SOLID SECOND QUARTER RESULTS FOR COGECO CABLE

Solid

second quarter results for Cogeco Cable

Montréal, April 8, 2011 – Today,

Cogeco Cable Inc. (TSX: CCA) (“Cogeco Cable” or the “Corporation”) announced its

financial results for the second quarter

and first six months

For the second quarter and first six months

•

Revenue increased by 5

% to reach $

•

perating income before amortization

of fiscal 2010, and by 7.6% to $

263.8

•

Operating margin

(1)

creased to

when compared to the

same period

•

In the second quarter, the

Corporation

at 7.73%, from the

net proceeds of the

Secured Debentures Series

2, bearing interest at 5.15%. A

on the redemption

, which increased

•

Net income grew by $1.4

million, or

the same period

of the previous fiscal year

compared to $86.5

million in the first half of fiscal 2010.

favourable income tax adjustment of $29.8

rates for the Canadian operations

fiscal 2011 amounted to $8.1

million, or

first half of fiscal 2010;

•

Free cash flow

(1)

reached $48.2

$43.9 million in

the comparable quarter of the prior year. For the first six months, free cash flow amounted to

$18.1 million, compared to $

105.9

recognition of current income tax expense rela

future income tax expense accordingly

•

Quarterly dividends

of $0.17 per share w

quarterly increase of $0.03

per share, or 21.4%, when

first six months of

fiscal 2010. Dividend payments in the first six months totalled $0.34 per share in fiscal 2011,

compared to $0.28 per shar

e in fiscal 2010

•

Revenue-

generating units (“RGU”)

first six months, for a total of

3,327,297

“In the second quarter, we have continued to increase our customer base with 57,079 RGU net additions essentially in

Digital television, HSI and Telephony services from both ou

cascaded in Cogeco Cable’s other key consolidated financial indicators, in particular with revenue and operating income

before amortization. In this quarter, Cogeco Cable maintained its increased qu

and multiple voting shares

reflecting the continuous growth and positive financial results of the Corporation.

to deliver Cogeco Cable’s revised projections as issued in January of this year

offering, through various improvements and best

Cogeco Cable.

(1)

The indicated terms do not have standard definitions prescribed by Canadian Generally Accepted Accounting Principles (“GAAP”)

to similar measures presented by other companies. For more details, please

analysis.

(2)

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

For immediate release

second quarter results for Cogeco Cable

Cogeco Cable Inc. (TSX: CCA) (“Cogeco Cable” or the “Corporation”) announced its

and first six months

of fiscal 2011, ended February 28, 2011.

fiscal 2011:

% to reach $

336.6 million, and by 4.8% to reach $668.1 million;

perating income before amortization

(1)

increased by 9.6% to $134.4 million

when compared to the

263.8

million when

compared to the first half of the prior fiscal year

creased to

39.9% from 38.3% in the quarter, and to 39.5% from

38.4

same period

s of the prior year;

Corporation

redeemed the $175

million Senior Secured Notes Series B, bearing interest

net proceeds of the

issuance, in the first quarter of fiscal 2011, of the $200

2, bearing interest at 5.15%. A

one-time make-

whole premium of $8.8

, which increased

financial expense during the second quarter

and first six months

million, or

4.6% to reach $31.2 million in the second quarter,

compared to $

of the previous fiscal year

. For the first half of fiscal 2011, net income amounted to $

million in the first half of fiscal 2010.

In the

first six months of fiscal 2010

favourable income tax adjustment of $29.8

million related to the reduction of Ontario provincial corporate income tax

rates for the Canadian operations

. Excluding this adjustment, net income progress

ion in

million, or

14.3% when compared to the

adjusted net income

million for the quarter, an increase of $4.2 million, or

9.6

the comparable quarter of the prior year. For the first six months, free cash flow amounted to

105.9

million in the first half of fiscal 2010.

This reduction is primarily due to the

recognition of current income tax expense rela

ting to the modifications to the corporate structure which reduced the

future income tax expense accordingly

and the increase in financial expense;

of $0.17 per share w

ere

paid to the holders of subordinate and multiple voting shares

per share, or 21.4%, when

compared to quarterly dividends

of $0.14 per share

fiscal 2010. Dividend payments in the first six months totalled $0.34 per share in fiscal 2011,

e in fiscal 2010

;

generating units (“RGU”)

(2)

grew by 57,079 net additions in the quarter and

147,948

3,327,297

RGU at February 28, 2011.

“In the second quarter, we have continued to increase our customer base with 57,079 RGU net additions essentially in

Digital television, HSI and Telephony services from both ou

r Canadian and European operations. This positive growth

cascaded in Cogeco Cable’s other key consolidated financial indicators, in particular with revenue and operating income

before amortization. In this quarter, Cogeco Cable maintained its increased qu

arterly dividends

to the holders of subordinate

reflecting the continuous growth and positive financial results of the Corporation.

to deliver Cogeco Cable’s revised projections as issued in January of this year

by providing to our customers a superior

offering, through various improvements and best

-in-class customer service”

, declared Louis Audet, President and CEO of

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

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

PRESS RELEASE

For immediate release

Cogeco Cable Inc. (TSX: CCA) (“Cogeco Cable” or the “Corporation”) announced its

when compared to the

second quarter

compared to the first half of the prior fiscal year

;

38.4

% in the first six months

million Senior Secured Notes Series B, bearing interest

issuance, in the first quarter of fiscal 2011, of the $200

million Senior

whole premium of $8.8

million was paid

and first six months

;

compared to $

29.8 million for

. For the first half of fiscal 2011, net income amounted to $

64.8 million,

first six months of fiscal 2010

, net income included a

million related to the reduction of Ontario provincial corporate income tax

ion in

the first six months of

adjusted net income

(1)

of $56.7 million in the

9.6

%, when compared to

the comparable quarter of the prior year. For the first six months, free cash flow amounted to

This reduction is primarily due to the

ting to the modifications to the corporate structure which reduced the

paid to the holders of subordinate and multiple voting shares

, a

of $0.14 per share

in the

fiscal 2010. Dividend payments in the first six months totalled $0.34 per share in fiscal 2011,

147,948

net additions in the

“In the second quarter, we have continued to increase our customer base with 57,079 RGU net additions essentially in

our

r Canadian and European operations. This positive growth

cascaded in Cogeco Cable’s other key consolidated financial indicators, in particular with revenue and operating income

to the holders of subordinate

reflecting the continuous growth and positive financial results of the Corporation.

We are on target

by providing to our customers a superior

, declared Louis Audet, President and CEO of

and therefore, may not be comparable

GAAP financial measures” section of the Management’s discussion and

ABOUT COGECO CABLE

Cogeco Cable (www.cogeco.ca) is a telecommunications company, the second largest hybrid fibre coaxial cable operator in Ontario, Québec

and Portugal. 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, Voice over Internet Protocol (“VoIP”), HSI access, data

storage, data 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).

– 30 –

Source: Cogeco Cable Inc.

Pierre Gagné

Senior Vice President and Chief Financial Officer

Tel.: 514-764-4700

Information: Media

Marie Carrier

Director, Communications

Tel.: 514-764-4761

Analyst Conference Call: Friday, April 8, 2011 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 dialling 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: 5366022

By Internet at www.cogeco.ca/investors

A rebroadcast of the conference call will be available until April 15, 2011, by dialling:

Canada and USA access number: 1 888 203-1112

International access number: + 1 647 436-0148

Confirmation code: 5366022

SHAREHOLDERS’ REPORT

Second quarter ended

February 28, 2011

SHAREHOLDERS’ REPORT

February 28, 2011

COGECO CABLE INC. Q2 2011

FINANCIAL HIGHLIGHTS

Quarters ended February 28, Six months ended February 28,

2011 2010 Change 2011 2010 Change

($000, except percentages and per share data) $ $ % $ $ %

(unaudited)

Operations

Revenue 336,569 320,397 5.0 668,088 637,762 4.8

Operating income before amortization

(1)

134,372 122,613 9.6 263,800 245,219 7.6

Operating margin

(1)

39.9% 38.3% – 39.5% 38.4% –

Operating income 69,293 56,774 22.1 135,731 113,815 19.3

Net income 31,151 29,789 4.6 64,788 86,455 (25.1)

Adjusted net income

(1)

31,151 29,789 4.6 64,788 56,673 14.3

Cash Flow

Cash flow from operating activities 92,663 114,037 (18.7)

147,666 110,419 33.7

Cash flow from operations

(1)

118,819 118,318 0.4 155,252 248,547 (37.5)

Capital expenditures and increase in deferred charges 70,668 74,379 (5.0)

137,115 142,600 (3.8)

Free cash flow

(1)

48,151 43,939 9.6 18,137 105,947 (82.9)

Financial Condition

(2)

Fixed assets – – – 1,333,314 1,325,077 0.6

Total assets – – – 2,694,331 2,702,819 (0.3)

Indebtedness

(3)

– – – 954,933 958,939 (0.4)

Shareholders’ equity – – – 1,185,258 1,136,301 4.3

RGU growth 57,079 68,782 (17.0)

147,948 158,567 (6.7)

Per Share Data

(4)

Earnings per share

Basic 0.64 0.61 4.9 1.34 1.78 (24.7)

Diluted 0.64 0.61 4.9 1.33 1.78 (25.3)

Adjusted earnings per share

(1)

Basic 0.64 0.61 4.9 1.34 1.17 14.5

Diluted 0.64 0.61 4.9 1.33 1.16 14.7

(1)

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.

