Cogeco Câble inc.
TSX : CCA

July 06, 2007 19:02 ET

Cogeco Cable's Third Quarter Financial Results Exceed Expectations; 2007 Guidance Revised Upward

MONTREAL, QUEBEC--(Marketwire - July 6, 2007) - Today, Cogeco Cable Inc. (TSX:CCA) announced its financial results for the third quarter ended May 31, 2007.

Results ahead of expectations

During the third quarter, Cogeco Cable continued to exceed its last financial projections. On a consolidated basis, revenue was up 56.3% reaching $240.6 million, operating income before amortization improved by 54.8%, standing at $97.9 million while net income stood at $20.4 million, an increase of 64.7%

"Our financial results exceed last April's guidance. Our Canadian and Portuguese subsidiaries are experiencing a steady progression, thanks to a continuous improved penetration of our Digital Telephony service in Canada and improved penetration of all services in Portugal. Our customers appreciate our offering tailored to their needs," said Mr. Louis Audet, President and CEO of Cogeco Cable.

Improved 2007 projections and preliminary guidelines for 2008

Management has revised upwards its projections for the fiscal year 2007 to better reflect the Corporation's improved performance for the first nine months of fiscal 2007. Therefore, consolidated revenue should reach $940 million, operating income before amortization $368 million and net income should stand at $68 million. "The outstanding features of our triple-play offer of Television, Internet and Telephony continues to receive strong consumer endorsement and is the source of continued growth in Canada and Portugal," said Mr. Louis Audet.

In addition, the Corporation announced its 2008 preliminary guidelines, setting revenue outlook to about $1,050 million, operating income before amortization to approximately $425 million and free cash flow(1) to approximately $60 million".

(1) See the "Non-GAAP financial measures" section for explanations.



FINANCIAL HIGHLIGHTS

Quarters ended May 31, Nine months ended May 31,
(unaudited) (unaudited)
($000s, except
percentages and
per share data) 2007 2006 % Change 2007 2006 % Change
------- ------- ------- ------- ------- -------

Revenue $240,612 $153,956 56.3 $694,566 $445,126 56.0

Operating
income before
amortization 97,874 63,244 54.8 268,327 180,114 49.0

Net income 20,381 12,371 64.7 48,323 31,569 53.1

Cash flow from
operations (1) 76,416 49,696 53.8 200,740 138,025 45.4
Less:
Capital
expenditures
and increase
in deferred
charges 57,817 38,009 52.1 185,044 111,167 66.5
------- ------- ------- -------
Free cash
flow (1) 18,599 11,687 59.1 15,696 26,858 (41.6)
Per share data
Basic net income $0.45 $0.31 45.2 $1.14 $0.79 44.3

(1) Cash flow from operations and free cash flow do not have standard
definitions prescribed by Canadian generally accepted accounting
principles (GAAP) and should be treated accordingly. For more details,
please consult the "Non-GAAP financial measures section".


FORWARD-LOOKING STATEMENT

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", "ensure" 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 "Uncertainties and main risk factors" of the Corporation's 2006 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 2006 Annual Report. Throughout this discussion, all amounts are in Canadian dollars unless otherwise indicated.

MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

CORPORATE STRATEGIES AND OBJECTIVES

Cogeco Cable's objectives are to improve profitability and create shareholder value. The strategies for reaching those objectives are constant corporate growth through the diversification and the improvement of products and services as well as clientele and territories; effective management of capital; and tight cost control and business processes. The Corporation measures its performance with regard to these objectives with revenue growth, RGU(1) growth and free cash flow(2). Below are the recent achievements in furtherance of Cogeco Cable's objectives.



Continuous improvement of the service offering and a larger customer base

Canadian operations
- Digital Television services:
- On March 26, 2007, signature of an agreement with Twentieth Century
Fox Film Corporation for the Video On Demand (VOD) offering;
- Addition of three High Definition (HD) channels to the HD offering
in Ontario, on March 27, 2007;
- On June 5, 2007, addition of six HD channels to the HD offering in
Quebec.
- Digital Telephony service:
- Available to 77% of homes passed in Cogeco Cable's territories, as
at May 31, 2007;
- Since February 28, 2007, deployment of the Digital Telephony service
in Trenton, Belleville, Cannifton, Amherstburg and Belle River in
Ontario, as well as Plessisville in Quebec.
- High Speed Internet services (HSI):
- On March 9, 2007, access to Wi-Fi connections for Cogeco Cable
Ontario customers in Burlington, Oakville and Hamilton.

Portuguese operations and its integration
- Cabovisao - Televisao por Cabo, S.A. (Cabovisao) is in the process of
completing its plan to launch its Digital Television service during
fiscal 2007.

Continuous improvement of networks and equipment

- During the first nine months of fiscal 2007, the Corporation has
invested approximately $74 million in its infrastructure including
head-ends and upgrade/rebuild.

Effective management of capital

- The Corporation redeemed the remaining $35.7 million of its $125
million 8.44% Second Secured Debentures due July 31, 2007.

Tight control over costs, business processes

- The first nine months of fiscal 2007 of the Canadian operating costs,
excluding management fees, increased by 19.1% essentially in line with
revenue growth of 18.1% during this period;

- The design of internal controls over financial reporting as per
National Instrument 52-109 is still underway. As discussed in the 2006
annual MD&A, the Corporation had identified certain material weaknesses
in the design of internal controls over financial reporting and there
have been no changes to most of the identified material weaknesses
since August 31, 2006, except for the implementation of the
Corporation's Code of Ethics at Cabovisao in Portugal. The
documentation and remediation of internal controls weaknesses are
progressing normally.

(1) See the "Customer statistics" section for detailed explanations.

(2) See the "Non-GAAP financial measures" section for explanations.


RGU growth

During the first nine months of fiscal 2007, the consolidated number of RGUs increased by 11.5% to reach almost 2.44 million units, en route towards the achievement of the Corporation's revised projections of 13% to 14% for this fiscal year.

Revenue growth

During the first nine months, revenue increased by $249.4 million to reach $694.6 million. For fiscal 2007, the appreciation of the Canadian dollar over the euro currency during the last quarter brought the Corporation to slightly revise its projections from $945 million to the $940 million. Please consult the "Fiscal 2007 financial guidelines" section for further details.

Free cash flow

In the third quarter of fiscal 2007, Cogeco Cable generated free cash flow of $18.6 million, compared to $11.7 million for the same period last year, as a result of an increase in operating income before amortization. For the nine month period ended May 31, 2007, the Corporation invested more in capital expenditures in order to sustain RGU growth and build inventory to sustain growth for the forthcoming period thus resulting in a free cash flow of $15.7 million compared to $26.9 million for the same period the year before. Capital expenditures and deferred charges amounted to $185 million for the nine month period ended May 31, 2007, of which $156.1 million was intended to support Canadian operations and the remainder was earmarked for the Portuguese operations. The revised free cash flow for fiscal 2007 should be approximately $20 million. Please consult the "Fiscal 2007 financial guidelines" section for further details.



OPERATING RESULTS - CONSOLIDATED OVERVIEW

Quarters ended May 31, Nine months ended May 31,
($000s, except
percentages) % %
2007 2006 Change 2007 2006 Change
------- ------- ------ ------- ------- ------

Revenue $240,612 $153,956 56.3 $694,566 $445,126 56.0

Operating costs 142,738 88,145 61.9 417,671 256,620 62.8

Management fees -
COGECO Inc. - 2,567 - 8,568 8,392 2.1

Operating income
before amortization 97,874 63,244 54.8 268,327 180,114 49.0

Operating margin 40.7% 41.1% 38.6% 40.5%


Revenue

In the third quarter of fiscal 2007, consolidated revenue grew by $86.7 million, or 56.3%, to reach $240.6 million and by $249.4 million, or 56% to reach $694.6 million for the first nine months of 2007. These increases are mainly due to strong RGU growth, to the consolidation of the financial results of the Portuguese operations acquired on August 1, 2006 and to rate increases. Canadian operations revenue, driven by an increased number of customers in basic, HSI, Digital Telephony and Digital Television services as well as rate increases, went up by $28.8 million, or 18.7% in the third quarter and by $80.5 million, or 18.1%, in the first nine months of fiscal 2007. The Portuguese operations revenue amounted to $57.8 million for the third quarter of fiscal 2007 and to $168.9 million for the first nine months of fiscal 2007.

Operating costs

For the third quarter and the first nine months of fiscal 2007, operating costs excluding management fees payable to COGECO Inc. increased by $54.6 million and $161.1 million to reach $142.7 million and $417.7 million respectively, an increase of 61.9% and 62.8% compared to last year. The increase in operating costs is mainly attributable to the inclusion of the operating costs of Cabovisao and to servicing additional RGUs, including the increased penetration of Digital Telephony service.

