Cogeco Câble inc.
TSX : CCA

Cogeco Câble inc.

April 09, 2009 07:30 ET

Solid Growth in Canadian Operations Lead Cogeco Cable to Strong Results Despite a Non-Cash Impairment in its European Operations Intangible Assets

MONTREAL, QUEBEC--(Marketwire - April 9, 2009) - Today, Cogeco Cable Inc. (TSX:CCA) ("Cogeco Cable" or the "Corporation") announced its financial results for the second quarter and first six months of fiscal 2009, ended February 28, 2009.

For the second quarter and first six months of fiscal 2009:

- Consolidated revenue increased by 15% to $304.9 million, and by 16.9% to $604.4 million, respectively;

- Consolidated operating income before amortization(1) grew by 15.5% to reach $125.5 million, and by 19% to reach $245.2 million, respectively;

- In the second quarter of fiscal 2009, a non-cash impairment loss of the Corporation's investment in Cabovisao was recorded in the amount of $399.6 million as a result of recurring competitive pressure resulting in subscriber losses that are significantly more important than originally anticipated. Net of related income taxes, the impairment loss amounted to $383.6 million;

- Consolidated net loss amounted to $358.6 million in the second quarter compared to net income of $49.9 million for the same period of the prior year, and net loss amounted to $335 million for the first six months compared to net income of $70.3 million in the prior year. Excluding the impairment loss described above and the income tax adjustment of $24 million related to the reduction of federal enacted income tax rates in the second quarter of the prior year(1) , consolidated net income would have amounted to $25.1 million and $48.6 million for the quarter and first six months, respectively, a decrease of $0.8 million, or 3.3% compared to $25.9 million for second quarter of fiscal 2008, and an increase of $2.3 million, or 5.1%, compared to $46.3 million for the first six months of the prior year;

- Free cash flow(1) reached $31 million for the quarter and $48.8 million for the first six months, increases of 60.4% and 19.2%, respectively, over the same periods of the prior year;

- Operating margin(1) remained essentially the same for the quarter at 41.1% compared to 41% in the prior year, and increased to 40.6% from 39.8% for the first six months of the fiscal year;

- Revenue-generating units ("RGU")(2) grew by 25,626 and 78,340 net additions in the quarter and first six months, for a total of 2,795,214 RGU at February 28, 2009.

"Our performance in the second quarter rests on the solid performance of our Canadian operations as we have maintained our focus and increased the number of RGU by 47,577 units in the quarter, for total net additions of 113,040 RGU so far this year. Our commercial activities, the results of which are in line with our expectations, continue to constitute a wonderful growth opportunity for Cogeco Cable as shown by the 10-year, $39 million deal with the Toronto District School Board announced in December 2008 by Cogeco Data Services. However, in our European operations, Cabovisao's competitive position continued to deteriorate in the second quarter due to the unfavourable economic climate and recurring intense customer promotions and advertising initiatives from competitors in the Portuguese market during the latter part of the second quarter. In accordance with current accounting standards, management considers that this situation, as evidenced by the RGU and revenue decline, is more significant and persistent than expected, resulting in a decrease in the value of Cogeco Cable's investment in the Portuguese subsidiary. Consequently, the Corporation recorded a non-cash impairment loss of $399.6 million on the net value of the assets acquired. Cogeco Cable is in the process of implementing new marketing and other operating initiatives to improve the results of the European operations", declared Louis Audet, President and CEO of Cogeco Cable.



(1) The indicated terms do not have standard definitions prescribed by
Canadian Generally Accepted Accounting Principles ("GAAP") and
therefore, may not be comparable to similar measures presented by
other companies. For more details, please consult the "Non-GAAP
financial measures" section of the Management's discussion and
analysis.

(2) Represents the sum of Basic Cable, High Speed Internet ("HSI"),
Digital Television and Telephony service customers.


FINANCIAL HIGHLIGHTS


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Quarters ended Six months ended
($000, except February February February February
percentages 28, 29, 28, 29,
and per 2009 2008(1)Change 2009 2008(1)Change
share data) $ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 304,920 265,102 15.0 604,358 516,935 16.9
Operating
income
before
amortization
(2) 125,461 108,658 15.5 245,184 205,960 19.0
Operating
income 58,817 52,669 11.7 114,618 97,284 17.8
Impairment of
goodwill and
intangible
assets 399,648 - - 399,648 - -
Net income
(loss) (358,569) 49,911 - (335,018) 70,274 -
Net income
excluding
the impairment
loss and the
income tax
adjustment(2) 25,061 25,909 (3.3) 48,612 46,272 5.1

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Cash flow from
operating
activities 118,440 90,991 30.2 146,914 136,336 7.8

Cash flow from
operations(2) 99,086 85,273 16.2 190,696 165,026 15.6
Capital
expenditures
and increase
in deferred
charges 68,121 65,968 3.3 141,934 124,112 14.4
Free cash
flow(2) 30,965 19,305 60.4 48,762 40,914 19.2

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Earnings (loss)
per share
Basic (7.39) 1.03 - (6.90) 1.45 -
Diluted (7.39) 1.02 - (6.90) 1.44 -
Earnings per
share excluding
the impairment
loss and
the income tax
adjustment(2)
Basic 0.52 0.53 (1.9) 1.00 0.96 4.2
Diluted 0.51 0.53 (3.8) 1.00 0.95 5.3
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of
foreign exchange gains or losses from operating costs to financial
expense.

(2) The indicated terms do not have standardized definitions prescribed by
Canadian Generally Accepted Accounting Principles ("GAAP") and
therefore, may not be comparable to similar measures presented by
other companies. For more details, please consult the "Non-GAAP
financial measures" section of the Management's discussion and
analysis.


FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to Cogeco Cable's future outlook and anticipated events, business, operations, financial performance, financial condition or 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 the Corporation's future operating results and economic performance and its 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 Cogeco Cable believes are reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently available to the Corporation, they may prove to be incorrect. The Corporation cautions the reader that the current adverse economic conditions make forward-looking information and the underlying assumptions subject to greater uncertainty and that, consequently, they may not materialize, or the results may significantly differ from the Corporation's expectations. It is impossible for Cogeco Cable to predict with certainty the impact that the current economic downturn may have on future results. Forward-looking information is also subject to certain factors, including risks and uncertainties (described in the "Uncertainties and main risk factors" section of the Corporation's 2008 annual Management's Discussion and Analysis (MD&A) that could cause actual results to differ materially from what Cogeco Cable currently expects. 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 the Corporation's control. Therefore, future events and results may vary significantly from what management currently foresee. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While management may elect to, the Corporation is under no obligation (and expressly disclaims any such obligation), and does not undertake to update or alter this information before the next quarter.

This analysis should be read in conjunction with the Corporation's consolidated financial statements, and the notes thereto, prepared in accordance with Canadian Generally Accepted Accounting Principles and the MD&A included in the Corporation's 2008 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 Inc.'s ("Cogeco Cable" or the "Corporation") objectives are to improve profitability and create shareholder value. The strategies for reaching those objectives are sustained growth through the diversification and the improvement of products, services, clientele and territories, as well as the continuous improvement of networks and equipment and tight controls over costs and business processes. The Corporation measures its performance, with regard to these objectives by monitoring revenue growth, revenue-generating units ("RGU")(1) growth and free cash flow(2). Below are the recent achievements in furthering Cogeco Cable's objectives.



Continuous improvement of the service offering and expansion of the
customer base

Canadian operations

- Digital Television service:
- During the second quarter, the following Digital and High Definition
("HD") Television services were launched:
- TSN2 HD, Teletoon Retro and Sportsnet East HD in Quebec.

- Telephony service:
- During the second quarter, the Telephony service was launched in the
following cities:
- Callander, Ingleside, Long Sault and Lancaster, Ontario;
- Daveluyville, Chambord, Desbiens, Lac Bouchette, Metabetchouan,
Normandin, St-Ferdinand-d'Halifax, St-Gedeon, Tring Jonction,
Amqui, Batiscan, Causapscal, Lac-au-Saumon, St-Stanislas, St-Ulric,
Ste-Anne-de-la-Perade, Sayabec et Val-Brillant, Quebec.

- High Speed Internet service :
- Launch of a new High Speed Internet ("HSI") package, HSI Lite Plus, in
Ontario and in Quebec with download speeds of up to 3 Mbps and a
monthly load bit capacity of 20 GB.

- Cogeco Data Services:
- During the second quarter, announcement of a 10-year, $39 million
contract with the Toronto District School Board ("TDSB").

European operations

- Bundled offers:
- Cabovisao - Televisao por Cabo, S.A. ("Cabovisao") realigned some of
its bundle offers for certain customers and is currently assessing
improvements to its retention strategies;

- Digital Television service:
- Continued deployment of Cabovisao's Digital Television service;
- Launch of SET channel, Sony Entertainment, Animax, Benfica TV, Disney
Channel and Disney Cinemagic;
- Launch of a new HD Set Top Box with Digital Video recording
capabilities (HD + DVR).

- High Speed Internet service:
- During the second quarter, Cabovisao ceased charging for excess
consumption for HSI customers.

Continuous improvement of networks and equipment

- During the first six months of fiscal 2009, the Corporation invested
approximately $48.3 million in its infrastructure including head-ends
and upgrades and rebuilds.

Tight control over costs and business processes

- For the first six months of the 2009 fiscal year, consolidated operating
costs excluding management fees payable to COGECO Inc. increased by
15.8%, while revenue grew by 16.9% for the same periods;
- Cabovisao continued to improve its business processes, and at the end of
the second quarter, reinforced controls over its doubtful accounts;
- The design of internal controls over financial reporting as per National
Instrument 52-109 is still ongoing. As discussed in the 2008 annual
MD&A, the Corporation had identified certain material weaknesses in the
design of internal controls over financial reporting and has been
working to improve the design and efficiency of internal controls on
some significant processes during the quarter. The documentation and
remediation of key internal controls are progressing normally.


(1) Represents the sum of Basic Cable, HSI, Digital Television and
Telephony service customers.

(2) Free cash flow does not have a standardized definition prescribed by
Canadian Generally Accepted Accounting Principles ("GAAP") and
therefore, may not be comparable to similar measures presented by

other companies. For more details, please consult the "Non-GAAP
financial measures" section.

Effective management of capital

- On January 22, 2009, the Corporation entered into a swap agreement with
a financial institution to fix the floating benchmark interest rate with
respect to the Euro-denominated Term Loan facilities for a notional
amount of EUR 111.5 million. The interest rate swap to hedge the Term
Loans has been fixed at 2.08% until their maturity on July 28, 2011. The
notional value of the swap will decrease in line with the amortization
schedule of the Term Loans. In addition to this fixed interest rate,
Cogeco Cable will continue to pay the applicable margin on these Term
Loans in accordance with its Term Facility. At February 28, 2009, 76% of
Cogeco Cable's debt is at fixed interest rates;

- On October 1, 2008, the Corporation completed, pursuant to a private
placement, the issue of 7.00% Senior Secured Notes Series A for US$190
million maturing October 1, 2015, and 7.60% Senior Secured Notes Series
B for $55 million maturing October 1, 2018. The Corporation also entered
into cross-currency swap agreements to fix the liability for interest
and principal payments on the total of its Senior Secured Notes Series
A. Interest on the Notes is payable semi-annually on April 1 and October
1 of each year commencing April 1, 2009. The aggregate gross proceeds
from the issuance of these Notes amounted to approximately $257 million.
Net proceeds of approximately $255 million, after underwriters' fees and
other expenses, were used to repay maturing debt and reduce bank
indebtedness.


RGU growth

During the first six months ended February 28, 2009, the consolidated number of RGU increased by 78,340, or 2.9%, to reach 2,795,214 RGU, on target to attain the Corporation's RGU growth projections of 100,000 net additions issued on October 29, 2008 and revised on April 8, 2009, which represents approximately 3.7%, for the fiscal year ending August 31, 2009. Please consult the "Fiscal 2009 financial guidelines" section for further details.

Revenue growth

Second-quarter revenue increased by $39.8 million, or 15%, when compared to the same period of the prior year, to reach $304.9 million. During the first six months of 2009, revenue increased by $87.4 million, or 16.9%, to reach $604.4 million. Due to the difficult environment in the Portuguese market, management has revised downward its guidelines and now expect that revenue should reach $1,205 million a decrease of $5 million compared to its original guidelines. Please consult the "Fiscal 2009 financial guidelines" section for further details.

Free cash flow

In the second quarter and first six months, Cogeco Cable generated free cash flows of $31 million and of $48.8 million compared to $19.3 million and $40.9 million, respectively, for the same periods last year, representing increases of 60.4% and 19.2% . These free cash flow increases resulted mainly from an increase in cash flow from operations(1), resulting primarily from the improvement of the Corporation's operating income before amortization(1), partly offset by an increase in capital expenditures and by the impact of the rapid appreciation of the US dollar over the Canadian dollar in the first six months of the year. Due to the difficult environment in the Portuguese market partly offset by the appreciation of the Euro currency over the Canadian dollar, management has revised downward its guidelines and now expect that free cash flow should reach $80 million, a decrease of $10 million compared to its original guidelines. Please consult the "Fiscal 2009 financial guidelines" section for further details.

IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS

In the second quarter of fiscal 2009, the competitive position of Cabovisao in the Iberian Peninsula further deteriorated due to the continuing unfavourable economic climate and recurring intense customer promotions and advertising initiatives from competitors in the Portuguese market at the end of the second quarter. Please refer to "European operations" section for further details. In accordance with current accounting standards, management considers that the continued RGU and local currency revenue decline are more significant and persistent than expected, resulting in a decrease in the value of the Corporation's investment in the Portuguese subsidiary. As a result, the Corporation tested goodwill and all long-lived assets for impairment at February 28, 2009.

Goodwill has to be tested for impairment using a two step approach. The first step consists of determining whether the fair value of the reporting unit exceeds the net carrying amount of that reporting unit, including goodwill. In the event that the net carrying amount exceeds the fair value, a second step is performed in order to determine the amount of the impairment loss. The Corporation has completed its impairment tests on goodwill and has concluded that goodwill was impaired at February 28, 2009. As a result, a non-cash impairment loss of $339.2 million was recorded in the second quarter. Fair value of the reporting unit was determined using the discounted cash flow method. Future cash flows are based on internal forecasts and consequently, considerable management judgement is necessary to estimate future cash flows. Significant changes in assumptions could result in further impairments of goodwill.

Intangible assets with definite lives, such as customer relationships, must be tested for impairment by comparing the carrying amount of the asset or group of assets to the expected future undiscounted cash flow to be generated by the asset or group of assets. Accordingly, the Corporation has completed its impairment test on customer relationships at February 28, 2009, and has determined that the carrying value of customer relationships exceeds its fair value. As a result, a non-cash impairment loss of $60.4 million was recorded in the second quarter.



(1) The indicated terms do not have standardized definitions prescribed by
Canadian GAAP and therefore, may not be comparable to similar measures
presented by other companies. For more details, please consult the
"Non-GAAP financial measures" section.