(2)

At February 28, 2011 and August 31, 2010.

(3)

Indebtedness is defined as the total of bank indebtedness, principal on long-term debt and obligations under derivative financial instruments.

(4)

Per multiple and subordinate voting share.

COGECO CABLE INC. Q2 2011

FORWARD-LOOKING STATEMENTS

Certain statements in this report 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 economic downturn experienced over the past two years makes 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 2010 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 report 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 2010 Annual Report. Throughout this

discussion, all amounts are in Canadian dollars unless otherwise indicated.

MANAGEMENT’S DISCUSS

(MD&A)

Second quarter ended

February 28, 2011

MANAGEMENT’S DISCUSS

ION AND ANALYSIS

February 28, 2011

ION AND ANALYSIS

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 4

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 regards to these objectives by monitoring operating income before amortization

(1)

, operating

margin

(1)

, revenue-generating units (“RGU”)

(2)

growth and free cash flow

(1)

During the first six months of fiscal 2011, the Corporation invested approximately $66.3 million in its network infrastructure and equipment to

upgrade its capacity, improve its robustness and extend its territories in order to better serve and increase its service offerings for new and

existing clientele.

RGU growth and penetration of service offerings

During the six month period ended February 28, 2011, the number of RGU increased by 147,948, or 4.7%, to reach 3,327,297 RGU, mainly as

a result of targeted marketing initiatives in the Canadian operations and customer acquisition and retention strategies in the European

operations designed to improve penetration, and to the continuing interest for high definition (“HD”) television service. As a result of the

sustained growth in the first half of the fiscal year, Cogeco Cable expects to achieve its fiscal 2011 revised guidelines of 275,000 net additions,

representing growth of approximately 8.6% when compared to August 31, 2010. RGU growth is expected to stem primarily from the continued

strong interest in Digital Television services, enhanced service offerings, and through promotional activities.

Operating income before amortization and operating margin

First-half operating income before amortization increased by 7.6% when compared to the first six months of fiscal 2010 to reach $263.8 million

and operating margin increased to 39.5% from 38.4%, in line to achieve Management’s revised projection of $545 million in operating income

before amortization for fiscal 2011. The resulting operating margin of approximately 40.1% is expected for the 2011 fiscal year.

Free cash flow

For the six month period ended February 28, 2011, Cogeco Cable achieved free cash flow of $18.1 million, compared to $105.9 million for the

first half of the previous fiscal year, a decrease of $87.8 million. The decrease in free cash flow in the first six months of fiscal 2011 reflects the

timing of the recognition of income tax liabilities as a result of modifications made to the corporate structure in fiscal 2009. Management

expects to achieve its fiscal 2011 free cash flow revised guidelines of $70 million.

OPERATING RESULTS – CONSOLIDATED OVERVIEW

Quarters ended February 28, Six months ended February 28,

2011 2010 Change 2011 2010 Change

($000, except percentages)

(unaudited)

Revenue 336,569 320,397 5.0 668,088 637,762 4.8

Operating costs 199,669 195,106 2.3 395,116 383,524 3.0

Management fees - COGECO Inc. 2,528 2,678 (5.6) 9,172 9,019 1.7

Operating income before amortization 134,372 122,613 9.6 263,800 245,219 7.6

Operating margin 39.9% 38.3% 39.5% 38.4%

Revenue

Fiscal 2011 second-quarter revenue rose by $16.2 million, or 5%, to reach $336.6 million, when compared to the prior year. For the first six

months, revenue amounted to $668.1 million, an increase of $30.3 million, or 4.8% when compared to the first six months of fiscal 2010. For

further details on the Corporation’s operating results, please refer to the “Canadian operations” and “European operations” sections.

Operating costs

For the second quarter of fiscal 2011, operating costs, excluding management fees payable to COGECO Inc., increased by $4.6 million, to

reach $199.7 million, an increase of 2.3% compared to the prior year. For the first half of the fiscal year, operating costs, excluding

management fees payable to COGECO Inc., amounted to $395.1 million, an increase of $11.6 million, or 3%, when compared to fiscal 2010.

For further details on the Corporation’s operating results, please refer to the “Canadian operations” and “European operations” sections.

Operating income before amortization and operating margin

Fiscal 2011 operating income before amortization increased by $11.8 million, or 9.6%, to reach $134.4 million in the second quarter, and by

$18.6 million, or 7.6%, in the first six months to reach $263.8 million. Cogeco Cable’s second-quarter operating margin increased to 39.9%

from 38.3% in the comparable period of the prior year. For the first six months, the operating margin grew to 39.5% from 38.4% in the first half

of fiscal 2010. For further details on the Corporation’s operating results, please refer to the “Canadian operations” and “European operations”

sections.

(1)

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.

(2)

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

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 5

RELATED PARTY TRANSACTIONS

Cogeco Cable is a subsidiary of COGECO Inc., which holds 32.2% of the Corporation’s equity shares, representing 82.6% 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, capped annually and subject to an adjustment based on the increase in the Consumer Price Index in Canada,

for certain executive, administrative, legal, regulatory, strategic and financial planning and additional services. Accordingly, for fiscal 2011,

management fees have been set at a maximum of $9.2 million, which was paid within the first six months of the fiscal year. For fiscal 2010,

management fees were capped at $9 million, and were fully paid in the first half of the year.

Cogeco Cable granted 35,800 stock options to COGECO Inc.’s employees during the first six months of fiscal 2011, compared to 33,266 for

the same period last year. During the second quarter and first six months, Cogeco Cable charged COGECO Inc. amounts of $57,000 and

$115,000, respectively, with regards to Cogeco Cable’s options granted to COGECO Inc.’s employees, compared to $62,000 and $177,000 in

the comparable periods of the prior year.

Cogeco Cable has also established an incentive share unit plan for senior executives and designated employees. During the first six months of

this year, the Corporation granted 10,000 incentive share units to COGECO Inc.’s employees, compared to 9,981 incentive share units in the

first six months of fiscal 2010. During the second quarter and first half of fiscal 2011, the Corporation charged COGECO Inc. amounts of

$58,000 and $97,000 with respect to these incentive share units, compared to $28,000 and $37,000, respectively, in the comparable periods

of the previous fiscal year.

Details regarding the management agreement and stock options and incentive share units granted to COGECO Inc.’s employees are provided

in the Corporation’s 2010 Annual Report.

There were no other material related party transactions during the periods covered.

FIXED CHARGES

Quarters ended February 28,

Six months ended February 28,

2011 2010 Change 2011 2010 Change

($000, except percentages) $ $ % $ $ %

(unaudited)

Amortization

65,079

65,839

(1.2)

128,069

131,404

(2.5)

Financial expense 24,125 15,033 60.5 40,825 31,174 31.0

Second-quarter 2011 amortization amounted to $65.1 million, $0.8 million, or 1.2% less when compared to $65.8 million for the same period of

the prior year. For the first six months, amortization decreased by $3.3 million, or 2.5%, at $128.1 million when compared to $131.4 million in

the first half of the prior year. The decreases are mainly due to a reduction in amortization in the European operations stemming from certain

acquired assets that are now fully amortized and the depreciation of the Euro in relation to the Canadian dollar in fiscal 2011, partly offset by

additional capital expenditures in the Canadian operations arising from customer premise equipment acquisitions to support RGU growth.

Financial expense amounted to $24.1 million in the second quarter compared to $15 million in the prior year. In the first six months of fiscal

2011, financial expense amounted to $40.8 million, compared to $31.2 million in the first half of the prior year. Financial expense increases are

primarily due to the payment of a make-whole premium amounting to $8.8 million on the early repayment, on December 22, 2010, of the

$175 million Senior Secured Notes Series B due on October 31, 2011, partly offset by the impact of the lower interest rate on the $200 million

Senior Secured Debentures Series 2 issued on November 16, 2010 and the financial expense impact of fluctuations in the level of bank

indebtedness.