Operating income before amortization

For the third quarter and the first nine months of fiscal 2007, operating income before amortization increased by $34.6 million, or 54.8%, to reach $97.9 million and by $88.2 million, or 49% to reach $268.3 million, respectively, as a result of RGU growth, the consolidation of the Portuguese operations and rate increases outpacing increases in operating costs. Cogeco Cable's third quarter and first nine months' operating margins declined from 41.1% to 40.7% and from 40.5% to 38.6% respectively as a result of the Digital Telephony deployment in Canada and the consolidation of the Portuguese operations' lower operating margin. Considering the improved performance of the Corporation during the first nine months of fiscal 2007, management has revised upwards its projections for the fiscal year 2007. Therefore, operating income before amortization should increase to $368 million. Please consult the "Fiscal 2007 financial guidelines" section for further details.

RELATED PARTY TRANSACTIONS

Cogeco Cable is a subsidiary of COGECO Inc., which holds 34.6% of the Corporation's equity shares, representing 84.1% of the Corporation's voting shares. Under a management agreement, the Corporation pays COGECO Inc. monthly management fees equal to 2% of its total revenue for certain executive, administrative, legal, regulatory, strategic and financial planning, and additional services. In 1997, management fees were capped at $7 million per year, subject to annual upward adjustments based on increases in the Consumer Price Index in Canada. Accordingly, for fiscal 2007, management fees have been set at a maximum of $8.6 million, which has been reached in the second quarter, and therefore, no management fees were paid in this fiscal third quarter. For fiscal 2006, management fees were set a maximum of $8.4 million fully paid during the first nine month period and from which $2.6 million were paid in the third quarter. Furthermore, Cogeco Cable granted 319,647 stock options to COGECO Inc.'s employees during the first nine months of fiscal 2007, compared to 31,743 for the same period last year. Of these 319,647 stock options, 262,400 are conditional on the achievement of certain yearly financial objectives by the Portuguese subsidiary, Cabovisao, over a period of three years. Details regarding the management agreement and stock options granted to COGECO Inc.'s employees are provided in the MD&A of the Corporation's 2006 annual report. There were no other material related party transactions during the three and nine month periods ended May 31, 2007 and 2006.



FIXED CHARGES

Quarters ended May 31, Nine months ended May 31,

($000s, except
percentages) 2007 2006 % Change 2007 2006 % Change
------ ------ ------- ------- ------ -------

Amortization $47,278 $29,048 62.8 $135,159 $85,981 57.2

Financial expense 21,273 13,634 56.0 66,045 40,992 61.1


For the third quarter and first nine months of fiscal 2007, amortization amounted to $47.3 million and $135.2 million respectively, compared to $29 million and $86 million for the same periods last year. The increase in amortization expense for both periods of fiscal 2007 compared to fiscal 2006 is due to the consolidation of the financial results of the Portuguese operations and to the increased capital expenditures arising from customer growth resulting in higher demand for customer premise equipment, scalable infrastructure, upgrade/rebuild, support capital and deferred charges for the Canadian operations.

During the third quarter and first nine months of fiscal 2007, financial expense increased by $7.6 million and $25.1 million respectively, compared to the same periods in fiscal 2006. This is due to the higher level of Indebtedness (defined as bank indebtedness and long-term debt) required to finance the acquisition of the Portuguese subsidiary, Cabovisao and to a non-recurring charge of $2 million during the quarter in connection with its financing.

INCOME TAXES

For the third quarter of fiscal 2007, income taxes amounted to $8.9 million compared to $8.2 million in fiscal 2006. The increase is mainly due to higher operating income before amortization net of fixed charges. For the first nine months of fiscal 2007, income taxes amounted to $18.8 million compared to $21.6 million for the same period last year. The decrease in income taxes for fiscal 2007 is mainly due to the Canadian operations and is attributable to the elimination of Canadian federal capital tax on January 1, 2006 and to the recognition in the second quarter of benefits related to prior years' minimum income tax paid, partly offset by an increase in operating income before amortization surpassing the increase in fixed charges.

NET INCOME

Net income for the third quarter amounted to $20.4 million, or $0.45 per share, compared to $12.4 million, or $0.31 per share, for the same period last year. For the nine month period of fiscal 2007, net income amounted to $48.3 million, or $1.14 per share compared to $31.6 million or $0.79 per share for the same period in fiscal 2006. Net income increases in these periods were attributable to the growth in operating income before amortization partly outpacing the fixed charges increases.



CASH FLOW AND LIQUIDITY

Quarters ended Nine months ended
May 31, May 31,
($000s) 2007 2006 2007 2006
------- ------- -------- --------

Operating Activities
Cash flow from operations $76,416 $49,696 $200,740 $138,025
Changes in non-cash
operating items (23,029) (4,132) (101,545) (49,444)
------- ------- -------- --------
$53,387 $45,564 $99,195 $88,581
------- ------- -------- --------
------- ------- -------- --------

Investing Activities (1) $(53,548) $(16,458) $(179,801) $(108,499)
------- ------- -------- --------
------- ------- -------- --------

Financing Activities (1) $(14,920) $(29,106) $30,260 $19,857
------- ------- -------- --------
------- ------- -------- --------

Net change in cash and
cash equivalents $(15,081) $- $(50,346) $(61)
Effect of exchange rate
changes on cash and cash
equivalents denominated
in foreign currencies (1,774) - 1,486 -
Cash and cash equivalents
at beginning 39,511 - 71,516 61
Cash and cash equivalents
at end $22,656 $- $22,656 $-

(1) Excludes assets acquired under capital leases.


During the third quarter of fiscal 2007, cash flow from operations reached $76.4 million, 53.8% higher than for the comparable period last year, primarily due to the increase in operating income before amortization partly offset by the increase in financial expense. Changes in non-cash operating items generated greater cash outflows than for the same period last year, mainly as a result of a decrease in accounts payables and accrued liabilities from non recurring payments made by the Portuguese subsidiary in accordance with the terms of the acquisition. This decrease was partly offset by decreases in accounts and income tax receivables.

During the first nine months of fiscal year 2007, cash flow from operations reached $200.7 million, an increase of 45.4% compared to the same period the year before, primarily due to the growth in operating income before amortization partly offset by the increase in financial expense. Changes in non-cash operating items generated greater cash outflows than for the same period last year, mainly as a result of a decrease in accounts payable and accrued liabilities from non recurring payments made by the Portuguese subsidiary in accordance with the terms of the acquisition.

On March 9, 2007, the Corporation and Cable Satisfaction International Inc. came to an agreement for a final adjustment of the working capital which was still outstanding since the date of acquisition, and consequently, an amount of $3.3 million was received by the Corporation during the third quarter of fiscal 2007.

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



Quarters ended Nine months ended
May 31, May 31,
($000s) 2007 2006 2007 2006
------ ------ ------ ------
Customer Premise
Equipment (1) $18,985 $13,824 $76,188 $43,430
Scalable Infrastructure 10,940 4,488 31,700 15,103
Line Extensions 2,598 2,606 7,798 7,449
Upgrade / Rebuild 13,936 11,882 41,967 28,488
Support Capital 5,358 980 8,133 5,019
------ ------ ------ ------
Total Capital
Expenditures (2) $51,817 $33,780 $165,786 $99,489
------ ------ ------ ------
Deferred charges and others 5,571 4,199 18,790 11,640
------ ------ ------ ------
Adjustments related to
business acquisition (3,279) - (1,894) -
------ ------ ------ ------
Decrease in restricted cash - (20,322) (88) -
------ ------ ------ ------
Total investing activities $54,109 $17,657 $182,594 $111,129
------ ------ ------ ------

(1) Includes mainly new and replacement drops as well as home terminal
devices.
(2) Includes capital leases, which are excluded from the statements of cash
flow.


Capital expenditures increased during the quarter and first nine months of fiscal 2007 compared to last year mainly as a result of the following factors:

- The capital expenditures from the Portuguese operations amounted to $8.6 million and $29 million for the third quarter and first nine months of fiscal 2007, respectively, essentially to support RGU growth.

- The increase in customer premise equipment expenditures resulted from a greater demand for HSI and Digital Telephony services, from a rise in the number of HD terminals and from a greater ratio of digital terminals per digital home. Furthermore, customer premise equipment amounting to approximately $8 million was acquired by the Corporation during the first nine months to serve expected RGU growth.

- The growth in capital expenditures for scalable infrastructure was mainly attributable to the support of the Digital Telephony roll-out for the Canadian operations.

- The increase in capital expenditures associated with the network upgrade and rebuild program for the Canadian operations was due to the acceleration of the program to expand the bandwidth to 750 MHz and 550 MHz for the Ontario and Quebec networks, respectively, and to improve network reliability. An increase in the number of households with access to two-way service was also a factor and the percentage of customers with access to two-way service rose from 92% as at May 31, 2006 to 93% as at May 31, 2007.

The third quarter and first nine months of fiscal 2007 increases in deferred charges are explained by higher reconnect costs attributable to the significant level of RGU growth.