The impairment loss affected the Corporation's goodwill and customer relationship asset balances as follows at February 28, 2009:



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($000) $
-------------------------------------------------------------------------
(unaudited)

Goodwill 339,206
Customer relationships 60,442
Future income taxes (16,018)
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Impairment loss net of related income taxes 383,630
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OPERATING RESULTS -- CONSOLIDATED OVERVIEW

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Quarters ended Six months ended
($000, February February February February
except 28, 29, 28, 29,
percentages 2009 2008(1)Change 2009 2008(1)Change
$ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 304,920 265,102 15.0 604,358 516,935 16.9
Operating
costs 176,421 152,765 15.5 350,155 302,261 15.8
Management
fees -
COGECO Inc. 3,038 3,679 (17.4) 9,019 8,714 3.5
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Operating
income
before
amortization 125,461 108,658 15.5 245,184 205,960 19.0
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Operating
margin(2) 41.1% 41.0% 40.6% 39.8%
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.

(2) Operating margin does not have a standardized definition prescribed by
Canadian GAAP and therefore, may not be comparable to similar measures
presented by other companies. For more details, please consult the
"Non-GAAP financial measures" section.


Revenue

Fiscal 2009 second-quarter consolidated revenue improved by $39.8 million, or 15%, to reach $304.9 million, and first six-month consolidated revenue by $87.4 million, or 16.9%, to reach $604.4 million, when compared to the prior year. Driven by an increased number of RGU combined with rate increases and the acquisition of MaXess Networx®, FibreWired Burlington Hydro Communications and Cogeco Data Services (the "recent acquisitions") in the second half of fiscal 2008, second-quarter Canadian operations revenue went up by $38.5 million, or 18.8%, and for the first six months by $79.6 million, or 19.8% .

Fiscal 2009 second-quarter European operations revenue increased by $1.3 million, or 2.2%, to reach $61.2 million, and first six month revenue by $7.8 million, or 6.7%, to reach $123.3 million, compared to the same period last year. The increase is due to the strength of the Euro against the Canadian dollar, despite a RGU loss in the first six months of the year. Revenue from the European operations in the local currency for the second quarter amounted to EUR 37.6 million, a decrease of EUR 3 million, or 7.4%, and to EUR 77.8 million, a decrease of EUR 2.3 million, or 2.8%, for the first six months.

Operating costs

For the second quarter and first six months of fiscal 2009, operating costs, excluding management fees payable to COGECO Inc., increased by $23.7 million and $47.9 million to reach $176.4 million and $350.2 million, respectively, increases of 15.5% and 15.8% compared to the prior year. Operating costs increased due to the servicing of additional RGU and the impact of the recent acquisitions in Canada, and in Europe, due to the appreciation of the Euro over the Canadian dollar and an increase in the level of uncollectible customer accounts.

Operating income before amortization

Fiscal 2009 second quarter and first six-month operating income before amortization increased by $16.8 million, or 15.5%, to reach $125.5 million, and by $39.2 million, or 19%, to reach $245.2 million, respectively, as a result of various rate increases, recent acquisitions, and RGU growth generating additional revenues which outpaced operating cost increases. Cogeco Cable's second quarter operating margin remained essentially the same at 41.1% compared to 41% for the same period of the prior year. The operating margin in Canada improved to 44.2% from 42.3% which offset the decrease in the European operating margin to 29.1% from 36.6% .

For the first six months of fiscal 2009, the consolidated operating margin improved to 40.6% from 39.8% with the Canadian operating margin improving to 42.9% from 41.5% and the European operating margin decreasing to 31.4% from 34% the year before.

RELATED PARTY TRANSACTIONS

Cogeco Cable is a subsidiary of COGECO Inc., which holds 32.3% of the Corporation's equity shares, representing 82.7% of the votes attached to 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 upwards adjustments based on increases in the Consumer Price Index in Canada. Accordingly, for fiscal 2009, management fees have been set at a maximum of $9 million, which was reached in the second quarter. For fiscal 2008, management fees were set at a maximum of $8.7 million, and were fully paid in the first six months of the year.

Furthermore, Cogeco Cable granted 29,711 stock options to COGECO Inc.'s employees during the first six months of fiscal 2009, compared to 22,683 for the same period last year. During the second quarter Cogeco Cable charged COGECO Inc. an amount of $0.1 million with regards to Cogeco Cable's options granted to COGECO Inc.'s employees, for a total charge of $0.1 million in the first six months of the year, compared to $0.1 million and $0.2 million, for the same periods of the prior year. Details regarding the management agreement and stock options granted to COGECO Inc.'s employees are provided in the MD&A of the Corporation's 2008 Annual Report. There were no other material related party transactions during the quarter.



FIXED CHARGES

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Quarters ended Six months ended
($000, February February February February
except 28, 29, 28, 29,
percentages 2009 2008(1)Change 2009 2008(1)Change
$ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Amortization 66,644 55,989 19.0 130,566 108,676 20.1
Financial
expense 17,988 17,136 5.0 41,382 33,013 25.4
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(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.


The second-quarter and first six months of 2009 amortization amounted to $66.6 million and $130.6 million, respectively, compared to $56 million and $108.7 million for the same periods the year before. The increase is mainly due to additional capital expenditures arising from customer premise equipment acquisitions to sustain RGU growth, to the recent acquisitions in Canada and to the appreciation of the Euro currency over the Canadian dollar.

Second-quarter and first six-month period financial expense increased by $0.9 million and $8.4 million compared to the same periods in 2008 due to the rapid appreciation of the US dollar and the Euro over the Canadian dollar in the first six months of the year and the increase in the level of Indebtedness (defined as bank indebtedness, derivative financial instruments and long-term debt). More specifically, financial expense was adversely impacted by foreign exchange losses amounting to $0.6 million and $4.4 million in the second quarter and first half of fiscal 2009, respectively, as the majority of customer premise equipment is purchased and subsequently paid in US dollars. The losses in the first half of the year were essentially due to the unusually high US dollar volatility with the Bank of Canada closing rate fluctuating from CA$1.0620 per US dollar at August 31, 2008 to CA$1.2723 per US dollar at February 27, 2009, reaching a high of CA$1.2935 per US dollar on November 20, 2008. For the corresponding periods of the prior year, the Corporation recorded foreign exchange losses of $0.2 million and foreign exchange gains of $0.9 million,respectively.

INCOME TAXES

Fiscal 2009 second-quarter income tax expense recovery amounted to $0.3 million compared to a recovery of $14.4 million in fiscal 2008, and for the first six months, the income tax expense amounted to $8.6 million compared to a recovery of $6 million in the prior year. The income tax recoveries for the current year include a future income tax recovery of $16 million related to the impairment loss recorded in the second quarter. Prior year income tax amounts include the impact of the reduction in corporate income tax rates announced on October 16, 2007 by the Canadian federal government in its Economic Statement and considered substantively enacted on December 14, 2007 (the "income tax adjustment"). The reduction of these corporate income tax rates reduced future income tax expense by $24 million in the second quarter and first six months of fiscal 2008. Excluding the effect of the impairment loss in the current year and the tax rate reductions in the prior year, income tax expense would have amounted to $15.8 million and $24.6 million for the second quarter and first six months of fiscal 2009, compared to $9.6 million for the second quarter and $18 million for the first half of fiscal 2008. The increases in income tax expense for fiscal 2009 are mainly due to the increase in operating income before amortization surpassing that of the fixed charges.

NET INCOME (LOSS)

Fiscal 2009 second quarter net loss amounted to $358.6 million, or $7.39 per share, compared to a net income of $49.9 million, or $1.03 per share, for the same period in 2008. For the first half of fiscal 2009, net loss amounted to $335 million, or $6.90 per share, compared to a net income of $70.3 million, or $1.45 per share. Fiscal 2009 net losses are due to the impairment loss net of related income taxes of $383.6 million recorded in the second quarter of the year, as described in the "Impairment of goodwill and intangible assets" section. Furthermore, 2008 second quarter net income included the income tax adjustment of $24 million described above. Excluding the effect of the impairment loss and the income tax adjustment(1), net income would have amounted to $25.1 million, or $0.52 per share(1), and $48.6 million, or $1.00 per share, for the quarter and first six months ended February 28, 2009, respectively, compared to $25.9 million, or $0.53 per share, representing decreases of 3.3% and 1.9%, and $46.3 million, or $0.96 per share, representing increases of 5.1% and 4.2%, respectively, for the second quarter and first six months of the 2008 fiscal year. Net income reduction for the quarter has resulted from the deterioration of the financial results of the European operations and by the appreciation of the Euro currency over the Canadian dollar, partly offset by the improvement of the Canadian operations. Net income progression for the first six months has resulted mainly from the growth in operating income before amortization exceeding that of fixed charges from the Canadian operations, partly offset by the reduction in operating income before amortization, the increase in fixed charges and the unfavourable impact of the Euro currency over the Canadian dollar for the European operations.



(1) The indicated terms do not have standardized definitions prescribed by
Canadian GAAP and therefore, may not be comparable to similar measures
presented by other companies. For more details, please consult the
"Non-GAAP financial measures" section.



CASH FLOW AND LIQUIDITY

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Quarters ended Six months ended
February February February February
28, 29, 28, 29,
2009 2008 2009 2008
($000) $ $ $ $
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Operating activities
Cash flow from
operations(1) 99,086 85,273 190,696 165,026
Changes in non-cash
operating items 19,354 5,718 (43,782) (28,690)
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118,440 90,991 146,914 136,336
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Investing activities(2) (67,857) (64,571) (140,715) (122,641)


-------------------------------------------------------------------------
Financing activities(2) (34,623) (20,022) 4,797 (54,423)
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Effect of exchange rate
changes on cash and
cash equivalents
denominated
in foreign currencies 641 355 1,328 202
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Net change in cash and
cash equivalents 16,601 6,753 12,324 (40,526)
Cash and cash
equivalents,
beginning of period 32,094 16,929 36,371 64,208
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Cash and cash
equivalents, end
of period 48,695 23,682 48,695 23,682
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(1) Cash flow from operations does not have a standardized definition
prescribed by Canadian GAAP and therefore, may not be comparable to
similar measures presented by other companies. For more details,
please consult the "Non-GAAP financial measures" section.

(2) Excludes assets acquired under capital leases.


Fiscal 2009 second quarter cash flow from operations reached $99.1 million, 16.2% higher than the comparable period last year, primarily due to the increase in operating income before amortization. Changes in non-cash operating items generated greater cash inflows compared to the same period last year, mainly as a result of increases in accounts payable and accrued liabilities, and a slight decrease in accounts receivable in the second quarter of fiscal 2009 compared to an increase in accounts receivable in the second quarter of the prior year, partly offset by an increase in income taxes receivable.

For the first six months of fiscal 2009, cash flow from operations reached $190.7 million, 15.6% higher than in the prior year, primarily due to the increase in operating income before amortization, partly offset by the increase in financial expense and current income taxes. Changes in non-cash operating items generated greater cash outflows compared to the same period last year, mainly as a result of a decrease in income tax liabilities in the current year compared to an increase in the prior year and a higher increase in income taxes receivable in the first half of the year compared to the prior year, partly offset by a lower decrease in accounts payable and accrued liabilities and an increase in accounts receivable in the prior year.

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



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Quarters ended Six months ended
February February February February
28, 29, 28, 29,
2009 2008 2009 2008
($000) $ $ $ $
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Customer premise
equipment (1) 23,308 26,443 55,132 50,240
Scalable infrastructure 15,050 12,275 27,592 22,098
Line extensions 5,290 2,989 9,577 5,578
Upgrade / Rebuild 10,246 13,745 20,688 25,607
Support capital 8,448 4,422 15,959 7,078
-------------------------------------------------------------------------

Total capital
expenditures(2) 62,342 59,874 128,948 110,601
-------------------------------------------------------------------------
Deferred charges and
others 5,734 6,070 12,925 13,486
-------------------------------------------------------------------------
Total investing
activities(2) 68,076 65,944 141,873 124,087
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(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 flows.


Fiscal 2009 second quarter total capital expenditures amounted to $62.3 million, an increase of 4.1%, when compared to the corresponding period of last year, due to the following factors:

- An increase in support capital spending due to improvements in the information systems to sustain the business activities and the acquisition of a new facility in the Canadian operations;

- An increase in scalable infrastructure capital spending mainly due to the timing of the expansion and head-end improvements, system powering and equipment reliability to sustain increased customer demand for HSI and Telephony services in Canada;

- An increase in line extensions due to the expansion of the networks in Canada;

- An increase from the appreciation of the US dollar and the Euro over the Canadian dollar;

- These increases were partly offset by a decrease in customer premise equipment spending which reflect lower RGU growth in Canadian operations and net RGU losses in European operations;

- A decrease in capital expenditures associated with network upgrades and rebuilds due to the timing of these initiatives.

Total capital expenditures in the first six months of fiscal 2009 amounted to $128.9 million, an increase of 16.6%, when compared to the corresponding period of last year, due to the following factors:

- An increase in support capital spending due to improvements in the information systems to sustain the business activities and the acquisition of a new facility in the Canadian operations, and to the acquisition of a power generator for Cogeco Data Services in the first quarter of the year;

- An increase in customer premise equipment capital spending resulting from RGU growth in Canadian operations fuelled in part by continued interest for the HD Television service, combined with the deployment of Digital Television in Portugal, net of RGU losses in the other services in European operations;

- An increase in scalable infrastructure capital spending mainly due to the timing of the expansion and head-end improvements, system powering and equipment reliability to sustain increased customer demand for HSI and Telephony services in Canada;

- An increase in line extensions due to the expansion of the networks in Canada;

- An increase from the appreciation of the US dollar and the Euro over the Canadian dollar;

- Partly offsetting these increases, capital expenditures associated with network upgrades and rebuilds decreased due to the timing of these initiatives.

Deferred charges and others are mainly attributable to reconnect costs. For the second quarter, the increase in deferred charges and others amounted to $5.7 million compared to $6.1 million for the same period of the prior year. For the first half of fiscal 2009, the Corporation increased deferred charges and others by $12.9 million compared to an increase of $13.5 million the year before. Slower RGU growth explained the lower increases recorded in fiscal 2009.

In the second quarter and first six months, the Corporation generated free cash flows amounting to $31 million and $48.8 million, respectively, compared to $19.3 million and $40.9 million in the preceding year. The free cash flow increases over the same periods of the prior year are mainly due to an increase in cash flow from operations, resulting primarily from the improvement of the Corporation's operating income before amortization, partly offset by an increase in capital expenditures. The aggregate amount of total capital expenditures and deferred charges increased by $2.2 million for the quarter ended February 28, 2009, and by $17.8 million for the first half of fiscal 2009 compared to the corresponding periods of the prior year due to the factors explained above.

In the second quarter of 2009, Indebtedness affecting cash decreased by $29.5 million due to the free cash flow of $31 million and the increase of non-cash operating items of $19.4 million, net of the increase in cash and cash equivalents of $16.6 million and the dividend payment of $5.8 million described below. During the second quarter of fiscal 2008, the level of Indebtedness affecting cash decreased by $15.4 million, mainly due to the free cash flow of $19.3 million, partly offset by a $4.9 million dividend payment described below.

During the second quarter of fiscal 2009, a dividend of $0.12 per share was paid to the holders of subordinate and multiple voting shares, totalling $5.8 million, compared to a dividend of $0.10 per share, or $4.9 million the year before.