INCOME TAXES

Fiscal 2011 second-quarter income tax expense amounted to $14 million, compared to $12 million in the prior year. The increase of

$2.1 million, or 17.3%, is mainly due to operating income before amortization growth, partly offset by increase in financial expense and the

previously announced annual declines in the enacted Canadian federal and provincial income tax rates.

In the first six months, income tax expense amounted to $30.1 million, compared to an income tax recovery of $3.8 million in the first half of

fiscal 2010. The income tax recovery in the first six months of the prior year included the favourable impact of $29.8 million from the reduction

in corporate income tax rates announced on March 26, 2009 by the Ontario provincial government and considered substantively enacted on

November 16, 2009 (the “reduction of Ontario provincial corporate income tax rates”). Excluding this impact in the prior year, income tax

expense would have amounted to $26 million. Fiscal 2011 first-half income tax expense increase is mainly due to operating income before

amortization growth and the decrease in amortization, partly offset by the increase in financial expense and the previously announced annual

declines in the enacted Canadian federal and provincial income tax rates.

NET INCOME

Fiscal 2011 second-quarter net income amounted to $31.2 million, or $0.64 per share, compared to $29.8 million, or $0.61 per share, for the

same period in fiscal 2010. The increases of $1.4 million, or 4.6%, and of $0.03 per share, or 4.9%, are mainly due to the growth in operating

income before amortization in the second quarter of fiscal 2011, partly offset by the make-whole premium on early repayment of debt

described in the “Fixed charges” section amounting to $6.4 million, net of income taxes.

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 6

For the first half of fiscal 2011, net income amounted to $64.8 million, or $1.34 per share. In the comparable period of fiscal 2010, net

income amounted to $86.5 million, or $1.78 per share, which included the reduction of Ontario provincial corporate income tax rates described

in the “Income Taxes” section. Excluding this prior year effect, fiscal 2011 net income increased by $8.1 million, or 14.3%, and $0.17 per

share, or 14.5%, when compared to adjusted net income

(1)

of $56.7 million, or $1.17 per share

(1)

, for the first half of fiscal 2010. Net income

progression has resulted mainly from the growth in operating income before amortization and the decrease in amortization expense, partly

offset by make-whole premium on early repayment of debt of $6.4 million, net of income taxes.

CASH FLOW AND LIQUIDITY

Quarters ended February 28, Six months ended February 28,

2011 2010 2011 2010

($000)

(unaudited)

Operating activities

Cash flow from operations 118,819 118,318 155,252 248,547

Changes in non-cash operating items (26,156) (4,281) (7,586) (138,128)

92,663 114,037 147,666 110,419

Investing activities

(1)

(70,668) (74,277) (137,115) (142,337)

Financing activities

(1)

(193,666) (44,528) (20,182) 4,967

Effect of exchange rate changes on cash and cash equivalents denominated in a

foreign currency 94 (1,102) (135) (900)

Net change in cash and cash equivalents (171,577) (5,870) (9,766) (27,851)

Cash and cash equivalents, beginning of period 197,653 17,477 35,842 39,458

Cash and cash equivalents, end of period 26,076 11,607 26,076 11,607

(1)

Excludes assets acquired under capital leases.

Fiscal 2011 second-quarter cash flow from operations reached $118.8 million, essentially the same when compared to $118.3 million in the

second quarter of the prior year. Changes in non-cash operating items required cash outflows of $26.2 million, mainly as a result of decreases

in accounts payable and accrued liabilities and income tax liabilities, combined with an increase in accounts receivable. In the prior year,

changes in non-cash operating items required cash outflows of $4.3 million, mainly as a result of increases in income taxes receivable and

accounts receivable, partly offset by increases in accounts payable and accrued liabilities and deferred and prepaid revenue and other

liabilities.

For the first six months of fiscal 2011, cash flow from operations reached $155.3 million, $93.3 million or 37.5%, lower than the comparable

period last year. This reduction is primarily due to the recognition of current income tax expense relating to the modifications to the corporate

structure which reduced the future income tax expense accordingly and the increase in financial expense. Changes in non-cash operating

items required cash outflows of $7.6 million, mainly as a result of a decrease in accounts payable and accrued liabilities and an increase in

accounts receivable, partly offset by an increase in income tax liabilities. In the prior year, changes in non-cash operating items required cash

outflows of $138.1 million, mainly as a result of decreases in accounts payable and accrued liabilities and income tax liabilities and increases

in income taxes receivable and accounts receivable.

(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.

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 7

Investing activities, including capital expenditures segmented according to the National Cable Television Association (“NCTA”) standard

reporting categories, are as follows:

Quarters ended February 28, Six months ended February 28,

2011 2010 2011 2010

($000)

(unaudited)

Customer premise equipment

(1)

27,588 26,630 54,534 60,105

Scalable infrastructure 21,143 17,513 37,147 30,340

Line extensions 4,055 6,354 7,945 11,788

Upgrade / Rebuild 10,949 15,215 21,178 25,685

Support capital 4,417 6,212 10,557 9,163

Total capital expenditures

(2)

68,152 71,924 131,361 137,081

Increase in deferred charges and others 2,516 2,353 5,754 5,397

Total investing activities

(2)

70,668 74,277 137,115 142,478

(1)

Includes mainly home terminal devices as well as new and replacement drops.

(2)

Includes capital leases, which are excluded from the statements of cash flows.

Fiscal 2011 second-quarter Total capital expenditures amounted to $68.2 million, a decrease of 5.2% when compared to $71.9 million in the

second quarter of the prior year due to the following factors:

• Decreases in upgrades and rebuilds and in line extensions which surpassed the increase in scalable infrastructure. This net

decrease stems from the timing of the various initiatives undertaken by the Corporation in order to expand its network and improve

its capacity;

• An increase in customer premise equipment spending mainly due to the timing of equipment purchases to support RGU growth in

the Canadian operations, which offset the decrease in customer premise equipment spending reflecting lower RGU growth in the

European operations and the depreciation of the value of the Euro relative to the Canadian dollar.

For the first half of fiscal 2011, Total capital expenditures amounted to $131.4 million, a decrease of 4.2% when compared to $137.1 million in

the comparable period of the prior year due to the following factors:

• A decrease in customer premise equipment spending mainly due to lower RGU growth in the European operations and the

depreciation of the value of the Euro relative to the Canadian dollar, partly offset by an increase in customer premise equipment

spending to support RGU growth in the Canadian operations;

• Decreases in upgrades and rebuilds and in line extensions stemming from the timing of the various initiatives undertaken by the

Corporation in order to expand its network and improve its capacity;

• An increase in scalable infrastructure in the Canadian operations to improve network capacity in existing areas served;

Deferred charges and others are mainly attributable to reconnect and additional service activation costs. For the second quarter and first six

months, the increase in deferred charges and others amounted to $2.5 million and $5.8 million, respectively, essentially the same when

compared to $2.4 million and $5.4 million for the same periods of the 2010 fiscal year.

In the second quarter, free cash flow amounted to $48.2 million, compared to $43.9 million in the comparable period of fiscal 2010,

representing an increase of $4.2 million, or 9.6%. The growth in free cash flow over the prior year is due to the increase in operating income

before amortization and the decrease in capital expenditures in the second quarter of fiscal 2011, partly offset by the increase in financial

expense and the decrease in current income tax recovery.

For the first six months, free cash flow amounted to $18.1 million, compared to $105.9 million in the comparable period of fiscal 2010,

representing a decrease of $87.8 million. The decline in free cash flow over the prior year is due to an increase of $104.2 million in current

income tax expense stemming from modifications to the corporate structure and the increase in financial expense, which offset the increase in

operating income before amortization and the decrease in capital expenditures in the first half of fiscal 2011.

In the second quarter of fiscal 2011, Indebtedness affecting cash decreased by $189.3 million mainly due to the decrease in cash and cash

equivalents of $171.6 million and the free cash flow of $48.2 million, partly offset by the cash outflows of $26.2 million from the changes in

non-cash operating items and the dividend payment of $8.2 million described below. Indebtedness mainly decreased through the repayment,

on December 22, 2010, of the $175 million Senior Secured Notes Series B due on October 31, 2011 and the related make-whole premium on

early repayment, combined with a net repayment of $13.6 million on the Corporation’s Term Revolving Facility. In the second quarter of

fiscal 2010, Indebtedness affecting cash decreased by $38 million mainly due to the free cash flow of $43.9 million and the reduction in cash

and cash equivalents of $5.9 million, partly offset by the dividend payment of $6.8 million described below and the decrease in non-cash

operating items of $4.3 million. Indebtedness mainly decreased through a net repayment of $36.5 million on the Corporation’s Term Facility.

During the second quarter of fiscal 2011, a dividend of $0.17 per share was paid to the holders of subordinate and multiple voting shares,

totalling $8.2 million, compared to a dividend of $0.14 per share, or $6.8 million the year before.