In the third quarter of fiscal 2007, the Corporation generated free cash flow in the amount of $18.6 million compared to $11.7 million the preceding year. For the first nine months of fiscal 2007, the Corporation generated free cash flow in the amount of $15.7 million compared to $26.9 million for the same period the year before. The third quarter free cash flow increase over the same period last year is due to growth in operating income before amortization, partly offset by higher level of capital expenditures and deferred charges to serve RGU growth and to support Digital Telephony service roll-out and by the increase in financial expense. The first nine months of fiscal 2007, free cash flow decrease compared to the same period in 2006 is due to several factors: a higher level of capital expenditures (including the acquisition of customer premise equipment amounting to approximately $8 million to serve expected RGU growth), deferred charges generated by RGU growth and to support the Digital Telephony service roll-out, and by the increase in financial expense. These factors were partly offset by the growth in operating income before amortization.

During the third quarter of fiscal 2007, the level of Indebtedness decreased by $13.6 million. The decrease in the level of Indebtedness is due to the generated free cash flow of $18.6 million and the net change of $16.9 million in cash and cash equivalents partly offset by a decline of $23 million in non-cash operating items. For the same period last year, Indebtedness decreased by $27.5 million mainly due to free cash flow of $11.7 million and a net decrease in restricted cash of $20.3 million partly offset by a decline in non-cash operating items of $4.1 million. In addition, a dividend of $0.06 per share for subordinate and multiple voting shares, totalling $2.7 million, was paid during the third quarter of fiscal 2007 compared to a dividend of $0.04 per share or $1.6 million for the third quarter of fiscal 2006.

During the first nine month period of fiscal 2007, the level of Indebtedness decreased by $153.1 million. The decrease in the level of Indebtedness is due to the completion of a public offering of 5,000,000 subordinate voting shares for a net proceeds of approximately $184.2 million, the generated free cash flow of $15.7 million and the net change of $48.9 million in cash and cash equivalents, partly offset by a decline of $101.5 million in non-cash operating items. For the same period last year, Indebtedness grew by $24.5 million mainly due to a decline in non-cash operating items of $49.4 million partly offset by generated free cash flow of $26.9 million. In addition, dividends totalling $6.7 million were paid during the first nine months of fiscal 2007 compared to $4.8 million for the same period the year before.

As at May 31, 2007, the working capital deficiency was reduced by an amount of $175 million compared to August 31, 2006, mainly as a result of the $184.2 million net proceeds of the share issuance being used to reimburse the Senior Secured debentures Series A and to the repayment of certain suppliers subsequent to the Cabovisao acquisition. Cogeco Cable maintains a working capital deficiency due to a low level of accounts receivable since the majority of the Corporation's customers pay before their services are rendered, contrary to accounts payable and accrued liabilities, which are paid after products or services are rendered. In addition, the Corporation generally uses cash and cash equivalents to reduce Indebtedness.

As at May 31, 2007, the Corporation had used $606 million of its $900 million Term Facility.

FINANCIAL POSITION

Since August 31, 2006, there have been major changes to "Fixed Assets", "Preliminary Goodwill", "Accounts Payable and accrued liabilities", "Accounts receivable", "Indebtedness", "Cash and cash equivalents", "Capital Stock", "Foreign currency translation adjustment" and "Future income tax liabilities".

The $51.6 million rise in fixed assets is mainly related to increased capital expenditures to sustain RGU growth during the first nine months as well as anticipated growth in the coming months. The increase of $1 million in preliminary goodwill is mainly the result of the appreciation of the euro currency over the Canadian dollar partly offset by adjustments of $6.2 million to the purchase price following the resolution of the working capital adjustments and the reevaluation of costs related to the acquisition of Cabovisao. The $4.4 million increase in accounts receivable is essentially due to an increase in the general level of receivables in line with the revenue growth and to the euro currency appreciation over the Canadian dollar. The $95.7 million and $48.9 million reductions in accounts payable and accrued liabilities and cash and cash equivalents respectively, are related to payments made with regards to the acquisition of Cabovisao. The $1.2 million increase in foreign currency translation adjustment is the result of the appreciation of the euro currency over the Canadian dollar.

The $9.3 million increase in Future income tax liabilities is mainly due to the utilization of income tax losses. Indebtedness decreased by $141.2 million as a result of the factors previously discussed in the "Cash Flow and Liquidity" section. Finally, capital stock increased by $199.2 million mostly due to the completion of a public offering of 5,000,000 subordinate voting shares for gross proceeds of $192.5 million.

A description of Cogeco Cable's share data as of June 30, 2007 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 29,621,029 731,344

Options to Purchase Subordinate Voting Shares
Outstanding options 985,272
Exercisable options 286,551


The number of outstanding options has increased significantly during the first nine months of fiscal 2007. With regards to the acquisition of Cabovisao, the Corporation granted 376,000 conditional stock options with an exercise price of $26.63. These options vest over a period of three years beginning one year after the day such options are granted and are exercisable over ten years. The vesting of these options is conditional to the achievement of certain yearly financial objectives by the Portuguese subsidiary over a period of three years.

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, discussed in the 2006 annual MD&A, have not materially changed since August 31, 2006 except for the repayment of the $125 million Second Secured Debentures Series A and the partial repayment of approximately $26.4 million of the $900 million Term Facility discussed in the "Cash Flow and Liquidity" section. Furthermore, during the second quarter of fiscal 2007, the Corporation has guaranteed the payment by Cabovisao of certain taxes for municipal rights of way assessed by the Municipality of Seixal in Portugal for the years 2004 and 2005 totalling EUR 5.7 million (the "Tax Amounts"), which are currently being challenged by Cabovisao. Trustworthy financial guarantees were required under applicable Portuguese law in order for Cabovisao to challenge the Tax Amounts and withhold payment thereof until a final judgment, no longer subject to appeal, is rendered by the Portuguese courts having jurisdiction in this matter. As a result, the Corporation may be required to pay, upon written demand by the Municipality of Seixal, the required amounts following final judgment up to a maximum aggregate amount of EUR 5.7 million, should Cabovisao fail to pay such required amounts.

DIVIDEND DECLARATION

At its July 6, 2007 meeting, the Board of Directors of Cogeco Cable declared a quarterly eligible dividend of $0.08 per share for subordinate and multiple voting shares, payable on August 3, 2007, to shareholders of record on July 20, 2007. Continued improvement of the Corporation's financial results explains the 33% increase of the dividend from $0.06 to $0.08 per share.

FOREIGN EXCHANGE MANAGEMENT

Cogeco Cable has entered into cross-currency swap agreements to set 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$5.4 million at the end of the third quarter compared to August 31, 2006 due to the Canadian dollar's appreciation. Since the Senior Secured Notes Series A are fully hedged, the fluctuation is offset by a variation in deferred credit described in Note 7 of the third quarter 2007 interim financial statements. The CDN$78.2 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.

As noted in the MD&A of the 2006 annual report, the Corporation's investment in the Portuguese subsidiary, Cabovisao, is exposed to market risk attributable to fluctuations in foreign currency exchange rate, primarily changes in the values of the Canadian dollar versus the euro. This risk is mitigated since the major part of the purchase price for Cabovisao was borrowed directly in euros. This debt is designated as a hedge of net investments in self-sustaining foreign subsidiaries and accordingly the Corporation realized a foreign exchange gain of CDN$1.2 million in the first nine months of fiscal 2007 which is deferred and recorded in the foreign currency translation adjustment. The exchange rate used to convert the euro currency into Canadian dollar for the balance sheet accounts as at May 31, 2007 was $1.4392 per euro compared to $1.4156 per euro as at August 31, 2006. The average exchange rate prevailing during the third quarter and the first nine months of fiscal 2007 used to convert the operating results of the Portuguese operations were $1.5202 per euro and $1.4946 per euro, respectively.



CANADIAN OPERATIONS

CUSTOMER STATISTICS

% of
Net additions (losses) Penetra-
Quarters ended Nine months ended tion(1)(4)
May 31, May 31, May 31,
-------------- ---------------- ----------
May 31,
2007 2007 2006 2007 2006 2007 2006
--------- ------ ------ ------- ------- ---- ----
RGUs(2) 1,748,852 35,768 48,081 192,916 163,960

Basic service
customers 851,784 (2,910) (3,349) 18,607 11,059
HSI service
customers(3) 403,473 11,030 12,378 60,393 52,831 50.7 43.1
Digital Television
service customers 371,132 8,583 23,635 43,768 69,597 44.5 38.8
Digital Telephony
service customers 122,463 19,065 15,417 70,148 30,473 18.5 7.6

(1) As a percentage of basic service customers in areas served.
(2) Represent the sum of basic service, HSI service, Digital Television
service and Digital Telephony service customers.
(3) Customers subscribing only to HSI or Digital Telephony services
totalled 66,072 as at May 31, 2007 compared to 60,786 as at May 31,
2006.
(4) An audit of homes passed in Ontario was completed during the first
quarter of fiscal 2007 and, as a result, the number of homes passed was
reduced by 42,386.


