony service
is now available to 30% of Cogeco Cable basic customers.

ACCOUNTING POLICIES AND ESTIMATES

There has been no significant change in Cogeco Cable's accounting
policies and estimates since August 31, 2005. A description of these policies
and estimates can be found in the Corporation's 2005 annual MD&A.

RELATED PARTY TRANSACTIONS

Cogeco Cable is a subsidiary of COGECO Inc., which holds 39.2% of the
Corporation's equity 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, the management fee was capped at
$7 million per year, subject to annual upward adjustments based on increases
in the Consumer Price Index in Canada. Accordingly, for fiscal 2006, the
management fee has been set at a maximum of $8.4 million. During the quarter,
the Corporation granted 31,743 stock options to COGECO Inc.'s employees,
compared to 38,397 in the first quarter of fiscal 2005. Further details
regarding the management agreement and stock options granted to COGECO Inc.'s
employees are provided in the Corporation's 2005 annual MD&A. There were no
other material related party transactions during the first quarter of fiscal
years 2006 and 2005.



OPERATING RESULTS

Quarters ended November 30,

2005 2004 %
($000s, except percentages) Change
------------- ------------- -------------

Revenue $ 143,413 $ 135,766 5.6

Operating costs 83,243 79,857 4.2
Management fees - COGECO Inc. 2,868 2,715 5.6

Operating income before
amortization 57,302 53,194 7.7

Operating margin 40.0% 39.2%


Revenue

Revenue for the first quarter rose by $7.6 million or 5.6% compared to
the same period last year due to higher penetration rates in digital video,
HSI and digital telephony services as well as to rate increases implemented in
June and August of 2005. Monthly rate increases of at most $3 per customer and
averaging $0.50 per basic service customer took effect on June 15, 2005 in
Ontario and on August 1, 2005 in Québec. As a result of these increases, the
basic monthly rate is now $24.99 in the majority of networks in Ontario, and
the number of different basic rates in Québec has dropped from 22 to 7,
ranging essentially between $20 and $27.50 per month. The monthly rate for
certain bundled services has increased by $1 in Ontario, and other limited
rate increases for selective tier services were implemented in Québec.
Furthermore, the August 2005 reduction in digital terminal rental rates was
more than offset by a greater number of customers renting digital terminals.

Operating Costs

During the first quarter, operating costs, excluding management fees
payable to COGECO Inc., rose by $3.4 million or 4.2%. This increase arises
mainly from higher operating costs to serve additional revenue-generating
units (RGU), including digital telephony. In addition, network fees increased
by 2.5% in the first quarter compared to the same period last year as a result
of the introduction of digital telephony, the Canadian Radio-television and
Telecommunications Commission mandated APTN wholesale rate increase and RGU
growth; this was partly offset by the IP transport costs that have declined
despite HSI customer growth.

Operating Income before Amortization

For the first quarter, operating income before amortization rose by 7.7%
compared to the same period last year due to the increase in revenue outpacing
the rise in operating costs. Cogeco Cable had previously anticipated a
reduction in its operating margin due to the launch of digital telephony.
However, the Corporation increased its operating margin to 40% in the first
quarter compared to 39.2% last year as a result of better than expected net
additions of HSI service customers.



FIXED CHARGES

Quarters ended November 30,

2005 2004 %
($000s, except percentages) Change
------------- ------------- -------------

Amortization $ 28,277 $ 32,244 (12.3)

Financial expense 13,582 13,894 (2.2)


Amortization expense amounted to $28.3 million during the first quarter
of fiscal 2006 compared to $32.2 million for the same period last year.
Amortization expense declined during the first quarter as many cable modems
and digital terminals were fully amortized.
For the first quarter of fiscal 2006, financial expense decreased
compared to the same period last year. The decline is due to the lower level
of Indebtedness (defined as bank indebtedness and long-term debt) during the
first quarter compared to the same period last year, partially offset by
increases in the short-term interest rate on the Term Facility.