In the first six months of fiscal 2011, Indebtedness affecting cash decreased by $5.6 million mainly due to the free cash flow of $18.1 million

generated in the first half of the fiscal year and the decrease in cash and cash equivalents of $9.8 million, partly offset by the dividend

payments totalling $16.5 million described below and the cash outflows of $7.6 million from the changes in non-cash operating items.

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 8

Indebtedness mainly decreased through the previously described repayment of the $175 million Senior Secured Notes Series B, combined

with a net repayment of $27.4 million on the Corporation’s Term Revolving Facility. The Senior Secured Notes Series B were repaid from the

net proceeds of $198.3 million as a result of the issuance, on November 16, 2010, of Senior Secured Debentures Series 2 (“Fiscal 2011

debentures”). In the first half of fiscal 2010, Indebtedness affecting cash increased by $20 million mainly due to the decrease in non-cash

operating items of $138 million and the dividend payment of $13.6 million described below, partly offset by the free cash flow of $105.9 million

and the decrease in cash and cash equivalents of $27.9 million. Indebtedness mainly increased through an increase of $43.7 million in bank

indebtedness, partly offset by a net repayment of $21.6 million on the Corporation’s Term Facility.

During the first half of fiscal 2011, quarterly dividends of $0.17 per share, for a total of $0.34 per share, were paid to the holders of subordinate

and multiple voting shares, totalling $16.5 million, compared to quarterly dividends of $0.14 per share, for a total of $0.28 per share, or

$13.6 million the year before.

As at February 28, 2011, the Corporation had a working capital deficiency of $157.1 million compared to $195.5 million at August 31, 2010.

The decrease in the deficiency is mainly attributable to decreases in accounts payable and accrued liabilities and future income tax liabilities,

combined with an increase in accounts receivable. This decrease was partly offset by an increase in income tax liabilities and a decrease in

cash and cash equivalents. 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, 2011, the Corporation had used $101.8 million of its $750 million Term Revolving Facility for a remaining availability of

$648.2 million.

FINANCIAL POSITION

Since August 31, 2010, there have been significant changes to the balances of “income tax liabilities”, “future income tax liabilities”, “future

income tax assets”, “accounts payable and accrued liabilities”, “long-term debt”, “cash and cash equivalents”, “derivative financial instruments”,

“accounts receivable” and “fixed assets”.

The increase of $73.4 million in income taxes liabilities and the decreases of $53.9 million in future income tax liabilities and $10.4 million in

future income tax assets primarily reflect the timing of the recognition of income tax liabilities as a result of modifications made to the corporate

structure. The $70.2 million decrease in accounts payable and accrued liabilities is related to the timing of supplier payments. The decrease of

$23 million in long-term debt and the $9.8 million decrease in cash and cash equivalents are due to the factors previously discussed in the

“Cash Flow and Liquidity” section combined with the fluctuations in foreign exchange rates. The $20 million decrease in derivative financial

instruments is due to the factors discussed in the “Financial management” section. The $12.4 million increase in accounts receivable is due to

the increase in revenues and the timing of payments received from customers. The $8.2 million increase in fixed assets reflects the capital

expenditures discussed in the “Cash Flow and Liquidity” section which surpassed the amortization expense and the impact of the depreciation

of the Euro in relation to the Canadian dollar.

A description of Cogeco Cable’s share data as of March 31, 2011 is presented in the table below:

Number of

shares/options

Amount

($000)

Common shares

Multiple voting shares

Subordinate voting shares

15,691,100

33,050,824

98,346

897,588

Options to purchase

Subordinate voting shares

Outstanding options

Exercisable options

586,902

413,491

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 2010 Annual Report, have not materially changed since

August 31, 2010, except as mentioned below.

On November 16, 2010, the Corporation completed, pursuant to a public debt offering, the issue of $200 million Senior Secured Debentures

Series 2 for net proceeds of $198.3 million, net of discounts and transaction costs. These debentures mature on November 16, 2020 and bear

interest at 5.15% per annum, payable semi-annually. These debentures are indirectly secured by a first priority fixed and floating charge and a

security interest on substantially all present and future real and personal property and undertaking of every nature and kind of the Corporation

and certain of its subsidiaries. The net proceeds of sale of the debentures were used to redeem in full, on December 22, 2010, the Senior

Secured Notes Series B due October 31, 2011 for an amount of $175 million plus accrued interest and make-whole premium, and the

remainder for working capital and general corporate purposes.

DIVIDEND DECLARATION

At its April 7, 2011 meeting, the Board of Directors of Cogeco Cable declared a quarterly eligible dividend of $0.17 per share for subordinate

and multiple voting shares, payable on May 5, 2011, to shareholders of record on April 21, 2011. 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 frequency may vary.

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 9

FINANCIAL MANAGEMENT

Cogeco Cable has entered into a swap agreement with a financial institution to fix the floating benchmark interest rate with respect to a portion

of the Euro-denominated loans outstanding under the Term Revolving Facility, and previously the Term Facility, for a notional amount of

€111.5 million, which has been reduced to €95.8 million on July 28, 2009, and to €69.6 million on July 28, 2010. The interest rate swap to

hedge these loans has been fixed at 2.08% until the maturity of the swap agreement on July 28, 2011. In addition to the interest rate swap of

2.08%, Cogeco Cable will continue to pay the applicable margin on these loans in accordance with its Term Revolving Facility. In the first six

months of fiscal 2011, the fair value of interest rate swap increased by $0.8 million, which is recorded as an increase of other comprehensive

income, net of income taxes, compared to a decrease of $0.2 million which was recorded as a decrease of other comprehensive income, net

of income taxes, in the prior year.

The Corporation has also 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 on 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 fixed at $1.0625 per US dollar. In the first half of fiscal 2011, amounts due under the US$190 million

Senior Secured Notes Series A decreased by $18.1 million due to the US dollar’s depreciation relative to the Canadian dollar. The fair value of

cross-currency swaps decreased by a net amount of $20.9 million, of which a decrease of $18.1 million offsets the foreign exchange gain on

the debt denominated in US dollars. The difference of $2.8 million was recorded as a decrease of other comprehensive income, net of income

taxes. In the first six months of the prior year, amounts due under the US$190 million Senior Secured Notes Series A decreased by

$8.1 million due to the US dollar’s depreciation over the Canadian dollar. The fair value of cross-currency swaps decreased by a net amount of

$7.2 million, of which $8.1 million offsets the foreign exchange gain on the debt denominated in US dollars. The difference of $0.9 million was

recorded as an increase of other comprehensive income, net of income taxes.

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 Cabovisão was borrowed directly in Euros. This debt is designated as a hedge of a net investment in self-

sustaining foreign subsidiaries and, accordingly, the Corporation recorded a foreign exchange loss of $1.4 million in the first six months of

fiscal 2011, compared to $5 million in the comparable period of the prior year, which is deferred and recorded in the consolidated statement of

comprehensive income. The exchange rate used to convert the Euro currency into Canadian dollars for the balance sheet accounts as at

February 28, 2011 was $1.3406 per Euro compared to $1.3515 per Euro as at August 31, 2010. The average exchange rates prevailing during

the second quarter and first six months of fiscal 2011 used to convert the operating results of the European operations were $1.3369 per Euro

and $1.3601 per Euro, respectively, compared to $1.4905 per Euro and $1.5318 per Euro in the comparable periods of fiscal 2010. Since the

Corporation’s consolidated financial statements are expressed in Canadian dollars but a portion of its business is conducted in the Euro

currency, exchange rate fluctuations can increase or decrease revenue, operating income before amortization, net income and the carrying

value of assets and liabilities.

The following table shows the Canadian dollar impact of a 10% fluctuation in the average exchange rate of the Euro currency into Canadian

dollars on European operating results for the six month period ended February 28, 2011:

Six months ended February 28, 2011 As reported

Exchange rate

impact

($000) $ $

(unaudited)

Revenue 85,324 8,532

Operating income before amortization 8,417 842

Net loss 17,382 1,738

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 “Foreign Exchange Risk” section in note 13 of the Interim Financial Statements for further details.

CANADIAN OPERATIONS

CUSTOMER STATISTICS

Net additions (losses) % of Penetration

(1)

Quarters ended February 28, Six months ended February 28,

February 28,

February 28, 2011

2011

2010

2011

2010

2011

2010

RGU 2,474,207 52,940 47,274 123,630 110,446 – –

Basic Cable service customers 880,755 (788)

(54)

6,250 8,865 – –

HSI service customers 586,479 10,550 11,068 27,422 28,574 68.4 64.9

Digital Television service customers 614,782 26,450 14,054 55,364 30,160 70.6 61.5

Telephony service customers 392,191 16,728 22,206 34,594 42,847 47.8 40.8

(1)

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

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 10

Fiscal 2011 second-quarter and first six month RGU net additions were higher than in the comparable periods of the prior year, and the

Canadian operations continue to generate RGU growth despite higher penetration rates, category maturity and aggressive competition.