RGUs generated lower growth in the third quarter of 2007 compared to the same period last year mainly due to slower growth of Digital Television service. During the third quarter, Digital Telephony customers grew by 19,065 to reach 122,463 compared to a growth of 15,417 for the same period last year. This growth is mostly attributable to the launch of the service in new markets and increased penetration in areas where the service is offered. Coverage of homes passed has now reached 77% compared to 50% last year. The net losses of basic service customers in the third quarter reached 2,910, compared to 3,349 for the same period last year, mainly due to students leaving campuses at the end of the school year. The number of net additions to HSI service stood at 11,030 compared to 12,378 for the same period last year. The growth in HSI customers during the quarter and the reduction of net losses for basic service customers compared to the same period last year is mostly due to the enhancement of the product offering, the impact of the bundled offer of Television, HSI and Digital Telephony services (Cogeco Complete Connection), and promotional activities.

The net additions of Digital Television service customers stood at 8,583 compared to 23,635 for the same period last year. The decrease in net additions this quarter compared to the same quarter last year reflects a maturing of the digital TV segment following a period of robust growth, especially in the second and third quarters of fiscal 2006. Nevertheless, customers continue to demonstrate strong interest in HD technology. Furthermore, the Corporation adjusted the service offering and price gap differential between analogue TV services and Digital Television services in the second half of fiscal 2006 which has also contributed to a moderation of the strong growth experienced in the first nine months of fiscal 2006.



OPERATING RESULTS

Quarters ended May 31, Nine months ended May 31,
($000s, except
percentages)
% %
2007 2006 Change 2007 2006 Change
-------- -------- ----- -------- -------- -----

Revenue $182,763 $153,956 18.7 $525,620 $445,126 18.1

Operating costs 103,778 88,145 17.7 305,733 256,620 19.1

Management fees -
COGECO Inc. - 2,567 - 8,568 8,392 2.1

Operating income
before amortization 78,985 63,244 24.9 211,319 180,114 17.3

Operating margin 43.2% 41.1% 40.2% 40.5%


Revenue

For the third quarter and the first nine months, revenue rose by $28.8 million and $80.5 million to reach $182.8 million and $525.6 million respectively, an increase of 18.7 % and 18.1% compared to fiscal 2006. This growth is explained mainly by an increase in the number of HSI, Digital Telephony and Digital Television service customers as mentioned in the "Customer Statistics" section, together with rate increases implemented in June and August of 2006 as well as in March and April of 2007. Monthly rate increases of at most $3 per customer and averaging $2 per basic service customer took effect on June 15, 2006 in Ontario and on August 1, 2006 in Quebec. During fiscal 2007, monthly rate increases of $3 per Digital Television customer were effective in March 2007 in Ontario and in April 2007 in Quebec. In Ontario Analogue Value Pak rate was also increased by $1.50 per customer effective in April 2007. The rate increases implemented in fiscal 2007 represent approximately an average of $1.25 per basic service customer.

Operating costs

For the third quarter and the first nine months, operating costs, excluding management fees payable to COGECO Inc., increased by $15.6 million and $49.1 million to reach $103.8 million and $305.7 million respectively, an increase of 17.7% and 19.1% compared to last year. The increase in operating costs is mainly attributable to the increased penetration of Digital Telephony service and to servicing additional RGUs.

Operating income before amortization

For the third quarter and the first nine months of fiscal 2007, operating income before amortization rose from $63.2 million to $79 million and from $180.1 million to $211.3 million respectively, representing increases of 24.9% and 17.3%, compared to the same periods last year. The rise in operating income before amortization is the result of increased revenue outpacing the rise in operating costs. In addition, Cogeco Cable's operating margin for the Canadian operations increased from 41.1% to 43.2% in the third quarter of fiscal 2007 due to new rate increases implemented during the quarter and to management fees that were fully paid at the end of the second quarter of fiscal 2007. For the first nine months of fiscal 2007, operating margin slightly decreased from 40.5% to 40.2% mainly as a result of the deployment of the Digital Telephony service.



PORTUGUESE OPERATIONS

CUSTOMER STATISTICS

% of
Net additions Penetra-
Quarter ended Nine months ended tion(1)
May 31, May 31, May 31,
May 31, 2007 2007 2007 2007
------------ ------- ------- ------
RGUs(2) 687,237 16,666 58,196
Basic service
customers 289,247 5,694 19,553
HSI service
customers 157,087 5,424 20,809 54.3
Telephony service
customers 240,903 5,548 17,834 83.3

(1) As a percentage of basic service customers in areas served.
(2) Represent the sum of basic service, HSI service and Telephony service
customers.


For the third quarter, all services generated customer growth as anticipated from the Corporation's guidelines. Basic service grew by 5,694 customers, HSI by 5,424 customers and Telephony by 5,548 customers.



OPERATING RESULTS

Quarter ended Nine months ended
May 31, May 31,
($000s, except percentages)
2007 2007
------- -------

Revenue $57,849 $168,946

Operating costs 38,960 111,938

Operating income before amortization 18,889 57,008

Operating margin 32.7% 33.7%


Revenue

Revenue for the third quarter and the first nine months of fiscal 2007 amounted to $57.8 million and $168.9 million respectively. The average exchange rate prevailing during the third quarter of fiscal 2007 used to convert the operating results of the foreign subsidiaries was $1.5202 per euro and $1.4946 per euro for the first nine month period compared to $1.50 per euro as per management's revised projections last April. Monthly rate increases of at most $3 (EUR 2) per HSI and Telephony customer, averaging $1 per basic customer, took effect on November 1, 2006 and of $1 (EUR 0.65) per basic service customer was effective in March 2007.

Operating costs

For the third quarter and the first nine months, operating costs amounted to $39 million and to $111.9 million, which meet management's guidelines.

Operating income before amortization

For the third quarter and the first nine months of fiscal 2007, operating income before amortization stood at $18.9 million and $57 million respectively, which meet management's objectives. The operating margin for the Portuguese operations stood at 32.7% in the third quarter of fiscal 2007 and at 33.7% for the first nine month period of fiscal 2007.

FISCAL 2007 AND FISCAL 2008 FINANCIAL GUIDELINES

Fiscal 2007 financial guidelines

Given the performance of the Corporation during the first nine months of fiscal 2007, management has revised its guidelines for fiscal year 2007.

Subsequent to these adjustments, projected revenue is reduced while operating income before amortization and net income were revised upward. Operating margin should essentially remain the same. Revenue is reduced to reflect the improvement of the Canadian dollar compared to the euro currency and as a result, for guideline purposes, the euro is converted at an average rate of $1.4250 per euro while the Corporation was using an average rate of $1.50 per euro last April. The operating income before amortization increases due to the reduction in operating costs.

The Corporation should generate free cash flow of $20 million and projected net income should stand at about $68 million due to operating income before amortization improvement and reduction in the expected amortization expense from $192 million to $185 million.

In furtherance of its existing line of business and external growth strategy, the Corporation may investigate further cable system acquisition opportunities, including cable systems located outside Canada over time.



Consolidated

Revised Revised
($ million, except Projections Projections
customer data) July 6, 2007 April 11, 2007
Fiscal 2007 Fiscal 2007
------------ -------------

Financial Guidelines
Revenue 940 945
Operating income before amortization 368 365
Operating margin About 39% About 39%
Financial expense 85 85
Amortization 185 192
Net income 68 60
Capital expenditures and deferred charges 260 260
Free cash flow 20 15

Customer Addition Guidelines
Basic service 39,000 37,000 to 40,000
HSI service 93,000 85,000 to 90,000
Digital Television service 52,000 60,000 to 65,000
Telephony service 113,000 105,000 to 110,000
RGUs 297,000 287,000 to 305,000

Canadian operations

Revised Revised
($ million, except Projections Projections
customer data) July 6,2007 April 11, 2007
Fiscal 2007 Fiscal 2007
------------ -------------

Financial Guidelines
Revenue 715 713
Operating income before amortization 292 286
Operating margin About 41% About 40%
Capital expenditures and deferred charges 215 215

Customer Addition Guidelines
Basic service 14,000 12,000 to 15,000
HSI service 68,000 60,000 to 65,000
Digital Television service 52,000 60,000 to 65,000
Telephony service 88,000 80,000 to 85,000
RGUs 222,000 212,000 to 230,000

Portuguese operations

(euro and $ million,
except customer data)

Revised Revised Revised Revised
Projections Projections Projections Projections
July 6, 2007 July 6, 2007 April 11, 2007 April 11, 2007
Fiscal 2007 Fiscal 2007 Fiscal 2007 Fiscal 2007
(EUR) (Canadian $) (EUR) (Canadian $)
----------- ----------- ------------ -----------

Financial Guidelines
Revenue 152 225 155 232
Operating income
before amortization 52 76 53 79
Operating margin About 34% About 34% About 34% About 34%
Capital expenditures
and deferred charges 30 45 30 45

Customer Addition
Guidelines
Basic service 25,000 25,000
HSI service 25,000 25,000
Telephony service 25,000 25,000
RGUs 75,000 75,000


The exchange rate used for July 2007 projections is $1.4250 per euro for the last quarter of fiscal 2007 compared to $1.50 per euro for the April 2007 projections.