For the first six months of fiscal 2009, Indebtedness affecting cash increased by $15.5 million due to the reduction of non-cash operating items of $43.8 million, the increase in cash and cash equivalents of $12.3 million and the payment of dividends totalling $11.6 million, partly offset by the free cash flow of $48.8 million. Indebtedness was increased through the issuance on October 1, 2008 of Senior Secured Notes, Series A and Series B, maturing October 1, 2015 and October 1, 2018, respectively, for net proceeds of approximately $255 million, and by an increase of $24.3 million in bank indebtedness, net of the repayment of US$150 million Senior Secured Notes Series A and the related derivative financial instrument of $56.2 million, both maturing on October 31, 2008, for a total of $238.7 million, and of net repayments on the Corporation's revolving loans of $23 million. During the first half of fiscal 2008, the level of Indebtedness affecting cash decreased by $48 million, mainly due to the free cash flow of $40.9 million, the reduction of $40.5 million in cash and cash equivalents partly used to offset the $28.7 million reduction in non-cash operating items and the increase of $3.3 million in capital stock from the exercise of stock options. These factors have been partly offset by a dividend payment of $9.7 million described below.

During the first half of fiscal 2009, quarterly dividends of $0.12 per share were paid to the holders of subordinate and multiple voting shares, totalling $11.6 million, compared to quarterly dividends of $0.10 per share, or $9.7 million the year before.

As at February 28, 2009, the Corporation had a working capital deficiency of $343.9 million compared to $607.8 million as at August 31, 2008. The decrease in the deficiency is mainly attributable to the repayment of the US$150 million Senior Secured Notes, Series A and the related derivative financial instrument for a total of $238.7 million on October 31, 2008, using the proceeds of issuance of the Senior Secured Notes Series A and B. As part of the usual conduct of its business, Cogeco Cable maintains a working capital deficiency due to a low level of accounts receivable as a large portion of the Corporation's customers pay before their services are rendered, unlike accounts payable and accrued liabilities, which are paid after products are delivered or services are rendered, thus enabling the Corporation to use cash and cash equivalents to reduce Indebtedness.

At February 28, 2009, the Corporation had used $476.8 million of its $885 million Term Facility for a remaining availability of $408.2 million.

On October 1, 2008, the Corporation completed, pursuant to a private placement, the issue of US$190 million Senior Secured Notes Series A maturing October 1, 2015, and $55 million Senior Secured Notes Series B maturing October 1, 2018. The Senior Secured Notes Series B bear interest at the coupon rate of 7.60% per annum, payable semi-annually. The Corporation has entered into cross-currency swap agreements to fix the liability for interest and principal payments on the Senior Secured Notes Series A in the amount of US$190 million, which bear interest at the coupon rate of 7.00% per annum, payable semi-annually. Taking into account these agreements, the effective interest rate on the Senior Secured Notes Series A is 7.24% and the exchange rate applicable to the principal portion of the US dollar-denominated debt has been fixed at CA$1.0625 per US dollar.

FINANCIAL POSITION

Since August 31, 2008, there have been major changes to the balances of "fixed assets", "intangible assets", "goodwill", "accounts payable and accrued liabilities", "future income tax assets" "income taxes receivable", "income tax liabilities", "future income tax liabilities", "cash and cash equivalents" and "Indebtedness".

The $28.2 million increase in fixed assets is mainly related to increases in capital expenditures to sustain RGU growth, to the recent acquisitions in Canada and to the appreciation of the Euro and the US dollar over the Canadian dollar. The $66.2 million and $326.1 million reductions in intangible assets and goodwill and the $13.9 million decrease in future income tax liabilities are due to the impairment loss recorded on the Corporation's investment in Cabovisao in the second quarter of the year as described in the "Impairment of goodwill and intangible assets" section, net of the appreciation of the Euro over the Canadian dollar. The $25 million decrease in accounts payable and accrued liabilities and the $12.3 million increase in cash and cash equivalents are related to the timing of payments made to suppliers and the fluctuations of the Euro currency over the Canadian dollar. The $5.6 million reduction in future income tax assets is due to the utilization of Ontario minimum tax credits and tax loss carry forwards to reduce current income taxes. The $7 million increase in income taxes receivable and the $9.9 million decrease in income tax liabilities are due to income tax payments relating to fiscal 2008 that were made in the first quarter of fiscal 2009. Indebtedness has increased by $35.2 million as a result of the factors previously discussed in the "Cash Flow and Liquidity" section and the unfavourable impact of the appreciation of the US dollar and the Euro over the Canadian dollar, partly offset by the increase of $34.3 million in the fair value of the cross-currency swaps related to the Senior Secured Notes Series A issued on October 1, 2008.



A description of Cogeco Cable's share data as of March 31, 2009 is
presented in the table below:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Number of shares/options Amount
($000)
-------------------------------------------------------------------------
Common shares
Multiple voting shares 15,691,100 98,346
Subordinate voting shares 32,867,426 891,715
Options to purchase Subordinate
voting shares
Outstanding options 902,925
Exercisable options 521,747
--------------------------------------------------------------------------
--------------------------------------------------------------------------


On April 6, 2009, the Corporation cancelled 206,180 options which had been conditionally granted in relation with the acquisition of Cabovisao, at a price of $26.63 per share, subject to performance criteria of Cabovisao being met. Of these options, 93,518 were exercisable.

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, as discussed in the 2008 annual MD&A, have not materially changed since August 31, 2008 except for the new financing discussed in the "Cash Flow and Liquidity" section.

DIVIDEND DECLARATION

At its April 8, 2009 meeting, the Board of Directors of Cogeco Cable declared a quarterly eligible dividend of $0.12 per share for subordinate and multiple voting shares, payable on May 6, 2009, to shareholders of record on April 22, 2009. The declaration, amount and date of any future dividend will continue to be considered and approved by the Board of Directors of the Corporation based upon the Corporation's financial condition, results of operations, capital requirements and such other factors as the Board of Directors, at its sole discretion, deems relevant. There is therefore no assurance that dividends will be declared, and if declared, the amount and periodicity may vary.

FINANCIAL MANAGEMENT

On January 22, 2009, the Corporation entered into a swap agreement with a financial institution to fix the floating benchmark interest rate with respect to the Euro-denominated Term Loan facilities for a notional amount of EUR 111.5 million. The interest rate swap to hedge the Term Loans has been fixed at 2.08% until their maturity at July 28, 2011. The notional value of the swap will decrease in line with the amortization schedule of the Term Loans. In addition to the interest rate swap of 2.08%, Cogeco Cable will continue to pay the applicable margin on these Term Loans in accordance with its Term Facility. Since the issuance on January 22, 2009, the fair value of interest rate swap liability increased by $1.3 million, which is recorded as a decrease of other comprehensive income net of income taxes of $0.4 million.

On October 1, 2008, Cogeco Cable entered into cross-currency swap agreements to set the liability for interest and principal payments on its US$190 million Senior Secured Notes, Series A maturing in October 1, 2015. These agreements have the effect of converting the U.S. interest coupon rate of 7.00% per annum to an average Canadian dollar interest rate of 7.24% per annum. The exchange rate applicable to the principal portion of the debt has been -xed at CA$1.0625 per US dollar. Since the issuance on October 1, 2008, amounts due under the US$190 million Senior Secured Notes Series A increased by $39.9 million due to the US dollar's appreciation over the Canadian dollar. The fair value of cross-currency swaps increased by a net amount of $35.5 million, of which $39.9 million offsets the foreign exchange loss on the debt denominated in US dollars. The difference of $4.3 million was recorded as a decrease of other comprehensive income, net of income taxes of $1.2 million.

The Corporation's net investment in the self-sustaining foreign subsidiary, Cabovisao, is exposed to market risk attributable to fluctuations in foreign currency exchange rates, 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 the net investment in self-sustaining foreign subsidiaries and accordingly, the Corporation realized a foreign exchange gain of $11.4 million in the first six months of fiscal 2009 which is presented in other comprehensive income. The exchange rate used to convert the Euro into Canadian dollars for the balance sheet accounts at February 28, 2009 was $1.6129 per Euro compared to $1.5580 per Euro at August 31, 2008. The average exchange rates prevailing during the second quarter and first six months used to convert the operating results of the European operations were $1.6265 per Euro and $1.5864 per Euro, respectively, compared to $1.4741 and $1.4430 per Euro for the same periods of the prior year.

The following table shows the Canadian dollar impact of a 10% change in the average exchange rate of the Euro currency into Canadian dollars on European operating results for the first six months ended February 28, 2009:





-------------------------------------------------------------------------
-------------------------------------------------------------------------
Exchange rate
Six months ended February 28, 2009 As reported impact
($000) $ $
-------------------------------------------------------------------------
(unaudited) (unaudited)

Revenue 123,304 12,330
Operating income before amortization 38,678 3,868
Net loss (385,773) (38,577)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


The Corporation is also impacted by foreign currency exchange rates, primarily changes in the values of the US dollar relative to the Canadian dollar with regards to purchases of equipment, as the majority of customer premise equipment is purchased and subsequently paid in US dollars. Please consult the "Fixed charges" section of this MD&A and the Foreign Exchange Risk section in note 14 of the consolidated financial statements for further details.

CANADIAN OPERATIONS

CUSTOMER STATISTICS



--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net additions (losses) % of
Penetration(1)
Quarters ended Six months ended
--------------------------------------------------------------------------
February February February February February February February
28, 28, 29, 28, 29, 28, 29,
2009 2009 2008 2009 2008 2009 2008
--------------------------------------------------------------------------
RGU 2,104,948 47,577 51,007 113,040 123,833 - -
Basic
Cable
service
customers 867,882 1,955 1,869 10,788 9,933 - -
HSI service
customers(2)503,494 10,518 15,058 30,027 40,352 60.7 56.4
Digital
Television
service
customers 478,659 18,693 17,879 36,913 34,132 56.0 49.1
Telephony
service
customers(3)254,913 16,411 16,201 35,312 39,416 33.1 27.5
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) As a percentage of Basic Cable service customers in areas served.

(2) Customers subscribing to the HSI service without the Basic Cable
service totalled 78,203 as at February 28, 2009 compared to 73,336 as
at February 29, 2008.

(3) Customers subscribing to the Telephony service without the Basic Cable
service totalled 22,488 as at February 28, 2009 compared to 13,327 as
at February 29, 2008.


Fiscal 2009 second quarter and first six-month RGU net additions were lower than for the same periods last year and reflect an early sign of maturation in some services. The number of net additions for Basic Cable stood at 1,955 customers for the quarter and 10,788 customers for the first six months, compared to 1,869 and 9,933 customers, respectively, for the same periods of the prior year. This increase is primarily due to continuous improvements to the service offering, targeted marketing activities and an upswing in subscription activity in border markets due to the impending over-the-air digital conversion in the United States. In the quarter, Telephony customers grew by 16,411 compared to a growth of 16,201 for the same period last year. For the first six months, Telephony customers grew by 35,312 compared to a growth of 39,416 for the first six months of the prior year. The lower growth for the six month period is mostly attributable to the increased penetration in areas where the service is already offered and to fewer new areas where the service was launched. Telephony service coverage, as a percentage of homes passed, has now reached 89% compared to 80% at February 29, 2008. The number of net additions to HSI service stood at 10,518 customers for the quarter and 30,027 customers for the first half of fiscal 2009, compared to 15,058 and 40,352 customers for the same periods last year. The growth in HSI customer net additions continues to stem from the enhancement of the product offering, the impact of the bundled offer (Cogeco Complete Connection) of Television, HSI and Telephony services, and promotional activities. The Digital Television service net additions stood at 18,693 customers compared to 17,879 customers for the second quarter, and at 36,913 customers compared to 34,132 customers for the first six months of the prior year, due to targeted marketing initiatives in the second half of fiscal 2008 and in 2009 to improved penetration and to the continuing strong interest for the HD Television service.




OPERATING RESULTS

--------------------------------------------------------------------------
--------------------------------------------------------------------------
Quarters ended Six months ended
($000, February February February February
except 28, 29, 28, 29,
percentages) 2009 2008(1)Change 2009 2008(1)Change
$ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 243,680 205,168 18.8 481,054 401,409 19.8
Operating
costs 133,002 114,751 15.9 265,529 226,054 17.5
Management
fees -
COGECO Inc. 3,038 3,679 (17.4) 9,019 8,714 3.5
--------------------------------------------------------------------------
Operating
income
before
amortization 107,640 86,738 24.1 206,506 166,641 23.9
--------------------------------------------------------------------------
Operating
margin 44.2% 42.3% 42.9% 41.5%
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.


Revenue

Second-quarter revenue rose by $38.5 million, or 18.8%, to reach $243.7 million, and first six month revenue increased by $79.6 million, or 19.8%, to reach $481.1 million mainly due to RGU growth mentioned in the "Customer Statistics" section, combined with the impact of the recent acquisitions as well as the various rate increases implemented by the Corporation during fiscal 2008. These rate increases represent an average of approximately $1.60 per Basic Cable service customer.

Operating costs

2009 second-quarter and first six-month operating costs, excluding management fees payable to COGECO Inc., increased by $18.3 million, or 15.9%, to reach $133 million, and by $39.5 million, or 17.5%, to reach $265.5 million, respectively. The increase in operating costs is mainly attributable to servicing additional RGU and to the impact of the recent acquisitions.

Operating income before amortization

Operating income before amortization rose by $20.9 million, or 24.1%, to reach $107.6 million in the second quarter, and by $39.9 million, or 23.9%, to reach $206.5 million in the first six months of fiscal 2009. The operating income before amortization has risen due to the increased revenue outpacing the operating costs growth including the impact of the recent acquisitions. Cogeco Cable's Canadian operations' second-quarter operating margin increased to 44.2% compared to 42.3% for the same period in the prior year, and to 42.9% from 41.5% for the first six months.



EUROPEAN OPERATIONS

CUSTOMER STATISTICS

--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net additions (losses) % of
Penetration(1)
Quarters ended Six months ended
--------------------------------------------------------------------------
February February February February February February February
28, 28, 29, 28, 29, 28, 29,
2009 2009 2008 2009 2008 2009 2008
--------------------------------------------------------------------------
RGU 690,266 (21,951) 5,189 (34,700) 15,387 - -
Basic Cable
service
customers 276,192 (11,908) 2,724 (19,943) 7,657 - -
HSI service
customers(2)146,604 (7,488) 2,096 (12,697) 5,902 53.1 55.0
Digital
Television
service
customers(3) 36,258 6,409 - 11,806 - 13.1 -
Telephony
service
customers(4)231,212 (8,964) 369 (13,866) 1,828 83.7 81.2
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) As a percentage of Basic Cable service customers in areas served.

(2) Customers subscribing to the HSI service without the Basic Cable
service totalled 7,284 as at February 28, 2009 compared to 8,409 as at
February 29, 2008.

(3) The Digital Television service was launched in the third quarter of
fiscal 2008.

(4) Customers subscribing to the Telephony service without the Basic Cable
service totalled 8,621 as at February 28, 2009 compared to 8,727 as at
February 29, 2008.


