Cogeco Câble inc.
TSX : CCA

October 24, 2005 23:59 ET

Cogeco Cable surpasses its objectives and projects maintaining its growth for fiscal 2006

MONTREAL, Oct. 24 2005 - Today, Cogeco Cable Inc. (TSX: CCA.SV)
announced its financial results for the fourth quarter and fiscal year ended
August 31, 2005.

The Corporation exceeded virtually all of its objectives for fiscal 2005
and continued to enhance its services throughout the fourth quarter.

Fiscal 2005 objectives surpassed

Most of the financial objectives for fiscal 2005 have been exceeded.
Operating income before amortization rose 11.9%, surpassing the initial
objective of 8% to 9%. Furthermore, at $28.7 million, net income is 30% higher
than forecast. Free Cash Flow was $45.3 million, within the projected range.
The number of high-speed Internet (HSI) and digital customers rose by 16% and
22% respectively. Launched last June, the number of customers for the digital
telephony service at the end of the fiscal year reached about 2,500, including
pending orders. The better than expected growth in HSI, digital and telephony
customers offsets a small decline in basic service customers.

Improved service offering

"Among the quarter's milestones, the launch of our digital telephony
service really stood out. Customer response to this new product exceeded our
expectations in the areas where the service was introduced. Launched across
24% of our territory as of October 21, 2005, the service is now available to
all residents in the areas served, whether or not they are Cogeco Cable
customers. By August 2006, most of our major markets will benefit from this
attractive service," commented Louis Audet, Cogeco Cable's President and Chief
Executive Officer.

The Corporation doubled its video-on-demand (VOD) service capacity from
800 to 1,600 hours, an important improvement for customers who are
increasingly tuning in to on-demand television. Also, in its drive to
continually offer enhanced functions and services, Cogeco Cable has launched a
new interactive program guide, iGuide, in Ontario. The new guide is very fast
and features an improved design and many other functions. HSI security
services are being offered to Lite service customers at an even better price.
The price dropped from $8 to $2 per month in May for Ontario, and in September
for Québec. These security services continue to be free for HSI Standard and
Pro customers.

Growth forecast for 2006

Cogeco Cable expects to continue growing in fiscal 2006. The projections
are for a sustained increase in customers, particularly for digital and
telephony services. As a result of strong demand for its telephony service,
the Corporation has revised its projected customer growth from between 7,000
and 8,000 to a range of 32,000 to 37,000. In spite of additional telephony
investments, the Corporation should generate Free Cash Flow in the order of
$38 million and an increase in the order of $8 million in operating income
before amortization.

FINANCIAL HIGHLIGHTS

In fiscal 2005, Cogeco Cable exceeded virtually all of its financial and
customer additions objectives.



------------------------------------------------------------------------
(in millions $,
except percentages
and customer Original Actual Actual
statistics) Target vs Target Results
--------- --------- ---------

Revenue growth 4 to 5% 5.3% Exceeded
Operating income
before amortization
growth 8 to 9% 11.9% Exceeded
Net income 22 28.7 Exceeded

Cash flow from operations 159 to 164 171 Exceeded
Free Cash Flow (2) 45 to 50 45.3 Achieved

Gain (loss) of basic
service customers 0 to 2,500 (2,422) Not achieved
HSI additions 32,000 to 37,000 38,040 Exceeded
Digital services additions 29,500 to 33,000 46,823 Exceeded
Digital telephony additions NA 1,448
Digital terminal additions 40,000 to 45,000 63,813 Exceeded
------------------------------------------------------------------------

------------------------------------------------------------------------
Fourth Quarters ended
August 31 Years ended August 31
(unaudited) (audited)
($000s, except
percentages and
per share data) % %
2005 2004 Change 2005 2004(1) Change
-------- -------- ------- -------- -------- -------
Revenue $140,178 $133,053 5.4 $554,404 $526,480 5.3
Operating
income
before
amortization 60,720 54,290 11.8 227,521 203,246 11.9

Net income
(loss) 11,036 6,469 70.6 28,721 (32,194) -

Cash flow
from
operations 46,509 41,025 13.4 170,938 144,778 18.1
Less:
Capital
expenditures
and
increase in
deferred
charges 46,259 34,696 32.3 125,671 101,244 24.1
------ ------ ------- -------
Free Cash
Flow (2) 250 6,329 - 45,267 43,534 4.0

Per share data
Basic net
income (loss) $0.28 $0.16 75.0 $0.72 $(0.81) -
Cash flow
from
operations 1.16 1.03 12.6 4.28 3.63 17.9
------------------------------------------------------------------------


(1) During the third quarter of fiscal 2004, Cogeco Cable adopted new
accounting standards regarding the revenue recognition and certain
related costs, as well as the classification of certain items as
revenue, expense or capitalized cost. These changes were made 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 accompanying Management's Discussion and Analysis (MD&A) for a
detailed description of these new accounting standards implemented on
a retroactive basis.
(2) Free Cash Flow is defined as cash flow from operations less capital
expenditures (including assets acquired under capital leases - as per
Note 7 b) in the accompanying financial statements - not reflected in
the statements of cash flow) and increase in deferred charges. Free
Cash Flow is not a defined term under Generally Accepted Accounting
Principles (GAAP) and should be treated accordingly.


MANAGEMENT'S DISCUSSION AND ANALYSIS

Certain statements in this quarterly report 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" or other similar expressions
concerning matters that are not historical facts. Particularly, statements
regarding our future operating results and economic performance, 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, which are described in the
section "Uncertainty and main risk factors" of this MD&A, the second and third
quarter reports of 2005 and the Corporation's 2004 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, the risks pertaining to information systems, 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 forward-looking 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 (losses)

Fourth Quarters Fiscal years % Penetra-
tion(1)
August 31
----------------- --------------- -----------
August 31, 2005 2004 2005 2004 2005 2004
2005
---------- -------- -------- ------- ------ ----- -----
Revenue
generating
units (2) 1,355,818 9,887 12,311 83,919 90,100
Basic service
customers 821,433 (5,891) (2,493) (2,422) 3,198
HSI service
customers (3) 277,648 2,775 1,769 38,040 40,999 37.7 33.4
Digital
service
customers 255,289 11,555 13,035 46,853 45,903 31.7 25.8
Digital
telephony
customers 1,448 1,448 NA 1,448 NA NA NA
Digital
terminals (4) 303,884 15,922 16,211 63,813 56,984 37.7 29.8

(1) As a percentage of basic service customers in areas served.
(2) Including basic service, digital service, Internet service and
digital telephony service customers.
(3) The number of Internet customers in fiscal 2004 has been restated to
reflect the number of customers based on the billing dates, which are
spread throughout the month, instead of the number of customers as at
the end of the fiscal year. This change produces a downward
adjustment of approximately 5,400 customers. Customers subscribing
only to Internet services amounted to 55,057 as at August 31, 2005
compared to 49,691 as at August 31, 2004.
(4) 69% of terminals as at August 31, 2005 were purchased compared to 82%
one year earlier.