INCOME TAXES

Income taxes for the first quarter amounted to $6.4 million compared to
$3.2 million for the same period last year. This increase was mainly
attributable to the operating income before amortization growth and the
decline in fixed charges as discussed above.

NET INCOME

Net income for the first quarter amounted to $9 million, or $0.23 per
share, compared to $3.8 million, or $0.10 per share, for the same period last
year. This increase was mainly attributable to the strong operating income
before amortization growth as well as the decline in fixed charges.



CASH FLOW AND LIQUIDITY
Quarters ended November 30,

($000s) 2005 2004
------------- -------------
Operating Activities
Cash flow from operations $ 43,389 $ 39,192
Changes in non-cash operating items (42,787) (33,006)
------------- -------------
$ 602 $ 6,186
------------- -------------
------------- -------------

Investing Activities $ (33,678) $ (23,777)
------------- -------------
------------- -------------

Financing Activities $ 53,698 $ 17,591
------------- -------------
------------- -------------
Net change in cash and cash equivalents $ 20,622 $ -
------------- -------------
------------- -------------


For the first quarter, cash flow from operations was $43.4 million, or
10.7%, higher than last year due primarily to the increase in operating income
before amortization. Changes in non-cash operating items generated greater
cash outflow than last year mainly as a result of a larger decrease in
accounts payable and accrued liabilities caused by increased capital
expenditures incurred late in fiscal 2005.

Investing activities, including capital expenditures segmented according
to the National Cable Television Association (NCTA) standard reporting
categories, are as follows:



Quarters ended November 30,

($000s) 2005 2004
------------- -------------

Customer premise equipment (1) $ 15,423 $ 11,304
Scalable infrastructure 3,672 2,405
Line extensions 2,552 2,777
Upgrade / rebuild 6,974 4,446
Support capital 1,392 642
------------- -------------
Total capital expenditures 30,013 21,574
------------- -------------
Deferred charges and others 3,665 2,203
------------- -------------
Total investing activities $ 33,678 $ 23,777
------------- -------------
------------- -------------

(1) Includes mainly new and replacement drops but also home terminal
devices.

During the first quarter, the increase related to capital expenditures is
due mainly to the following factors:

- The increase in customer premise equipment results primarily from a
rise in the number of digital terminals rented to customers. This
increase is explained by higher customer growth in the first
quarter, by more customers renting their digital terminals fuelled
by a reduction in rental rates for digital terminals in August 2005
and by a greater ratio of digital terminals per digital home.

- The growth in scalable infrastructure is mainly attributable to the
additional capital expenditures to support the rollout of digital
telephony.

- Expenditures associated with the network upgrade and rebuild program
rose by $2.5 million in the first quarter due to the acceleration of
the program to expand the bandwidth to 750 MHz and 550 MHz for the
Ontario and Québec networks, respectively, and to improve network
reliability. An increase in the number of households with access to
two-way service was also a factor. The percentage of customers with
access to two-way service rose from 87% as at November 30, 2004 to
90% as at November 30, 2005.


The first quarter increase in deferred charges is explained by higher
reconnect costs attributable to the significant level of RGU increase, which
includes the digital telephony customer growth.

Free Cash Flow of $9.7 million was generated during the first quarter of
fiscal 2006 as a result of increased cash flow from operations partly offset
by increased capital expenditures and deferred charges. Free Cash Flow
declined in the first quarter of fiscal 2006 compared to the same period last
year. This is attributable to increased capital expenditures and deferred
charges to support digital telephony and better than expected RGU growth.

Net change in cash and cash equivalents generated cash inflow in the
first quarter. At quarter end, the Corporation had cash and cash equivalents
in hand with a maturity that could not be synchronized with the maturity of
its Indebtedness under the Term Facility.