Fiscal 2009 second quarter and first six months were marked by a continuing unfavourable economic environment in the Iberian Peninsula, recurring intense customer promotions and advertising initiatives from competitors for their new respective third leg of the triple-play service during the latter part of the second quarter in the Portuguese market. These factors were the main contributors to net customer losses in the Basic Cable, HSI and Telephony services compared to the same periods of the prior year. The Digital Television service was launched in the third quarter of 2008, with net additions in fiscal 2009 of 6,409 customers in the second quarter and 11,806 customers in the first six months. Fiscal 2009 second quarter and first six month period Basic Cable service customers decreased by 11,908 and 19,943 customers, respectively, compared to a growth of 2,724 and 7,657 customers in 2008. HSI service customers decreased by 7,488 and 12,697 customers compared to increases of 2,096 and 5,902 for the corresponding periods in fiscal 2008. Telephony service decreased by 8,964 and 13,866 customers compared to a growth of 369 and 1,828 customers for the same periods of the preceding year.

In addition to the launch of new channels and retention strategies during the quarter, new marketing and other operating initiatives are in the process of being implemented, the result of which should help in reducing customer attrition in the upcoming quarters.



OPERATING RESULTS

--------------------------------------------------------------------------
--------------------------------------------------------------------------
Quarters ended Six months ended
($000, February February February February
except 28, 29, 28, 29,
percentages) 2009 2008(1)Change 2009 2008(1)Change
$ $ % $ $ %
--------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 61,240 59,934 2.2 123,304 115,526 6.7
Operating
costs 43,419 38,014 14.2 84,626 76,207 11.0
--------------------------------------------------------------------------
Operating
income
before
amortization 17,821 21,920 (18.7) 38,678 39,319 (1.6)
--------------------------------------------------------------------------
Operating
margin 29.1% 36.6% 31.4% 34.0%
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.


Revenue

Fiscal 2009 second-quarter and first six months revenue increased by $1.3 million to reach $61.2 million and by $7.8 million to reach $123.3 million, increases of 2.2% and 6.7%, respectively, when compared to fiscal 2008. The growth is due to the favourable impact of the appreciation of the Euro over the Canadian dollar and to monthly rate increases implemented by Cabovisao averaging $2.00 (EUR 1.30) per Basic Cable customer in January 2008, net of decreases in overall RGU in the second quarter and first six months of fiscal 2009. Revenue from the European operations in the local currency for the second quarter amounted to EUR 37.6 million, a decrease of EUR 3 million, or 7.4%, and to EUR 77.8 million, a decrease of EUR 2.3 million, or 2.8% for the first six months.

Operating costs

For the second quarter, operating costs increased by $5.4 million to reach $43.4 million, an increase of 14.2% compared to the prior year. In the first half of fiscal 2009, operating costs increased by $8.4 million to reach $84.6 million, an increase of 11%. The increases in operating costs are mainly attributable to the unfavourable impact of the appreciation of the Euro over the Canadian dollar. Operating costs from the European operations in the local currency for the second quarter and first six months of fiscal 2009 amounted to EUR 26.7 million and EUR 53.3 million, respectively, increases of EUR 0.9 million, or 3.5%, and EUR 0.5 million, or 0.9% compared to the prior year. The operating costs increased in local currency mainly due to an increase in the amount of bad debts recorded in the quarter and first six months of the year. However, Cabovisao has put together initiatives at the end of the second quarter of 2009 to better manage its collection process which should have a favourable impact on the level of bad debts in the coming months.

Operating income before amortization

For the second quarter operating income before amortization decreased to $17.8 million from $21.9 million, and to $38.7 million from $39.3 million in the first six months of fiscal 2009, representing decreases of 18.7% and 1.6%, respectively, mainly due to increases in operating costs outpacing the revenue growth. European operations' operating margin decreased for the second quarter to 29.1% from 36.6%, and for the first six months to 31.4% from 34% in the prior year. Operating income before amortization in the local currency amounted to EUR 10.9 million for the second quarter, a decrease of EUR 3.9 million, or 26.4%, and to EUR 24.4 million, a decrease of EUR 2.7 million, or 10.1% for the first half of the year.

FISCAL 2009 FINANCIAL GUIDELINES

As a result of the continuing unfavourable economic climate and the renewal of marketing initiatives from competitors in the Portuguese market, Cogeco Cable recorded a non-cash impairment loss amounting to $399.6 million on its net investment in its Portuguese subsidiary, Cabovisao, in the second quarter of fiscal 2009. Net of the related income taxes, the impairment loss had an unfavourable impact of $383.6 million on net income in the second quarter of 2009. For further details, please see the "Impairment of goodwill and intangible assets" section. Furthermore, the European operations financial results have been revised downwards to take into consideration the current situation in the Portuguese market described above and the exchange rate used for the fiscal 2009 revised projections for the European operations has been increased to $1.60 per Euro compared to $1.50 per Euro for the original guidelines.

Finally, Canadian operations continue to show solid results and management expects to meet its initial projections for this segment for the 2009 fiscal year.



Consolidated

--------------------------------------------------------------------------
--------------------------------------------------------------------------
Revised projections
April 8, 2009 Projections
(in millions of dollars, except net Fiscal 2009 Fiscal 2009
customer additions and operating margin) $ $
--------------------------------------------------------------------------
Financial guidelines
Revenue 1,205 1,210
Operating income before amortization 500 508
Operating margin 42% 42%
Financial expense 70 70
Amortization 270 275
Current income taxes 50 50
Net income (loss) (275) 107
Capital expenditures and deferred charges 300 300
Free cash flow 80 90

Net customer additions guidelines
RGU 100,000 100,000
--------------------------------------------------------------------------
--------------------------------------------------------------------------


UNCERTAINTIES AND MAIN RISK FACTORS

There has been no significant change in the uncertainties and main risk factors faced by the Corporation since August 31, 2008, except as described below. A detailed description of the uncertainties and main risk factors faced by Cogeco Cable can be found in the 2008 annual MD&A.

Cogeco Cable's footprint includes certain regions in Ontario (Burlington and Windsor) and in Portugal (Palmela) where the automobile industry is a significant driver of economic activity. The sharp downturn experienced by the automobile industry in recent months may have an adverse impact on the level of economic activity and consumer expenditures on goods and services within those communities. In previous recessionary periods, demand for cable telecommunications services has generally proved to be resilient. However, there is no assurance that demand will remain resilient in a prolonged global recession.

Despite Cogeco Cable's strong balance sheet and the proactive management of debt maturities, the present situation in financial markets and the credit crisis may result in reduced availability of capital in both the debt and equity markets in the coming years. As Cogeco Cable's current credit facilities and other sources of financing reach their respective maturities, the terms of bank and other debt facilities may be less favourable upon renewal.

Market conditions may also have an impact on the Corporation's defined benefit pension plans as there is no assurance that the actual rate of return on plan assets will approximate the assumed rate of return used in the most recent actuarial valuation. Market driven changes may impact the assumptions used in future actuarial valuations and could result in the Corporation being required to make contributions in the future that differ significantly from the current contributions to the Corporation's defined benefit pension plans.

The Corporation is exposed to interest rate risks for both fixed interest rate and fioating interest rate instruments. Fluctuations in interest rates will have an effect on the valuation and the collection or repayment of these instruments which could result in a significant impact on the Corporation's financial expense. At February 28, 2009, 76% of Cogeco Cable's debt is at fixed interest rates.

The current volatility of currency exchange and interest rate in the financial markets is unusually high and could lead to an increase in the level of risk on hedging instruments to which Cogeco Cable is a party should one or more of the counterparts to these instruments become financially distressed and unable to meet their obligations.

It is anticipated that digital terrestrial television services will be launched in Portugal in the second half of the current year. This development may result in some attrition of Basic Cable television service customers, and consequently have an adverse impact on RGU.

ACCOUNTING POLICIES AND ESTIMATES

There has been no significant change in Cogeco Cable's accounting policies, estimates and future accounting pronouncements since August 31, 2008, except as described below. A description of the Corporation's policies and estimates can be found in the 2008 annual MD&A.

Capital disclosures and financial instruments

Effective September 1, 2008, the Corporation adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1535, Capital Disclosures, Section 3862, Financial Instruments - Disclosures and Section 3863, Financial Instruments - Presentation.

Capital disclosures

Section 1535 of the CICA Handbook requires that an entity disclose information that enables users of its financial statements to evaluate the entity's objectives, policies and processes for managing capital, including disclosures of any externally imposed capital requirements and the consequences for non-compliance. These new disclosures are included in note 14 of the Corporation's interim consolidated financial statements.

Financial instruments

Section 3862 on financial instrument disclosures requires the disclosure of information about the significance of financial instruments for the entity's financial position and performance and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages those risks.

Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the classification of related interest, dividends, gains and losses, and circumstances in which financial assets and financial liabilities are offset.

The adoption of these standards did not have any impact on the classification and measurements of the Corporation's financial instruments. The new disclosures pursuant to these new Sections are included in note 14 of the Corporation's interim consolidated financial statements.

Credit risk and fair value of financial assets and financial liabilities

On January 20, 2009, the Emerging Issues Committee ("EIC") of the Canadian Accounting Standards Board issued EIC Abstract 173, Credit Risk and Fair Value of Financial Assets and Financial Liabilities, which establishes guidance requiring an entity to consider its own credit risk as well as the credit risk of the counterparty in determining the fair value of financial assets and financial liabilities, including derivative instruments. EIC 173 is applicable to all financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009 and is applicable to the Corporation for its second quarter of fiscal 2009 with retrospective application, without restatement of prior periods, to the beginning of its current fiscal year. The adoption of this new abstract during the second quarter decreased derivative financial instruments assets by $3.5 million, decreased future income tax liabilities by $1 million and decreased accumulated other comprehensive income by $2.6 million at December 1, 2008 and had no significant impact on the consolidated balance sheet at September 1, 2008.

General standards of financial statement presentation

The CICA amended Section 1400 of the CICA Handbook, General Standards of Financial Statement Presentation, to include a requirement for management to make an assessment of the entity's ability to continue as a going concern when preparing financial statements. These changes, including the related disclosure requirements, were adopted by the Corporation on September 1, 2008 and had no impact on the interim consolidated financial statements.

FUTURE ACCOUNTING PRONOUNCEMENTS

Business combinations, consolidated financial statements and non-controlling interests

During January 2009, the CICA issued Handbook Section 1582, Business Combinations, which replaces Section 1581 of the same name, and Sections 1601, Consolidated Financial Statements and 1602, Non-Controlling Interests, which together replace Section 1600, Consolidated Financial Statements. These new Sections harmonize significant aspects of Canadian accounting standards with the International Financial Reporting Standards ("IFRS") that will be mandated for entities with fiscal year beginning on or after January 1, 2011.

Section 1582 requires that all business acquisitions be measured at the fair value of the acquired entity at the acquisition date even if the business combination is achieved in stages, or if less than 100 percent of the equity interest in the acquiree is owned at the acquisition date, and expands the definition of a business subject to an acquisition. The Section also establishes new guidance on the measurement of consideration given and the recognition and measurement of assets acquired and liabilities assumed in a business combination. Furthermore, under this new guidance, acquisition costs, which were previously included as a component of the consideration given, and any negative goodwill resulting from the allocation of the purchase price, which was allocated as a reduction of non-current assets acquired under the previous standard, will be recorded in earnings in the current period. This new Section will be applied prospectively and will only impact the Corporation's consolidated financial statements for future acquisitions concluded in periods subsequent to the date of adoption.

Sections 1601 and 1602 dealing with consolidated financial statements require an entity to measure non-controlling interest upon acquisition either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets. The new Sections also require non-controlling interest to be presented as a separate component of shareholders' equity.

The new standards will apply as of the beginning of the first annual reporting period beginning on or after January 1, 2011, with simultaneous early adoption permitted. Early adoption may reduce the amount of restatement required upon conversion to IFRS. The Corporation is currently assessing the impact of these new Sections on its consolidated financial statements.

Harmonization of Canadian and International accounting standards

In March 2006, the Accounting Standards Board of the CICA released its new strategic plan, which proposed to abandon Canadian GAAP and effect a complete convergence to the IFRS for publicly accountable entities.

In April 2008, the CICA published an exposure draft as guidance which requires the transition to IFRS to replace Canadian GAAP as currently employed by Canadian publicly accountable enterprises. The changeover will occur no later than fiscal years beginning on or after January 1, 2011. Accordingly, the Corporation expects that its first interim consolidated financial statements presented in accordance with IFRS will be for the three-month period ending November 30, 2011, and its first annual consolidated financial statements presented in accordance with IFRS will be for the year ending August 31, 2012.

IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition, measurement and disclosure requirements. The Corporation has established a project team including representatives from various areas of the organization to plan and complete the transition to IFRS. This team reports periodically to the Audit Committee, who oversees the IFRS implementation project on behalf of the Board of Directors. The Corporation will be assisted by external advisors as required.

The implementation project consists of three primary phases, which may occur concurrently as IFRS are applied to specific areas of operations:

- Scoping and diagnostic phase - This phase involves performing a high-level impact assessment to identify key areas that are expected to be impacted by the transition to IFRS. The result of these procedures is the ranking of IFRS impacts in order of priority to assess the timing and complexity of transition efforts that will be required in subsequent phases.

- Impact analysis, evaluation and design phase - In this phase, each area identified from the scoping and diagnostic phase will be addressed in order of descending priority, with project teams established as deemed necessary. This phase involves specification of changes required to existing accounting policies, information systems and business processes, together with an analysis of policy choices permitted under IFRS and the development of draft IFRS financial statement content.

- Implementation and review phase - This phase includes execution of changes to information systems and business processes, completing formal authorization processes to approve recommended accounting policy changes and training programs across the organization, as necessary. It will culminate in the collection of financial information necessary to compile IFRS-compliant financial statements, embedding IFRS in business processes, eliminating any unnecessary data collection processes and finally the approval by the Audit Committee of the IFRS financial statements. Implementation also involves additional staff training with the deployment of revised systems.

The Corporation completed the scoping and diagnostic phase in February 2009, and is now conducting the impact analysis, evaluation and design phase. As implications of the conversion are identified, impact on information technology, data systems and business activities will be assessed. The Corporation's analysis of the IFRS and the comparison with currently applied accounting principles has identified a number of differences that may require information system changes or which are likely to have a material impact on the financial statements of the Corporation.

Set out below are the main areas where changes in accounting policies are expected to have a significant impact on the Corporation's consolidated financial statements. The list below should not be regarded as a complete list of changes that will result from transition to the IFRS. It is intended to highlight areas that the Corporation believes to be the most significant; however, analysis of changes is still in process and the selection of accounting policies where choices are available under IFRS has not been completed. We note that the regulatory bodies that promulgate the Canadian GAAP and the IFRS have significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRS and their impact on the Corporation's consolidated financial statements in future years. The future impacts of the IFRS will also depend on the particular circumstances prevailing in those years. The standards listed below are those existing based on current Canadian GAAP and IFRS. At this stage, the Corporation is not able to reliably quantify the expected impacts of these differences on its consolidated financial statements. They are as follows:

- Presentation of Financial Statements (IAS 1)

- Income Taxes (IAS 12)

- Property, Plant and Equipment (IAS 16)

- Revenue (IAS 18)

- Impairment of Assets (IAS 36)

- Business Combinations (IFRS 3)

Furthermore, IFRS 1, "First-Time Adoption of International Financial Reporting Standards", provides entities adopting IFRS for the first time with a number of optional exemptions and mandatory exceptions to the general requirement for full retrospective application of IFRS which may differ from the requirements of the sections listed above. The Corporation is analyzing the various accounting policy choices available and will implement those determined to be most appropriate in the Corporation's circumstances. The Corporation has not yet determined the aggregate financial impact of adopting IFRS 1 on its consolidated financial statements.