RGU growth was slower in the fourth quarter than in the same period last
year, primarily due to a larger decline in basic service customers. The loss
of basic service customers is largely due to long distance telephone service
plans offered by the competition from June 2004 to July 2005, when the plans
were withdrawn.

The increase in the number of digital service customers stems from an
expanded line of services, such as the addition of digital and high-definition
(HD) channels, and from consumers' growing interest in this technology.

HSI customer additions were slightly lower than last year due to slowing
demand as the penetration rate increases. To stimulate demand in a more mature
Québec market, Cogeco Cable started offering the Lite service to new customers
since the second quarter.

During the fourth quarter, Cogeco Cable progressively launched its
digital telephony service in Burlington, Oakville and Windsor in Ontario as
well as in Trois-Rivières, Drummondville and St-Hyacinthe in Québec. By the
end of fiscal 2005, the number of customers subscribing to this new service
had reached 1,448 and pending orders had reached about 1,000, exceeding
management's expectations. During the first quarter of fiscal 2006, the
service was rolled out to all residents of these areas and to those of the
Kingston area, in Ontario, whether or not they were Cogeco Cable customers.
The service will be gradually extended to most of Cogeco Cable's major markets
by the end of the 2006 fiscal year. The proven popularity of this new service
leads Cogeco Cable to revise upward its 2006 projections from a range of 7,000
to 8,000 to a range of 32,000 to 37,000 additional customers.

ACCOUNTING POLICIES AND ESTIMATES

Revenue Recognition
During the third quarter of fiscal 2004, Cogeco Cable adopted the CICA's
EIC Abstracts 141 and 142 issued in December 2003, regarding the timing of
revenue recognition and certain related costs and the classification of
certain items such as revenue, expense or capitalized costs. Consequently,
Cogeco Cable adopted the following changes:



- Installation revenues are now deferred and amortized over the average
life of a customer's subscription, which is four years. Previously,
these revenues were recognized immediately as they were considered a
partial recovery of direct selling costs incurred. Upon billing, the
portion of unearned revenue is now recorded as deferred and prepaid
income.
- The costs to reconnect customers are now recorded as deferred charges
up to a maximum amount not exceeding the revenue generated by the
reconnect activity, which are included in installation revenues, and
amortized over the average life of a customer's subscription, which is
four years. Previously, these costs, which include materials, direct
labour and certain overhead charges were capitalized to fixed assets
and generally amortized over a period of five years.
- Revenue from the sale of home terminal devices at a subsidized price,
which were recorded as a partial recovery of costs, are now recorded as
equipment revenue with an equal amount included in operating costs.
- The portion of advertising expense incurred to expand the digital and
HSI customer base that used to be recorded as a deferred charge is now
recorded as an operating cost.



As a result of the above changes, operating income before amortization
was adjusted downward by $8 million in fiscal 2004. The adjustments related to
the reversal of capitalized advertising expense and reconnection costs
amounted to $3.7 million and $1.2 million in fiscal 2004. Cogeco Cable has
decided to apply these changes retroactively to enhance the comparability of
its financial disclosure. The changes, relating to revenue recognition, had
the following impact on our financial results and cash flow:



Quarters ended Year ended
August 31, 2004 August 31, 2004
---------------------- ------------------------
(in thousands of
dollars, except
per share data Before After Before After
and percentages) adoption adoption adoption adoption
---------- ---------- ---------- ----------
Revenue $132,348 $133,053 $519,753 $526,480
Operating income
before amortization 56,556 54,290 211,224 203,246

Operating margin 42.7% 40.8% 40.6% 38.6%
Amortization 31,506 32,476 136,072 140,214
Income taxes 3,313 1,474 43,831 37,269
Net income (loss) 7,866 6,469 (26,636) (32,194)
Basic and diluted net
income (loss)
per share 0.20 0.16 (0.67) (0.81)



Amortization of Long-term Assets

In the first quarter of fiscal 2004, the Corporation reviewed the useful
life of its digital terminals, cable modems and certain other long-term
assets. The useful life of digital terminals was reduced from seven to five
years, while the useful life of cable modems was reduced from seven to three
years. These changes in accounting estimates, applied prospectively, increased
the amortization expense by $14 million for fiscal 2004.

Asset Retirement Obligations

In March 2003, the CICA issued Handbook section 3110, Asset Retirement
Obligations, which provides guidance for the recognition, measurement and
disclosure of liabilities for asset retirement obligations and the associated
costs. Some of Cogeco Cable's lease agreements contain provisions requiring
the Corporation to dismantle facilities or remove equipment in the event that
the lease agreement is not renewed. However, the Corporation expects to renew
most of its lease agreements related to the continued operation of the cable
business, and, consequently, the liabilities related to dismantling, if any,
are considered not material to the consolidated financial statements. In
addition, in the unlikely event that some of these lease agreements are not
renewed, the liability would be difficult to estimate, since there is a wide
range of potential expiration dates for these lease agreements.

Variable Interest Entities

In June 2003, the CICA issued Accounting Guideline 15 ("AcG-15"),
Consolidation of Variable Interest Entities, which defines Variable Interest
Entities ("VIE") as entities that have insufficient equity or whose equity
investors lack one or more specified essential characteristics of a
controlling financial interest. The standard provides guidance for determining
when an entity is a VIE and who, if anyone, should consolidate the VIE. During
fiscal 2005, the Corporation adopted this new accounting guideline and
concluded that it has no impact on the consolidated financial statements.

