Cogeco Câble inc.
TSX : CCA

July 11, 2005 23:59 ET

Quadrupled net income in the third quarter and anticipated increased profitability in 2006 for Cogeco Cable

MONTREAL, July 11 2005 - Today Cogeco Cable Inc. (TSX: CCA.SV)
announced its financial results for the third quarter of fiscal 2005 ended
May 31, 2005 and its preliminary financial outlook for fiscal 2006.

Increased number of revenue-generating units
--------------------------------------------

"Cogeco Cable continues to report progress in the size of its revenue-
generating units. Digital television and high-speed Internet services are
continuing to expand, and we are confident of reaching our projections by the
end of the fiscal year 2005," affirms Mr. Louis Audet, President and Chief
Executive Officer of Cogeco Cable.

Launch of digital telephony
---------------------------

"On June 8 of this year, Cogeco Cable launched its digital telephony
service, thus meeting the demand for high quality service and providing all of
the most popular features at a fair price. Our customers now have a choice
regarding their telephone supplier, and Cogeco Cable offers them a competitive
service that meets their expectations," says Mr. Audet.

Increased operating margin
--------------------------

"Cogeco Cable reports an increase in its operating margin, which now
stands at 41.6% compared to 38.8% for the same quarter last year. This is the
result of a 5.8% rise in operating revenues, partly offset by a 0.9% increase
in costs," adds Mr. Audet.

Financial projections looking up
--------------------------------

"The improvement in our results exceeds our forecasts and sheds a very
favourable light on the 2005 and 2006 fiscal years. We are therefore revising
our forecasts of operating income before amortization for the 2005 fiscal year
upwards to $226 million. For the 2006 fiscal year, Cogeco Cable anticipates a
meaningful increase in Free Cash Flow to about $52 million, up from 2005,
despite the launch of its digital telephony service in most of its markets,"
concludes Mr. Audet.


FINANCIAL HIGHLIGHTS

Quarters ended May 31 Nine months ended May 31
(unaudited) (unaudited)

($000s except
percentages and
per share data)
% %
2005 2004 Change 2005 2004(1) Change
---- ---- ------ ---- ------- ------

Revenue $ 140,071 $ 132,364 5.8 $ 414,226 $ 393,427 5.3
Operating
income
before
amortization 58,310 51,329 13.6 166,801 148,956 12.0

Net income
(loss) 8,245 1,852 -- 17,685 (38,663) --

Cash flow from
operations $ 43,562 $ 36,593 19.0 $ 124,429 $ 103,753 19.9
Less:
Capital
expenditures
and increase in
deferred charges 25,692 23,988 7.1 79,412 66,548 19.3
------ ------ ------ ------
Free Cash Flow (2) 17,870 12,605 41.8 45,017 37,205 21.0

Per share data
Basic net
income (loss) $ 0.21 $ 0.05 -- $ 0.44 $ (0.97) --
Cash flow from
operations 1.09 0.92 18.5 3.11 2.60 19.6

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

(2) Free Cash Flow is defined as cash flow from operations less capital
expenditures (including assets acquired under capital leases - as per
Note 7b) in the accompanying financial statements-not reflected in
the statements of cash flow) and increase in deferred charges. Free
Cash Flow is not a defined term under generally accepted accounting
principles (GAAP) and should be treated accordingly.


MANAGEMENT'S DISCUSSION AND ANALYSIS

Certain statements in this analysis may constitute forward-looking
statements that involve risks and uncertainties. Future results will be
affected by a number of factors with respect to technology, markets,
competition and regulations, including factors described in the section
"Uncertainties and main risk factors" of this MD&A, the second quarter
report of 2005 and the Corporation's 2004 annual MD&A. Therefore, actual
results may be materially different from those expressed or implied by
such forward-looking statements.
This analysis should be read in conjunction with the Corporation's
financial statements and the notes thereto prepared in accordance with
Canadian GAAP and the MD&A included in the Corporation's Annual Report.
Throughout this discussion, all amounts are in Canadian dollars unless
otherwise indicated.

CUSTOMER STATISTICS

Net additions (losses)
Third Quarter Nine Months
------------------ --------------
May 31,
2005 2005 2004 2005 2004
-------- ------- ------- ------- -------
Revenue-
generating
units (2) 1,345,931 7,722 9,633 74,032 77,789
Basic-
service
customers 827,324 (3,523) (3,100) 3,469 5,691
High-speed
Internet
customers (3) 274,873 5,731 4,593 35,265 39,230
Digital
terminals (4) 287,962 8,739 10,375 47,891 40,773


% Penetration (1)
---------------------
May 31, May 31,
2005 2004
---------- ---------
Revenue-generating units (2)
Basic-service customers
High-speed Internet customers (3) 37.6 33.3
Digital terminals (4) 35.5 27.7

(1) As a percentage of basic-service customers in areas served.
(2) Including basic-service, Internet-service and digital-service
customers.
(3) The number of Internet customers of previous quarters has been
restated to reflect the number of customers based on the billing
dates, which are spread throughout the month, instead of the number
of customers as at the end of the quarter. This change produces a
downward adjustment of approximately 5,500 customers. However,
additions for the year remain unchanged. Customers subscribing only
to Internet services amounted to 55,617 as at May 31, 2005 compared
to 56,824 as at February 28, 2005.
(4) 73% of terminals as at May 31, 2005 were purchased compared to 85%
one year earlier.