The conversion project is progressing according to the established plan.

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 therefore, may not be comparable to similar measures presented by other companies. These measures include "cash flow from operations", "free cash flow", "operating income before amortization", "operating margin", "net income excluding the impairment loss and the income tax adjustment" and "earnings per share excluding the impairment loss and the income tax adjustment".

Cash flow from operations and free cash flow

Cash flow from operations is used by Cogeco Cable's management and investors to evaluate cash flows generated by operating activities, excluding the impact of changes in non-cash operating items. This allows the Corporation to isolate the cash flows 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". 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.

Cash flow from operations is calculated as follows:



-------------------------------------------------------------------------
-------------------------------------------------------------------------
Quarters ended Six months ended
February February February February
28, 29, 28, 29,
2009 2008 2009 2008
($000) $ $ $ $
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Cash flow from
operating
activities 118,440 90,991 146,914 136,336
Changes in non-cash
operating items (19,354) (5,718) 43,782 28,690
-------------------------------------------------------------------------
Cash flow from
operations 99,086 85,273 190,696 165,026
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Free cash flow is calculated as follows:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Quarters ended Six months ended
February February February February
28, 29, 28, 29,
2009 2008 2009 2008
($000) $ $ $ $
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Cash flow from
operations 99,086 85,273 190,696 165,026
Acquisition of
fixed assets (62,123) (58,501) (127,790) (109,155)
Increase in
deferred charges (5,779) (6,094) (12,986) (13,511)
Assets acquired under
capital leases - as
per note 12 b) (219) (1,373) (1,158) (1,446)
-------------------------------------------------------------------------
Free cash flow 30,965 19,305 48,762 40,914
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Operating income before amortization and operating margin

Operating income before amortization is used by Cogeco Cable's management and investors to assess the Corporation's ability to seize growth opportunities in a cost effective manner, to finance its ongoing operations and to service its debt. Operating income before amortization is a proxy for cash flows from operations excluding the impact of the capital structure chosen, and is one of the key metrics used by the financial community to value the business and its financial strength. Operating margin is a measure of the proportion of the Corporation's revenue which is left over, before income taxes, to pay for its fixed costs, such as interest on Indebtedness. Operating margin is calculated by dividing operating income before amortization by revenue.

The most comparable Canadian GAAP financial measure is operating income. Operating income before amortization and operating margin are calculated as follows:



-------------------------------------------------------------------------
-------------------------------------------------------------------------
Quarters ended Six months ended
February February February February
28, 29, 28, 29,
2009 2008(1) 2009 2008(1)
($000, except percentages) $ $ $ $
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Operating income 58,817 52,669 114,618 97,284
Amortization 66,644 55,989 130,566 108,676
-------------------------------------------------------------------------
Operating income before
amortization 125,461 108,658 245,184 205,960
-------------------------------------------------------------------------
Revenue 304,920 265,102 604,358 516,935
-------------------------------------------------------------------------
Operating Margin 41.1% 41.0% 40.6% 39.8%
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.


Net income excluding the impairment loss and the income tax adjustment and earnings per share excluding the impairment loss and the income tax adjustment

Net income excluding the impairment loss and the income tax adjustment and earnings per share excluding the impairment loss and the income tax adjustment are used by Cogeco Cable's management and investors to evaluate what would have been the net income and earnings per share excluding these adjustments. This allows the Corporation to isolate the unusual adjustments in order to evaluate the net income and earnings per share from ongoing activities.

The most comparable Canadian GAAP financial measures are net income and earnings per share. Net income excluding the impairment loss and the income tax adjustment and earnings per share excluding the impairment loss and the income tax adjustment per share are calculated as follows:


-------------------------------------------------------------------------
-------------------------------------------------------------------------
Quarters ended Six months ended
February February February February
28, 29, 28, 29,
2009 2008 2009 2008
($000) $ $ $ $
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Net income (loss) (358,569) 49,911 (335,018) 70,274
Adjustments:
Impairment loss net
of related income
taxes 383,630 - 383,630 -
Income tax adjustment - (24,002) - (24,002)
-------------------------------------------------------------------------
Net income excluding
the impairment loss
and the income tax
adjustment 25,061 25,909 48,612 46,272
-------------------------------------------------------------------------

Weighted average
number of multiple
voting and
subordinate voting
shares outstanding 48,540,013 48,499,406 48,531,846 48,439,880
Effect of dilutive
stock options 158,317 300,010 185,596 318,789
-------------------------------------------------------------------------
Weighted average
number of diluted
multiple voting and
subordinate voting
shares outstanding 48,698,330 48,799,416 48,717,442 48,758,669
-------------------------------------------------------------------------

Earnings per share
excluding the
impairment loss and
the income tax
adjustment
Basic 0.52 0.53 1.00 0.96
Diluted 0.51 0.53 1.00 0.95
-------------------------------------------------------------------------
-------------------------------------------------------------------------


ADDITIONAL INFORMATION

This MD&A was prepared on April 8, 2009. Additional information relating to the Corporation, including its Annual Information Form, is available on the SEDAR website at www.sedar.com.

ABOUT COGECO CABLE

Cogeco Cable (www.cogeco.ca) is a telecommunications company, the second largest cable operator in Ontario, Quebec and Portugal in terms of the number of Basic Cable service customers served. Through its two-way broadband cable networks, Cogeco Cable provides its residential customers with Audio, Analogue and Digital Television, as well as HSI and Telephony services. Cogeco Cable also provides, to its commercial customers, data networking, e-business applications, video conferencing, hosting services, Ethernet, private line, VoIP, HSI access, dark fibre, data storage, date security and co-location services and other advanced communication solutions. Cogeco Cable's subordinate voting shares are listed on the Toronto Stock Exchange (TSX: CCA).



Analyst Conference Call: Thursday, April 9, 2009 at 11:00 A.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
five minutes before the start of the
conference:

Canada/USA Access Number: 1 800 820-0231
International Access Number: +1 416 640-5926
Confirmation Code: 7471071
By Internet at www.cogeco.ca/investors

A rebroadcast of the conference call will be
available until April 17, by dialing:
Canada and USA access number: 1 888-203-1112
International access number: +1 647-436-0148
Confirmation code: 7471071


Supplementary Quarterly Financial Information
(unaudited)

--------------------------------------------------------------------
Quarters ended February 28/29, November 30,
($000, except percentages 2009 2008(1) 2008 2007(1)
and per share data) $ $ $ $
--------------------------------------------------------------------
Revenue 304,920 265,102 299,438 251,833
Operating income before
amortization(2) 125,461 108,658 119,723 97,302
Operating margin(2) 41.1% 41.0% 40.0% 38.6%
Amortization 66,644 55,989 63,922 52,687
Operating income 58,817 52,669 55,801 44,615
Financial expense 17,988 17,136 23,394 15,877
Impairment of goodwill
and intangible assets 399,648 - - -
Income taxes (250) (14,378) 8,856 8,375
Net income (loss) (358,569) 49,911 23,551 20,363
Net income excluding the
impairment loss and the
income tax adjustment(2) 25,061 25,909 23,551 20,363

Cash flow from operations(2) 99,086 85,273 91,610 79,753
Cash flow from operating
activities 118,440 90,991 28,474 45,345
Free cash flow(2) 30,965 19,305 17,797 21,609

Earnings (loss) per share
Basic (7.39) 1.03 0.49 0.42
Diluted (7.39) 1.02 0.48 0.42
Earnings per share excluding
the impairment loss and the
income tax adjustment(2)
Basic 0.52 0.53 0.49 0.42
Diluted 0.51 0.53 0.48 0.42
--------------------------------------------------------------------
--------------------------------------------------------------------



--------------------------------------------------------------------
--------------------------------------------------------------------
Quarters ended August 31, May 31,
($000, except percentages 2008(1) 2007(1)(3) 2008(1) 2007(1)
and per share data) $ $ $ $
--------------------------------------------------------------------
Revenue 284,908 244,314 274,944 240,612
Operating income before
amortization(2) 122,000 102,586 117,492 96,616
Operating margin(2) 42.8% 42.0% 42.7% 40.2%
Amortization 61,414 54,164 58,209 47,278
Operating income 60,586 48,422 59,283 49,338
Financial expense 18,752 18,684 17,374 20,015
Impairment of goodwill
and intangible assets - - - -
Income taxes 9,968 (6,630) 10,767 8,942
Net income (loss) 31,866 36,368 31,142 20,381
Net income excluding
the impairment loss
and the income
tax adjustment(2) 31,866 21,647 31,142 20,381

Cash flow from operations(2) 99,547 83,825 95,829 76,416
Cash flow from operating
activities 143,748 112,615 112,799 53,387
Free cash flow(2) 21,075 14,861 36,901 18,599

Earnings (loss) per share
Basic 0.66 0.79 0.64 0.45
Diluted 0.65 0.78 0.64 0.45
Earnings per share excluding
the impairment loss and the
income tax adjustment(2)
Basic 0.66 0.47 0.64 0.45
Diluted 0.65 0.47 0.64 0.45
--------------------------------------------------------------------
--------------------------------------------------------------------

(1) Certain comparative figures have been reclassified to conform to the
current year's presentation to reflect the reclassification of foreign
exchange gains or losses from operating costs to financial expense.

(2) The indicated terms do not have standardized definitions prescribed by
Canadian Generally Accepted Accounting Principles ("GAAP") and
therefore, may not be comparable to similar measures presented by other
companies. For more details, please consult the "Non-GAAP financial
measures" section of the Management's discussion and analysis.

(3) Net income for the quarter ended August 31, 2007 has been adjusted to
remove income tax adjustments of $14.7 million related to the
recognition of benefits stemming from prior years' income tax losses
and minimum income tax paid, and a reduction of Canadian federal
enacted income tax rates in addition to the adjustments described in
the "Non-GAAP financial measures" section of the Management's
discussion and analysis.


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 service 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 in Canada, and Aveiro, Covilha, Evora, Guarda and Coimbra in Portugal. 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

February 28, August 31,
2009 2008
----------------------------------------------------------------------
----------------------------------------------------------------------


Homes Passed
Ontario 1,039,955 1,029,121
Quebec 509,701 502,490
----------------------------------------------------------------------
Canada 1,549,656 1,531,611
Portugal 902,570 895,923
----------------------------------------------------------------------
Total 2,452,226 2,427,534
----------------------------------------------------------------------
----------------------------------------------------------------------

Revenue Generating Units
Ontario 1,458,928 1,387,054
Quebec 646,020 604,854
----------------------------------------------------------------------
Canada 2,104,948 1,991,908
Portugal 690,266 724,966
----------------------------------------------------------------------
Total 2,795,214 2,716,874
----------------------------------------------------------------------
----------------------------------------------------------------------

Basic Cable Service Customers
Ontario 602,552 596,229
Quebec 265,330 260,865
----------------------------------------------------------------------
Canada 867,882 857,094
Portugal 276,192 296,135
----------------------------------------------------------------------
Total 1,144,074 1,153,229
----------------------------------------------------------------------
----------------------------------------------------------------------

Discretionnary Service Customers
Ontario 496,416 493,858
Quebec 223,190 215,820
----------------------------------------------------------------------
Canada 719,606 709,678
Portugal - -
----------------------------------------------------------------------
Total 719,606 709,678
----------------------------------------------------------------------
----------------------------------------------------------------------

Pay TV Service Customers
Ontario 108,279 97,753
Quebec 51,639 47,075
----------------------------------------------------------------------
Canada 159,918 144,828
Portugal 70,710 57,715
----------------------------------------------------------------------
Total 230,628 202,543
----------------------------------------------------------------------
----------------------------------------------------------------------

High Speed Internet Service Customers
Ontario 371,572 352,553
Quebec 131,922 120,914
----------------------------------------------------------------------
Canada 503,494 473,467
Portugal 146,604 159,301
----------------------------------------------------------------------
Total 650,098 632,768
----------------------------------------------------------------------
----------------------------------------------------------------------

Digital Television Service Customers
Ontario 313,886 288,345
Quebec 164,773 153,401
----------------------------------------------------------------------
Canada 478,659 441,746
Portugal 36,258 24,452
----------------------------------------------------------------------
Total 514,917 466,198
----------------------------------------------------------------------
----------------------------------------------------------------------

Telephony Service Customers
Ontario 170,918 149,927
Quebec 83,995 69,674
----------------------------------------------------------------------
Canada 254,913 219,601
Portugal 231,212 245,078
----------------------------------------------------------------------
Total 486,125 464,679
----------------------------------------------------------------------
----------------------------------------------------------------------


COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In thousands of Three months ended Six months ended
dollars, except February 28, February 29, February 28, February 29,
per share data) 2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Revenue
Service 302,409 262,678 599,802 513,084
Equipment 2,511 2,424 4,556 3,851
-------------------------------------------------------------------------
304,920 265,102 604,358 516,935

Operating costs 176,421 152,765 350,155 302,261
Management fees
- COGECO Inc. 3,038 3,679 9,019 8,714
-------------------------------------------------------------------------

Operating income
before amortization 125,461 108,658 245,184 205,960
Amortization (note 3) 66,644 55,989 130,566 108,676
-------------------------------------------------------------------------

Operating income 58,817 52,669 114,618 97,284
Financial expense
(note 4) 17,988 17,136 41,382 33,013
Impairment of
goodwill and
intangible assets
(note 5) 399,648 - 399,648 -
-------------------------------------------------------------------------

Income (loss)
before income taxes (358,819) 35,533 (326,412) 64,271
Income taxes
(note 6) (250) (14,378) 8,606 (6,003)
-------------------------------------------------------------------------

Net income (loss) (358,569) 49,911 (335,018) 70,274
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings (loss)
per share (note 7)
Basic (7.39) 1.03 (6.90) 1.45
Diluted (7.39) 1.02 (6.90) 1.44
-------------------------------------------------------------------------
-------------------------------------------------------------------------



COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
(In thousands February 28, February 29, February 28, February 29,
of dollars) 2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Net income (loss) (358,569) 49,911 (335,018) 70,274
-------------------------------------------------------------------------
Other comprehensive
income

Unrealized gains
(losses) on
derivative financial
instruments
designated as cash
flow hedges, net
of income tax
expense of
$1,401,000 and
$3,836,000
(income tax
recovery of
$44,000 and
$1,187,000
in 2008) 7,249 (1,498) 30,449 (8,151)

Reclassification to
net income of
realized losses
(gains) on
derivative
financial
instruments
designated as cash
flow hedges, net
of income tax
expense of
$902,000 and
$5,225,000 (income
tax recovery of
$319,000 and
$1,664,000 in
2008) (5,805) 2,021 (34,196) 9,106

Unrealized gain on
translation of a
net investment in
self-sustaining
foreign
subsidiaries 18,229 14,050 24,309 24,390