Fiscal 2008 preliminary outlook

For fiscal 2008, Cogeco Cable expects strong revenue and operating income before amortization growth. The revenue increase of approximately 12% should come from the combined Canadian and Portuguese operations. The Canadian operations revenue should increase by approximately 13% from continued deployment of Digital Telephony service, by expanded penetration of HSI service in fiscal 2007 and 2008, as well as Digital Television services. In addition, rate increases implemented in March 2007 in Ontario and in April 2007 in Quebec, of at most $3 per customer and averaging $1 per basic service customer for both divisions and by $1.50 per Ontario Analogue Value Pak customer implemented in April 2007. Cogeco Cable plans to expand its Canadian basic service clientele through consistently effective marketing, competitive product offering and superior customer service. As the penetration of HSI and Digital Television services increase, the demand for these products should slow down but should be offset by increased demand for Digital Telephony service. Revenue from the Portuguese operations should increase by approximately 11% from EUR 152 million to EUR 168 million mainly from rate increases of approximately EUR 0.65 (CDN$1) per basic service customer implemented in March 2007, by additional rate increases during fiscal 2008, by sustained RGU growth from fiscal 2007 and 2008 and from the launch of Digital Television service in late Fiscal 2007. However, the Portuguese operations should contribute to approximately 7% in revenue growth due to the effect of foreign exchange translation. For fiscal 2007, the expected Canadian dollar value of the euro should be approximately $1.48 while for fiscal 2008, the euro should be converted at a rate of $1.4250.

Growth in revenue and sustained cost control should help achieve a significant increase in operating income before amortization by approximately 15%. Cogeco Cable expects to achieve an operating margin of approximately 40% to 41%.

Cogeco Cable expects the amortization of capital assets and deferred charges to increase by $30 million, mainly due to capital expenditures and deferred charges for RGU additions in fiscal 2007 and 2008. Management expects that cash flows generated by operations will finance capital expenditures and deferred charges, expected to amount to $260 million, essentially the same as for fiscal 2007. The Corporation expects to generate free cash flow in the order of $60 million, an increase of approximately $40 million compared to fiscal 2007 projections. Generated free cash flow should be used primarily to reduce Indebtedness, thus improving the Corporation's leverage ratios. Given the anticipated decrease in Indebtedness, financial expense will slightly decline. Net income of approximately $90 million should be achieved as a result of growth in operating income before amortization exceeding the increase in fixed charges.



Consolidated

Preliminary
($ million, except customer data) Projections
Fiscal 2008
-----------
Financial Guidelines
Revenue 1,050
Operating income before amortization 425
Operating margin 40% to 41%
Financial expense 80
Amortization 215
Net income 90
Capital expenditures and deferred charges 260
Free cash flow 60

Customer Addition Guidelines
Basic service 30,000
HSI service 75,000
Digital Television service 54,000
Telephony service 100,000
RGUs 259,000

Canadian operations

Preliminary
($ million, except customer data) Projections
Fiscal 2008
-----------
Financial Guidelines
Revenue 810
Operating income before amortization 338
Operating margin About 41%
Capital expenditures and deferred charges 215

Customer Addition Guidelines
Basic service 10,000
HSI service 55,000
Digital Television service 45,000
Telephony service 80,000
RGUs 190,000

Portuguese operations
Preliminary Preliminary
(euro and $ million, except customer data) Projections Projections
Fiscal 2008 Fiscal 2008
(EUR) (Canadian $)
----------- -----------
Financial Guidelines
Revenue 168 240
Operating income before amortization 61 87
Operating margin About 36% About 36%
Capital expenditures and deferred charges 32 45

Customer Addition Guidelines
Basic service 20,000
HSI service 20,000
Digital Television service 9,000
Telephony service 20,000
RGUs 69,000


The exchange rate used for Fiscal 2008 preliminary projections is $1.4250 per euro.

UNCERTAINTIES AND MAIN RISK FACTORS

There has been no significant change in the risk factors and uncertainties facing Cogeco Cable as described in the Corporation's MD&A of the 2006 annual report.

ACCOUNTING POLICIES AND ESTIMATES

There has been no significant change in Cogeco Cable's accounting policies and estimates and future accounting pronouncements since August 31, 2006. A description of these policies and estimates can be found in the Corporation's 2006 annual MD&A.

NON-GAAP FINANCIAL MEASURES

This section describes Non-GAAP financial measures used by Cogeco Cable throughout this MD&A. It also provides reconciliations between these Non-GAAP measures and the most comparable GAAP financial measures. These financial measures do not have standard definitions prescribed by Canadian GAAP and may not be comparable with similar measures presented by other companies. These measures include "cash flow from operations" and "free cash flow".

Cash flow from operations

Cash flow from operations is used by Cogeco Cable's management and investors to evaluate cash flow generated by operating activities excluding the impact of changes in non-cash operating items. This allows the Corporation to isolate the cash flow from operating activities from the impact of cash management decisions. Cash flow from operations is subsequently used in calculating the Non-GAAP measure, "free cash flow". Cash flow from operations is calculated as follows:



Quarters ended Nine months ended
($ 000) May 31, May 31,
2007 2006 2007 2006
------ ------ ------ ------
Cash flow from operating activities $53,387 $45,564 $99,195 $88,581
Changes in non-cash operating items 23,029 4,132 101,545 49,444
------ ------ ------ ------
Cash flow from operations $76,416 $49,696 $200,740 $138,025
------ ------ ------ ------
------ ------ ------ ------


Free cash flow

Free cash flow is used, by Cogeco Cable's management and investors, to measure its ability to repay debt, distribute capital to its shareholders and finance its growth. Free cash flow is calculated as follows:




Quarters ended Nine months ended
($ 000) May 31, May 31,
2007 2006 2007 2006
------ ------ ------ ------
Cash flow from operations $76,416 $49,696 $200,740 $138,025
Acquisition of fixed assets (51,256) (32,581) (162,993) (96,859)
Increase in deferred charges (6,000) (4,229) (19,258) (11,678)

Assets acquired under capital
leases - as per Note 10 b) (561) (1,199) (2,793) (2,630)
------ ------ ------ ------
Free cash flow $18,599 $11,687 $15,696 $26,858
------ ------ ------ ------
------ ------ ------ ------


ADDITIONAL INFORMATION

This MD&A was prepared on July 6, 2007. 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), a telecommunications company offering a diverse range of services to its customers in Canada and in Portugal, is the second largest cable operator in Ontario, Quebec and Portugal, in terms of the number of basic cable service customers served. The Corporation 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 networks, Cogeco Cable provides its residential and commercial customers with analogue and digital video and audio services, high speed Internet access as well as telephony services. The Corporation provides about 1,749,000 revenue-generating units (RGUs) to approximately 1,470,000 homes passed in its Canadian service territory and about 688,000 RGUs to approximately 849,000 homes passed in its Portuguese service territory. Cogeco Cable's subordinate voting shares are listed on the Toronto Stock Exchange (CCA).



Analyst Conference Call: Monday, July 9, 2007 at 1:30 P.M. (EDT)
Media representatives may attend as listeners
only.

Please use the following dial-in number to have
access to the conference call by dialing 10
minutes before the start of the conference:
Canada/USA Access Number: 1-800 811-7286
International Access Number: + 1-913 981-4902
Confirmation Code: 8913434
By Internet at www.cogeco.ca/investors

A rebroadcast of the conference call will be
available until July 16, by dialing:
Canada and US access number: 1-888 203-1112
International access number: + 1-719 457-0820
Confirmation code: 8913434


Supplementary Quarterly Financial Information

Quarters ended May 31, February 28,
2007(1) 2006 2007(1) 2006
-------------------- --------------------
($000, except percentages
and per share data)

Revenue $240,612 $153,956 $231,952 $147,757
Operating income before
amortization 97,874 63,244 86,791 59,568
Operating margin 40.7% 41.1% 37.4% 40.3%
Amortization 47,278 29,048 43,572 28,656
Financial expense 21,273 13,634 23,551 13,776
Income taxes 8,942 8,191 4,261 6,936
Net income 20,381 12,371 15,407 10,200

Cash flow from operations 76,416 49,696 62,264 44,940

Net income per share $0.45 $0.31 $0.37 $0.26

November 30, August 31,
2006(1) 2005 2006(1) 2005
-------------------- --------------------

Revenue $ 222,002 $ 143,413 $ 174,875 $ 140,178
Operating income before
amortization 83,662 57,302 72,864 60,720
Operating margin 37.7% 40.0% 41.7% 43.3%
Amortization 44,309 28,277 34,801 29,460
Financial expense 21,221 13,582 16,374 14,004
Income taxes 5,597 6,445 (12,298) 6,220
Net income 12,535 8,998 33,987 11,036

Cash flow from operations 62,060 43,389 56,714 46,509

Net income per share $0.31 $0.23 $0.85 $0.28

(1) Include operating results of Cabovisao since the date of acquisition of
control on August 1, 2006.