Expansion of revenue-generating units in the third quarter was lower than
in the same period last year due to strong competition. Digital-service
customer growth declined slightly and basic-service customer loss was slightly
higher. The basic-service customer loss is mainly attributable to students
leaving their campuses at the end of the school year. Cogeco Cable offers its
services in several cities with universities and colleges such as Kingston,
Windsor, Hamilton, St. Catharines, Peterborough, Trois-Rivières and Rimouski.
The addition of high-speed Internet customers in the third quarter was higher
than in the same period last year, due to superior promotions and the addition
of our Lite offering in Québec during the second quarter. Given higher than
anticipated high-speed Internet customer additions for the first nine months,
Cogeco Cable has raised its 2005 forecasts from 32,000 - 37,000 to 37,000 -
41,000.

During the third quarter, Cogeco Cable improved its video service
offer by:



- Introducing in Ontario the "Medley Pack" consisting of 5 new digital
channels.
- Adding 6 new digital channels of multi-cultural television, including
the Italian news channel RAI.
- Adding 6 new high definition (HD) channels for a total of up to 19 HD
channels.


At the beginning of the fourth quarter, Cogeco Cable launched its digital
telephony service in its Burlington and Oakville, Ontario, and Trois-Rivières,
Québec markets. The planned initial capital expenditures for this service are
still $5 million for fiscal 2005.

ACCOUNTING POLICIES AND ESTIMATES

Revenue Recognition

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



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

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

- Revenue on the sale of home terminal devices at a subsidized price,
which was recorded as a partial recovery of cost, is now recorded as
operating revenue with an equal amount of operating cost.

- The portion of advertising expense incurred to expand the digital and
high-speed Internet customer base previously recorded as a deferred
charge, is now recorded as an operating cost.


These changes had the following impact on our financial results for the
third quarter and the first nine months of the 2004 fiscal year:



Periods ended May 31, 2004 Quarter Nine Months

($000s except percentages
and per share data) Before After Before After
restatement restatement restatement restatement
----------- ----------- ----------- -----------

Revenue $ 130,294 $ 132,364 $ 387,405 $ 393,427
Operating income
before
amortization 52,539 51,329 154,668 148,956
Operating margin 40.3% 38.8% 39.9% 37.9%
Amortization 30,972 32,070 104,566 107,738
Income taxes 3,709 2,993 40,518 35,795
Net income (loss) 3,444 1,852 (34,502) (38,663)
Basic net income (loss)
per share $ 0.09 $ 0.05 $ (0.86) $ (0.97)


Amortization of Long-term Assets

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

Asset Retirement Obligations

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

Variable Interest Entities

In June 2003, the CICA issued Accounting Guideline 15 ("AcG-15"),
Consolidation of Variable Interest Entities, which defines Variable Interest
Entities ("VIE") as entities that have insufficient equity or whose equity
investors lack one or more specified essential characteristics of a
controlling nancial interest. The standard provides guidance for determining
when an entity is a VIE and who, if anyone, should consolidate the VIE. During
the second quarter of fiscal 2005, the Corporation completed its evaluation
and concluded that it had no VIE.

No other significant changes in critical accounting policies and
estimates occurred since August 31, 2004, and such policies and estimates are
described in the Corporation's 2004 annual MD&A.

RELATED PARTY TRANSACTIONS

Cogeco Cable is a subsidiary of COGECO Inc., which holds 39.2% of the
Corporation's equity shares. Under a management agreement, the Corporation
pays COGECO Inc. monthly management fees equal to 2% of its total revenue for
certain executive, administrative, legal, regulatory, strategic and financial
planning, and additional services. For fiscal 2005, the management fee has
been set at a maximum of $8.2 million. Cogeco Cable granted 38,397 stock
options to COGECO Inc.'s employees during the first nine months of fiscal 2005
compared to 48,037 for the same period in fiscal 2004. Cogeco Cable did not
grant any stock options to COGECO Inc.'s employees during the third quarter of
fiscal years 2005 and 2004. Further details regarding the management agreement
and stock options granted to COGECO Inc.'s employees are provided in the
Corporation's 2004 annual MD&A. There were no other material related party
transactions during the first nine months of fiscals 2004 and 2005.



OPERATING RESULTS
Quarters ended May 31 Nine months ended May 31

($000s except
percentages)
% %
2005 2004 Change 2005 2004 Change
---- ---- ------ ---- ---- ------
Revenue $ 140,071 $ 132,364 5.8 $ 414,226 $ 393,427 5.3

Operating
costs 79,054 78,419 0.8 239,239 236,708 1.1
Management
fees
- COGECO Inc. 2,707 2,616 3.5 8,186 7,763 5.4

Operating
income
before
amortization 58,310 51,329 13.6 166,801 148,956 12.0

Operating
margin 41.6% 38.8% 40.3% 37.9%



Revenue

Revenue for the third quarter has risen by $7.7 million or 5.8% compared
to the same period last year. This growth in the third quarter and for the
first nine months is mainly attributable to basic-service rate increases and
the improved high-speed Internet access penetration rate, as mentioned in the
"Customer Statistics" section. Cogeco Cable introduced average monthly rate
increases of approximately $0.74 per basic-analogue-service customer,
effective June 15, 2004 in Ontario and August 1, 2004 in Québec. A monthly
digital basic rate hike of $4 was also implemented in Québec. In addition, the
monthly rate for the pay television package rose by $3, and other limited
selective tier service rate increases have been implemented in Ontario.

Operating Costs

During the third quarter and for the first nine months, operating costs,
excluding management fees payable to COGECO Inc., increased slightly due to
modest increases in IP (Internet Protocol) transport costs for Internet
service and affiliation charges for video service offset by a significant drop
in the sale of digital terminals.