Basic Cable service customers net losses stood at 788 for the quarter, compared to 54 in the second quarter of the prior year. For the first six

months, Basic Cable service customers increased by 6,250, compared to 8,865 in the prior year. Basic Cable service net additions in the first

six months of fiscal 2011 were mainly due to expansions in the network and the bundling effect of continued growth in HSI and Telephony

services. In the quarter, Telephony service customers grew by 16,728 compared to 22,206 for the same period last year, and the number of

net additions to the HSI service stood at 10,550 customers compared to 11,068 customers in the second quarter of the prior year. For the first

six months, net additions of Telephony service customers amounted to 34,594 compared to 42,847 for the same period last year, and the

number of HSI service customers grew by 27,422 compared to 28,574 in the first half of the prior year. HSI and Telephony net additions

continue 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. For the three and six-month periods ended February 28, 2011, additions to the Digital

Television service stood at 26,450 and 55,364 customers, compared to 14,054 and 30,160 for the comparable periods of the prior year. Digital

Television service net additions are due to targeted marketing initiatives to improve penetration, the launch of new HD channels and the

continuing interest for HD television service.

OPERATING RESULTS

Quarters ended February 28, Six months ended February 28,

2011 2010 Change 2011 2010 Change

($000, except percentages)

(unaudited)

Revenue 294,508 271,430 8.5 582,764 535,790 8.8

Operating costs 161,754 154,157 4.9 318,209 299,746 6.2

Management fees – COGECO Inc. 2,528 2,678 (5.6) 9,172 9,019 1.7

Operating income before amortization 130,226 114,595 13.6 255,383 227,025 12.5

Operating margin 44.2% 42.2% 43.8% 42.4%

Revenue

Driven by RGU growth combined with an increase in sales and rentals of home terminal devices stemming from the strong growth in Digital

Television services, rate increases implemented in the second half of fiscal 2010 and the revenue related to the new levy amounting to 1.5%

of gross Cable Television service revenue imposed by the Canadian Radio-television and Telecommunications Commission (“CRTC”) in order

to finance the new Local Programming Improvement Fund (“LPIF”), second-quarter revenue rose by $23.1 million, or 8.5%, to reach

$294.5 million, and first six-month revenue increased by $47 million, or 8.8%, at $582.8 million.

Operating costs

For the three and six months ended February 28, 2011, operating costs excluding management fees payable to COGECO Inc. increased by

$7.6 million, or 4.9%, at $161.8 million, and by $18.5 million, or 6.2%, to reach $318.2 million, respectively. The increases in operating costs

are mainly attributable to servicing additional RGU, the launch of new HD channels and additional marketing initiatives.

Operating income before amortization

Operating income before amortization rose by $15.6 million, or 13.6%, to reach $130.2 million in the second quarter, mainly due to the

increased revenue exceeding the growth in operating costs. Cogeco Cable’s Canadian operations’ operating margin increased to 44.2% in the

second quarter compared to 42.2% for the same period of the prior year. In the first half of fiscal 2011, operating income before amortization

amounted to $255.4 million, $28.4 million, or 12.5%, higher than in the first half of the prior year. The operating margin increased to 43.8%

from 42.4% when compared to the first six months of fiscal 2010. The growth in the operating margin stems from rate increases and RGU

growth.

EUROPEAN OPERATIONS

CUSTOMER STATISTICS

Net additions (losses) % of Penetration

(1)

Quarters ended February 28, Six months ended February 28, February 28,

February 28, 2011

2011

2010

2011

2010

201

RGU 853,090 4,139 21,508 24,318 48,121 – –

Basic Cable service customers 260,100 (755)

(740)

(167)

(1,302)

– –

HSI service customers 167,221 442 5,793 4,034 11,002 64.3 59.9

Digital Television service customers 175,803 3,216 12,189 15,951 28,303 67.6 50.8

Telephony service customers 249,966 1,236 4,266 4,500 10,118 96.1 91.7

(1)

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

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 11

In the second quarter and first half of fiscal 2011, the number of Basic Cable service customers decreased by 755 and 167 customers,

respectively, compared to losses of 740 and 1,302 customers in the comparable periods of the prior year. Economic conditions in Portugal

continued to be difficult. Management has not yet detected clear signs of a sustained economic recovery. Consequently, the Corporation

continues to closely control costs and is focusing on generating RGU growth in the near term. The rate of growth for our services has

diminished in this environment. HSI service customers increased by 442 for the quarter and 4,034 for the first six months compared to 5,793

and 11,002 customers in the second quarter and first half of fiscal 2010. The number of Digital Television service customers grew by 3,216

customers in the second quarter of fiscal 2011, compared to 12,189 customers in the comparable period of fiscal 2010, and by 15,951 in the

first half of fiscal 2011 compared to 28,303 in the first half of fiscal 2010. Telephony service customers increased by 1,236 and

4,500 customers in the three and six months ended February 28, 2011, compared to 4,266 and 10,118 customers in the same periods of the

prior year.

OPERATING RESULTS

Quarters ended February 28, Six months ended February 28,

2011 2010 Change 2011 2010 Change

($000, except percentages)

(unaudited)

Revenue 42,061 48,967 (14.1) 85,324 101,972 (16.3)

Operating costs 37,915 40,949 (7.4) 76,907 83,778 (8.2)

Operating income before amortization 4,146 8,018 (48.3) 8,417 18,194 (53.7)

Operating margin 9.9% 16.4% 9.9% 17.8%

Revenue

In the second quarter of fiscal 2011 revenue decreased by $6.9 million, or 14.1%, at $42.1 million. First six-month revenue amounted to

$85.3 million, $16.6 million, or 16.3%, less than in the prior year. These declines in revenue were mainly due to the depreciation of the Euro in

relation to the Canadian dollar and reflect the impact of retention strategies implemented in the second half of fiscal 2009 in order to offset the

recurring intense promotions and advertising initiatives from competitors in the Portuguese market. Revenue from the European operations in

the local currency for the three and six-month periods ended February 28, 2011 amounted to €31.5 million and €62.7 million, decreases of

€1.4 million, or 4.2%, and €3.8 million, or 5.7%, respectively, when compared to the same periods of the prior year.

Operating costs

Fiscal 2011 second-quarter operating costs decreased by $3 million, or 7.4%, at $37.9 million. 2011 first-half operating costs decreased by

$6.9 million, or 8.2%, at $76.9 million. These decreases were mainly due to the decline of the value of the Euro over the Canadian dollar which

surpassed increases in operating costs related to additional marketing initiatives and the launch of new HD channels by Cabovisão. Operating

costs of the European operations for the second quarter and first six months in the local currency amounted to €28.4 million, an increase of

€0.9 million, or 3.3%, and €56.5 million, an increase of €1.8 million, or 3.4%, respectively, when compared to the corresponding periods of the

prior year.

Operating income before amortization

Operating income before amortization decreased to $4.1 million in the second quarter from $8 million for the same period of the prior year,

representing a decrease of $3.9 million, or 48.3%. In the first six months, operating income before amortization decreased by $9.8 million, or

53.7%, at $8.4 million. The reductions are mainly due to decreases in revenue which outpaced the decreases in operating costs. European

operations’ operating margin decreased to 9.9% in the second quarter and first six months of fiscal 2011 from 16.4% in the second quarter and

17.8% in the first six months of fiscal 2010. Operating income before amortization in the local currency amounted to €3.1 million compared to

€5.4 million in the second quarter of the prior year, representing a decrease of 42.3%, and €6.2 million compared to €11.8 million in the first six

months, representing a decrease of 47.7%.

CONTROLS AND PROCEDURES

The President and Chief Executive Officer (“CEO”) and the Senior Vice President and Chief Financial Officer (“CFO”), together with

Management, are responsible for establishing and maintaining adequate disclosure controls and procedures and internal controls over

financial reporting, as defined in NI 52-109. Cogeco Cable’s internal control framework is based on the criteria published in the report “Internal

Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission and is designed to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with Canadian GAAP.

The CEO and CFO, supported by Management, evaluated the design of the Corporation’s disclosure controls and procedures and internal

controls over financial reporting as at February 28, 2011, and have concluded that they were adequate. Furthermore, no significant changes to

the internal controls over financial reporting occurred during the quarter ended February 28, 2011.

However, in the first quarter of fiscal 2011, the Corporation introduced a new financial suite under an integrated Oracle platform. This project

was required in order to adequately support the implementation of the International Financial Reporting Standards (“IFRS”) and to remain

current with the operational platform used by the Corporation. Following the introduction of this new financial suite, internal controls over

financial reporting have been updated in order to support adequate disclosure controls and procedures.