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-Rivieres and Rimouski. Furthermore, the third and fourth quarters' 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. For more details, please refer to the "Related Party Transactions" section.



COGECO CABLE INC.
Customer Statistics
May 31, August 31,
2007 2006
------------------------------------------------------------------------
------------------------------------------------------------------------
Homes Passed
Ontario (1) 986,494 1,002,187
Quebec 482,851 474,717
--------------------------
Canada 1,469,345 1,476,904
Portugal 848,175 826,369
--------------------------
Total 2,317,520 2,303,273
--------------------------
--------------------------

Revenue Generating Units
Ontario 1,236,229 1,104,157
Quebec 512,623 451,779
--------------------------
Canada 1,748,852 1,555,936
Portugal 687,237 629,041
--------------------------
Total 2,436,089 2,184,977
--------------------------
--------------------------

Basic Service Customers
Ontario 600,192 587,289
Quebec 251,592 245,888
--------------------------
Canada 851,784 833,177
Portugal 289,247 269,694
--------------------------
Total 1,141,031 1,102,871
--------------------------
--------------------------

Discretionnary Service Customers
Ontario 472,003 463,783
Quebec 201,424 192,895
--------------------------
Canada 673,427 656,678
Portugal - -
--------------------------
Total 673,427 656,678
--------------------------
--------------------------

Pay TV Service Customers
Ontario 90,765 84,425
Quebec 41,229 38,455
--------------------------
Canada 131,994 122,880
Portugal 54,042 54,089
--------------------------
Total 186,036 176,969
--------------------------
--------------------------

High Speed Internet Service Customers
Ontario 309,854 269,328
Quebec 93,619 73,752
--------------------------
Canada 403,473 343,080
Portugal 157,087 136,278
--------------------------
Total 560,560 479,358
--------------------------
--------------------------

Digital Video Service Customers
Ontario 241,801 213,556
Quebec 129,331 113,808
--------------------------
Canada 371,132 327,364
Portugal - -
--------------------------
Total 371,132 327,364
--------------------------
--------------------------

Telephony Service Customers
Ontario 84,382 33,984
Quebec 38,081 18,331
--------------------------
Canada 122,463 52,315
Portugal 240,903 223,069
--------------------------
Total 363,366 275,384
--------------------------
--------------------------


(1) An audit of homes passed in Ontario was completed during the first quarter of fiscal 2007 and, as a result, the number of homes passed was reduced by 42,386



COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF INCOME

Three months ended Nine months ended
May 31, May 31,
--------------------------------------------------------------------------
(In thousands of
dollars, except per
share data) 2007 2006 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenue
Service $239,862 $153,381 $691,846 $443,312
Equipment 750 575 2,720 1,814
--------------------------------------------------------------------------
240,612 153,956 694,566 445,126

Operating costs 142,738 88,145 417,671 256,620
Management fees -
COGECO Inc. - 2,567 8,568 8,392
--------------------------------------------------------------------------

Operating income
before amortization 97,874 63,244 268,327 180,114
Amortization (note 3) 47,278 29,048 135,159 85,981
--------------------------------------------------------------------------

Operating income 50,596 34,196 133,168 94,133
Financial expense
(note 7) 21,273 13,634 66,045 40,992
--------------------------------------------------------------------------

Income before
income taxes 29,323 20,562 67,123 53,141
Income taxes (note 4) 8,942 8,191 18,800 21,572
--------------------------------------------------------------------------

Net income $20,381 $12,371 $48,323 $31,569
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Earnings per share
(note 5)
Basic $0.45 $0.31 $1.14 $0.79
Diluted 0.45 0.31 1.13 0.79
--------------------------------------------------------------------------
--------------------------------------------------------------------------



COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

Nine months ended May 31,
-------------------------------------------------------------------------
(In thousands of dollars) 2007 2006
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Balance at beginning $117,760 $58,604

Net income 48,323 31,569

Subordinate voting shares issue costs,
net of related income taxes of $2,560 (5,729) -

Dividends on multiple voting shares (2,510) (1,884)

Dividends on subordinate voting shares (4,210) (2,916)
-------------------------------------------------------------------------

Balance at end $153,634 $85,373
--------------------------------------------------------------------------
--------------------------------------------------------------------------



COGECO CABLE INC.
CONSOLIDATED BALANCE SHEETS

May 31, August 31,
(In thousands of dollars) 2007 2006
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (audited)

Assets
Current
Cash and cash equivalents $22,656 $71,516
Restricted cash 491 569
Accounts receivable 48,155 43,728
Income tax receivable 1,177 -
Prepaid expenses 6,853 6,265
-------------------------------------------------------------------------
79,332 122,078
-------------------------------------------------------------------------

Income tax receivable 1,313 -
Fixed assets 1,073,119 1,021,538
Deferred charges 49,739 47,327
Customer base (note 6) 989,552 989,552
Preliminary goodwill (note 6) 423,152 422,108
-------------------------------------------------------------------------
$2,616,207 $2,602,603
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and Shareholders' equity
Liabilities
Current
Accounts payable and accrued liabilities $187,413 $283,087
Income tax liabilities 797 444
Deferred and prepaid income 28,606 26,652
Current portion of long-term debt (note 7) 2,354 126,851
-------------------------------------------------------------------------
219,170 437,034
-------------------------------------------------------------------------

Long-term debt (note 7) 1,173,407 1,190,126
Deferred and prepaid income 11,593 10,525
Pension plan liabilities and
accrued employees benefits 3,052 2,091
Future income tax liabilities 226,899 217,636
-------------------------------------------------------------------------
1,634,121 1,857,412
-------------------------------------------------------------------------

Shareholders' equity
Capital stock (note 8) 829,690 630,458
Contributed surplus - stock-based compensation 1,987 1,425
Retained earnings 153,634 117,760
Foreign currency translation adjustment (note 9) (3,225) (4,452)
-------------------------------------------------------------------------
982,086 745,191
-------------------------------------------------------------------------
$2,616,207 $2,602,603
-------------------------------------------------------------------------
-------------------------------------------------------------------------



COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF CASH FLOW

Three months ended Nine months ended
May 31, May 31,
--------------------------------------------------------------------------
(In thousands of
dollars) 2007 2006 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Cash flow from
operating
activities
Net income $20,381 $12,371 $48,323 $31,569
Items not affecting
cash and cash
equivalents
Amortization (note 3) 47,278 29,048 135,159 85,981
Amortization of
deferred financing
costs 532 243 1,713 724
Future income
taxes (note 4) 7,861 7,455 13,535 18,598
Stock-based
compensation 803 263 2,036 551
Other (439) 316 (26) 602
--------------------------------------------------------------------------
76,416 49,696 200,740 138,025
Changes in non-cash
operating items
(note 10a)) (23,029) (4,132) (101,545) (49,444)
--------------------------------------------------------------------------
53,387 45,564 99,195 88,581
--------------------------------------------------------------------------

Cash flow from
investing
activities
Acquisition of
fixed assets
(note 10b)) (51,256) (32,581) (162,993) (96,859)
Increase in
deferred charges (6,000) (4,229) (19,258) (11,678)
Decrease in
restricted cash - 20,322 88 -
Adjustments related
to business
acquisition 3,279 - 1,894 -
Other 429 30 468 38
---------------------------------------------------------------------------
(53,548) (16,458) (179,801) (108,499)
---------------------------------------------------------------------------

Cash flow from
financing
activities
Increase (decrease)
in bank
indebtedness - (15,081) - 7,693
Increase in
long-term debt 22,861 - 22,861 18,000
Repayment of
long-term debt (36,475) (12,425) (175,947) (1,202)
Issue of
subordinate voting
shares 1,434 - 198,355 166
Subordinate voting
shares issue costs (23) - (8,289) -
Dividends on
multiple voting
shares (941) (628) (2,510) (1,884)
Dividends on
subordinate voting
shares (1,776) (972) (4,210) (2,916)
--------------------------------------------------------------------------
(14,920) (29,106) 30,260 19,857
--------------------------------------------------------------------------

Net change in cash
and cash equivalents (15,081) - (50,346) (61)
Effect of exchange
rate changes on
cash and cash
equivalents
denominated in
foreign currencies (1,774) - 1,486 -
Cash and cash
equivalents at
beginning 39,511 - 71,516 61
--------------------------------------------------------------------------
Cash and cash
equivalents at end $22,656 $- $22,656 $-
--------------------------------------------------------------------------
--------------------------------------------------------------------------

See supplemental cash flow information in note 10.



COGECO CABLE INC.

Notes to Consolidated Financial Statements May 31, 2007

(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 May 31, 2007 and August 31, 2006 as well as its results of operations and its cash flow for the three and the nine month periods ended May 31, 2007 and 2006.