Customer care expenses increased during the third quarter and during the
first nine months due to 6.9% growth in the number of revenue-generating units
since May 31, 2004. In addition, since the financial results of the third
quarter were higher than anticipated, an increase in the provision for bonuses
paid to employees has been accrued.

Operating Income before Amortization

Operating income before amortization improved by 13.6% in the third
quarter compared to the same period in fiscal 2004, as a result of revenue
growth partly offset by a modest increase in operating expenses. Cogeco
Cable's operating margin increased from 38.8% to 41.6%.



FIXED CHARGES

Quarters ended May 31 Nine months ended May 31
($000s except % %
percentages) 2005 2004 Change 2005 2004 Change
---- ---- ------ ---- ---- ------

Amortization $ 31,396 $ 32,070 (2.1) $ 95,628 $ 107,738 (11.2)

Financial expense $ 13,954 $ 14,414 (3.2) $ 41,688 $ 44,086 (5.4)



Amortization in the first nine months amounted to $95.6 million compared
to $93.7 million for the same period last year, excluding the effect of the
$14 million increase in amortization related to the revision in the estimated
useful lives of home terminal devices and certain other long-term assets.
Increased amortization in the first nine months of fiscal 2005 stemmed mainly
from capital expenditures linked to digital services.

The decline in the financial expense of $2.4 million was mainly related
to lower levels of Indebtedness (defined as bank indebtedness and long-term
debt) during the first nine months compared to the same period last year as a
result of Free Cash Flow generated.

INCOME TAXES

Income taxes for the third quarter amounted to $4.7 million compared to
$3 million for the same period last year. Income taxes for the first nine
months amounted to $11.8 million, compared to $8.2 million for the same period
last year, excluding the effect of non-cash adjustments described below. The
income tax increases for the third quarter and the first nine months were
mainly attributable to growth in operating income before amortization.

During the first quarter of fiscal 2004, the Ontario government announced
that corporate income tax rates would increase to 14% effective January 1,
2004. Prior to this announcement, the tax rate was to decline from 11% in 2004
to 8% in 2007. As a result, a $32.5 million non-cash adjustment was recorded
in the first quarter of fiscal 2004 for future income tax liabilities. This
amount was partly offset by a non-cash reduction of future income taxes of
$4.9 million in that same quarter. This reduction of future income taxes was
related to the decline in carrying value of home terminal devices and certain
other long-term assets.

NET INCOME (LOSS)

Net income for the third quarter amounted to $8.2 million, or $0.21 per
share, compared to $1.9 million, or $0.05 per share for the same period last
year. Net loss for the first nine months of 2004 amounted to $38.7 million and
is attributable to non-cash adjustments for amortization and income tax, which
totalled $41.6 million, as previously mentioned. Excluding these elements, the
Corporation would have recorded a net income of $2.9 million in the first nine
months of fiscal 2004 compared to $17.7 million for the first nine months of
fiscal 2005.



CASH FLOW AND LIQUIDITY

Quarters Nine months
ended May 31 ended May 31
($000s )
2005 2004 2005 2004
---- ---- ---- ----
Operating Activities

Cash flow from operations $ 43,562 $ 36,593 $ 124,429 $ 103,753
Changes in non-cash
working capital items
and long-term portion
of deferred and
prepaid income 15 2,719 (22,439) (25,944)
--------- --------- --------- ---------
$ 43,577 $ 39,312 $ 101,990 $ 77,809
--------- --------- --------- ---------
--------- --------- --------- ---------
Investing Activities (1) $ (24,115) $ (22,454) $ (77,808) $ (64,888)
--------- --------- --------- ---------
--------- --------- --------- ---------
Financing Activities (1) $ (19,462) $ (16,858) $ (24,182) $ (12,921)
--------- --------- --------- ---------
--------- --------- --------- ---------
(1) Excludes assets acquired under capital leases and related
indebtedness.


During the third quarter, cash flow from operations was greater than last
year by $7 million or 19%, mainly due to growth in operating income before
amortization. Cash inflows from changes in non cash working capital items and
long-term deferred and prepaid income were lower than those of the same period
last year, mainly due to a greater decline in accounts payable and accrued
liabilities.

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



Quarters Nine months
ended May 31 ended May 31
($000s)
2005 2004 2005 2004
--------- --------- --------- ---------
Customer Premise
Equipment (1) $ 4,935 $ 5,228 $ 31,625 $ 15,445
Scalable Infrastructure 3,760 5,594 8,966 11,687
Line Extensions 2,074 2,158 6,842 7,101
Upgrade / Rebuild 10,554 6,185 20,938 14,087
Support Capital 1,140 993 2,475 3,621
--------- --------- --------- ---------
Total Capital
Expenditures (2) $ 22,463 $ 20,158 $ 70,846 $ 51,941
Deferred Charges 3,229 3,830 8,566 14,607
Others (17) - (44) -
--------- --------- --------- ---------
Total Investing
Activities $ 25,675 $ 23,988 $ 79,368 $ 66,548
--------- --------- --------- ---------
--------- --------- --------- ---------
(1) Includes mainly digital terminals and cable modems, but also new
customer connections and reconnections.
(2) Includes capital leases, which are excluded from the statements of
cash flow.


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

During the first nine months, the increase in capital expenditures
including capital leases is mainly due to an increase in purchases of digital
terminals that are subsequently leased to customers and to increased upgrade
and rebuild activities in the third quarter. Cogeco Cable is pursuing its
plans to expand the bandwidth to 750 MHz for its Ontario networks and to
550 MHz for the Québec networks and the percentage of two-way households rose.