During the first quarter, the level of Indebtedness increased by
$55.3 million mainly due to a decline in non-cash operating items of
$42.8 million and a net change in cash and cash equivalents of $20.6 million,
partly offset by generated Free Cash Flow of $9.7 million. For the same period
last year, Indebtedness grew by $18.1 million, essentially due to a decline of
$33 million in non-cash operating items counterbalanced by generated Free Cash
Flow of $15.4 million. In addition, a dividend of $0.04 per share for
subordinate and multiple voting shares, totalling $1.6 million, was paid
during the first quarter of fiscal 2006 compared to a dividend of $0.02 per
share or $0.8 million for the first quarter of fiscal 2005.

As at November 30, 2005, the Corporation had utilized $40 million of its
Term Facility. Taking into account existing bank covenants, Cogeco Cable could
have used the entire committed amount under the Term Facility. Going forward,
Cogeco Cable expects to generate Free Cash Flow and thus further reduce its
leverage ratio net of cash and cash equivalents.

DIVIDEND DECLARATION AND NORMAL COURSE ISSUER BID

At its January 11, 2006 meeting, the Board of Directors of Cogeco Cable
declared a quarterly dividend of $0.04 per share for subordinate and multiple
voting shares, payable on February 8, 2006, to shareholders on record as at
January 25, 2006.

On December 14, 2005, Cogeco Cable renewed its normal course issuer bid
pursuant to which it can acquire up to 250,000 subordinate voting shares for
cancellation representing 1.03% of the outstanding shares of this class.
During the first quarter of fiscal 2006, Cogeco Cable did not acquire any of
its shares.

FINANCIAL POSITION

Since August 31, 2005, there have been major changes to the "Cash and
cash equivalents," "Accounts payable and accrued liabilities," and
"Indebtedness" items on the balance sheet. Accounts payable and accrued
liabilities declined by $43.5 million as the use of working capital was
tightly managed at fiscal 2005 year-end. Cash and cash equivalents and
Indebtedness increased by $20.6 million and $55.3 million, respectively, due
to the factors previously discussed in the "Cash Flow and Liquidity" section.

A description of Cogeco Cable's share data as of December 30, 2005 is
presented in the table below:



Number of Amount
shares/options ($000s)
-------------- --------------
Common Shares
Multiple voting shares 15,691,100 98,346
Subordinate voting shares 24,301,000 532,036
Options to Purchase Subordinate Voting Shares
Outstanding options 714,065
Exercisable options 447,140


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 have not materially changed
since August 31, 2005 and are described in the 2005 annual MD&A.

FOREIGN EXCHANGE MANAGEMENT

Cogeco Cable has entered into cross-currency swap agreements to fix the
liability for interest and principal payments on its US$150 million Senior
Secured Notes. These agreements have the effect of converting the US interest
coupon rate of 6.83% per annum to an average Canadian dollar fixed interest
rate of 7.254% per annum. The exchange rate applicable to the principal
portion of the debt has been fixed at CDN$1.5910. Amounts due under the
US$150 million Senior Secured Notes Series A decreased by CDN$3 million during
the first quarter due to the Canadian dollar's appreciation. Since the Senior
Secured Notes Series A are fully hedged, the fluctuation is fully offset by a
variation in deferred credit described in Note 5 of the first quarter interim
financial statements. The $63.6 million deferred credit represents the
difference between the quarter-end exchange rate and the exchange rate on the
cross currency swap agreements, which determine the liability for interest and
principal payments on the Senior Secured Notes Series A.

FISCAL 2006 FINANCIAL GUIDELINES

In furtherance of its existing line of business and external growth
strategy, the Corporation continues to investigate cable system acquisition
opportunities, including cable systems located outside Canada.
Since economic and industry factors described in the 2005 annual MD&A
remain unchanged, management is maintaining its fiscal 2006 financial and
customer guidance and, as a result, still expects to generate Free Cash Flow
of $35 to $40 million.

RISK FACTORS AND UNCERTAINTIES

There has been no significant change in the risk factors and
uncertainties facing Cogeco Cable as described in the Corporation's 2005
annual MD&A.