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, 2006. These unaudited interim consolidated financial statements follow the same accounting policies as the most recent annual consolidated financial statements.

2. Segmented Information

The Corporation's activities are comprised of cable, high-speed Internet access and telephony services. The Corporation considers its cable distribution, high-speed Internet access and telephony activities as a single operating segment. The Corporation's activities are carried out in Canada and in Europe.

The Europe segment includes operating results since the date of the acquisition of control on August 1, 2006.

The principal financial information per business segment is presented in the tables below:



Canada Europe
--------------------------------------------------------------------------
Three months ended May 31, 2007 2006 2007 2006
(unaudited)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Revenue $182,763 $153,956 $57,849 $-
Operating costs 103,778 88,145 38,960 -
Management fees - 2,567 - -
Operating income before
amortization 78,985 63,244 18,889 -
Amortization 33,624 29,048 13,654 -
Operating income 45,361 34,196 5,235 -
Financial expense 19,191 13,634 2,082 -
Income taxes 8,629 8,191 313 -
Net income 17,541 12,371 2,840 -
--------------------------------------------------------------------------
Net assets employed (1)(2) $1,752,858 $1,649,631 $613,081 $561,192
Total assets (2) 1,889,514 1,842,312 726,693 760,291
Fixed assets (2) 796,282 741,024 276,837 280,514
Preliminary goodwill (2) - - 423,152 422,108
Acquisition of fixed assets 43,237 33,780 8,580 -
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Consolidated
--------------------------------------------------------------------------
Three months ended May 31, 2007 2006
(unaudited)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Revenue $240,612 $153,956
Operating costs 142,738 88,145
Management fees - 2,567
Operating income before amortization 97,874 63,244
Amortization 47,278 29,048
Operating income 50,596 34,196
Financial expense 21,273 13,634
Income taxes 8,942 8,191
Net income 20,381 12,371
--------------------------------------------------------------------------
Net assets employed (1)(2) $2,365,939 $2,210,823
Total assets (2) 2,616,207 2,602,603
Fixed assets (2) 1,073,119 1,021,538
Preliminary goodwill (2) 423,152 422,108
Acquisition of fixed assets 51,817 33,780
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Total assets less cash and cash equivalents, accounts payable and
accrued liabilities, and deferred and prepaid income.
(2) As at May 31, 2007 and August 31, 2006.



Canada Europe
--------------------------------------------------------------------------
Nine months ended May 31, 2007 2006 2007 2006
(unaudited)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Revenue $525,620 $445,126 $168,946 $-
Operating costs 305,733 256,620 111,938 -
Management fees 8,568 8,392 - -
Operating income before
amortization 211,319 180,114 57,008 -
Amortization 96,391 85,981 38,768 -
Operating income 114,928 94,133 18,240 -
Financial expense 64,256 40,992 1,789 -
Income taxes 16,086 21,572 2,714 -
Net income 34,586 31,569 13,737 -
--------------------------------------------------------------------------
Net assets
employed (1)(2) $1,752,858 $1,649,631 $613,081 $561,192
Total assets (2) 1,889,514 1,842,312 726,693 760,291
Fixed assets (2) 796,282 741,024 276,837 280,514
Preliminary goodwill(2) - - 423,152 422,108
Acquisition of fixed
assets 136,815 99,489 28,971 -
--------------------------------------------------------------------------


Consolidated
--------------------------------------------------------------------------
Nine months ended May 31, 2007 2006
(unaudited)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Revenue $694,566 $445,126
Operating costs 417,671 256,620
Management fees 8,568 8,392
Operating income before amortization 268,327 180,114
Amortization 135,159 85,981
Operating income 133,168 94,133
Financial expense 66,045 40,992
Income taxes 18,800 21,572
Net income 48,323 31,569
--------------------------------------------------------------------------
Net assets employed (1)(2) $2,365,939 $2,210,823
Total assets (2) 2,616,207 2,602,603
Fixed assets (2) 1,073,119 1,021,538
Preliminary goodwill (2) 423,152 422,108
Acquisition of fixed assets 165,786 99,489
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Total assets less cash and cash equivalents, accounts payable and
accrued liabilities, and deferred and prepaid income.
(2) As at May 31, 2007 and August 31, 2006.



3. Amortization
Three months ended Nine months ended
May 31, May 31,
--------------------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Fixed assets $42,268 $24,006 $120,026 $70,434

Deferred charges 5,010 5,042 15,133 15,547
--------------------------------------------------------------------------
$47,278 $29,048 $135,159 $85,981
--------------------------------------------------------------------------
--------------------------------------------------------------------------



4. Income Taxes
Three months ended Nine months ended
May 31, May 31,
--------------------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Current $1,081 $736 $5,265 $2,974

Future 7,861 7,455 13,535 18,598
--------------------------------------------------------------------------
$8,942 $8,191 $18,800 $21,572
--------------------------------------------------------------------------
--------------------------------------------------------------------------


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

Three months ended Nine months ended
May 31, May 31,
--------------------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Income before income
taxes $29,323 $20,562 $67,123 $53,141
Combined income tax
rate 34.96% 35.09% 34.96% 35.09%
Income taxes at
combined income tax
rate $10,251 $7,215 $23,466 $18,647
Loss or income
subject to lower or
higher tax rates (707) 45 (473) 137
Increase in income
taxes as a result of
increase in
substantially
enacted tax rates - - - 162

Large corporation tax - 795 - 2,415
Effect of foreign
income tax rate
differences (788) - (3,037) -
Benefit related to
prior years' minimum
income tax paid - - (1,475) -
Other 186 136 319 211
--------------------------------------------------------------------------

Income taxes at
effective income
tax rate $8,942 $8,191 $18,800 $21,572
--------------------------------------------------------------------------
--------------------------------------------------------------------------



5. Earnings per Share

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

Three months ended Nine months ended
May 31, May 31,
--------------------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Net income $20,381 $12,371 $48,323 $31,569

Weighted average
number of multiple
voting and
subordinate voting
shares outstanding 45,254,307 39,992,734 42,290,852 39,989,053
Effect of dilutive
stock options (1) 405,175 204,512 323,832 187,348
--------------------------------------------------------------------------

Weighted average number
of diluted multiple
voting and
subordinate voting
shares outstanding 45,659,482 40,197,246 42,614,684 40,176,401
--------------------------------------------------------------------------

Earnings per share
Basic $0.45 $0.31 $1.14 $0.79
Diluted 0.45 0.31 1.13 0.79
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) For the three and nine month periods ended May 31, 2007, 713 and 47,845
stock options (143,248 in 2006) 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.



6. Customer Base and Preliminary Goodwill
--------------------------------------------------------------------------
Customer Preliminary
base goodwill
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited)

Balance as at August 31, 2006 $989,552 $422,108

Adjustment to the purchase price - (6,205)

Foreign currency translation adjustment - 7,249
--------------------------------------------------------------------------

Balance as at May 31, 2007 $989,552 $423,152
--------------------------------------------------------------------------
--------------------------------------------------------------------------


On March 9, 2007, the Corporation and Cable Satisfaction International Inc. came to an agreement for a final adjustment to the working capital which was outstanding since the date of acquisition. According to the agreement, the Corporation has recorded an account receivable of an amount of EUR 2,194,000 ($3,279,000) in the second quarter which was received on March 16, 2007 and as a result, the purchase price was reduced accordingly. The remaining adjustment to the purchase price is due to the reevaluation of costs related to the acquisition of Cabovisao - Televisao por Cabo, S.A. ("Cabovisao").

In addition, as mentioned in the Corporation's 2006 annual consolidated financial statements, management is currently carrying out a more specific analysis and changes will be made to the allocation of the excess of consideration over net assets acquired as the information becomes available. For example, since the measurement of the fair value of fixed assets had not yet been completed at the time of the preliminary allocation, fixed assets have been presented at cost. The measurement of indefinite and finite-lived intangible assets is also under way. Furthermore, in accordance with the Portuguese Companies Income Tax Code, accumulated tax losses cannot be deducted if the ownership of at least 50% of the social capital changes from the moment when the tax losses were generated, unless an authorization is granted before such change in the ownership takes place. To this effect, a request for preservation of tax losses was filed by Cabovisao on July 28, 2006. These losses have not been included in the preliminary purchase price allocation. As a result, the actual amounts allocated to the identifiable assets acquired and liabilities assumed and the related operating results will vary according to the amounts initially recorded, and such differences could be significant.