Free Cash Flow of $17.9 million and $45 million was generated during the
third quarter and first nine months, respectively, as a result of increased
cash flow from operations partly offset by increased capital expenditures.

During the third quarter, Indebtedness declined by $18.7 million, mainly
due to generated Free Cash Flow of $17.9 million. For the same period last
year, Indebtedness declined by $17.1 million, essentially due to generated
Free Cash Flow of $12.6 million and an increase in non-cash working capital
items and long-term deferred and prepaid income of $2.7 million. A dividend of
$0.02 per share for subordinate and multiple voting shares, totalling
$0.8 million, was paid during the third quarter of fiscal 2005 and no
dividends were paid in fiscal 2004.

During the first nine months, the level of Indebtedness declined by
$22.5 million mainly due to generated Free Cash Flow of $45 million partly
offset by a decline in non-cash working capital items and long-term deferred
and prepaid income of $22.4 million. For the same period last year,
Indebtedness fell by $13.3 million essentially due to Free Cash Flow of
$37.2 million, partly offset by a decrease of $25.9 million in non-cash
working capital items and long-term deferred and prepaid income. Dividends
totalling $2.4 million were paid during the first nine months of fiscal 2005,
and no dividends were paid in fiscal 2004.

As at May 31, 2005, the Corporation had utilized $25 million of its
$270 million Term Facility. Taking into account existing bank covenants,
Cogeco Cable had access to the entire committed amount under the Term
Facility. Going forward, Cogeco Cable expects to generate higher Free Cash
Flow and thus further reduce its leverage ratio.

DIVIDEND DECLARATION

At its July 8, 2005 meeting, the Board of Directors of Cogeco Cable
declared a quarterly dividend of $0.04 per share for subordinate and multiple
voting shares, payable on August 5, 2005, to shareholders on record as at
July 22, 2005. Significant improvement to overall results contributed to
doubling the quarterly dividend from $0.02 per share to $0.04 per share.

FINANCIAL POSITION

Since August 31, 2004, significant changes in the balance sheet include
accounts payable and accrued liabilities as well as Indebtedness. Accounts
payable and accrued liabilities declined by $31.2 million as use of working
capital was steadfastly managed at fiscal year-end. Indebtedness was reduced
by $20.9 million, mainly due to Free Cash Flow of $45 million, partly offset
by a drop of $22.4 million in non-cash working capital items and in the long-
term deferred and prepaid income.

A description of Cogeco Cable's share data as of May 31, 2005 is
presented in the table below:



Number of shares/ Amount
options ($000s)
---------- ----------
Common Shares
Multiple voting shares 15,691,100 98,346
Subordinate voting shares 24,292,314 531,846

Options to Purchase Subordinate Voting Shares
Outstanding options 591,895
Exercisable options 323,320


In the normal course of business, Cogeco Cable has incurred financial
obligations, primarily in the form of long-term debt, operating and capital
leases and guarantees. Cogeco Cable's obligations have not materially changed
since August 31, 2004 and are described in the 2004 annual MD&A.

FOREIGN EXCHANGE MANAGEMENT

Cogeco Cable has entered into cross-currency swap agreements to fix the
liability for interest and principal payments on its US$150 million Senior
Secured Notes. These agreements have the effect of converting the US interest
coupon rate of 6.83% per annum to an average Canadian dollar fixed interest
rate of 7.254% per annum. The exchange rate applicable to the principal
portion of the debt has been fixed at CDN$1.5910. Amounts due under the
US$150 million Senior Secured Notes Series A increased by CDN$3.3 million
during the third quarter due to the Canadian dollar's depreciation. Since the
Senior Secured Notes Series A are fully hedged, the fluctuation is fully
offset by a variation in deferred credit described in Note 4 of the third
quarter interim financial statements. The $50.4 million deferred credit
represents the difference between the quarter-end exchange rate and the
exchange rate on the cross currency swap agreements, which determine the
liability for interest and principal payments on the Senior Secured Notes
Series A.



FISCAL 2005 AND FISCAL 2006 PRELIMINARY OUTLOOK

($ million except customer data)
Revised Revised
Projections Projections
Preliminary in the third in the second
Projections quarter quarter
Fiscal 2006 Fiscal 2005 Fiscal 2005
----------- ----------- -----------
Financial Guidelines
Revenue 583 to 588 553 to 554 550 to 555
Operating income
before amortization 237 to 242 226 220 to 222
Operating margin 40 to 41% 40 to 41% About 40%
Financial expense 55 56 56
Amortization 115 122 122
Net income 41 25 22
Capital expenditures
and deferred charges 132 119 119
Free Cash Flow 49 to 55 45 to 50 45 to 50

Customer Addition
Guidelines
Basic service 0 to 3,000 0 to 2,500 0 to 2,500
High-speed
Internet 32,000 to 37,000 37,000 to 41,000 32,000 to 37,000
Digital
terminals 60,000 to 65,000 55,000 to 60,000 55,000 to 60,000
Digital video
service 47,000 to 52,000 46,000 to 51,000 46,000 to 51,000
Digital telephony
service 7,000 to 8,000 500 to 1,000 N/A


Fiscal 2005 Financial Guidelines

The Corporation is revising its financial projections for the 2005 fiscal
year in light of the very favourable third quarter results. Accordingly,
revenues have been projected between $553 million and $554 million, and the
operating income before amortization and the net income are expected to be
higher to reach $226 million and $25 million, respectively. Furthermore, high-
speed Internet customer additions have been revised upward.