No other significant changes in critical accounting policies and
estimates occurred since August 31, 2004, and such policies and estimates are
described in the Corporation's 2004 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 2005, the
maximum amount of $8.2 million was paid to COGECO, compared to $8 million in
2004, which represents about 1.5% of the Corporation's total revenue, for both
fiscal years. The Corporation however granted 38,397 stock options to its
officers, who are also officers of COGECO Inc., during the 2005 fiscal year,
compared to 48,037 in the 2004 fiscal year. Cogeco Cable did not grant any
stock options to COGECO Inc.'s employees during the fourth quarter of fiscal
years 2005 and 2004. Further details regarding the management agreement and
stock options granted to COGECO Inc.'s employees are provided in the
Corporation's 2004 annual MD&A. There were no other material related party
transactions during fiscals 2004 and 2005.



OPERATING RESULTS

Quarters ended August 31 Years ended August 31
($000s, except
percentages) % %
2005 2004 Change 2005 2004 Change
-------- -------- ------- -------- -------- -------

Revenue $140,178 $133,053 5.4 $554,404 $526,480 5.3

Operating
costs 79,458 78,500 1.2 318,704 315,208 1.1
Management
fees
- COGECO Inc. - 263 - 8,179 8,026 1.9

Operating
income before
amortization 60,720 54,290 11.8 227,521 203,246 11.9

Operating
margin 43.3% 40.8% 41.0% 38.6%


Revenue

Revenue for fiscal 2005 has risen by $27.9 million or 5.3% compared to
fiscal 2004 mainly as a result of the improved HSI access penetration rate and
rate increases implemented in June and August of both fiscal 2004 and 2005.
Revenue for the fourth quarter has risen by $7.1 million or 5.4% compared to
the same period last year. This growth is mainly attributable to the improved
HSI access penetration rate and recent basic service rate increases. Monthly
rate increases of at most $3 per customer and averaging $0.50 per basic
service customer took effect on June 15 in Ontario and on August 1 in Québec.
As a result of these increases, the basic monthly rate is now $24.99 in the
large 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 bundle services has increased by $1 in
Ontario, and other limited rate increases for selective tier services were
implemented in Québec.

Operating Costs

Operating costs rose slightly, by $1 million or 1.2%. Since Cogeco Cable
has substantially outstripped its fiscal 2005 growth objectives for operating
income before amortization, an increase in the provision for employee bonuses
has been recorded. Furthermore, the rise in customer service expenses is
mainly attributable to a 6.6% increase in RGUs year over year. On the other
hand, the cost of sales, including equipment sold, network fees and IP
transport costs for HSI, has declined. The modest rise in operating costs for
fiscal 2005 is mainly attributable to the same reasons described for the
fourth quarter.

Operating Income before Amortization

Operating income before amortization for the fourth quarter and fiscal
2005 rose 11.8% and 11.9% compared to the same periods last year due to the
increase in revenue partially offset by a modest rise in operating costs.
Cogeco Cable's efforts to improve its operating margin resulted in an increase
in the margin from 40.8% to 43.3% for the fourth quarter and from 38.6% to 41%
for fiscal 2005.



FIXED CHARGES


Quarters ended August 31 Years ended August 31
($000s, except
percentages) % %
2005 2004 Change 2005 2004 Change
-------- -------- ------- -------- -------- -------
Amortization $29,460 $32,476 (9.3) $125,088 $140,214 (10.8)

Financial
expense $14,004 $13,871 0.9 $55,692 $57,957 (3.9)


Amortization amounted to $125.1 million during fiscal 2005 compared to
$126.2 million for the same period last year, excluding the financial impact
of a $14 million adjustment for change in the estimated useful lives of home
terminal devices and of certain long-term assets. Amortization declined during
the fourth quarter of fiscal 2005 and in fiscal 2005 as many cable modems and
digital terminals were fully amortized.

During fiscal 2005, the $2.3 million decrease in the financial expense
resulted primarily from lower Indebtedness (defined as bank indebtedness and
long-term debt) due to the Free Cash Flow generated.

INCOME TAXES

Income taxes for the fourth quarter amounted to $6.2 million compared to
$1.5 million for the same period last year. For fiscal 2005, income taxes
amounted to $18 million compared to $9.6 million for fiscal 2004, excluding
the financial impact of non-cash adjustments described below. The income tax
increase, on a normalized basis, was mainly attributable to the operating
income before amortization growth.

During the first quarter of fiscal 2004, the Ontario government announced
that corporate income tax rates would not decline in the future but would
instead rise to 14% effective January 1, 2004. Prior to this announcement, the
tax rate was expected to decline from 11% in 2004 to 8% in 2007. As a result,
a $32.5 million non-cash adjustment was recorded for future income tax
liabilities. This amount was partly offset by a non-cash reduction of future
income tax liabilities of $4.9 million. This reduction is related to the
decline in the carrying value of home terminal devices and certain other long-
term assets.

NET INCOME (NET LOSS)

Net income for the fourth quarter amounted to $11 million, or $0.28 per
share, compared to $6.5 million, or $0.16 per share for the same period last
year. This increase is mainly attributable to the strong growth of the
operating income before amortization. Net income for fiscal 2005 amounted to
$28.7 million, or $0.72 per share compared to a net loss of $32.2 million last
year, or $0.81 per share. The fiscal 2004 net loss is attributable to non-cash
adjustments for amortization and income tax, which totalled $41.6 million, as
previously mentioned.



CASH FLOW AND LIQUIDITY

Quarters ended Year ended
August 31 August 31
($000s)
2005 2004 2005 2004
---------- ---------- ---------- ----------
Operating Activities
Cash flow from
operations $46,509 $41,025 $170,938 $144,778
Changes in non-cash
operating items 46,096 30,246 23,657 4,302
---------- ---------- ---------- ----------
$92,605 $71,271 $194,595 $149,080
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Investing
Activities (1) ($45,895) ($33,714) ($123,703) ($98,602)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Financing Activities ($46,649) ($37,557) ($70,831) ($50,478)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net change in cash
and cash equivalents
and cash and cash
equivalents at end $61 - $61 -
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

(1) Excludes assets acquired under capital leases.