Unrealized losses
on translation
of long-term debts
designated as
hedges of a net
investment in
self-sustaining
foreign
subsidiaries (9,557) (8,887) (12,916) (15,263)
-------------------------------------------------------------------------
10,116 5,686 7,646 10,082
-------------------------------------------------------------------------
Comprehensive
income (loss) (348,453) 55,597 (327,372) 80,356
-------------------------------------------------------------------------
-------------------------------------------------------------------------



COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
(unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six months ended
(In thousands of dollars) February 28, 2009 February 29, 2008
$ $
-------------------------------------------------------------------------

Balance at beginning, as previously reported 297,150 181,952
Changes in accounting policies - 1,307
-------------------------------------------------------------------------
Balance at beginning, as restated 297,150 183,259
Net income (loss) (335,018) 70,274
Dividends on multiple voting shares (3,766) (3,138)
Dividends on subordinate voting shares (7,883) (6,553)
-------------------------------------------------------------------------
Balance at end (49,517) 243,842
-------------------------------------------------------------------------
-------------------------------------------------------------------------



COGECO CABLE INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In thousands of dollars) February 28, 2009 August 31, 2008
$ $
-------------------------------------------------------------------------

Assets
Current
Cash and cash equivalents 48,695 36,371
Accounts receivable 59,430 59,582
Income taxes receivable 9,262 2,267
Prepaid expenses 12,900 12,892
Future income tax assets 4,254 8,661
-------------------------------------------------------------------------
134,541 119,773
-------------------------------------------------------------------------

Fixed assets 1,286,150 1,257,965
Deferred charges 58,120 57,751
Intangible assets (note 8) 1,024,822 1,091,042
Goodwill (note 8) 161,669 487,805
Derivative financial instruments 34,285 -
Future income tax assets 3,577 4,819
-------------------------------------------------------------------------
2,703,164 3,019,155
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and Shareholders' equity
Liabilities
Current
Bank indebtedness 34,562 10,302
Accounts payable and accrued liabilities 222,599 247,638
Income tax liabilities 10,360 20,212
Deferred and prepaid income 32,496 32,859
Derivative financial instruments - 79,791
Current portion of long-term debt (note 9) 178,403 336,807
-------------------------------------------------------------------------
478,420 727,609
-------------------------------------------------------------------------

Long-term debt (note 9) 1,001,623 718,234
Deferred and prepaid income and other
liabilities 12,636 11,859
Pension plan liabilities and accrued
employees benefits 3,823 3,139
Future income tax liabilities 239,365 253,235
-------------------------------------------------------------------------
1,735,867 1,714,076
-------------------------------------------------------------------------

Shareholders' equity
Capital stock (note 10) 990,061 988,889
Contributed surplus 3,753 3,686
Retained earnings (deficit) (49,517) 297,150
Accumulated other comprehensive income
(note 11) 23,000 15,354
-------------------------------------------------------------------------
967,297 1,305,079
-------------------------------------------------------------------------
2,703,164 3,019,155
-------------------------------------------------------------------------
-------------------------------------------------------------------------



COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(In thousands Three months ended Six months ended
of dollars) February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Cash flow from
operating activities
Net income (loss) (358,569) 49,911 (335,018) 70,274
Adjustments for:
Amortization
(note 3) 66,644 55,989 130,566 108,676
Amortization of

deferred
transaction costs 643 731 1,291 1,453
Impairment of
goodwill and
intangible assets
(note 5) 399,648 - 399,648 -
Future income
taxes (note 6) (9,879) (22,448) (6,968) (17,262)
Stock-based
compensation 377 986 433 1,222
Loss (gain) on
disposal of fixed
assets (5) (103) 218 239
Other 227 207 526 424
-------------------------------------------------------------------------
99,086 85,273 190,696 165,026
Changes in non-cash
operating items
(note 12 a)) 19,354 5,718 (43,782) (28,690)
-------------------------------------------------------------------------
118,440 90,991 146,914 136,336
-------------------------------------------------------------------------

Cash flow from
investing activities
Acquisition of
fixed assets
(note 12 b)) (62,123) (58,501) (127,790) (109,155)
Increase in
deferred charges (5,779) (6,094) (12,986) (13,511)
Other 45 24 61 25
-------------------------------------------------------------------------
(67,857) (64,571) (140,715) (122,641)
-------------------------------------------------------------------------

Cash flow from
financing activities
Increase in bank
indebtedness 2,629 17,697 24,260 17,697
Net repayments under
the term facility (31,300) (32,473) (23,003) (64,466)
Issuance of long-term
debt, net of
transaction costs - - 254,771 -
Repayments of
long-term debt and
settlement of
derivative financial
instruments (812) (632) (240,546) (1,255)
Issue of subordinate
voting shares 686 236 964 3,292
Dividends on multiple
voting shares (1,883) (1,569) (3,766) (3,138)
Dividends on
subordinate voting
shares (3,943) (3,281) (7,883) (6,553)
-------------------------------------------------------------------------
(34,623) (20,022) 4,797 (54,423)
-------------------------------------------------------------------------

Effect of exchange
rate changes on cash
and cash equivalents
denominated in
foreign currencies 641 355 1,328 202
-------------------------------------------------------------------------
Net change in cash
and cash equivalents 16,601 6,753 12,324 (40,526)
Cash and cash
equivalents at
beginning 32,094 16,929 36,371 64,208
-------------------------------------------------------------------------
Cash and cash
equivalents at end 48,695 23,682 48,695 23,682
-------------------------------------------------------------------------
-------------------------------------------------------------------------

See supplemental cash flow information in note 12.



COGECO CABLE INC.
Notes to Consolidated Financial Statements
February 28, 2009
(unaudited)
(amounts in tables are in thousands of dollars, except number of shares and
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 ("GAAP"), present fairly the financial position of Cogeco Cable Inc. ("the Corporation") at February 28, 2009 and August 31, 2008 as well as its results of operations and its cash flows for the three and six month periods ended February 28, 2009 and February 29, 2008.

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, 2008. These unaudited interim consolidated financial statements follow the same accounting policies as the most recent annual consolidated financial statements, except for the adoption of the new accounting policies described below.

Adoption of new accounting policies

Capital disclosures and financial instruments

Effective September 1, 2008, the Corporation adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1535, Capital Disclosures, Section 3862, Financial Instruments - Disclosures and Section 3863, Financial Instruments - Presentation.

Capital disclosures

Section 1535 of the CICA Handbook requires that an entity disclose information that enables users of its financial statements to evaluate the entity's objectives, policies and processes for managing capital, including disclosures of any externally imposed capital requirements and the consequences for non-compliance. These new disclosures are included in note 14.

Financial instruments

Section 3862 on financial instrument disclosures requires the disclosure of information about the significance of financial instruments for the entity's financial position and performance and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages those risks.

Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the classification of related interest, dividends, gains and losses, and circumstances in which financial assets and financial liabilities are offset.

The adoption of these standards did not have any impact on the classification and measurements of the Corporation's financial instruments. The new disclosures pursuant to these new Sections are included in note 14.

General standards of financial statement presentation

The CICA amended Section 1400 of the CICA Handbook, General Standards of Financial Statement Presentation, to include a requirement for management to make an assessment of the entity's ability to continue as a going concern when preparing financial statements. These changes, including the related disclosure requirements, were adopted by the Corporation on September 1, 2008 and had no impact on the interim consolidated financial statements.

Credit risk and fair value of financial assets and financial liabilities

On January 20, 2009, the Emerging Issues Committee ("EIC") of the Canadian Accounting Standards Board issued EIC Abstract 173, Credit Risk and Fair Value of Financial Assets and Financial Liabilities, which establishes guidance requiring an entity to consider its own credit risk as well as the credit risk of the counterparty in determining the fair value of financial assets and financial liabilities, including derivative instruments. EIC 173 is applicable to all financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009 and is applicable to the Corporation for its second quarter of fiscal 2009 with retrospective application, without restatement of prior periods, to the beginning of its current fiscal year. The adoption of this new abstract during the second quarter decreased derivative financial instruments assets by $3.5 million, decreased future income tax liabilities by $1 million and decreased accumulated other comprehensive income by $2.6 million at December 1, 2008 and had no significant impact on the consolidated balance sheet at September 1, 2008.

Future accounting pronouncements

Business combinations, consolidated financial statements and non-controlling interests

During January 2009, the CICA issued Handbook Section 1582, Business Combinations, which replaces Section 1581 of the same name, and Sections 1601, Consolidated Financial Statements and 1602, Non-Controlling Interests, which together replace Section 1600, Consolidated Financial Statements. These new Sections harmonize significant aspects of Canadian accounting standards with the International Financial Reporting Standards ("IFRS") that will be mandated for entities with fiscal year beginning on or after January 1, 2011.

Section 1582 requires that all business acquisitions be measured at the fair value of the acquired entity at the acquisition date even if the business combination is achieved in stages, or if less than 100 percent of the equity interest in the acquiree is owned at the acquisition date, and expands the definition of a business subject to an acquisition. The Section also establishes new guidance on the measurement of consideration given and the recognition and measurement of assets acquired and liabilities assumed in a business combination. Furthermore, under this new guidance, acquisition costs, which were previously included as a component of the consideration given, and any negative goodwill resulting from the allocation of the purchase price, which was allocated as a reduction of non-current assets acquired under the previous standard, will be recorded in earnings in the current period. This new Section will be applied prospectively and will only impact the Corporation's consolidated financial statements for future acquisitions concluded in periods subsequent to the date of adoption.

Sections 1601 and 1602 dealing with consolidated financial statements require an entity to measure non-controlling interest upon acquisition either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets. The new Sections also require non-controlling interest to be presented as a separate component of shareholders' equity.

The new standards will apply as of the beginning of the first annual reporting period beginning on or after January 1, 2011, with simultaneous early adoption permitted. Early adoption may reduce the amount of restatement required upon conversion to IFRS. The Corporation is currently assessing the impact of these new Sections on its consolidated financial statements.

Harmonization of Canadian and International accounting standards

In March 2006, the Accounting Standards Board of the CICA released its new strategic plan, which proposed to abandon Canadian GAAP and effect a complete convergence to the IFRS for publicly accountable entities.

In April 2008, the CICA published an exposure draft as guidance which requires the transition to IFRS to replace Canadian GAAP as currently employed by Canadian publicly accountable enterprises. The changeover will occur no later than fiscal years beginning on or after January 1, 2011. Accordingly, the Corporation expects that its first interim consolidated financial statements presented in accordance with IFRS will be for the three-month period ending November 30, 2011, and its first annual consolidated financial statements presented in accordance with IFRS will be for the year ending August 31, 2012.

IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition, measurement and disclosure requirements. The Corporation has established a project team including representatives from various areas of the organization to plan and complete the transition to IFRS. This team reports periodically to the Audit Committee, who oversees the IFRS implementation project on behalf of the Board of Directors. The Corporation will be assisted by external advisors as required.

The implementation project consists of three primary phases, which may occur concurrently as IFRS are applied to specific areas of operations:

- Scoping and diagnostic phase - This phase involves performing a high-level impact assessment to identify key areas that are expected to be impacted by the transition to IFRS. The result of these procedures is the ranking of IFRS impacts in order of priority to assess the timing and complexity of transition efforts that will be required in subsequent phases.

- Impact analysis, evaluation and design phase - In this phase, each area identified from the scoping and diagnostic phase will be addressed in order of descending priority, with project teams established as deemed necessary. This phase involves specification of changes required to existing accounting policies, information systems and business processes, together with an analysis of policy choices permitted under IFRS and the development of draft IFRS financial statement content.

- Implementation and review phase - This phase includes execution of changes to information systems and business processes, completing formal authorization processes to approve recommended accounting policy changes and training programs across the organization, as necessary. It will culminate in the collection of financial information necessary to compile IFRS-compliant financial statements, embedding IFRS in business processes, eliminating any unnecessary data collection processes and finally the approval by the Audit Committee of the IFRS consolidated financial statements. Implementation also involves additional staff training with the deployment of revised systems.

The Corporation completed the scoping and diagnostic phase in February 2009, and is now conducting the impact analysis, evaluation and design phase. As implications of the conversion are identified, impact on information technology, data systems and business activities will be assessed. The Corporation's analysis of the IFRS and the comparison with currently applied accounting principles has identified a number of differences that may require information system changes or which are likely to have a material impact on the consolidated financial statements of the Corporation.

Set out below are the main areas where changes in accounting policies are expected to have a significant impact on the Corporation's consolidated financial statements. The list below should not be regarded as a complete list of changes that will result from transition to the IFRS. It is intended to highlight areas that the Corporation believes to be the most significant; however, analysis of changes is still in process and the selection of accounting policies where choices are available under IFRS has not been completed. We note that the regulatory bodies that promulgate the Canadian GAAP and the IFRS have significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRS and their impact on the Corporation's consolidated financial statements in future years. The future impacts of the IFRS will also depend on the particular circumstances prevailing in those years. The standards listed below are those existing based on current Canadian GAAP and IFRS. At this stage, the Corporation is not able to reliably quantify the expected impacts of these differences on its consolidated financial statements. They are as follows:

- Presentation of Financial Statements (IAS 1)

- Income Taxes (IAS 12)

- Property, Plant and Equipment (IAS 16)

- Revenue (IAS 18)

- Impairment of Assets (IAS 36)

- Business Combinations (IFRS 3)

Furthermore, IFRS 1, First-Time Adoption of International Financial Reporting Standards, provides entities adopting IFRS for the first time with a number of optional exemptions and mandatory exceptions to the general requirement for full retrospective application of IFRS which may differ from the requirements of the sections listed above. The Corporation is analyzing the various accounting policy choices available and will implement those determined to be most appropriate in the Corporation's circumstances. The Corporation has not yet determined the aggregate financial impact of adopting IFRS 1 on its consolidated financial statements.

The conversion project is progressing according to the established plan.

2. Segmented Information

The Corporation's activities are comprised of Cable Television, High Speed Internet and Telephony services. The Corporation considers its Cable Television, High Speed Internet and Telephony activities as a single operating segment. The Corporation's activities are carried out in Canada and in Europe.