The June and August 2005 rate increases will not have any significant
impact on the fourth quarter results, since billing is spread over a one-month
period. Monthly rate increases of at most $3 per customer and averaging
$0.50 per basic-service customer were announced to take effect on June 15 in
Ontario and on August 1 in Québec. As a result of these increases, the basic
monthly rate is now $24.99 in the large majority of networks in Ontario, and
the number of different basic rates will drop from 22 to 7, ranging
essentially between $20 and $27.50 per month, in Québec. The monthly rate for
certain bundle services has increased by $1 in Ontario, and other limited rate
increases for selective tier services will be implemented in Québec. On an
annual basis, these rate increases should result in additional revenues of
approximately $5 million.

Fiscal 2006 Preliminary Financial Outlook

The increase of approximately 5% to 6% in revenues should result mainly
from expanded penetration of high-speed Internet service in 2005 and 2006,
with the balance, primarily from the rate increases implemented in June and
August, increased penetration of digital services and from the launch of
digital telephony. Cogeco Cable plans to expand its basic service clientele
through consistently effective marketing, competitive product offers and
superior customer service. As the penetration of high-speed Internet service
and digital service increases, the demand for these products will likely slow
down but should be compensated by increased demand for digital telephony
services.

Cogeco Cable expects to achieve an operating margin similar to that of
the 2005 fiscal year, i.e. approximately 40 to 41%, despite the launch of
digital telephony in most of its networks. Growth in revenues and sustained
cost control should help achieve an increase in operating income before
amortization of approximately 6% to 7%.

Cogeco Cable expects the amortization of capital assets and deferred
charges to fall by $7 million, mainly due to a reduction in the amortization
of subsidies for residential equipments, digital terminals and cable modems.
Management expects that the cash flows generated by operations will finance
the capital expenditures and the deferred charges, expected to amount to
$132 million. The Corporation expects to generate Free Cash Flow in the order
of $49 to $55 million, i.e. an increase of approximately $5 million compared
to the forecasts for 2005. An increase in Free Cash Flow is anticipated
despite the launch of digital telephony in most of its networks during the
2006 fiscal year. The Free Cash Flow that is generated should be used
primarily to reduce Indebtedness, thus improving the Corporation's leverage
ratios. Given the anticipated decrease in Indebtedness, the financial expense
will likely decline by 1%. Net income of approximately $41 million should be
earned as a result of growth in operating income before amortization exceeding
the increase in fixed charges.

The rise in capital expenditures and in deferred charges compared to the
2005 fiscal year will result primarily from an increase of approximately
$8.5 million associated with the upgrade program, mainly for the expansion of
the bandwidth to 750 MHz in Ontario and 550 MHz in Québec. The capital
expenditures budget also includes an amount of approximately $5 million for
telephony.

RISK FACTORS AND UNCERTAINTIES

On June 29, 2005, Cogeco Cable signed two new collective agreements,
expired since December 31, 2002, with its technical and office personnel in
Québec, which represents 25% of the Corporation's total staff. These new
collective agreements will expire on December 31, 2008.

There have been no other significant changes in the risk factors and
uncertainties facing Cogeco Cable as described in the Corporation's 2004
annual MD&A and in the second quarterly report of 2005.

ADDITIONAL INFORMATION

This MD&A was prepared on July 8, 2005. Additional information relating
to the Corporation, including its Annual Information Form, is available on the
SEDAR Web site at www.sedar.com .

ABOUT COGECO CABLE

Cogeco Cable is the second largest cable operator in both Ontario and
Québec, and ranks fourth in Canada in terms of the number of basic-service
customers served. Cogeco Cable provides about 1,346,000 revenue-generating
units to approximately 1,440,000 households in its service territory. Through
its two-way broadband cable infrastructure, Cogeco Cable provides its
residential and commercial customers with analogue and digital video and audio
services, high-speed Internet access as well as digital telephony service.
Cogeco Cable's subordinate voting shares are listed on the Toronto Stock
Exchange (CCA.SV).



Analyst Conference Call: Monday July 11, 2005, at 11:00 a.m.
EDST By Internet at www.cogeco.ca/investors
By telephone: 1 800 479-9001 (confirmation
code 9584968)
Media are invited to participate in listen
mode only. Re-broadcast of the call available
until July 18: 1 888 203-1112 (confirmation
code 9584968)


Supplementary Quarterly Financial Information


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

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

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

Net income (loss)
per share $ 0.21 $ 0.05 $ 0.14 $ 0.01



Quarters ended November 30 August 31
---------------------- ----------------------
($000, except percentages
and per share data) 2004 2003 2004 2003

Revenue $ 135,766 $ 129,489 $ 133,053 $ 126,483
Operating income before
amortization 53,194 47,214 54,290 48,249
Operating margin 39.2% 36.5% 40.8% 38.1%
Amortization 32,244 43,313 32,476 28,989
Financial expense 13,894 14,905 13,871 14,704
Income taxes 3,229 30,099 1,474 2,390
Net income (loss) 3,827 (41,103) 6,469 2,166

Cash flow from operations 39,192 31,882 41,025 32,573

Net income (loss)
per share $ 0.10 $ (1.03) $ 0.16 $ 0.05



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 high-speed Internet customers is generally lower
in the third quarter, mainly because students leave their campus at the end of
the school year. Cogeco Cable offers its services in several university and
college towns such as Kingston, Windsor, St. Catharines, Hamilton,
Peterborough, Trois-Rivières and Rimouski. Furthermore, the fourth quarter's
operating margin is usually higher as lower management fees are paid to COGECO
Inc. Under a Management Agreement, Cogeco Cable pays a fee equal to 2% of its
total revenue subject to a maximum amount. Since the maximum amount was
reached early in the fourth quarter of fiscal 2004 and 2003, Cogeco Cable paid
lower management fees as a result.