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 12

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, 2010. A detailed

description of the uncertainties and main risk factors faced by Cogeco Cable can be found in the 2010 Annual Report.

ACCOUNTING POLICIES AND ESTIMATES

There has been no significant change in Cogeco Cable’s accounting policies, estimates and future accounting pronouncements since

August 31, 2010, except as described below. A description of the Corporation’s policies and estimates can be found in the 2010 Annual

Report.

Future accounting pronouncements

Adoption of International accounting standards

In March 2006, the Canadian Accounting Standards Board (“AcSB”) of the Canadian Institute of Chartered Accountants (“CICA”) released its

new strategic plan, which proposed to abandon Canadian GAAP and effect a complete convergence to the IFRS for Canadian publicly

accountable entities. This plan was confirmed in subsequent exposure drafts issued in April 2008, March 2009 and October 2009. The

changeover will occur no later than fiscal years beginning on or after January 1, 2011. Accordingly, the Corporation’s first interim consolidated

financial statements presented in accordance with IFRS will be for the quarter 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, which oversees the IFRS implementation

project on behalf of the Board of Directors. The Corporation is 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:

Phase Area of impact Key activities Status

Scoping and

diagnostic

Pervasive Perform a high-level impact assessment to identify key areas that are expected to be impacted by the

transition to IFRS.

Completed

Rank 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

For each area

identified in the

scoping and

diagnostic phase

Identify the specific changes required to existing accounting policies. Completed

Analyse policy choices permitted under IFRS.

Present analysis and recommendations on accounting policy choices to the Audit Committee.

Pervasive Identify impacts on information systems and business processes. Completed

Prepare draft IFRS consolidated financial statement template.

Identify impacts on internal controls over financial reporting and other business processes.

Implementation and

review

For each area

identified in the

scoping and

diagnostic phase

Test and execute changes to information systems and business processes. Completed

Obtain formal approval of required accounting policy changes and selected accounting policy choices.

In progress - to be

completed in fiscal 2011

Communicate impact on accounting policies and business processes to external stakeholders. To be completed during

fiscal 2011

Pervasive Gather financial information necessary for opening balance sheet and comparative IFRS financial

statements.

In progress - to be

completed in fiscal 2011

Update and test internal control processes over financial reporting and other business processes.

Collect financial information necessary to compile IFRS-compliant financial statements. In progress - to be

completed during fiscal

2012

Provide training to employees and end-users across the organization.

Prepare IFRS compliant financial statements.

Obtain the approval from the Audit Committee of the IFRS consolidated financial statements.

Continually review IFRS and implement changes to the standards as they apply to the Corporation. To be completed

throughout transition and

post-conversion periods

The Corporation’s project for the transition from Canadian GAAP to IFRS is progressing according to the established plan and the Corporation

expects to meet its target date for migration.

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 13

Multiple deliverable revenue arrangements

In December 2009, the Emerging Issues Committee (“EIC”) of the Canadian AcSB issued a new abstract concerning multiple deliverable

revenue arrangements, EIC-175, Multiple deliverable revenue arrangements, which amended EIC-142, Revenue arrangements with multiple

deliverables. EIC-175 requires a vendor to allocate arrangement consideration at the inception of the arrangement to all deliverables using the

relative selling price method, thereby eliminating the use of the residual value method. The amendment also changes the level of evidence of

the standalone selling price required to separate deliverables when more objective evidence of the selling price is not available. EIC-175

should be adopted prospectively to revenue arrangements entered into or materially modified in the first annual fiscal period beginning on or

after January 1, 2011, with early adoption permitted. The Corporation has elected not to early-adopt this EIC, and in light of the adoption of

International accounting standards taking effect at that same date, this EIC will not be applicable to the Corporation.

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”, “adjusted net income” and

“adjusted earnings per share”.

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.

The most comparable Canadian GAAP measure is cash flow from operating activities. Cash flow from operations is calculated as follows:

Quarters ended February 28, Six months ended February 28,

2011 2010 2011 2010

($000)

(unaudited)

Cash flow from operating activities 92,663 114,037 147,666 110,419

Changes in non-cash operating items 26,156 4,281 7,586 138,128

Cash flow from operations 118,819 118,318 155,252 248,547

Free cash flow is calculated as follows:

Quarters ended February 28, Six months ended February 28,

2011 2010 2011 2010

($000)

(unaudited)

Cash flow from operations 118,819 118,318 155,252 248,547

Acquisition of fixed assets (68,152)

(71,924)

(131,361)

(136,940)

Increase in deferred charges (2,516)

(2,455)

(5,754)

(5,519)

Assets acquired under capital leases – as per note 11 c) – – – (141)

Free cash flow 48,151 43,939 18,137 105,947

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 available, 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.

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 14

The most comparable Canadian GAAP financial measure is operating income. Operating income before amortization and operating margin

are calculated as follows:

Quarters ended February 28, Six months ended February 28,

2011 2010 2011 2010

($000, except

percentages)

(unaudited)

Operating income 69,293 56,774 135,731 113,815

Amortization 65,079 65,839 128,069 131,404

Operating income before amortization 134,372 122,613 263,800 245,219

Revenue 336,569 320,397 668,088 637,762

Operating margin 39.9% 38.3% 39.5% 38.4%

Adjusted net income and adjusted earnings per share

Adjusted net income and adjusted earnings per share are used by Cogeco Cable’s management and investors to evaluate what would have

been the net income and earnings per share excluding unusual 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. Adjusted net income and adjusted

earnings per share are calculated as follows:

Quarters ended February 28, Six months ended February 28,

2011 2010 2011 2010

($000, except numbers of shares and per share data)

(unaudited)

Net income 31,151 29,789 64,788 86,455

Adjustments:

Reduction of Ontario provincial corporate income tax rates – – –

(29,782)

Adjusted net income 31,151 29,789 64,788 56,673

Weighted average number of multiple voting and subordinate voting shares

outstanding 48,512,576 48,507,599 48,513,011 48,528,628

Effect of dilutive stock options

198,787 175,639 187,651 121,857

Effect of dilutive subordinate voting shares held in trust under the Incentive

Share Unit Plan 111,561 55,094 89,076 31,573

Weighted average number of diluted

multiple voting and subordinate voting

shares outstanding 48,822,924 48,738,332 48,789,738 48,682,058

Adjusted earnings per share

Basic 0.64 0.61 1.34 1.17

Diluted 0.64 0.61 1.33 1.16

Management’s Discussion and Analysis COGECO CABLE INC. Q2 2011 15

SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION

Quarters

ended

(1)

February 28,

November 30,

August 31,

May 31,

($000, except percentages and per

share data)

2011

2010

2009

2010

2009

2010

2009

(unaudited)

Revenue

336,569

320,397

331,519

317,365

324,323

307,807

319,291

305,672

Operating income before amortization

134,372

122,613

129,428

122,606

138,177

143,892

126,700

125,951

Operating margin

39.9%

38.3%

39.0%

38.6%

42.6%

46.7%

39.7%

41.2%

Operating income

69,293

56,774

66,438

57,041

74,481

75,624

62,929

62,086

Income taxes

14,017

11,952

16,101

(15,766)

17,772

22,005

15,060

26,357

Net income

31,151

29,789

33,637

56,666

39,663

44,698

31,185

32,453

Adjusted net income

31,151

29,789

33,637

26,884

39,663

26,123

31,185

27,665

Cash flow from operating activities

92,663

114,037

55,003

(3,618)

194,414

175,450

112,451

99,956

Cash flow from operations

118,819

118,318

36,433

130,229

127,024

108,631

119,243

92,030

Capital expenditures and increase

deferred charges 70,668 74,379 66,447 68,221 107,799 93,872 69,283 60,139

Free cash flow

48,151

43,939

(30,014)

62,008

19,225

14,759

49,960

31,891

Earnings per share

(2)

Basic

0.64

0.61

0.69

1.17

0.82

0.92

0.64

0.67

Diluted

0.64

0.61

0.69

1.16

0.81

0.92

0.64

0.67

Adjusted earnings per share

(2)

Basic

0.64

0.61

0.69

0.55

0.82

0.54

0.64

0.57

Diluted

0.64

0.61

0.69

0.55

0.81

0.54

0.64

0.57

(1)

The addition of quarterly information may not correspond to the annual total due to rounding.

(2)

Per multiple and subordinate voting share.

ADDITIONAL INFORMATION

This MD&A was prepared on April 7, 2011. Additional information relating to the Corporation, including its Annual Report and Annual

Information Form, is available on the SEDAR website at www.sedar.com.