For the fourth quarter, cash flow from operations was $5.5 million or
13.4% higher than last year due primarily to the increase in operating income
before amortization. Net changes in non-cash operating items generated greater
cash inflows than last year mainly as a result of a larger increase 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 Year ended
August 31 August 31
($000s)
2005 2004 2005 2004
---------- ---------- ---------- ----------

Customer Premise
Equipment (1) $12,901 $12,543 $44,526 $27,988
Scalable Infrastructure 10,397 4,555 19,363 16,415
Line Extensions 3,574 3,056 10,416 10,157
Upgrade / Rebuild 13,158 6,806 34,096 20,893
Support Capital 1,413 2,321 3,888 5,769
---------- ---------- ---------- ----------
Total Capital
Expenditures (2) $41,443 $29,281 $112,289 $81,222
Deferred Charges
and others 4,816 5,356 13,338 19,963
---------- ---------- ---------- ----------
Total Investing
Activities $46,259 $34,637 $125,627 $101,185
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

(1) Includes mainly digital terminals and cable and telephony modems, but
also new customer connections and reconnections.
(2) Includes capital leases, which are excluded from the statements of
cash flow.


Lower deferred charges were attributable to lower equipment subsidies
given that most of the new digital customers decided to rent their terminals
during fiscal 2005. The higher percentage of customers renting their terminals
is mainly attributable to the attractive rental program that was launched in
the fourth quarter of the 2004 fiscal year.

During the fourth quarter and fiscal 2005, the increase related to
capital expenditures (including capital leases) is mainly attributable to the
following factors:



- Expenditures associated with the network upgrade and rebuild program
rose by $ 6.4 million in the fourth quarter and by $13.2 million in
fiscal 2005 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 improvements in 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 of August 31, 2004 to 89% as of August 31, 2005

- The increase in customer premise equipment mainly results from a rise
in expenditures related to digital terminals and to telephony
equipment. The number of digital terminals rented to customers
increased as a result of an attractive rental plan launched during the
fourth quarter of fiscal 2004 and a greater number of terminals
purchased at fiscal year-end 2005.


Free Cash Flow of $0.3 million and $45.3 million was generated during the
fourth quarter and fiscal 2005, respectively, as a result of increasing cash
flow from operations partly offset by increased capital expenditures.

During the fourth quarter, the level of Indebtedness declined by
$45.1 million mainly due to an increase in non-cash operating items of
$46.1 million. For the same period last year, Indebtedness fell by
$33.8 million essentially due to an increase of $30.2 million in non-cash
operating items and to Free Cash Flow of $6.3 million. A dividend of $0.04 per
share for subordinate and multiple voting shares, totalling $1.6 million, was
paid during the fourth quarter of fiscal 2005 and no dividends were paid in
fiscal 2004.

In fiscal 2005, Indebtedness declined by $67.6 million essentially due to
Free Cash Flow of $45.3 million and an increase in non-cash operating items of
$23.7 million. For the same period last year, Indebtedness declined by
$50.9 million essentially due to Free Cash Flow amounting to $43.5 million and
to an increase in non-cash operating items of $4.3 million. Dividends
totalling $4 million were paid during fiscal 2005, and no dividends were paid
in fiscal 2004.

As at August 31, 2005, the Corporation had not used its $270 million 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

At its October 21, 2005 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 November 18, 2005, to shareholders on record as at
November 4, 2005.

FINANCIAL POSITION

Since August 31, 2004, there have been major changes to the
"Indebtedness" and "shareholders' equity" items on the balance sheet.
Indebtedness has declined by $65.7 million primarily as a result of Free Cash
Flow of $45.3 million and a $23.7 million increase in non-cash operating
items. As a result, the leverage ratio (Indebtedness/Operating income before
amortization) declined from 3.7x as of August 31, 2004 to 3.0x as of August
31, 2005. Shareholders' equity saw an increase of $26 million mainly
attributable to net income of $28.7 million partially offset by dividends
amounting to $4 million. On August 31, 2005, the Corporation carried out an
impairment test of the customer base and concluded that no impairment existed.
A description of Cogeco Cable's share data as of September 30, 2005 is
presented in the table below:



Number of shares/ Amount
options ($000s)
----------------- ----------
Common Shares
Multiple voting shares 15,691,100 98,346
Subordinate voting shares 24,293,486 531,874
Options to Purchase Subordinate Voting Shares
Outstanding options 590,723
Exercisable options 326,851


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, 2004 and are described in the 2004 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$10.2 million during the
fourth 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 4 of the fourth quarter interim
financial statements. The $60.6 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

Revised Preliminary
($ million, except customer data) Projections(1) Projections
--------------- -------------

Financial Guidelines
Revenue 588 to 593 583 to 588
Operating income before
amortization 234 to 236 237 to 242
Operating margin About 40% 40 to 41%
Financial expense 56 55
Amortization 115 115
Net income 39 41
Capital expenditures and
deferred charges 140 132
Free Cash Flow 35 to 40 49 to 55

Customer Addition Guidelines
Basic service 0 to 3,000 0 to 3,000
HSI service 32,000 to 37,000 32,000 to 37,000
Digital service 47,000 to 52,000 47,000 to 52,000
Digital telephony service 32,000 to 37,000 7,000 to 8,000
Digital terminals 60,000 to 65,000 60,000 to 65,000

(1) As of October 24, 2005
(2) As of July 11, 2005


The Corporation is revising its financial projections for fiscal 2006
primarily as a result of stronger than expected demand for digital telephony
services, as well as a larger than expected decline in basic service customers
in the fourth quarter of 2005, a drop in rental fees for digital terminals in
the fourth quarter of fiscal 2005, an increase in programming fees for APTN
effective November 1, 2005, and an expected increase in network maintenance
costs. Digital telephony customer additions should be between 32,000 and
37,000, for an increase of between 25,000 and 29,000 customers over initial
projections.

Subsequent to these adjustments, projected revenues are being revised
upward to between $588 million and $593 million. However, operating income
before amortization should be lower, between $234 million and $236 million.
Approximately $2 million of the downward adjustment is tied to digital
telephony. As a result of stronger demand for digital telephony services,
capital expenditures and deferred charges should increase by approximately
$8 million. The capital expenditures and deferred charges rise during fiscal
2006 compared to fiscal 2005 will stem mainly from a $18.7 million increase in
digital telephony (compared to an amount of $5.3 million in fiscal 2005) and
from a $4.5 million increase (excluding telephony expenditures) in support
capital mainly for improvements in information systems. These increases should
be partially offset by a $10.4 million decline in expenditures as a large
amount of digital terminals were purchased late in fiscal 2005. Free Cash Flow
should decrease by approximately $15 million as a result of lower forecasted
operating income before amortization and higher capital expenditures and
deferred charges. Consequently, financial expenses should be slightly higher
than expected, resulting in projected net income of about $39 million.