ADDITIONAL INFORMATION

This MD&A was prepared on January 11, 2006. Additional information
relating to the Corporation, including its Annual Information Form, is
available on the SEDAR Web site at www.sedar.com.

ABOUT COGECO CABLE

Cogeco Cable (www.cogeco.ca) is the second largest cable operator in both
Ontario and Québec, and ranks fourth in Canada in terms of the number of basic
service customers served. Cogeco Cable invests in state-of-the-art broadband
network facilities, delivers a wide range of services over these facilities
with great speed and reliability at attractive prices, and strives to provide
both superior customer care and growing profitability to satisfy its
customers' varied electronic communication needs. Through its two-way
broadband cable infrastructure, Cogeco Cable provides its residential and
commercial customers with analogue and digital video and audio services, high-
speed Internet access as well as digital telephony service. The Corporation
provides about 1,409,000 revenue-generating units to approximately 1,454,000
households in its service territory. Cogeco Cable's subordinate voting shares
are listed on the Toronto Stock Exchange (CCA.SV).

Analyst Conference Call:

Thursday January 12, 2006, at 11:00 a.m. EST
By Internet at www.cogeco.ca/investors
By telephone: 1 (800) 310-6649 (confirmation code 4786865)
Media are invited to participate in listen mode only.
Re-broadcast of the call available until January 19: 1 (888) 203-1112
(confirmation code 4786865)



Supplementary Quarterly Financial Information

Quarters ended November 30, August 31,
--------------------------- ---------------------------
2005 2004 2005 2004
($000, except percentages
and per share data)

Revenue $ 143,413 $ 135,766 $ 140,178 $ 133,053
Operating income
before amortization 57,302 53,194 60,720 54,290
Operating margin 40.0% 39.2% 43.3% 40.8%
Amortization 28,277 32,244 29,460 32,476
Financial expense 13,582 13,894 14,004 13,871
Income taxes 6,445 3,229 6,220 1,474
Net income 8,998 3,827 11,036 6,469

Cash flow from
operations 43,389 39,192 46,509 41,025

Net income
per share $ 0.23 $ 0.10 $ 0.28 $ 0.16


Quarters ended May 31, February 28, February 29,
--------------------------- ---------------------------
2005 2004 2005 2004
($000, except percentages (restated)(1)
and per share data)

Revenue $ 140,071 $ 132,364 $ 138,389 $ 131,574
Operating income
before amortization 58,310 51,329 55,297 50,413
Operating margin 41.6% 38.8% 40.0% 38.3%
Amortization 31,396 32,070 31,988 32,355
Financial expense 13,954 14,414 13,840 14,767
Income taxes 4,715 2,993 3,856 2,703
Net income 8,245 1,852 5,613 588

Cash flow from
operations 43,562 36,593 41,675 35,278

Net income
per share $ 0.21 $ 0.05 $ 0.14 $ 0.01

(1) During the third quarter of fiscal 2004, Cogeco Cable adopted new
accounting standards regarding revenue recognition and certain
related costs, as well as the classification of certain items as
revenue, expense or capitalized cost. These changes were applied on a
retroactive basis in accordance with Abstracts 141 and 142 issued by
the Canadian Institute of Chartered Accountants' (CICA) Emerging
Issues Committee (EIC). See "Accounting Policies and Estimates" of
the 2005 MD&A for a detailed description of these new accounting
standards implemented on a retroactive basis.


Cogeco Cable's operating results are not generally subject to material
seasonal fluctuations. However, the loss of basic service customers is usually
greater, and the addition of HSI customers is generally lower in the third
quarter, mainly due to students leaving campuses at the end of the school
year. Cogeco Cable offers its services in several university and college towns
such as Kingston, Windsor, St. Catharines, Hamilton, Peterborough, Trois-
Rivières and Rimouski. Furthermore, the fourth quarter's operating margin is
usually higher as lower or no management fees are paid to COGECO Inc. Under a
Management Agreement, Cogeco Cable pays a fee equal to 2% of its total revenue
subject to a maximum amount. Since the maximum amount was reached early in the
fourth quarter of fiscal 2004 and at the end of the third quarter of fiscal
2005, Cogeco Cable paid lower or no management fees during these quarters.