SEASONAL VARIATIONS

Cogeco Cable’s operating results are not generally subject to material seasonal fluctuations. However, the customer growth in the Basic Cable

and HSI service are generally lower in the second half of the fiscal year as a result of a decrease in economic activity due to the beginning of

the vacation period, the end of the television seasons, and students leaving their campuses at the end of the school year. Cogeco Cable offers

its services in several university and college towns such as Kingston, Windsor, St. Catharines, Hamilton, Peterborough, Trois-Rivières and

Rimouski in Canada, and Aveiro, Covilhã, Evora, Guarda and Coimbra in Portugal. Furthermore, the third and fourth quarter operating margins

are usually higher as no management fees are paid to COGECO Inc. Under the Management Agreement, Cogeco Cable pays a fee equal to

2% of its total revenue subject to a maximum amount. As the maximum amount has been reached in the second quarter of fiscal 2011,

Cogeco Cable will not pay management fees in the second half of fiscal 2011. Similarly, as the maximum amount was paid in the first six

months of fiscal 2010, Cogeco Cable paid no management fees in the second half of the previous fiscal year.

/s/ Jan Peeters /s/ Louis Audet

Jan Peeters Louis Audet

Chairman of the Board President and Chief Executive Officer

Cogeco Cable Inc.

Montréal, Québec

April 8, 2011

INTERIM FINANCIAL ST

Second quarter ended February

INTERIM FINANCIAL ST

ATEMENTS

Second quarter ended February

28, 2011

COGECO CABLE INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

Interim Financial Statements COGECO CABLE INC. Q2 2011 17

Three months ended February 28,

Six months ended February 28,

(In thousands of dollars, except per share data) 2011

2010

2011 2010

$ $

Revenue

Service 332,448

316,430

660,784 631,763

Equipment 4,121

3,967

7,304 5,999

336,569

320,397

668,088 637,762

Operating costs 199,669

195,106

395,116 383,524

Management fees – COGECO Inc. 2,528

2,678

9,172 9,019

Operating income before amortization 134,372

122,613

263,800 245,219

Amortization (note 3) 65,079

65,839

128,069 131,404

Operating income 69,293

56,774

135,731 113,815

Financial expense (note 4) 24,125

15,033

40,825 31,174

Income before income taxes 45,168

41,741

94,906 82,641

Income taxes (note 5) 14,017

11,952

30,118 (3,814)

Net income 31,151

29,789

64,788 86,455

Earnings per share (note 6)

Basic 0.64

0.61

1.34 1.78

Diluted 0.64

0.61

1.33 1.78

COGECO CABLE INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Interim Financial Statements COGECO CABLE INC. Q2 2011 18

Three months ended February 28,

Six months ended February 28,

(In thousands of dollars) 2011

2010

2011 2010

$ $

Net income 31,151

29,789

64,788 86,455

Other comprehensive income (loss)

Unrealized losses on derivative financial instruments designated as cash flow hedges,

net of income tax recovery of $2,334,000 and $3,300,000 ($333,000 and $2,474,000

in 2010) (11,866)

(1,155)

(16,733) (4,924)

Reclassification to net income of unrealized losses

on derivative financial instruments

designated as cash flow hedges, net of income tax recovery of $1,411,000 and

$2,328,000 ($79,000 and $1,086,000 in 2010) 9,077

510

15,741 6,989

Unrealized gains (losses) on translation of a net investment in self

sustaining foreign

subsidiaries 1,390

(26,316)

(1,753) (23,590)

Unrealized gains (losses) on translation of long

term debt designated as hedges of a net

investment in self-sustaining foreign subsidiaries (826)

20,664

401 18,573

(2,225)

(6,297)

(2,344) (2,952)

Comprehensive income 28,926

23,492

62,444 83,503

COGECO CABLE INC.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)

(unaudited)

Interim Financial Statements COGECO CABLE INC. Q2 2011 19

Six months ended February 28,

(In thousands of dollars)

2011

2010

Balance at beginning, as previously reported

123,025 17,172

Changes in accounting policies

– (24,279)

Balance at beginning, as restated

123,025 (7,107)

Net income

64,788 86,455

Dividends on multiple voting shares

(5,334) (4,394)

Dividends on subordinate voting shares

(11,159) (9,203)

Balance at end

171,320 65,751

COGECO CABLE INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

Interim Financial Statements COGECO CABLE INC. Q2 2011 20

(In thousands of dollars) February 28, 2011 August 31, 2010

$ $

Assets

Current

Cash and cash equivalents (note 11 b)) 26,076 35,842

Accounts receivable (note 13) 79,458 67,064

Income taxes receivable 43,218 44,800

Prepaid expenses and other 14,494 13,669

Future income tax assets 4,290 6,133

167,536 167,508

Fixed assets 1,333,314 1,325,077

Deferred charges 26,523 26,974

Intangible assets (note 7) 1,015,271 1,017,658

Goodwill (note 7) 144,465 144,695

Derivative financial instruments – 5,085

Future income tax assets 7,222 15,822

2,694,331 2,702,819

Liabilities and Shareholders’ equity

Liabilities

Current

Accounts payable and accrued liabilities 164,847 235,087

Income tax liabilities 73,967 558

Deferred and prepaid revenue 45,042 45,602

Derivative financial instrument 356 1,189

Current portion of long-term debt (note 8) 2,424 2,296

Future income tax liabilities 38,017 78,267

324,653 362,999

Long-term debt (note 8) 929,534 952,687

Derivative financial instruments 15,781 ─

Deferred and prepaid revenue and other liabilities 13,366 12,234

Pension plan liabilities and accrued employees benefits 4,380 3,624

Future income tax liabilities 221,359 234,974

1,509,073 1,566,518

Shareholders’ equity

Capital stock (note 9) 992,147 988,830

Contributed surplus 5,776 6,087

Retained earnings 171,320 123,025

Accumulated other comprehensive income (note 10) 16,015 18,359

1,185,258 1,136,301

2,694,331 2,702,819

COGECO CABLE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Interim Financial Statements COGECO CABLE INC. Q2 2011 21

Three months ended February 28, Six months ended February 28,

(In thousands of dollars)

2011

2010 2011

2010

$ $

Cash flow from operating activities

Net income

31,151 29,789 64,788 86,455

Adjustments for:

Amortization (note 3)

65,079 65,839 128,069 131,404

Amortization of deferred transaction costs and discounts on long-term debt

865 760 1,596 1,508

Future income taxes

19,509 21,388 (42,446)

27,809

Stock-based compensation (note 9) 841 441 1,260 900

Loss (gain) on disposals and write-offs of fixed assets

1,084 (36)

1,404 62

Other

290 137 581 409

118,819 118,318 155,252 248,547

Changes in non-cash operating items (note 11 a))

(26,156)

(4,281)

(7,586)

(138,128)

92,663 114,037 147,666 110,419

Cash flow from investing activities

Acquisition of fixed assets (note 11 c))

(68,152)

(71,924)

(131,361)

(136,940)

Increase in deferred charges

(2,516)

(2,455)

(5,754)

(5,519)

Other

― 102 – 122

(70,668)

(74,277)

(137,115)

(142,337)

Cash flow from financing activities

Increase (decrease) in bank indebtedness

― (663)

– 43,673

Net repayments under the Term Facility and Term Revolving Facility

(13,592)

(36,495)

(27,392)

(21,579)

Issuance of long-term debt, net of discounts and transaction costs

(25)

─ 198,295 ─

Repayments of long-term debt

(175,694)

(854)

(176,513)

(2,069)

Issuance of subordinate voting shares (note 9) 3,889 283 4,179 283

Acquisition of subordinate voting shares held in trust under the Incentive Share Unit

Plan (note 9)

― ─ (2,258)

(1,744)

Dividends on multiple voting shares

(2,667)

(2,197)

(5,334)

(4,394)

Dividends on subordinate voting shares

(5,577)

(4,602)

(11,159)

(9,203)

(193,666)

(44,528)

(20,182)

4,967

Effect of exchange rate changes on cash and cash equivalents

denominated in a

foreign currency

94 (1,102)

(135)

(900)

Net change in cash and cash equivalents

(171,577)

(5,870)

(9,766)

(27,851)

Cash and cash equivalents at beginning

197,653 17,477 35,842 39,458

Cash and cash equivalents at end

26,076 11,607 26,076 11,607

See supplemental cash flow information in note 11.

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 22

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”)

as at February 28, 2011 and August 31, 2010 as well as its results of operations and its cash flows for the three and six month periods

ended February 28, 2011 and 2010.

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, 2010. These unaudited interim consolidated financial statements have been prepared using the same accounting policies and

methods as the most recent annual consolidated financial statements.