Cogeco Cable remains committed to its basic expansion strategy of organic
growth combined with appropriate acquisition opportunities, in or outside of
Canada, provided that they bring a significant number of customers at a fair
price to increase the Corporation's growth and value.

RISK FACTORS AND UNCERTAINTIES

The following risk factors and uncertainties facing Cogeco Cable serve as
an update to the ones described in the Corporation's 2004 annual report as
well as those of the second and third quarters of fiscal 2005.

Risks pertaining to markets and to competition

Combined offers of services delivered to the home and mobile services are
becoming increasingly common across the entire broadband telecommunications
market. Some mobile telephone services already carry audio and video content
in addition to Internet, email and telephone communications. Adding mobility
to the services provided by the Corporation constitutes an important challenge
in the medium term. The Corporation is also evaluating a number of solutions
that might enable it to combine fixed and mobile telecommunications in one
service offering, but it has yet to make a decision on the matter.

Risks pertaining to technology

Growth in the penetration of HSI access of all types and the emergence of
new, more sophisticated algorithms for audiovisual content, such as MPEG-4,
will promote the increased distribution and consumption of movies and
television programs on demand through an Internet connection. This trend opens
up the possibility that the market for existing analog and digital audiovisual
programming distribution services may become fragmented, especially for
movies, special events and specialized or repertory programs. In the event of
a significant migration of the audiovisual content offering to an IP platform,
it may happen that the revenues and margins derived from HSI access services
will not entirely outweigh the loss of revenues or reduction of margins
derived from analog and digital video services.

Risks pertaining to regulation

Provincial consumer protection laws also have a major impact on the way
these activities are carried out. During the last fiscal year, the Corporation
was obliged to devote resources and review its sales and customer account
management processes in order to comply with the increased requirements of
regulations under the new Ontario law. Management believes that it has
implemented the information and verification measures required by the
regulations, but the new law nevertheless makes it easier for consumers to
take legal action, either individually or collectively.

As far as telephone services are concerned, the Corporation decided to
launch a new digital telephony service in the last fiscal year, despite
uncertainty surrounding the continuance of the regulatory framework governing
the local telephone services provided by incumbent telephone companies and its
application to their Voice over IP (VoIP) services. The Canadian Radio-
television and Telecommunications Commission (CRTC) has ruled that there are
grounds for applying the same regulatory framework to the incumbent telephone
companies' VoIP services until competition develops in the market. This ruling
is being challenged on two fronts: in the federal cabinet and in the Federal
Court of Appeal. Incidentally, the CRTC has initiated a proceeding to consider
whether it should forbear from regulating telephone services that are still
subject to regulatory control. The CRTC's decision on the criteria, conditions
and timetable for forbearance on these services will not become known until
later in the 2006 fiscal year.


Risks pertaining to information systems


The Corporation still uses different customer account management systems
in Ontario and in Québec. The agreement for the use of the existing customer
account management system in Ontario will expire in 2008. Therefore, the
Corporation must either negotiate a new agreement or find other solutions in
the medium term.

ADDITIONAL INFORMATION

This MD&A was prepared on October 21, 2005. 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 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 provides about 1,356,000 revenue-generating
units to approximately 1,449,000 households in its service territory. 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.
Cogeco Cable's subordinate voting shares are listed on the Toronto Stock
Exchange (CCA.SV).



Analyst Conference Call:

Monday October 24, 2005, at 11:00 a.m. EST
By Internet at www.cogeco.ca/investors
By telephone: 1-888-208-1812 (confirmation code 5732974)
Media are invited to participate in listen mode only.
Re-broadcast of the call available until October 31: 1 888 203-1112
(confirmation code 5732974)


Supplementary Quarterly Financial Information

Fiscal 2005
-------------------------------------------------
Quarters ended(1) Nov. 30 Feb. 28 May 31 Aug. 31
(in thousands of
dollars, except
percentages and
per share data)

Revenue 135,766 138,389 140,071 140,178
Operating income before
amortization 53,194 55,297 58,310 60,720
Operating margin 39.2% 40.0% 41.6% 43.3%
Amortization 32,244 31,988 31,396 29,460
Financial expense 13,894 13,840 13,954 14,004
Income taxes 3,229 3,856 4,715 6,220
Net income (loss) 3,827 5,613 8,245 11,036

Cash flow from operations 39,192 41,675 43,562 46,509

Net income (loss)
per share 0.10 0.14 0.21 0.28


Fiscal 2004
-------------------------------------------------
Quarters ended(1) Nov. 30 Feb. 29 May 31 Aug. 31
(in thousands of (restated) (restated)
dollars, except
percentages and
per share data)

Revenue 129,489 131,574 132,364 133,053
Operating income before
amortization 47,214 50,413 51,329 54,290
Operating margin 36.5% 38.3% 38.8% 40.8%
Amortization 43,313 32,355 32,070 32,476
Financial expense 14,905 14,767 14,414 13,871
Income taxes 30,099 2,703 2,993 1,474
Net income (loss) (41,103) 588 1,852 6,469

Cash flow from operations 31,882 35,278 36,593 41,025

Net income (loss)
per share (1.03) 0.01 0.05 0.16

(1) The addition of quarterly information may not correspond to the
annual total given rounding.


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 because students leave their campus 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 as a result during these
quarters.

The large net loss in the first quarter of fiscal 2004 was attributable
to non-cash adjustments for amortization and income taxes, totalling together
$41.6 million. These non-cash adjustments are discussed in the "Fixed Charges"
and "Income Taxes" sections.