COGECO CABLE INC.
Customer Statistics
November 30, August 31,
2005 2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Homes Passed
Ontario 990,777 986,401
Québec 463,516 462,332
-------------------------------------------------------------------------
1,454,293 1,448,733
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Revenue Generating Units
Ontario 1,011,926 968,749
Québec 396,577 378,984
-------------------------------------------------------------------------
1,408,503 1,347,733
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Basic Service Customers
Ontario 589,476 581,631
Québec 242,860 239,802
-------------------------------------------------------------------------
832,336 821,433
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Discretionnary Service Customers
Ontario 466,250 461,038
Québec 186,957 183,320
-------------------------------------------------------------------------
653,207 644,358
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Pay TV Service Customers
Ontario 82,923 80,817
Québec 38,019 35,407
-------------------------------------------------------------------------
120,942 116,224
-------------------------------------------------------------------------
-------------------------------------------------------------------------

High Speed Internet Service Customers
Ontario 243,896 226,133
Québec 56,745 51,515
-------------------------------------------------------------------------
300,641 277,648
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Digital Video Customers
Ontario 173,811 159,734
Québec 94,808 87,470
-------------------------------------------------------------------------
268,619 247,204
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Digital Terminals
Ontario 232,265 209,662
Québec 102,604 94,222
-------------------------------------------------------------------------
334,869 303,884
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Digital Telephony
Ontario 4,743 1,251
Québec 2,164 197
-------------------------------------------------------------------------
6,907 1,448
-------------------------------------------------------------------------
-------------------------------------------------------------------------


COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF INCOME

Three months ended November 30,
-------------------------------------------------------------------------
(In thousands of dollars, 2005 2004
except per share data)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Revenue
Service $ 142,759 $ 134,710
Equipment 654 1,056
-------------------------------------------------------------------------
143,413 135,766

Operating costs 83,243 79,857
Management fees - COGECO Inc. 2,868 2,715
-------------------------------------------------------------------------

Operating income before amortization 57,302 53,194
Amortization (note 2) 28,277 32,244
-------------------------------------------------------------------------

Operating income 29,025 20,950
Financial expense (note 5) 13,582 13,894
-------------------------------------------------------------------------

Income before income taxes 15,443 7,056
Income taxes (note 3) 6,445 3,229
-------------------------------------------------------------------------

Net income $ 8,998 $ 3,827
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings per share (note 4)
Basic $ 0.23 $ 0.10
Diluted 0.22 0.10
-------------------------------------------------------------------------
-------------------------------------------------------------------------


COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS


Three months ended November 30,
-------------------------------------------------------------------------
(In thousands of dollars) 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Balance at beginning $ 58,604 $ 33,880

Net income 8,998 3,827

Dividends on multiple voting shares (628) (314)

Dividends on subordinate voting shares (972) (485)
-------------------------------------------------------------------------

Balance at end $ 66,002 $ 36,908
-------------------------------------------------------------------------
-------------------------------------------------------------------------


COGECO CABLE INC.
CONSOLIDATED BALANCE SHEETS


-------------------------------------------------------------------------
November 30, August 31,
(In thousands of dollars) 2005 2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (audited)

Assets
Current
Cash and cash equivalents $ 20,683 $ 61
Accounts receivable 27,521 26,485
Income tax receivable 286 -
Prepaid expenses 3,378 3,946
-------------------------------------------------------------------------
51,868 30,492
-------------------------------------------------------------------------