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



-------------------------------------------------------------------------
-------------------------------------------------------------------------
Canada Europe
-------------------------------------------------------------------------
Three months February 28, February 29, February 28, February 29,
ended 2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
Revenue 243,680 205,168 61,240 59,934
Operating costs 133,002 114,751 43,419 38,014
Management fees
- COGECO Inc. 3,038 3,679 - -
Operating income
before amortization 107,640 86,738 17,821 21,920
Amortization 45,041 36,892 21,603 19,097
Operating income
(loss) 62,599 49,846 (3,782) 2,823
Financial expense
(revenue) 18,088 17,206 (100) (70)
Impairment of
goodwill and
intangible assets - - 399,648 -
Income taxes 15,553 (13,130) (15,803) (1,248)
Net income (loss) 28,958 45,770 (387,527) 4,141
-------------------------------------------------------------------------
Total assets (1) 2,288,806 2,214,840 414,358 804,315
Fixed assets (1) 975,994 940,683 310,156 317,282
Intangible
assets (1) 1,024,822 1,027,268 - 63,774
Goodwill (1) 116,890 116,890 44,779 370,915
Acquisition of
fixed assets (2) 54,447 47,177 7,895 12,697
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated
-------------------------------------------------------------------------
Three months ended February 28, 2009 February 29, 2008
$ $
-------------------------------------------------------------------------
Revenue 304,920 265,102
Operating costs 176,421 152,765
Management fees - COGECO Inc. 3,038 3,679
Operating income before amortization 125,461 108,658
Amortization 66,644 55,989
Operating income (loss) 58,817 52,669
Financial expense (revenue) 17,988 17,136
Impairment of goodwill and intangible assets 399,648 -
Income taxes (250) (14,378)
Net income (loss) (358,569) 49,911
-------------------------------------------------------------------------
Total assets (1) 2,703,164 3,019,155
Fixed assets (1) 1,286,150 1,257,965
Intangible assets (1) 1,024,822 1,091,042
Goodwill (1) 161,669 487,805
Acquisition of fixed assets (2) 62,342 59,874
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) At February 28, 2009 and August 31, 2008.
(2) Includes capital leases that are excluded from the statements of cash
flows.


-------------------------------------------------------------------------
-------------------------------------------------------------------------
Canada Europe
-------------------------------------------------------------------------
Six months ended February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
Revenue 481,054 401,409 123,304 115,526
Operating costs 265,529 226,054 84,626 76,207
Management fees
- COGECO Inc. 9,019 8,714 - -
Operating income
before amortization 206,506 166,641 38,678 39,319
Amortization 88,317 72,771 42,249 35,905
Operating income
(loss) 118,189 93,870 (3,571) 3,414
Financial expense
(revenue) 41,493 33,149 (111) (136)
Impairment of
goodwill and
intangible assets - - 399,648 -
Income taxes 25,941 (3,816) (17,335) (2,187)
Net income (loss) 50,755 64,537 (385,773) 5,737
-------------------------------------------------------------------------
Total assets (1) 2,288,806 2,214,840 414,358 804,315
Fixed assets (1) 975,994 940,683 310,156 317,282
Intangible
assets (1) 1,024,822 1,027,268 - 63,774
Goodwill (1) 116,890 116,890 44,779 370,915
Acquisition of
fixed assets (2) 110,198 85,470 18,750 25,131
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated
-------------------------------------------------------------------------
Six months ended February 28, 2009 February 29, 2008
$ $
-------------------------------------------------------------------------
Revenue 604,358 516,935
Operating costs 350,155 302,261
Management fees - COGECO Inc. 9,019 8,714
Operating income before amortization 245,184 205,960
Amortization 130,566 108,676
Operating income (loss) 114,618 97,284
Financial expense (revenue) 41,382 33,013
Impairment of goodwill and intangible assets 399,648 -
Income taxes 8,606 (6,003)
Net income (loss) (335,018) 70,274
-------------------------------------------------------------------------
Total assets (1) 2,703,164 3,019,155
Fixed assets (1) 1,286,150 1,257,965
Intangible assets (1) 1,024,822 1,091,042
Goodwill (1) 161,669 487,805
Acquisition of fixed assets (2) 128,948 110,601
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) At February 28, 2009 and August 31, 2008.
(2) Includes capital leases that are excluded from the statements of cash
flows.



3. Amortization

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Fixed assets 56,514 47,819 110,784 92,693
Deferred charges 6,066 5,622 11,849 10,992
Intangible assets 4,064 2,548 7,933 4,991
-------------------------------------------------------------------------
66,644 55,989 130,566 108,676
-------------------------------------------------------------------------
-------------------------------------------------------------------------


4. Financial expense

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Interest on long-term
debt 16,863 16,554 36,890 33,079
Foreign exchange
losses (gains) 619 177 4,403 (858)
Amortization of
deferred transaction
costs 407 407 814 814
Other 99 (2) (725) (22)
-------------------------------------------------------------------------
17,988 17,136 41,382 33,013
-------------------------------------------------------------------------
-------------------------------------------------------------------------


5. Impairment of goodwill and intangible assets

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Impairment of
goodwill 339,206 - 339,206 -
Impairment of
intangible assets 60,442 - 60,442 -
-------------------------------------------------------------------------
399,648 - 399,648 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------


In the second quarter of fiscal 2009, the competitive position of Cabovisao in the Iberian Peninsula further deteriorated due to the continuing unfavourable economic climate and recurring intense customer promotions and advertising initiatives from competitors in the Portuguese market at the end of the second quarter. In accordance with current accounting standards, management considers that the continued RGU and local currency revenue decline are more significant and persistent than expected, resulting in a decrease in the value of the Corporation's investment in the Portuguese subsidiary. As a result, the Corporation tested goodwill and all long-lived assets for impairment at February 28, 2009.

Goodwill has to be tested for impairment using a two step approach. The first step consists of determining whether the fair value of the reporting unit exceeds the net carrying amount of that reporting unit, including goodwill. In the event that the net carrying amount exceeds the fair value, a second step is performed in order to determine the amount of the impairment loss. The Corporation has completed its impairment tests on goodwill and has concluded that goodwill was impaired at February 28, 2009. As a result, an impairment loss of $339.2 million was recorded in the second quarter. Fair value of the reporting unit was determined using the discounted cash flow method. Future cash flows are based on internal forecasts and consequently, considerable management judgement is necessary to estimate future cash flows. Significant changes in assumptions could result in further impairments of goodwill.

Intangible assets with definite lives, such as customer relationships, must be tested for impairment by comparing the carrying amount of the asset or group of assets to the expected future undiscounted cash flow to be generated by the asset or group of assets. Accordingly, the Corporation has completed its impairment test on customer relationships at February 28, 2009, and has determined that the carrying value of customer relationships exceeds its fair value. As a result, an impairment loss of $60.4 million was recorded in the second quarter.

6. Income Taxes



-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Current 9,629 8,070 15,574 11,259
Future (9,879) (22,448) (6,968) (17,262)
-------------------------------------------------------------------------
(250) (14,378) 8,606 (6,003)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


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

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

Three months ended Six months ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
Income (loss) before
income taxes (358,819) 35,533 (326,412) 64,271
Combined income
tax rate 32.56% 32.97% 32.56% 33.51%
Income taxes at
combined income
tax rate (116,831) 11,717 (106,279) 21,537
Adjustment for loss
or income subject
to lower or higher
tax rates (331) (297) (558) (682)
Decrease in future
income taxes as a
result of decreases
in substantively
enacted tax rates - (24,002) - (24,002)
Decrease in income
tax recovery arising
from the
non-deductible
impairment of
goodwill 89,890 - 89,890 -
Decrease in income
tax recovery
arising from
non-deductible
expenses 95 192 172 293
Effect of foreign
income tax rate
differences 25,632 (2,213) 24,028 (3,377)
Other 1,295 225 1,353 228
-------------------------------------------------------------------------
Income taxes at
effective income
tax rate (250) (14,378) 8,606 (6,003)
-------------------------------------------------------------------------
-------------------------------------------------------------------------



7. Earnings per Share

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

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 29, February 28, February 29,

2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Net income (loss) (358,569) 49,911 (335,018) 70,274
Weighted average
number of multiple
voting and
subordinate voting
shares
outstanding 48,540,013 48,499,406 48,531,846 48,439,880
Effect of dilutive
stock options (1) - 300,010 - 318,789
-------------------------------------------------------------------------
Weighted average
number of diluted
multiple voting
and subordinate
voting shares
outstanding 48,540,013 48,799,416 48,531,846 48,758,669
-------------------------------------------------------------------------

Earnings (loss)
per share
Basic (7.39) 1.03 (6.90) 1.45
Diluted (7.39) 1.02 (6.90) 1.44
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) The weighted average dilutive potential number of subordinate voting
share, which were antidilutive for the three and six month periods ended
February 28, 2009 amounted to 158,317 and 185,596. For the three and six
month periods ended February 28, 2009, 240,859 and 175,178 stock options
(99,797 and 98,506 in 2008) were excluded from the calculation of diluted
earnings per share as the exercise price of the options was greater than
the average share price of the subordinate voting shares.


8. Goodwill and Intangible Assets

-------------------------------------------------------------------------
-------------------------------------------------------------------------
February 28, 2009 August 31, 2008
$ $
-------------------------------------------------------------------------


Customer relationships 35,270 101,490
Customer base 989,552 989,552
-------------------------------------------------------------------------
1,024,822 1,091,042
Goodwill 161,669 487,805
-------------------------------------------------------------------------
1,186,491 1,578,847
-------------------------------------------------------------------------
-------------------------------------------------------------------------


a) Intangible assets

During the first six months, intangible assets variations were as follows:


-------------------------------------------------------------------------
-------------------------------------------------------------------------
Customer Customer
relationships base Total
$ $ $
-------------------------------------------------------------------------

Balance at August 31, 2008 101,490 989,552 1,091,042
Amortization (7,933) - (7,933)
Foreign currency translation
adjustment 2,155 - 2,155
Impairment (note 5) (60,442) - (60,442)
-------------------------------------------------------------------------
Balance at February 28, 2009 35,270 989,552 1,024,822
-------------------------------------------------------------------------
-------------------------------------------------------------------------


b) Goodwill

During the first six months, goodwill variation was as follows:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
$
-------------------------------------------------------------------------
Balance at August 31, 2008 487,805
Foreign currency translation adjustment 13,070
Impairment (note 5) (339,206)
-------------------------------------------------------------------------
Balance at February 28, 2009 161,669
-------------------------------------------------------------------------
-------------------------------------------------------------------------


9. Long-Term Debt

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Maturity Interest February 28, August 31,
rate 2009 2008
% $ $
-------------------------------------------------------------------------

Parent company
Term Facility
Term loan
- EUR 94,096,350 2011 2.31 (1)(4) 151,173 145,832
Term loan
- EUR 17,358,700 2011 2.31 (1)(4) 27,862 26,881
Revolving loan
- EUR 117,500,000
(EUR 126,000,000
at August 31, 2008) 2011 2.44 (1) 189,516 196,308
Revolving loan 2011 1.86 (1) 84,839 94,375
Senior Secured
Debentures Series 1 2009 6.75 149,931 149,814
Senior Secured Notes
Series A - US$150
million 2008 6.83 (2) - 159,233
Series B 2011 7.73 174,434 174,338
Senior Secured Notes (3)
Series A
- US$190 million 2015 7.00 240,180 -
Series B 2018 7.60 54,560 -
Senior Unsecured
Debenture 2018 5.94 99,777 99,768

Subsidiaries
Obligations under
capital leases 2013 6.47 - 9.93 7,754 8,492
-------------------------------------------------------------------------
1,180,026 1,055,041
Less current portion 178,403 336,807
-------------------------------------------------------------------------
1,001,623 718,234
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Average interest rate on debt at February 28, 2009, 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 US denominated
debt.

(3) On October 1, 2008, the Corporation issued US$190 million Senior
Secured Notes Series A maturing October 1, 2015, and $55 million Senior
Secured Notes Series B maturing October 1, 2018, net of transaction costs
of $2.1 million. The Senior Secured Notes Series B bear interest at the
coupon rate of 7.60% per annum, payable semi-annually. The Corporation has
entered into cross-currency swap agreements to fix the liability for
interest and principal payments on the Senior Secured Notes Series A in the
amount of US$190 million, which bear interest at the coupon rate of 7.00%
per annum, payable semi-annually. Taking into account these agreements, the
effective interest rate on the Senior Secured Notes Series A is 7.24% and
the exchange rate applicable to the principal portion of the US dollar-
denominated debt has been fixed at $1.0625.

(4) On January 22, 2009, the Corporation entered into a swap agreement with
a financial institution to fix the floating benchmark interest rate with
respect to the Euro-denominated Term Loan facilities for a notional amount
of EUR 111.5 million. The interest swap rate to hedge the Term Loans has
been fixed at 2.08% until their maturity of July 28, 2011. The notional
value of the swap will decrease in line with the amortization schedule of
the Term Loans. In addition to the interest swap rate of 2.08%, the
Corporation will continue to pay the applicable margin on these Term Loans
in accordance with the Term Facility.

10. Capital Stock

Authorized, an unlimited number

Class A Preference shares, non-voting, 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, non-voting, issuable in series.

Multiple voting shares, 10 votes per share.

Subordinate voting shares, 1 vote per share.

-------------------------------------------------------------------------
-------------------------------------------------------------------------
February 28, 2009 August 31, 2008
$ $
-------------------------------------------------------------------------

Issued
15,691,100 multiple voting shares 98,346 98,346
32,867,426 subordinate voting shares
(32,826,611 at August 31, 2008) 891,715 890,543
-------------------------------------------------------------------------
990,061 988,889
-------------------------------------------------------------------------
-------------------------------------------------------------------------

During the first six months, subordinate voting share transactions were as
follows:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Number of shares Amount
$
-------------------------------------------------------------------------

Balance at August 31, 2008 32,826,611 890,543
Shares issued for cash under the Employee
Stock Purchase Plan and Stock Option Plan 40,815 964
Compensation expense previously recorded
in contributed surplus for options
exercised - 208
-------------------------------------------------------------------------
Balance at February 28, 2009 32,867,426 891,715
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Stock-based plans

The Corporation offers, 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 six months, the Corporation granted 133,381 stock options (99,084 in 2008) with an exercise price of $34.46 ($45.59 to $49.82 in 2008) of which 29,711 stock options (22,683 in 2008) were granted to COGECO Inc.'s employees. During the three and six month periods ended February 28, 2009, the Corporation charged an amount of $79,000 and $91,000 ($97,000 and $181,000 in 2008) with regards to the Corporation's options granted to COGECO Inc.'s employees. The Corporation records compensation expense for options granted on or after September 1, 2003. As a result, a compensation expense of $95,000 and $184,000 ($490,000 and $726,000 in 2008) was recorded for the three and six month periods ended February 28, 2009.

The fair value of stock options granted for the six month period ended February 28, 2009 was $8.96 ($12.86 in 2008) per option. The fair value of each option granted was estimated at the grant date for purposes of determining the stock-based compensation expense using the binomial option pricing model based on the following assumptions:



-------------------------------------------------------------------------
-------------------------------------------------------------------------
2009 2008
% %
-------------------------------------------------------------------------

Expected dividend yield 1.40 0.90
Expected volatility 29 27
Risk-free interest rate 4.22 4.25
Expected life in years 4.0 4.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------


At February 28, 2009, the Corporation had outstanding stock options providing for the subscription of 905,492 subordinate voting shares. These stock options, which include 123,067 conditional stock options, can be exercised at various prices ranging from $7.05 to $49.82 and at various dates up to October 29, 2018. On April 6, 2009, the Corporation cancelled 206,180 stock options which had been conditionally granted in relation with the acquisition of Cabovisao, at a price of $26.63 per share, subject to performance criteria of Cabovisao being met. Of these options, 112,662 were conditional.

The Corporation also offers a deferred share unit plan ("DSU Plan") which is described in the Corporation's annual consolidated financial statements. During the first six months, 6,282 deferred share units were awarded to the participants in connection with the DSU Plan. Expenses of $203,000 and $158,000 were recorded for the three and six month periods ended February 28, 2009 for the liability related to this plan.