COGECO CABLE INC.
Customer Statistics
August 31, August 31,
2005 2004
-------------------------------------------------------------------------
Homes Passed
Ontario 986,401 972,964
Québec 462,332 450,292
-------------------------------------------------------------------------
1,448,733 1,423,256
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Revenue Generating Units
Ontario 976,834 917,551
Québec 378,984 354,348
-------------------------------------------------------------------------
1,355,818 1,271,899
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Basic Service Customers
Ontario 581,631 584,686
Québec 239,802 239,169
-------------------------------------------------------------------------
821,433 823,855
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Discretionnary Service Customers
Ontario 461,038 463,217
Québec 183,320 178,022
-------------------------------------------------------------------------
644,358 641,239
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Pay TV Service Customers
Ontario 80,817 80,567
Québec 35,407 32,246
-------------------------------------------------------------------------
116,224 112,813
-------------------------------------------------------------------------
-------------------------------------------------------------------------

High Speed Internet Service Customers
Ontario 226,133 198,197
Québec 51,515 41,411
-------------------------------------------------------------------------
277,648 239,608
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Digital Customers
Ontario 167,819 134,668
Québec 87,470 73,768
-------------------------------------------------------------------------
255,289 208,436
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Digital Terminals
Ontario 209,662 161,731
Québec 94,222 78,340
-------------------------------------------------------------------------
303,884 240,071
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Digital Telephony
Ontario 1,251
Québec 197
-------------------------------------------------------------------------
1,448
-------------------------------------------------------------------------
-------------------------------------------------------------------------



COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF INCOME

Three months ended Twelve months ended
August 31 August 31
-------------------------------------------------------------------------
(In thousands of dollars,
except per share data) 2005 2004 2005 2004
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Revenue
Service $ 139,064 $ 131,253 $ 550,711 $ 518,401
Equipment 1,114 1,800 3,693 8,079
-------------------------------------------------------------------------
140,178 133,053 554,404 526,480

Operating costs 79,458 78,500 318,704 315,208
Management fees -
COGECO Inc. - 263 8,179 8,026
-------------------------------------------------------------------------

Operating income
before amortization 60,720 54,290 227,521 203,246
Amortization 29,460 32,476 125,088 140,214
-------------------------------------------------------------------------

Operating income 31,260 21,814 102,433 63,032
Financial expense 14,004 13,871 55,692 57,957
-------------------------------------------------------------------------

Income before
income taxes 17,256 7,943 46,741 5,075
Income taxes (note 3) 6,220 1,474 18,020 37,269
-------------------------------------------------------------------------

Net income (loss) $ 11,036 $ 6,469 $ 28,721 $ (32,194)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings (loss)
per share (note 6)
Basic $ 0.28 $ 0.16 $ 0.72 $ (0.81)
Diluted 0.27 0.16 0.72 (0.81)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

Twelve months ended
August 31,
-------------------------------------------------------------------------
(In thousands of dollars) 2005 2004
-------------------------------------------------------------------------
(audited) (audited)

Balance at beginning
As previously reported $ 33,880 $ 95,677
Changes in accounting policies (note 2d)) - (29,603)
-------------------------------------------------------------------------
As restated 33,880 66,074
Net income (loss) 28,721 (32,194)
Dividends on multiple voting shares (1,569) -
Dividends on subordinate voting shares (2,428) -
-------------------------------------------------------------------------
Balance at end $ 58,604 $ 33,880
-------------------------------------------------------------------------
-------------------------------------------------------------------------

COGECO CABLE INC.
CONSOLIDATED BALANCE SHEETS

-------------------------------------------------------------------------
(In thousands of dollars) August 31, August 31,
2005 2004
-------------------------------------------------------------------------
(audited) (audited)
Assets

Current
Cash and cash equivalents $ 61 $ -
Accounts receivable 26,485 31,039
Prepaid expenses 3,946 4,535
-------------------------------------------------------------------------
30,492 35,574
-------------------------------------------------------------------------

Fixed assets 697,526 687,960
Deferred charges 38,226 48,293
Customer base 989,552 989,552
-------------------------------------------------------------------------
$ 1,755,796 $ 1,761,379
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and Shareholders' equity

Liabilities

Current
Bank indebtedness $ - $ 5,410
Accounts payable and accrued liabilities 125,090 109,402
Income tax liabilities 678 844
Deferred and prepaid income 24,907 22,778
Current portion of long-term debt (note 4) 1,322 2,455
-------------------------------------------------------------------------
151,997 140,889
-------------------------------------------------------------------------

Long-term debt (note 4) 691,159 750,268
Deferred and prepaid income 10,522 9,659
Pension plans liabilities and accrued
employee benefits 1,903 1,506
Future income tax liabilities 210,731 195,523
-------------------------------------------------------------------------
1,066,312 1,097,845
-------------------------------------------------------------------------

Shareholders' equity

Capital stock (note 5) 630,220 629,416
Retained earnings 58,604 33,880
Contributed surplus - stock-based
compensation 660 238
-------------------------------------------------------------------------
689,484 663,534
-------------------------------------------------------------------------
$ 1,755,796 $ 1,761,379
-------------------------------------------------------------------------
-------------------------------------------------------------------------

COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF CASH FLOW

Three months ended Twelve months ended
August 31, August 31,
-------------------------------------------------------------------------
(In thousands of dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Cash flow from operating activities
Net income (loss) $ 11,036 $ 6,469 $ 28,721 $ (32,194)
Items not affecting
cash and cash
equivalents
Amortization 29,460 32,476 125,088 140,214
Amortization of
deferred financing
costs 241 235 958 1,223
Future income
taxes (note 3) 5,804 2,106 15,208 35,143
Other (32) (261) 963 392
-------------------------------------------------------------------------
Cash flow from
operations 46,509 41,025 170,938 144,778
Changes in non-cash
operating items
(note 7a)) 46,096 30,246 23,657 4,302
-------------------------------------------------------------------------
92,605 71,271 194,595 149,080
-------------------------------------------------------------------------

Cash flow from investing activities
Acquisition of
fixed assets
(note 7b)) (41,079) (28,358) (110,365) (78,639)
Increase in
deferred charges (4,816) (5,415) (13,382) (20,022)
Other - 59 44 59
-------------------------------------------------------------------------
(45,895) (33,714) (123,703) (98,602)
-------------------------------------------------------------------------

Cash flow from financing activities
Increase (decrease)
in bank indebtedness (16,812) (5,865) (5,410) 3,516
Repayment of
long-term debt (28,258) (31,707) (62,166) (54,395)
Issue of subordinate
voting shares 20 15 742 401
Dividends on multiple
voting shares (627) - (1,569) -
Dividends on subordinate
voting shares (972) - (2,428) -
-------------------------------------------------------------------------
(46,649) (37,557) (70,831) (50,478)
-------------------------------------------------------------------------

Net change in cash
and cash equivalents
and cash and cash
equivalents at end $ 61 $ - $ 61 $ -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See supplemental cash flow information in note 7.


COGECO CABLE INC.
Notes to Consolidated Financial Statements
August 31, 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 August 31,
2005 and 2004 as well as its results of operations and its cash flow for the
three and twelve month periods ended August 31, 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. These unaudited interim consolidated financial statements follow
the same accounting policies as the most recent annual consolidated financial
statements, except as noted below.