Fixed assets 704,590 697,526
Deferred charges 36,322 38,226
Customer base 989,552 989,552
-------------------------------------------------------------------------
$ 1,782,332 $ 1,755,796
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and Shareholders' equity
Liabilities
Current
Bank indebtedness $ 15,646 $ -
Accounts payable and accrued liabilities 81,542 125,090
Income tax liabilities - 678
Deferred and prepaid income 26,778 24,907
Current portion of long-term debt (note 5) 1,296 1,322
-------------------------------------------------------------------------
125,262 151,997
-------------------------------------------------------------------------

Long-term debt (note 5) 730,837 691,159
Deferred and prepaid income 10,844 10,522
Pension plans liabilities and accrued
employee benefits 1,993 1,903
Future income tax liabilities 216,351 210,731
-------------------------------------------------------------------------
1,085,287 1,066,312
-------------------------------------------------------------------------

Shareholders' equity
Capital stock (note 6) 630,220 630,220
Retained earnings 66,002 58,604
Contributed surplus - stock-based
compensation 823 660
-------------------------------------------------------------------------
697,045 689,484
-------------------------------------------------------------------------
$ 1,782,332 $ 1,755,796
-------------------------------------------------------------------------
-------------------------------------------------------------------------


COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF CASH FLOW

Three months ended November 30,
-------------------------------------------------------------------------
(In thousands of dollars) 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Cash flow from operating activities
Net income $ 8,998 $ 3,827
Items not affecting cash and cash equivalents
Amortization (note 2) 28,277 32,244
Amortization of deferred financing costs 241 234
Future income taxes (note 3) 5,620 2,604
Other 253 283
-------------------------------------------------------------------------
Cash flow from operations 43,389 39,192
Changes in non-cash operating items (note 7a)) (42,787) (33,006)
-------------------------------------------------------------------------
602 6,186
-------------------------------------------------------------------------

Cash flow from investing activities
Acquisition of fixed assets (30,013) (21,574)
Increase in deferred charges (3,665) (2,205)
Other - 2
-------------------------------------------------------------------------
(33,678) (23,777)
-------------------------------------------------------------------------

Cash flow from financing activities
Increase in bank indebtedness 15,646 21,328
Increase in long-term debt 40,000 -
Repayment of long-term debt (348) (3,267)
Issue of subordinate voting shares - 329
Dividends on multiple voting shares (628) (314)
Dividends on subordinate voting shares (972) (485)
-------------------------------------------------------------------------
53,698 17,591
-------------------------------------------------------------------------

Net change in cash and cash equivalents 20,622 -
Cash and cash equivalents at beginning 61 -
-------------------------------------------------------------------------
Cash and cash equivalents at end $ 20,683 $ -
-------------------------------------------------------------------------
-------------------------------------------------------------------------

See supplemental cash flow information in note 7.


COGECO CABLE INC.
Notes to Consolidated Financial Statements
November 30, 2005
(amounts in tables are in thousands of dollars, except per share data)


1. Basis of Presentation

In the opinion of management, the accompanying unaudited interim
consolidated financial statements, prepared in accordance with Canadian
generally accepted accounting principles, contain all adjustments necessary to
present fairly the financial position of Cogeco Cable Inc. as at November 30,
2005 and August 31, 2005 as well as its results of operations and its cash
flow for the three month periods ended November 30, 2005 and 2004.
While management believes that the disclosures presented are adequate,
these unaudited interim consolidated financial statements and notes should be
read in conjunction with Cogeco Cable Inc.'s annual consolidated financial
statements for the year ended August 31, 2005. These unaudited interim
consolidated financial statements follow the same accounting policies as the
most recent annual consolidated financial statements.
The interim consolidated financial statements for the three month period
ended November 30, 2004 have not been subject to a review by the Corporation's
external auditors.