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



COGECO CABLE INC.
Customer Statistics
May 31, August 31,
2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Homes Passed
Ontario 982,550 972,964
Québec 457,529 450,292
-------------------------------------------------------------------------
1,440,079 1,423,256
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue-Generating Units
Ontario 974,704 917,551
Québec 371,227 354,348
-------------------------------------------------------------------------
1,345,931 1,271,899
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic-Service Customers
Ontario 587,687 584,686
Québec 239,637 239,169
-------------------------------------------------------------------------
827,324 823,855
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Discretionnary-Service Customers
Ontario 466,594 463,217
Québec 181,752 178,022
-------------------------------------------------------------------------
648,346 641,239
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Pay-TV Service Customers
Ontario 81,680 80,567
Québec 34,400 32,246
-------------------------------------------------------------------------
116,080 112,813
-------------------------------------------------------------------------
-------------------------------------------------------------------------
High-Speed Internet Service Customers
Ontario 225,553 198,197
Québec 49,320 41,411
-------------------------------------------------------------------------
274,873 239,608
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Digital Customers
Ontario 161,464 134,668
Québec 82,270 73,768
-------------------------------------------------------------------------
243,734 208,436
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Digital Terminals
Ontario 199,539 161,731
Québec 88,423 78,340
-------------------------------------------------------------------------
287,962 240,071
-------------------------------------------------------------------------
-------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF INCOME

Three months ended Nine months ended
May 31, May 31,
-------------------------------------------------------------------------
(In thousands of dollars,
except per share data) 2005 2004 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenue
Service $ 139,522 $ 130,461 $ 411,647 $ 387,148
Equipment 549 1,903 2,579 6,279
-------------------------------------------------------------------------
140,071 132,364 414,226 393,427

Operating costs 79,054 78,419 239,239 236,708
Management fees -
COGECO Inc. 2,707 2,616 8,186 7,763
-------------------------------------------------------------------------
Operating income before
amortization 58,310 51,329 166,801 148,956
Amortization 31,396 32,070 95,628 107,738
-------------------------------------------------------------------------
Operating income 26,914 19,259 71,173 41,218
Financial expense 13,954 14,414 41,688 44,086

Income (loss) before
income taxes 12,960 4,845 29,485 (2,868)
Income taxes (note 3) 4,715 2,993 11,800 35,795
-------------------------------------------------------------------------
Net income (loss) $ 8,245 $ 1,852 $ 17,685 $ (38,663)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss)
per share (note 6)
Basic and diluted $ 0.21 $ 0.05 $ 0.44 $ (0.97)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

Nine months ended May 31,
-------------------------------------------------------------------------
(In thousands of dollars) 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited)

Balance at beginning
As previously reported $ 33,880 $ 95,677
Changes in accounting policies (note 2d)) - (29,603)
-------------------------------------------------------------------------
As restated 33,880 66,074
Net income (loss) 17,685 (38,663)
Dividends on multiple voting shares (942) -
Dividends on subordinate voting shares (1,456) -
-------------------------------------------------------------------------
Balance at end $ 49,167 $ 27,411
-------------------------------------------------------------------------
-------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEETS

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

Assets

Current
Accounts receivable $ 27,644 $ 31,039
Prepaid expenses 2,769 4,535
-------------------------------------------------------------------------
30,413 35,574
-------------------------------------------------------------------------
Fixed assets 680,068 687,960
Deferred charges 39,126 48,293
Customer base 989,552 989,552
-------------------------------------------------------------------------
$1,739,159 $1,761,379
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and Shareholders' equity

Liabilities

Current
Bank indebtedness $ 16,812 $ 5,410
Accounts payable and accrued liabilities 78,244 109,402
Income tax liabilities 1,179 844
Deferred and prepaid income 24,897 22,778
Current portion of long-term debt (note 4) 2,557 2,455
-------------------------------------------------------------------------
123,689 140,889
-------------------------------------------------------------------------

Long-term debt (note 4) 717,818 750,268
Deferred and prepaid income 10,763 9,659
Pension plan liabilities and accrued
employee benefits 2,067 1,506
Future income tax liabilities 204,927 195,523
-------------------------------------------------------------------------
1,059,264 1,097,845
-------------------------------------------------------------------------

Shareholders' equity

Capital stock (note 5) 630,192 629,416
Retained earnings 49,167 33,880
Contributed surplus - stock-based compensation 536 238
-------------------------------------------------------------------------
679,895 663,534
-------------------------------------------------------------------------
$1,739,159 $1,761,379
-------------------------------------------------------------------------
-------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOW

Three months ended Nine months ended
May 31, May 31,
-------------------------------------------------------------------------
(In thousands of dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Cash flow from operating
activities
Net income (loss) $ 8,245 $ 1,852 $ 17,685 $ (38,663)
Items not affecting cash
and cash equivalents
Amortization 31,396 32,070 95,628 107,738
Amortization of deferred
financing costs 242 335 717 988
Future income taxes
(note 3) 3,269 2,068 9,404 33,037
Other 410 268 995 653
-------------------------------------------------------------------------
Cash flow from operations 43,562 36,593 124,429 103,753
Changes in non-cash working
capital items and long-term
deferred and prepaid income
(note 7a)) 15 2,719 (22,439) (25,944)
-------------------------------------------------------------------------
43,577 39,312 101,990 77,809
-------------------------------------------------------------------------