11. Accumulated Other Comprehensive Income



-------------------------------------------------------------------------
-------------------------------------------------------------------------
Translation
of a net
investment in
self-sustaining
foreign Cash flow
subsidiaries hedges Total
$ $ $
-------------------------------------------------------------------------

Balance at August 31, 2008 15,660 (306) 15,354
Other comprehensive income (loss) 11,393 (3,747) 7,646
-------------------------------------------------------------------------
Balance at February 28, 2009 27,053 (4,053) 23,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------


12. Statements of Cash Flows

a) Changes in non-cash operating items


-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Accounts receivable 2,257 (3,977) 692 (4,420)
Income taxes
receivable (3,083) (129) (6,916) (28)
Prepaid expenses (1,387) (766) 10 569
Accounts payable and
accrued liabilities 15,366 6,493 (28,093) (32,499)
Income tax liabilities 7,029 6,225 (9,873) 8,841
Deferred and prepaid
income and other
liabilities (828) (2,128) 398 (1,153)
-------------------------------------------------------------------------
19,354 5,718 (43,782) (28,690)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


b) Other information

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Six months ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------

Fixed asset
acquisitions through
capital leases 219 1,373 1,158 1,446
Interest paid 12,217 10,962 33,714 31,884
Income taxes paid 5,680 2,473 32,366 2,473
-------------------------------------------------------------------------
-------------------------------------------------------------------------


13. Employees Future Benefits

The Corporation and its Canadian 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 Six months ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
Contributory defined
benefit pension plans 346 282 692 564
Defined contribution
pension plan and
collective registered
retirement savings plan 880 749 1,776 1,439
-------------------------------------------------------------------------
1,226 1,031 2,468 2,003
-------------------------------------------------------------------------
-------------------------------------------------------------------------


14. Financial and Capital Management

a) Financial management

Management's objectives are to protect Cogeco Cable Inc. and its subsidiaries against material economic exposures and variability of results, and against certain financial risks including credit risk, liquidity risk, interest rate risk and foreign exchange risk.

Credit risk

Credit risk represents the risk of financial loss for the Corporation if a customer or counterpart to a financial asset fails to meet its contractual obligations. The Corporation is exposed to credit risk arising from the derivative financial instruments, cash and cash equivalents and trade accounts receivable, the maximum exposure of which is represented by the carrying amounts reported on the balance sheet.

Credit risk from the derivative financial instruments arises from the possibility that counterparts to the cross-currency swap and interest rate swap agreements may default on their obligations in instances where these agreements have positive fair values for the Corporation. The Corporation reduces this risk by completing transactions with financial institutions that carry a credit rating equal to or superior to its own credit rating. The Corporation assesses the creditworthiness of the counterparts in order to minimize the risk of counterparts default under the agreements. At February 28, 2009, management believes that the credit risk relating to its swaps is minimal, since the lowest credit rating of the counterparts to the agreements is A-.

Cash and cash equivalents consist mainly of highly liquid investments, such as money market deposits. The Corporation has deposited the cash and cash equivalents with reputable financial institutions, from which management believes the risk of loss to be remote.

The Corporation is also exposed to credit risk in relation to its trade accounts receivable. In the current global economic environment, the Corporation's credit exposure is higher but it is difficult to predict the impact this could have on the Corporation's accounts receivable balances. To mitigate such risk, the Corporation continuously monitors the financial condition of its customers and reviews the credit history or worthiness of each new major customer. At February 28, 2009, no customer balance represents a significant portion of the Corporation's consolidated trade receivables. The Corporation establishes an allowance for doubtful accounts based on specific credit risk of its customers by examining such factors as the number of overdue days of the customer's balance outstanding as well as the customer's collection history. The Corporation believes that its allowance for doubtful accounts is sufficient to cover the related credit risk. The Corporation has credit policies in place and has established various credit controls, including credit checks, deposits on accounts and advance billing, and has also established procedures to suspend the availability of services when customers have fully utilized approved credit limits or have violated existing payment terms. Since the Corporation has a large and diversified clientele dispersed throughout in it's market area in Canada and Portugal, there is no significant concentration of credit risk. The following table provides further details on the Corporation's accounts receivable balances:



-------------------------------------------------------------------------
-------------------------------------------------------------------------
February 28, 2009 August 31, 2008
$ $
-------------------------------------------------------------------------

Trade accounts receivable 71,071 66,559
Allowance for doubtful accounts (16,172) (12,357)
-------------------------------------------------------------------------
54,899 54,202
Other accounts receivable 4,531 5,380
-------------------------------------------------------------------------
59,430 59,582
-------------------------------------------------------------------------
-------------------------------------------------------------------------


The following table provides further details on trade accounts receivable,
net of allowance for doubtful accounts. Trade accounts receivable past due
is defined as amount outstanding beyond normal credit terms and conditions
for the respective customers. A large portion of the Corporation's
customers are billed in advance and are required to pay before their
services are rendered. The Corporation considers amount outstanding at the
due date as trade accounts receivable past due.



-------------------------------------------------------------------------
-------------------------------------------------------------------------
February 28, 2009 August 31, 2008
$ $
-------------------------------------------------------------------------

Net trade accounts receivable not past due 40,416 40,945
Net trade accounts receivable past due 14,483 13,257
-------------------------------------------------------------------------
54,899 54,202
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Liquidity risk

Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they become due. The Corporation manages liquidity risk through the management of its capital structure and access to different capital markets. It also manages liquidity risk by continuously monitoring actual and projected cash flows to ensure sufficient liquidity to meet its obligations when due. At February 28, 2009, the available amount of the Corporation's Term Facility was $408.2 million. Management believes that the committed Term Facility will, until its maturity in July 2011, provide sufficient liquidity to manage its long-term debt maturities and support working capital requirements.



The following table summarizes the contractual maturities of the financial
liabilities and related capital amounts:

--------------------------------------------------------------------------
--------------------------------------------------------------------------
2009 2010 2011 2012
(six (twelve (twelve (twelve
months) months) months) months)
$ $ $ $
--------------------------------------------------------------------------

Bank indebtedness 34,562 - - -

Accounts payable and
accrued liabilities 222,599 - - -

Long-term debt (1) 175,295 42,158 386,829 175,000

Derivative financial
instruments

Cash outflows
(Canadian dollar) - - - -

Cash inflows
(Canadian dollar
equivalent of US dollar) - - - -

Obligations under
capital leases (2) 2,323 3,197 1,992 1,258
--------------------------------------------------------------------------
434,779 45,355 388,821 176,258
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Principal excluding obligations under capital leases.
(2) Including interest.


--------------------------------------------------------------------------
--------------------------------------------------------------------------
2013
(twelve
months) Thereafter Total
$ $ $
---------------------------------------------------------------------------

Bank indebtedness - - 34,562

Accounts payable and accrued liabilities - - 222,599

Long-term debt (1) - 396,737 1,176,019

Derivative financial instruments

Cash outflows (Canadian dollar) - 201,875 201,875

Cash inflows (Canadian dollar
equivalent of US dollar) - (241,737) (241,737)

Obligations under capital leases (2) 50 - 8,820
--------------------------------------------------------------------------
50 356,875 1,402,138
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Principal excluding obligations under
(2) Including interest.


The following table is a summary of interest payable on long-term debt
(excluding interest on capital leases) that are due for each of the next
five years and thereafter, based on the principal and interest rate
prevailing on the current debt at February 28, 2009 and their respective
maturities:

-------------------------------------------------------------------------
-------------------------------------------------------------------------
2009 2010 2011 2012
(six (twelve (twelve (twelve
months) months) months) months)
$ $ $ $
-------------------------------------------------------------------------


Interest payments on long-term
debt 27,943 50,256 48,629 29,292

Interest payments on
derivative
financial instruments 9,787 18,880 17,523 14,614

Interest receipts on
derivative financial
instruments (10,490) (20,412) (19,302) (16,922)
-------------------------------------------------------------------------
27,240 48,724 46,850 26,984
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
-------------------------------------------------------------------------
2013
(twelve
months) Thereafter Total
$ $ $
-------------------------------------------------------------------------

Interest payments on long-term debt 27,038 83,214 266,372

Interest payments on derivative
financial instruments 14,614 30,445 105,863

Interest receipts on derivative
financial
instruments (16,922) (35,253) (119,301)
-------------------------------------------------------------------------
24,730 78,406 252,934
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Interest rate risk

The Corporation is exposed to interest rate risks for both fixed interest rate and floating interest rate instruments. Fluctuations in interest rates will have an effect on the valuation and collection or repayment of these instruments. At February 28, 2009, all of the Corporation's long-term debt was at fixed rate, except for the Corporation's Term Facility. On January 22, 2009, the Corporation entered into a swap agreement with a financial institution to fix the floating benchmark interest rate with respect to the Euro-denominated Term Loan facilities for a notional amount of EUR 111.5 million. The interest swap rate to hedge the Term Loans has been fixed at 2.08% until their maturity of July 28, 2011. The notional value of the swap will decrease in line with the amortization schedule of the Term Loans. In addition to the interest swap rate of 2.08%, the Corporation will continue to pay the applicable margin on these Term Loans in accordance with the Term Facility. The Corporation elected to apply cash flow hedge accounting on this derivative financial instrument. The sensitivity of the Corporation's annual financial expense to a variation of 1% in the interest rate applicable to the Term Facility is approximately $2.7 million based on the current debt at February 28, 2009 and taking into consideration the effect of the interest rate swap agreement.

Foreign exchange risk

The Corporation is exposed to foreign exchange risk related to its long-term debt denominated in US dollars. In order to mitigate this risk, the Corporation has established guidelines whereby currency swap agreements can be used to fix the exchange rates applicable to its US dollar denominated long-term debt. All such agreements are exclusively used for hedging purposes. Accordingly, on October 2, 2008, the Corporation entered into cross-currency swap agreements to set the liability for interest and principal payments on its US$190 million Senior Secured Notes Series A issued on October 1, 2008. These agreements have the effect of converting the US interest coupon rate of 7.00% per annum to an average Canadian dollar interest rate of 7.24% per annum. The exchange rate applicable to the principal portion of the debt has been fixed at $1.0625. The Corporation elected to apply cash flow hedge accounting on these derivative financial instruments.

The Corporation is also exposed to foreign exchange risk on cash and cash equivalents, bank indebtedness and accounts payable denominated in US dollars or EUR. At February 28, 2009, bank indebtedness denominated in US dollars amounted to US$1,451,000 (US$286,000 at August 31, 2008) while accounts payable denominated in US dollars amounted to US$7,580,000 (US$16,121,000 at August 31, 2008). At February 28, 2009, Euro-denominated cash and cash equivalents amounted to EUR 736,000 EUR 219,000 at August 31, 2008) while accounts payable denominated in Euros amounted to euros 134,000 EUR 163,000 at August 31, 2008). Due to their short-term nature, the risk arising from fluctuations in foreign exchange rates is usually not significant, except for the unusual high volatility of the US dollar compared to the Canadian dollar during the first six months of fiscal 2009. During the six month period ended February 28, 2009, the exchange rate increased from $1.0620 at August 31, 2008, to $1.2723 at February 27, 2009, reaching a high of $1.2935 on November 20, 2008. The impact of a 10% change in the foreign exchange rates (US dollar and Euros) would change financial expense by approximately $1.1 million.

Furthermore, the Corporation's net investment in self-sustaining foreign subsidiaries is exposed to market risk attributable to fluctuations in foreign currency exchange rates, 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-Televisao por Cabo, S.A. was borrowed directly in Euros. At February 28, 2009, the net investment amounted to euros 196,758,000 EUR 446,051,000 at August 31, 2008) while long-term debt denominated in Euros amounted to euros 228,955,000 EUR 237,455,000 at August 31, 2008). The exchange rate used to convert the Euro currency into Canadian dollars for the balance sheet accounts at February 28, 2009 was $1.6129 per Euro compared to $1.5580 per Euro at August 31, 2008. The impact of a 10% change in the exchange rate of the Euro into Canadian dollars would change financial expense by approximately $1.0 million and other comprehensive income by approximately $5.2 million.

Fair value

Fair value is the amount at which willing parties would accept to exchange a financial instrument based on the current market for instruments with the same risk, principal and remaining maturity. Fair values are estimated at a specific point in time, by discounting expected cash flows at rates for debts of the same remaining maturities and conditions. These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and therefore, cannot be determined with precision. In addition, income taxes and other expenses that would be incurred on disposition of these financial instruments are not reflected in the fair values. As a result, the fair values are not necessarily the net amounts that would be realized if these instruments were settled. The carrying value of all of the Corporation's financial instruments approximates fair value, except as otherwise noted in the following table:



-------------------------------------------------------------------------
-------------------------------------------------------------------------
February 28, 2009 August 31, 2008
Carrying value Fair value Carrying value Fair value
-------------------------------------------------------------------------


Long-term debt 1,180,026 1,149,318 1,055,041 1,049,329
-------------------------------------------------------------------------
-------------------------------------------------------------------------


b) Capital management

The Corporation's objectives in managing capital are to ensure sufficient liquidity to support the capital requirements of its various businesses, including growth opportunities. The Corporation manages its capital structure and makes adjustments in light of general economic conditions, the risk characteristics of the underlying assets and the Corporation's working capital requirements. Management of the capital structure involves the issuance of new debt, the repayment of existing debts using cash generated by operations and the level of distribution to shareholders.

The capital structure of the Corporation is composed of shareholders' equity, bank indebtedness, long-term debt and assets or liabilities related to derivative financial instruments.

The provisions under the Term Facility provide for restrictions on the operations and activities of the Corporation. Generally, the most significant restrictions relate to permitted investments and dividends on multiple and subordinate voting shares, as well as incurrence and maintenance of certain financial ratios primarily linked to the operating income before amortization, financial expense and total Indebtedness. At February 28, 2009, the Corporation was in compliance with all of its debt covenants and was not subject to any other externally imposed capital requirements.

The following table summarizes certain of the key ratios used by management to monitor and manage the Corporation's capital structure:



---------------------------------------------------------------------------
---------------------------------------------------------------------------
February 28, 2009 August 31, 2008
---------------------------------------------------------------------------

Net indebtedness (1) / Shareholders' equity 1.2 0.8
Net indebtedness (1) / Operating income before
amortization (2) 2.3 2.5
Operating income before amortization / Financial
expense (3) 5.9 6.4
---------------------------------------------------------------------------
---------------------------------------------------------------------------

(1) Net indebtedness is defined as the total of bank indebtedness, long-
term debt and derivative financial instrument liability, less cash and cash
equivalents and assets related to derivative financial instruments.

(2) Calculation based on operating income before amortization for the last
twelve month period ended February 28, 2009.

(3) Calculation based on operating income before amortization for the six
month period ended February 28, 2009 and twelve month period ended August
31, 2008.


15. Comparative figures

Certain comparative figures have been reclassified to conform to the current year's presentation to reflect the reclassification of foreign exchange gains or losses from operating costs to financial expense.

Contact Information

  • Source:
    Cogeco Cable Inc.
    Pierre Gagne
    Vice President, Finance and Chief Financial Officer
    514-764-4700
    or
    Information:
    Media
    Marie Carrier
    Director, Corporate Communications
    514-764-4700