2. Amortization

Three months ended November 30,
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Fixed assets $ 22,949 $ 26,304

Deferred charges 5,328 5,940
-------------------------------------------------------------------------
$ 28,277 $ 32,244
-------------------------------------------------------------------------
-------------------------------------------------------------------------


3. Income taxes

Three months ended November 30,
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)


Current $ 825 $ 625

Future 5,620 2,604
-------------------------------------------------------------------------
$ 6,445 $ 3,229
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The following table provides the reconciliation between statutory federal
and provincial income taxes and the consolidated income tax expense:

Three months ended November 30,
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Income tax at combined income tax
rate of 35.09 % $ 5,419 $ 2,467
(34.96 % in 2004)

Loss or income subject to lower or higher
tax rates (8) 94

Increase in income taxes as a result of
increases in substantially enacted tax rates 162 -

Large corporation tax 825 625

Other 47 43
-------------------------------------------------------------------------

Income tax at effective income tax rate $ 6,445 $ 3,229
-------------------------------------------------------------------------
-------------------------------------------------------------------------


4. Earnings per share

The following table provides reconciliation between basic and diluted
earnings per share:

Three months ended November 30,
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Net income $ 8,998 $ 3,827

Weighted average number of multiple voting
and subordinate voting shares outstanding 39,984,586 39,935,729

Effect of dilutive stock options (1) 195,214 114,763
-------------------------------------------------------------------------

Weighted average number of diluted multiple
voting and subordinate voting shares
outstanding 40,179,800 40,050,492

-------------------------------------------------------------------------

Earnings per share

Basic $ 0.23 $ 0.10

Diluted 0.22 0.10
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) For the three month period ended November 30, 2005, 143,248 stock
options (162,942 in 2004) were excluded from the calculation of
diluted earnings per share since the exercise price of the options
was greater than the average share price of the subordinate voting
shares.


5. Long-term debt

-------------------------------------------------------------------------
Maturity Interest November 30, August 31,
rate 2005 2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (audited)

Parent company

Term Facility 2007 4.75% $ 40,000 $ -

Senior Secured
Debentures Series 1 2009 6.75 150,000 150,000

Senior - Secured Notes

Series A -
US $150 million 2008 6.83(1) 175,035 178,065

Series B 2011 7.73 175,000 175,000

Second Secured
Debentures Series A 2007 8.44 125,000 125,000

Deferred credit (2) 2008 - 63,615 60,585

Subsidiaries

Obligations under
capital leases 2010 5.87 - 8.36 3,483 3,831
-------------------------------------------------------------------------
732,133 692,481

Less current portion 1,296 1,322
-------------------------------------------------------------------------
$ 730,837 $ 691,159
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Cross-currency swap agreements have resulted in an effective interest
rate of 7.254% on the Canadian dollar equivalent of the U.S.
denominated debt.
(2) The deferred credit represents the amount which would have been
payable as at November 30, 2005 and August 31, 2005 under cross-
currency swaps entered into by the Corporation to hedge Senior
Secured Notes Series A denominated in US dollars.


Interest on long-term debt for the three month period ended November 30,
2005 amounted to $13,048,000 ($13,244,000 in 2004).


6. Capital Stock

Authorized, an unlimited number

Class A Preference shares, without voting rights, redeemable by the
Corporation and retractable at the option of the holder at any time at a price
of $1 per share, carrying a cumulative preferential cash dividend at a rate of
11% of the redemption price per year.



Class B Preference shares, without voting rights, issuable in series.

Multiple voting shares, 10 votes per share.

Subordinate voting shares, 1 vote per share.