These interim consolidated financial statements have not been subject to
a review by the Corporation's external auditors.

2. Recent accounting pronouncements and changes in accounting policies

a) Asset retirement obligations

In March 2003, the Canadian Institute of Chartered Accountants ("CICA")
issued Handbook section 3110, Asset Retirement Obligations, which provides
guidance for the recognition, measurement and disclosure of liabilities for
asset retirement obligations and the associated asset retirement costs. The
standard applies to legal or contractual obligations associated with the
retirement of a tangible long-lived asset that result from acquisition,
construction, development or normal operations. The standard requires the
Corporation to record the fair value of a liability for an asset retirement
obligation in the year in which it is incurred and when a reasonable estimate
of fair value can be made. The standard describes the fair value of a
liability for an asset retirement obligation as the amount at which that
liability could be settled in a current transaction between willing parties,
that is, other than in a forced or liquidation transaction. The Corporation is
subsequently required to allocate that asset retirement cost to the expense
using a systematic and rational method over the asset's useful life. The
standard applies to fiscal years beginning on or after January 1, 2004.
Certain lease agreements contain provisions requiring the Corporation to
restore facilities or remove equipment in the event that the lease agreement
is not renewed. However, the Corporation expects to renew most of its lease
agreements related to the continued operation of its cable business and
consequently, any liabilities related to the removal provisions on non-renewed
leases, if any, are considered not significant to these consolidated financial
statements.

b) Variable Interest Entities

In June 2003, the CICA issued Accounting Guideline 15 ("AcG-15"),
Consolidation of Variable Interest Entities, which defines Variable Interest
Entities as entities that have insufficient equity or their equity investors
lack one or more specified essential characteristics of a controlling
financial interest. The standard provides guidance for determining when an
entity is a Variable Interest Entity and which entity, if anyone, should
consolidate the Variable Interest Entity. The Guideline applies to all annual
and interim periods beginning on or after November 1, 2004. During the second
quarter, the Corporation adopted this new accounting guideline and concluded
that it has no significant impact on these consolidated financial statements.

c) Amortization of long-term assets

During the first quarter of last fiscal year, the Corporation reviewed
the useful life of its decoders and modems, commonly referred to as home
terminal devices, and of certain other long-term assets. The useful life of
decoders was changed from seven to five years while the useful life of modems
was changed from seven to three years. These changes in accounting estimates,
applied prospectively, increased amortization expense by $14.0 million for the
twelve month period ended August 31, 2004.

d) Revenue recognition

On December 17, 2003, the Emerging Issues Committee issued EIC-141,
Revenue recognition, which provides general interpretative guidance on the
application of CICA 3400, Revenue, and summarizes the principles set forth in
"Staff Accounting Bulletin" No. 101 ("SAB 101") published in the United
States. In addition, EIC-141 also provides additional guidance on the
capitalization of direct incremental costs in connection with up-front
revenues. At the same time, the committee also issued EIC-142, Revenue
arrangements with multiple deliverables, which addresses how to determine when
an arrangement involving multiple deliverables contains more than one unit of
accounting and if so, how the arrangement consideration should be measured and
allocated among each separate unit of accounting.

During the third quarter of last fiscal year, the Corporation applied
these new recommendations and determined that it has multiple revenue
arrangements comprised of installation services, sales of home terminal
devices and related subscription services. Based on the criteria of EIC-142,
the Corporation determined that the sale of home terminal devices is
considered a single unit of accounting of a multiple element arrangement,
while installation and related subscription services must be assessed as an
integrated package. In addition, certain direct incremental costs in
connection with installation revenues may be deferred over the same term as
the related revenue. Accordingly, the following changes were adopted
retroactively:



- Installation revenues are now deferred and amortized over the average
life of a customer's subscription, which is four years. Previously,
these revenues were recognized immediately as they were considered as a
partial recovery of direct selling costs incurred. Upon billing, the
portion of unearned revenue is now recorded as deferred and prepaid
income;

- The costs to reconnect customers are now recorded as deferred charges
up to a maximum amount not exceeding the revenues generated by the
reconnect activity, which are included in installation revenues, and
amortized over the average life of a customer's subscription, which is
four years. Previously, these costs, which include materials, direct
labor and certain overhead charges were capitalized to fixed assets and
generally amortized over a period of five years;

- Revenue from the sale of home terminal devices at a subsidized price,
which were recorded as a partial recovery of costs, are now recorded as
equipment revenue with an equal amount included in operating costs;

- The portion of advertising expense incurred to expand the digital and
high-speed Internet customer base that used to be recorded as deferred
charges is now recorded as operating costs.


These changes, relating to revenue recognition, have been applied
retroactively and had the following impact on the Corporation's consolidated
statements of income for the three and twelve month periods ended August 31,
2004:



-------------------------------------------------------------------------
Three months ended Twelve months ended
August 31, 2004 August 31, 2004
-------------------------------------------------------------------------
Before After Before After
adoption adoption adoption adoption
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Revenue $ 132,348 $ 133,053 $ 519,753 $ 526,480
Operating costs 75,529 78,500 300,503 315,208
Amortization 31,506 32,476 136,072 140,214
Income taxes 3,313 1,474 43,831 37,269
Net Income (loss) 7,866 6,469 (26,636) (32,194)
-------------------------------------------------------------------------
Earnings (loss)
per share
Basic and diluted $ 0.20 $ 0.16 $ (0.67) $ (0.81)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Consequently, retained earnings have been reduced by $29.6 million as at
September 1, 2003 following these changes.