7. Long-Term Debt
--------------------------------------------------------------------------
Maturity Interest rate May 31, August 31,
2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (audited)

Parent company

Term Facility
Term loan 2011 5.33% (1) $150,000 $150,000
Term loan -
EUR 17,358,700 2011 5.00 (1) 24,983 24,573
Revolving loan
Euro currency -
EUR 299,500,000
(EUR 317,000,000 as
at August 31, 2006) 2011 5.00 (1) 431,040 448,745
Senior Secured
Debentures Series 1 2009 6.75 150,000 150,000
Senior - Secured Notes
Series A
- US $150 million 2008 6.83 (2) 160,440 165,795
Series B 2011 7.73 175,000 175,000
Second Secured
Debentures Series A 2007 (3) - - 125,000
Deferred credit (4) 2008 - 78,210 72,855

Subsidiaries

Obligations under
capital leases 2010 6.42 - 8.18 6,088 5,009
--------------------------------------------------------------------------
1,175,761 1,316,977

Less: current portion 2,354 126,851
--------------------------------------------------------------------------
$1,173,407 $1,190,126
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Average interest rate on debt as at May 31, 2007, including stamping
fees.

(2) 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.

(3) On February 2, 2007, the Corporation gave a notice of redemption to
purchase on March 5, 2007 all of its 8.44% Second Secured Debentures
Series A (the "Notes") in the aggregate principal amount of
$125,000,000. Concurrently, the Corporation also made an offer to
purchase for cancellation on February 12, 2007, all of the validly
issued and held Notes upon receipt by the Trustee of a written notice
of acceptance by the holders of Notes. As a result, a total of
$89,257,000 of Notes were redeemed on February 12, 2007, for a total
cash consideration of $91,038,000. The remaining Notes of $35,743,000
were redeemed on March 5, 2007, for a total cash consideration of
$36,550,000. The excess of the redemption price over the aggregate
principal amount was recorded as financial expense.

(4) The deferred credit represents the amount which would have been payable
as at May 31, 2007 and August 31, 2006 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 and nine month periods ended May 31, 2007 amounted to $17,944,000 and $60,523,000 ($13,264,000 and $39,565,000 in 2006).


8. Capital Stock

Authorized, an unlimited number

Class A Preference shares, without voting rights, redeemable by the holder at any time at a price of $1 per share, carrying a cumulative redemption price per year.

Class B Preference shares, without voting rights, could be issued in

series.

Multiple voting shares, 10 votes per share.

Subordinate voting shares, 1 vote per share.



May 31, August 31,
2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (audited)

Issued

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

29,621,029 subordinate voting shares
(24,308,112 as at August 31, 2006) 731,344 532,112
--------------------------------------------------------------------------
$829,690 $630,458
--------------------------------------------------------------------------
--------------------------------------------------------------------------

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

Nine months ended Twelve months ended
--------------------------------------------------------------------------
May 31, 2007 August 31, 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (audited)
--------------------------------------------------------------------------
Number of Number of
shares Amount shares Amount
--------------------------------------------------------------------------

Balance at beginning 24,308,112 $532,112 24,293,486 $531,874

Shares issued for
cash consideration 5,000,000 192,500 - -

Shares issued for
cash under the
Employee Stock
Purchase Plan
and the Stock
Option Plan 312,917 5,855 14,626 228

Compensation expense
previously recorded in
contributed surplus
for options exercised - 877 - 10
-------------------------------------------------------------------------
Balance at end 29,621,029 $731,344 24,308,112 $532,112
-------------------------------------------------------------------------
-------------------------------------------------------------------------


On February 2, 2007, the Corporation issued 5,000,000 subordinate voting shares for a total consideration of $192,500,000. Proceeds of this offering, net of issue costs, amounted to $184,211,000.

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 nine months, the Corporation granted 201,587 stock options (126,059 in 2006) with an exercise price of $26.63 to $44.54 ($25.12 to $29.05 in 2006) of which 57,247 stock options (31,743 in 2006) were granted to COGECO Inc.'s employees. The Corporation also granted 376,000 conditional stock options with an exercise price of $26.63 of which 262,400 stock options were granted to COGECO Inc.'s employees. These conditional options vest over a period of three years beginning one year after the day such options are granted and are exercisable over ten years. The vesting of these options is conditional to the achievement of certain yearly financial objectives by the Portuguese subsidiary, Cabovisao - Televisao por Cabo, S.A., over a period of three years. The Corporation records compensation expense for options granted on or after September 1, 2003. As a result, a compensation expense of $538,000 and $1,439,000 ($207,000 and $573,000 in 2006) was recorded for the three and nine month periods ended May 31, 2007. If compensation expense 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 and nine month periods ended May 31, 2006 would have been reduced to the following pro forma amounts:



Three months ended Nine months ended
--------------------------------------------------------------------------
May 31, 2006 May 31, 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited)

Net income
As reported $12,371 $31,569
Pro forma 12,350 31,508

Basic earnings per share
As reported $0.31 $0.79
Pro forma 0.31 0.79

Diluted earnings per share
As reported $0.31 $0.79
Pro forma 0.31 0.78
--------------------------------------------------------------------------
--------------------------------------------------------------------------

The fair value of stock options granted for the nine month period ended
May 31, 2007 was $7.39 ($9.44 in 2006) per option. The fair value of each
option granted was estimated at the grant date for purposes of determining
stock-based compensation expense using the Binomial option pricing model
based on the following assumptions:

2007 2006
--------------------------------------------------------------------------
Expected dividend yield 1.27 1.27

Expected volatility 32 39

Risk-free interest rate 4.05 3.70

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


As at May 31, 2007, the Corporation had outstanding stock options providing for the subscription of 985,272 subordinate voting shares. These stock options, which include 376,000 conditional stock options, can be exercised at various prices ranging from $7.05 to $44.54 and at various dates up to April 11, 2017.

The Corporation has also adopted a Performance Unit Plan for key employees which is described in the Corporation's annual consolidated financial statements and which has been terminated. A compensation expense of $265,000 and $597,000 ($117,000 and $140,000 as a reduction of expense in 2006) was recorded for the three and nine months periods ended May 31, 2007 related to this plan.

9. Foreign Currency Translation Adjustment

The change in the foreign currency translation adjustment included in shareholders' equity is the result of the fluctuation in the exchange rates on translation of net investments in self-sustaining foreign operations and foreign exchange gains or losses related to long-term debt denominated in foreign currency used to hedge net investments. The net change in foreign currency translation adjustment is as follows:



Nine months Twelve months
ended ended
--------------------------------------------------------------------------
May 31, 2007 August 31, 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (audited)

Effect of exchange rate variation on
translation of net investments in self
sustaining foreign subsidiaries $(2,828) $(12,412)

Effect of exchange rate variation on
translation of long-term debt designated
as hedge of net investments in
self-sustaining subsidiaries (net of income
taxes of $1,703,000 for the twelve month
period ended August 31, 2006) (397) 7,960
--------------------------------------------------------------------------
$(3,225) $(4,452)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


10. Statements of Cash Flow

a) Changes in non-cash operating items

Three months ended Nine months ended
May 31, May 31,
--------------------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Accounts receivable $4,665 $146 $(4,374) $(2,154)

Income tax receivable 1,679 329 (2,586) (178)

Prepaid expenses (993) (695) (586) (1,264)

Accounts payable
and accrued liabilities (28,876) (3,924) (97,382) (47,107)

Income tax liabilities 2 - 349 (678)

Deferred and
prepaid income 494 12 3,034 1,937
--------------------------------------------------------------------------
$(23,029) $(4,132) $(101,545) $(49,444)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


b) Other information

Three months ended Nine months ended
May 31, May 31,
--------------------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Fixed asset
acquisitions through
capital leases $561 $1,199 $2,793 $2,630

Interest paid 25,098 15,822 69,082 43,087

Income taxes paid
(received) (681) 407 6,983 3,830
--------------------------------------------------------------------------
--------------------------------------------------------------------------


11. Employee Future Benefits

The Corporation and its subsidiaries offer their employees contributory defined 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 Nine months ended
May 31, May 31,
--------------------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Contributory
defined benefit
pension plans $230 $222 $690 $618

Defined
contribution
pension plan and
collective registered
retirement savings
plan 678 356 1,703 1,115
--------------------------------------------------------------------------
$908 $578 $2,393 $1,733
--------------------------------------------------------------------------
--------------------------------------------------------------------------


12. Guarantees

During the second quarter, the Corporation has guaranteed the payment by Cabovisao of certain taxes for municipal rights of way assessed by the Municipality of Seixal in Portugal for the years 2004 and 2005 totalling EUR 5.7 million (the "Tax Amounts"), which are currently being challenged by Cabovisao. Trustworthy financial guarantees were required under applicable Portuguese law in order for Cabovisao to challenge the Tax Amounts and withhold payment thereof until a final judgment no longer subject to appeal is rendered by the Portuguese courts having jurisdiction in this matter. As a result, the Corporation may be required to pay, upon written demand by the Municipality of Seixal, the required amounts following final judgment up to a maximum aggregate amount of EUR5.7 million ($8.3 million), should Cabovisao fail to pay such required amounts.

Contact Information

  • Source:
    Cogeco Cable Inc.
    Pierre Gagne
    Vice President, Finance and Chief Financial Officer
    514-874-2600
    or
    Information:
    Media
    Marie Carrier
    Director, Corporate Communications
    514-874-2600