-------------------------------------------------------------------------
November 30, August 31,
2005 2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (audited)

Issued

15,691,100 multiple voting shares $ 98,346 $ 98,346

24,293,486 subordinate voting shares 531,874 531,874
-------------------------------------------------------------------------

$ 630,220 $ 630,220
-------------------------------------------------------------------------
-------------------------------------------------------------------------


During the period, subordinate voting shares transactions were as
follows:

Three months ended Twelve months ended
November 30, 2005 August 31, 2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (audited)
-------------------------------------------------------------------------
Number of Number of
shares Amount shares Amount
-------------------------------------------------------------------------

Balance at
beginning 24,293,486 $ 531,874 24,232,815 $ 531,070

Shares issued for
cash under the
Employee Stock
Purchase Plan and
the Stock Option
Plan - - 60,671 742

Compensation
expense previously
recorded in
contributed
surplus for
options exercised - - - 62
-------------------------------------------------------------------------
Balance at end 24,293,486 $ 531,874 24,293,486 $ 531,874
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Stock-based plans

The Corporation established for the benefit of its employees and those of
its subsidiaries, an Employee Stock Purchase Plan and a Stock Option Plan for
certain executives which are described in the Corporation's annual
consolidated financial statements. During the first quarter, the Corporation
granted 123,342 stock options (140,766 in 2004) with an exercise price of
$29.05 ($21.50 in 2004) of which 31,743 stock options (38,397 in 2004) were
granted to COGECO Inc.'s employees. The Corporation records compensation
expense for options granted on or after September 1, 2003. As a result, a
compensation expense of $163,000 ($98,000 in 2004) was recorded for the three
month period ended November 30, 2005. If compensation cost had been recognized
using the fair value-based method at the grant date for options granted
between September 1, 2001 and August 31, 2003, the Corporation's net income
and earnings per share for the three month periods ended November 30, 2005 and
2004 would have been reduced to the following pro forma amounts:

Three months ended November 30,
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Net income
As reported $ 8,998 $ 3,827
Pro forma 8,978 3,731

Basic earnings per share
As reported $ 0.23 $ 0.10
Pro forma 0.22 0.09

Diluted earnings per share
As reported $ 0.22 $ 0.10
Pro forma 0.22 0.09
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The fair value of each option granted was estimated on the grant date for
purposes of determining stock-based compensation expense using the Binomial
option pricing model based on the following assumptions:

-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
Expected dividend yield 1.27% 1.27%

Expected volatility 39% 43%

Risk-free interest rate 3.70% 3.70%

Expected life in years 4.0 4.0
-------------------------------------------------------------------------

The fair value of stock options granted for the three month period ended
November 30, 2005 was $9.46 ($7.46 in 2004) per option.
As at November 30, 2005, the Corporation had outstanding stock options
providing for the subscription of 714,065 subordinate voting shares. These
stock options can be exercised at various prices ranging from $7.05 to $40.75
and at various dates up to October 20, 2015.


7. Statements of cash flow

a) Changes in non-cash operating items

Three months ended November 30,
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Accounts receivable $ (1,036) $ (671)

Income tax receivable (286) -

Prepaid expenses 568 603

Accounts payable and accrued liabilities (43,548) (36,411)

Income tax liabilities (678) (64)

Deferred and prepaid income 2,193 3,537
-------------------------------------------------------------------------
$ (42,787) $ (33,006)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

b) Other information

Three months ended November 30,
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Interest paid $ 15,957 $ 16,120

Income taxes paid 1,789 689
-------------------------------------------------------------------------
-------------------------------------------------------------------------

8. Employees future benefits

The Corporation and its subsidiaries offer their employees defined
contributory benefit pension plans, a defined contribution pension plan or a
collective registered retirement savings plan which are described in the
Corporation's annual consolidated financial statements. The total expenses
related to these plans are as follows:

Three months ended November 30,
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Defined contributory benefit pension plans $ 174 $ 92

Defined contribution pension plan and
collective registered retirement savings
plan 383 340
-------------------------------------------------------------------------
$ 557 $ 432
-------------------------------------------------------------------------
-------------------------------------------------------------------------

/T/

Contact Information

  • Media:
    Marie Carrier, Director, Corporate Communications,
    514-874-2600

    Source
    Cogeco Cable Inc.
    Pierre Gagné, Vice President
    Finance and Chief Financial Officer
    (514) 874-2600