3. Income taxes

Three months ended Twelve months ended
August 31, August 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Current $ 416 $ (632) $ 2,812 $ 2,126

Future 5,804 2,106 15,208 35,143
-------------------------------------------------------------------------
$ 6,220 $ 1,474 $ 18,020 $ 37,269
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

Three months ended Twelve months ended
August 31, August 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Income tax at combined
income tax rate of
34.96 % (35.35 %
in 2004) $ 6,033 $ 2,807 $ 16,341 $ 1,794
Loss or income subject
to lower or higher
tax rates (204) (559) (218) 131
Increase in income
taxes as a result
of increases in
substantially
enacted tax rates - - - 32,483
Large corporation tax 165 925 1,482 3,700
Other 226 (1,699) 415 (839)
-------------------------------------------------------------------------
Income tax at
effective income
tax rate $ 6,220 $ 1,474 $ 18,020 $ 37,269
-------------------------------------------------------------------------
-------------------------------------------------------------------------

4. Long-term debt

-------------------------------------------------------------------------
Maturity Interest August 31, August 31,
rate 2005 2004
-------------------------------------------------------------------------
(audited) (audited)
Parent company
Term Facility 2007 - $ - $ 58,000
Senior Secured
Debentures
Series 1 2009 6.75% 150,000 150,000
Senior - Secured
Notes
Series A -
US $150 million 2008 6.83 (1) 178,065 196,950
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 - 60,585 41,700

Subsidiaries
Obligations under
capital leases 2010 5.87 - 8.36 3,831 3,153
Preferred shares (3) - - - 2,920
-------------------------------------------------------------------------
692,481 752,723
Less current portion 1,322 2,455
-------------------------------------------------------------------------
$ 691,159 $ 750,268
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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 August 31, 2005 and 2004 under cross-currency swaps
entered into by the Corporation to hedge Senior Secured Notes Series
A denominated in US dollars.
(3) 2,920,000 preferred shares in 2004, 5.5% cumulative dividend,
redeemed in the fourth quarter of 2005 for a cash consideration of
$3,004,000

5. 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.

-------------------------------------------------------------------------
August 31, August 31,
2005 2004
-------------------------------------------------------------------------
(audited) (audited)
Issued

15,691,100 multiple voting shares $ 98,346 $ 98,346
24,293,486 subordinate voting shares
(24,232,815 in 2004) 531,874 531,070
-------------------------------------------------------------------------
$ 630,220 $ 629,416
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

-------------------------------------------------------------------------
Twelve months ended Twelve months ended
August 31, 2005 August 31, 2004
-------------------------------------------------------------------------
(audited) (audited)
-------------------------------------------------------------------------
Number of Number of
shares Amount shares Amount
-------------------------------------------------------------------------

Balance at beginning 24,232,815 $ 531,070 24,190,043 $ 530,669
Shares issued for
cash under the
Employee Stock
Purchase Plan and
the Stock Option Plan 60,671 742 42,772 401
Compensation expense
previously recorded
in contributed surplus
for options exercised - 62 - -
-------------------------------------------------------------------------
Balance at end 24,293,486 $ 531,874 24,232,815 $ 531,070
-------------------------------------------------------------------------
-------------------------------------------------------------------------


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 year, the Corporation granted
140,766 stock options (164,980 in 2004) with an exercise price of $21.50
($15.70 to $18.12 in 2004) of which 38,397 stock options (48,037 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 $132,000 and $484,000 ($63,000 and $238,000 in 2004)
were recorded for the three and twelve month periods ended August 31, 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 (loss) and earnings (loss) per share for the
three and twelve month periods ended August 31, 2005 and 2004 would have been
reduced (increased) to the following pro forma amounts:



Three months ended Twelve months ended
August 31, August 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Net income (loss)
As reported $ 11,036 $ 6,469 $ 28,721 $ (32,194)
Pro forma 10,940 6,373 28,337 (32,578)

Basic earnings
(loss) per share
As reported $ 0.28 $ 0.16 $ 0.72 $ (0.81)
Pro forma 0.27 0.16 0.71 (0.82)

Diluted earnings
(loss) per share
As reported $ 0.27 $ 0.16 $ 0.72 $ (0.81)
Pro forma 0.27 0.16 0.71 (0.82)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


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



-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
Expected dividend yield 1.27% 1.27%
Expected volatility 43% 49%
Risk-free interest rate 3.70% 4.04%
Expected life in years 4.0 3.9
-------------------------------------------------------------------------


The fair value of stock options granted for the twelve month period ended
August 31, 2005 was $7.46 ($6.53 in 2004) per option.

As at August 31, 2005, the Corporation had outstanding stock options
providing for the subscription of 590,723 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 14, 2014.

6. Earnings (loss) per share

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



Three months ended Twelve months ended
August 31, August 31,
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2005 2004 2005 2004
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(unaudited) (unaudited) (audited) (audited)

Net income (loss) $ 11,036 $ 6,469 $ 28,721 $ (32,194)
Weighted average
number of multiple
voting and
subordinate
voting shares
outstanding 39,983,975 39,923,448 39,964,857 39,901,595
Effect of dilutive
stock options (1) 213,087 118,418 161,587 -
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Weighted average
number of diluted
multiple voting
and subordinate
voting shares
outstanding 40,197,062 40,041,866 40,126,444 39,901,595
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Earnings (loss)
per share
Basic $ 0.28 $ 0.16 $ 0.72 $ (0.81)
Diluted 0.27 0.16 0.72 (0.81)
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(1) For the three and twelve month periods ended August 31, 2005, 19,906
and 55,665 stock options (200,372 for three month period ended
August 31, 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. For the twelve month period ended August 31, 2004, the effect
of 279,079 stock options was not included in diluted loss per share,
as the effect of their inclusion was antidilutive.

7. Statements of cash flow

a) Changes in non-cash operating items

Three months ended Twelve months ended
August 31, August 31,
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2005 2004 2005 2004
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Accounts receivable $ 1,159 $ (221) $ 4,554 $ 2,761
Prepaid expenses (1,177) (2,699) 589 (1,602)
Accounts payable and
accrued liabilities 46,846 33,337 15,688 (174)
Income tax liabilities (501) (1,508) (166) 112
Deferred and
prepaid income (231) 1,337 2,992 3,205
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$ 46,096 $ 30,246 $ 23,657 $ 4,302
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b) Other information

Three months ended Twelve months ended
August 31, August 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Fixed assets
acquisitions
through capital
leases $ 364 $ 923 $ 1,924 $ 2,583
Interest paid 11,055 11,113 54,438 56,654
Income taxes paid 917 876 2,978 2,014
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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 Twelve months ended
August 31, August 31,
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2005 2004 2005 2004
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Defined contributory
benefit pension plans $ 205 $ 181 $ 657 $ 550
Defined contribution
pension plan and
collective registered
retirement savings
plan 307 283 1,239 1,247
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$ 512 $ 464 $ 1,896 $ 1,797
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Contact Information

  • COGECO CABLE INC.
    Marie Carrier
    Director, Corporate Communications
    514-874-2600

    Source:
    COGECO CABLE INC.
    Pierre Gagne,
    Vice-President, Finance and Chief Financial Officer
    514-874-2600