Cash flow from investing
activities
Acquisition of fixed assets
(note 7b)) (20,903) (18,624) (69,286) (50,281)
Increase in deferred
charges (3,229) (3,830) (8,566) (14,607)
Other 17 - 44 -
-------------------------------------------------------------------------
(24,115) (22,454) (77,808) (64,888)
-------------------------------------------------------------------------

Cash flow from financing
activities
Increase in bank
indebtedness 1,627 233 11,402 9,381
Repayment of long-term
debt (20,371) (17,295) (33,908) (22,688)
Issue of subordinate
voting shares 82 204 722 386
Dividends on multiple
voting shares (314) - (942) -
Dividends on subordinate
voting shares (486) - (1,456) -
-------------------------------------------------------------------------
(19,462) (16,858) (24,182) (12,921)
-------------------------------------------------------------------------

Net change in cash and
cash equivalents and
cash and cash equivalents
at end $ - $ - $ - $ -
-------------------------------------------------------------------------
-------------------------------------------------------------------------

See supplemental cash flow information in note 7.



Notes to Consolidated Financial Statements
May 31, 2005
(amounts in tables are in thousands of dollars, except per share data)

1. Basis of Presentation

In the opinion of management, the accompanying unaudited interim
consolidated financial statements, prepared in accordance with Canadian
generally accepted accounting principles, contain all adjustments necessary to
present fairly the financial position of Cogeco Cable Inc. as at May 31, 2005
and August 31, 2004 as well as its results of operations and its cash flow for
the three and nine month periods ended May 31, 2005 and 2004.

While management believes that the disclosures presented are adequate,
these unaudited interim consolidated financial statements and notes should be
read in conjunction with Cogeco Cable Inc.'s annual consolidated financial
statements. These unaudited interim consolidated financial statements follow
the same accounting policies as the most recent annual consolidated financial

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

2. Recent accounting pronouncements and changes in accounting policies

a) Asset retirement obligations

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

b) Variable Interest Entities

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

c) Amortization of long-term assets

In 2003, the Corporation reviewed the useful life of its decoders and
modems, commonly referred to as home terminal devices, and of certain other
long-term assets. The useful life of decoders was changed from seven to five
years while the useful life of modems was changed from seven to three years.
These changes in accounting estimates, applied prospectively, increased
amortization expense by $14.0 million for the nine month period ended
May 31, 2004.

d) Revenue recognition

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

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



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

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

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

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


These changes have been applied retroactively and had the following
impact on the Corporation's consolidated statements of income for the three
and nine month periods ended May 31, 2004:



-------------------------------------------------------------------------
Three months ended Nine months ended
May 31, 2004 May 31, 2004
-------------------------------------------------------------------------
Before After Before After
restatement restatement restatement restatement
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenue $ 130,294 $ 132,364 $ 387,405 $ 393,427
Operating costs 75,139 78,419 224,974 236,708
Amortization 30,972 32,070 104,566 107,738
Income taxes 3,709 2,993 40,518 35,795
Net Income (loss) 3,444 1,852 (34,502) (38,663)
-------------------------------------------------------------------------
Earnings (loss) per share
Basic and diluted $ 0.09 $ 0.05 $ (0.86) $ (0.97)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

3. Income taxes

Three months ended Nine months ended
May 31, May 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
(unaudited) (unaudited) (unaudited) (unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Current $ 1,446 $ 925 $ 2,396 $ 2,758
Future 3,269 2,068 9,404 33,037
-------------------------------------------------------------------------
$ 4,715 $ 2,993 $ 11,800 $ 35,795
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

Three months ended Nine months ended
May 31, May 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Income tax at combined
income tax rate of
34.96 % (35.31 %
in 2004) $ 4,531 $ 1,711 $ 10,308 $ (1,013)
Loss or income subject to
lower or higher tax rates (279) 213 (14) 690
Increase in income taxes
as a result of change in
substantially enacted tax
rates - - - 32,483
Large corporation tax 367 925 1,317 2,775
Other 96 144 189 860
-------------------------------------------------------------------------
Income tax at effective
income tax rate $ 4,715 $ 2,993 $ 11,800 $ 35,795
-------------------------------------------------------------------------
-------------------------------------------------------------------------

4. Long-term debt

-------------------------------------------------------------------------
Maturity Interest May 31, August 31,
rate 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (audited)
Parent company
Term Facility 2007 3.54%(1) $ 25,000 $ 58,000
Senior Secured Debentures
Series 1 2009 6.75 150,000 150,000
Senior - Secured Notes
Series A - US
$150 million 2008 6.83 (2) 188,280 196,950
Series B 2011 7.73 175,000 175,000
Second Secured Debentures
Series A 2007 8.44 125,000 125,000
Deferred credit (3) 2008 - 50,370 41,700

Subsidiaries
Obligations under capital
leases 2009 5.87 - 9.11 3,805 3,153
Preferred shares (4) 2006 - 2,920 2,920
-------------------------------------------------------------------------
720,375 752,723
Less current portion 2,557 2,455
-------------------------------------------------------------------------
$ 717,818 $ 750,268
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Average interest rate on debt as of May 31, 2005, 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) The deferred credit represents the amount which would have been
payable as at May 31, 2005 and August 31, 2004 under cross-currency
swaps entered into by the Corporation to hedge Senior Secured Notes
Series A denominated in US dollars.
(4) 2,920,000 preferred shares, 5.5% cumulative dividend, redeemable and
retractable to a maximum of $1,400,000 annually.


5. Capital Stock

Authorized, an unlimited number

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

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

Multiple voting shares, 10 votes per share.

Subordinate voting shares, 1 vote per share.



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

15,691,100 multiple voting shares $ 98,346 $ 98,346
24,292,314 subordinate voting shares
(24,232,815 as at August 31, 2004) 531,846 531,070
-------------------------------------------------------------------------
$ 630,192 $ 629,416
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

Nine months ended Twelve months ended
May 31, 2005 August 31, 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (audited)
-------------------------------------------------------------------------
Number of Amount Number of Amount
shares shares
-------------------------------------------------------------------------
Balance at beginning 24,232,815 $ 531,070 24,190,043 $ 530,669
Shares issued for cash
under the Employee
Stock Purchase Plan
and the Stock Option
Plan 59,499 722 42,772 401
Compensation costs
previously recorded
in contributed surplus
for options exercised - 54 - -
-------------------------------------------------------------------------
Balance at end 24,292,314 $ 531,846 24,232,815 $ 531,070
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Stock-based plans

The Corporation established for the benefit of its employees and those of
its subsidiaries, an Employee Stock Purchase Plan and a Stock Option Plan for
certain executives which are described in the financial statements for the
year ended August 31, 2004. During the first three quarters, the Corporation
granted 140,766 stock options (159,580 in 2004) with an exercise price of
$21.50 ($15.70 to $18.12 in 2004) of which 38,397 stock options (48,037 in
2004) were granted to COGECO Inc. employees. The Corporation records
compensation expense for options granted on or after September 1, 2003. As a
result, a compensation expense of $133,000 and $352,000 ($63,000 and $175,000
in 2004) was recorded for the three and nine month periods ended May 31, 2005.
If compensation cost had been recognized using the fair value-based method at
the grant date for options granted between September 1, 2001 and August 31,
2003, the Corporation's net income (loss) and earnings (loss) per share for
the three and nine month periods ended May 31, 2005 and 2004 would have been
reduced (increased) to the following pro forma amounts:



Three months ended Nine months ended
May 31, May 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Net income (loss)
As reported $ 8,245 $ 1,852 $ 17,685 $ (38,663)
Pro forma 8,149 1,756 17,397 (38,951)

Basic earnings (loss)
per share
As reported $ 0.21 $ 0.05 $ 0.44 $ (0.97)
Pro forma 0.20 0.04 0.44 (0.98)

Diluted earnings (loss)
per share
As reported $ 0.21 $ 0.05 $ 0.44 $ (0.97)
Pro forma 0.20 0.04 0.43 (0.98)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


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



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


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

As at May 31, 2005, the Corporation had outstanding stock options
providing for the subscription of 591,895 subordinate voting shares. These
stock options can be exercised at various prices ranging from $7.05 to $40.75
and at various dates up to October 14, 2014.

6. Earnings (loss) per share

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



Three months ended Nine months ended
May 31, May 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Net income (loss) $ 8,245 $ 1,852 $ 17,685 $ (38,663)

Weighted average number
of multiple voting and
subordinate voting
shares outstanding 39,976,292 39,909,895 39,958,414 39,893,715
Effect of dilutive
stock options (1) 158,430 113,555 144,420 -
-------------------------------------------------------------------------
Weighted average number
of diluted multiple
voting and subordinate
voting shares
outstanding 40,134,722 40,023,450 40,102,834 39,893,715
-------------------------------------------------------------------------

Earnings (loss) per share
Basic and diluted $ 0.21 $ 0.05 $ 0.44 $ (0.97)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) The weighted average dilutive potential number of subordinate voting
shares, which were antidilutive for the nine month period ended
May 31, 2004 amounted to 101,741 shares. Stock options to purchase
19,906 shares (203,681 in 2004) in the nine month period ended
May 31, 2005 were outstanding, but were not included in the
computation of diluted earnings per share since the exercise price of
the stock options was greater than the average share price of the
subordinate voting shares and, therefore, the effect would have been
antidilutive.

7. Statements of cash flow

a) Changes in non-cash working capital items and long-term deferred and
prepaid income

Three months ended Nine months ended
May 31, May 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Accounts receivable $ 4,530 $ 2,461 $ 3,395 $ 2,982
Prepaid expenses 1,071 625 1,766 1,097
Accounts payable and
accrued liabilities (6,506) (1,518) (31,158) (33,511)
Income tax liabilities 1,120 868 335 1,620
Deferred and prepaid income (200) 283 3,223 1,868
-------------------------------------------------------------------------
$ 15 $ 2,719 $(22,439) $ (25,944)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

b) Other information

Three months ended Nine months ended
May 31, May 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Fixed assets acquisitions
through capital leases $ 1,560 $ 1,534 $ 1,560 $ 1,660
Interest paid 16,026 16,514 43,383 45,541
Income taxes paid 326 57 2,061 1,138
-------------------------------------------------------------------------
-------------------------------------------------------------------------


8. Employees future benefits

The Corporation and its subsidiaries offer their employees defined
contributory benefit pension plans, a defined contribution pension plan or a
collective registered retirement savings plan which are described in the
financial statements for the year ended August 31, 2004. The total expenses
related to these plans are as follows:



Three months ended Nine months ended
May 31, May 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Defined contributory
benefit pension plans $ 156 $ 123 $ 452 $ 369
Defined contribution
pension plan and
collective registered
retirement savings plan 270 248 932 964
-------------------------------------------------------------------------
$ 426 $ 371 $ 1,384 $ 1,333
-------------------------------------------------------------------------
-------------------------------------------------------------------------


9. Comparative figures

Certain comparative figures have been reclassified in order to conform to
the presentation adopted in the current period.

Contact Information

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

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