Future accounting pronouncements

Multiple deliverable revenue arrangements

In December 2009, the Emerging Issues Committee (“EIC”) of the Canadian Accounting Standards Board issued a new abstract

concerning multiple deliverable revenue arrangements, EIC-175, Multiple deliverable revenue arrangements, which amended EIC-142,

Revenue arrangements with multiple deliverables. EIC-175 requires a vendor to allocate arrangement consideration at the inception of

the arrangement to all deliverables using the relative selling price method, thereby eliminating the use of the residual value method. The

amendment also changes the level of evidence of the standalone selling price required to separate deliverables when more objective

evidence of the selling price is not available. EIC-175 should be adopted prospectively to revenue arrangements entered into or

materially modified in the first annual fiscal period beginning on or after January 1, 2011, with early adoption permitted. The Corporation

has elected not to early-adopt this EIC, and in light of the adoption of International accounting standards taking effect at that same date,

this EIC will not be applicable to the Corporation.

2. Segmented Information

The Corporation’s activities are comprised of Cable Television, High Speed Internet (“HSI”), Telephony and other telecommunications

services. The Corporation considers its Cable Television, HSI, Telephony and other telecommunications 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 table below:

Canada Europe Consolidated

Three months ended February 28, 2011 2010 2011 2010 2011 2010

$ $ $ $ $ $

Revenue 294,508 271,430 42,061 48,967 336,569 320,397

Operating costs 161,754 154,157 37,915 40,949 199,669 195,106

Management fees – COGECO Inc. 2,528 2,678 ― ─ 2,528 2,678

Operating income before amortization 130,226 114,595 4,146 8,018 134,372 122,613

Amortization 50,963 46,803 14,116 19,036 65,079 65,839

Operating income (loss) 79,263 67,792 (9,970) (11,018) 69,293 56,774

Financial expense (revenue) 24,177 16,205 (52) (1,172) 24,125 15,033

Income taxes 14,712 13,177 (695) (1,225) 14,017 11,952

Net income (loss) 40,374 38,410 (9,223) (8,621) 31,151 29,789

Total assets

(1)

2,417,010 2,407,059 277,321 295,760

2,694,331 2,702,819

Fixed assets

(1)

1,113,493 1,094,971 219,821 230,106

1,333,314 1,325,077

Intangible assets

(1)

1,015,271 1,017,658 ― ─

1,015,271 1,017,658

Goodwill

(1)

116,243 116,243 28,222 28,452

144,465 144,695

Acquisition of fixed assets

(2)

58,486 55,703 9,666 16,221 68,152 71,924

(1)

At February 28, 2011 and August 31, 2010.

(2)

Includes fixed assets acquired through capital leases that are excluded from the consolidated statements of cash flows.

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 23

2. Segmented Information (continued)

Canada Europe Consolidated

Six months ended February 28, 2011 2010 2011 2010 2011 2010

$ $ $ $ $ $

Revenue 582,764 535,790 85,324 101,972 668,088 637,762

Operating costs 318,209 299,746 76,907 83,778 395,116 383,524

Management fees – COGECO Inc. 9,172 9,019 ― ─ 9,172 9,019

Operating income before amortization 255,383 227,025 8,417 18,194 263,800 245,219

Amortization 101,641 92,217 26,428 39,187 128,069 131,404

Operating income (loss) 153,742 134,808 (18,011) (20,993) 135,731 113,815

Financial expense (revenue) 40,903 32,080 (78) (906) 40,825 31,174

Income taxes 30,669 (4,041) (551) 227 30,118 (3,814)

Net income (loss) 82,170 106,769 (17,382) (20,314) 64,788 86,455

Total assets

(1)

2,417,010 2,407,059 277,321 295,760

2,694,331 2,702,819

Fixed assets

(1)

1,113,493 1,094,971 219,821 230,106

1,333,314 1,325,077

Intangible assets

(1)

1,015,271 1,017,658 ― ─

1,015,271 1,017,658

Goodwill

(1)

116,243 116,243 28,222 28,452

144,465 144,695

Acquisition of fixed assets

(2)

113,222 107,851 18,139 29,230 131,361 137,081

(1)

At February 28, 2011 and August 31, 2010.

(2)

Includes fixed assets acquired through capital leases that are excluded from the consolidated statements of cash flows.

3. Amortization

Three months ended February 28, Six months ended February 28,

2011 2010 2011 2010

$ $ $ $

Fixed assets 61,207 61,963 120,318 123,528

Deferred charges 2,678 2,681 5,364 5,488

Intangible assets 1,194 1,195 2,387 2,388

65,079 65,839 128,069 131,404

4. Financial expense

Three months ended February 28, Six months ended February 28,

2011 2010 2011 2010

$ $ $ $

Interest on long-term debt 24,373 15,731 40,262 31,550

Foreign exchange gains (1,133) (391) (1,465) (879)

Amortization of deferred transaction costs 399 407 841 814

Other 486 (714) 1,187 (311)

24,125 15,033 40,825 31,174

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 24

5. Income Taxes

Three months ended February 28, Six months ended February 28,

2011 2010 2011 2010

$ $ $ $

Current (5,492) (9,436) 72,564 (31,623)

Future 19,509 21,388 (42,446) 27,809

14,017 11,952 30,118 (3,814)

The following table provides the reconciliation between income taxes at the Canadian statutory federal and provincial income tax rates

and the consolidated income tax expense (recovery):

Three months ended February 28, Six months ended February 28,

2011 2010 2011 2010

$ $ $ $

Income before income taxes 45,168 41,741 94,906 82,641

Combined income tax rate 28.91% 31.51% 28.91% 31.51%

Income taxes at combined income tax rate 13,058 13,152 27,437 26,040

Adjustment for losses or income subject to lower or higher tax rates (1,489) (3,251) (2,408) (5,629)

Decrease in future income taxes as a result of decrease in substantively

enacted tax rates – – – (29,782)

Utilization of pre-acquisition tax losses – – – 4,432

Income taxes arising from non-deductible expenses 159 100 324 303

Effect of foreign income tax rate differences 2,172 1,877 4,633 2,124

Other 117 74 132 (1,302)

Income taxes at effective income tax rate 14,017 11,952 30,118 (3,814)

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 25

6. Earnings per Share

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

Three months ended February 28, Six months ended February 28,

2011 2010 2011 2010

$ $ $ $

Net income 31,151 29,789 64,788 86,455

Weighted average number of multiple voting and subordinate voting

outstanding 48,512,576 48,507,599 48,513,011 48,528,628

Effect of dilutive stock options

(1)

198,787 175,639 187,651 121,857

Effect of dilutive subordinate voting shares held in trust under the Incentive

Share Unit Plan 111,561 55,094 89,076 31,573

Weighted average number of diluted multiple voting and subordinate voting

shares outstanding 48,822,924 48,738,332 48,789,738 48,682,058

Earnings per share

Basic 0.64 0.61 1.34 1.78

Diluted 0.64 0.61 1.33 1.78

(1)

For the three and six month periods ended February 28, 2011, 71,761 stock options (103,549 and 224,905 in 2010) 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.

7. Goodwill and Other Intangible Assets

February 28, 2011 August 31, 2010

$ $

Customer relationships 25,719 28,106

Customer base 989,552 989,552

1,015,271 1,017,658

Goodwill 144,465 144,695

1,159,736 1,162,353

a) Intangible assets

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

Customer

relationships

Customer

base Total

$ $ $

Balance at August 31, 2010 28,106 989,552 1,017,658

Amortization (note 3) (2,387) ― (2,387)

Balance at February 28, 2011 25,719 989,552 1,015,271

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 26

7. Goodwill and Other Intangible Assets (continued)

b) Goodwill

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

Balance at August 31, 2010 144,695

Foreign currency translation adjustment (230)

Balance at February 28, 2011 144,465

8. Long-Term Debt

Maturity Interest rate February 28, 2011 August 31, 2010

% $

Parent company

Term Revolving Facility

Revolving loan – €70,000,000 (€90,000,000 at August 31, 2010) 2014 3.00

(1)(2)

93,842

121,635

Senior Secured Notes

Series A – US$190,000,000 2015 7.00

(3)

183,424

201,387

Series B 2018 7.60 54,628

54,609

Senior Secured Debentures Series 1 2014 5.95 297,697

297,379

Senior Secured Debentures Series 2

(4)

2020 5.15 198,334

─

Senior Secured Notes Series B 2011

(5)

7.73 ―

174,738

Senior Unsecured Debenture 2018 5.94 99,817

99,806

Subsidiaries

Obligations under capital leases 2013 6.71 – 9.93 4,216

5,429

931,958

954,983

Less current portion 2,424

2,296

929,534

952,687

(1)

Interest rate on debt as at February 28, 2011, including applicable margin.

(2)

On January 21, 2009, the Corporation entered into a swap agreement with a financial institution to fix the floating benchmark interest rate with respect to a

portion of Euro-denominated loans outstanding under the Term Revolving Facility, and previously the Term Facility, for a notional amount of €111.5 million

which has been reduced to €95.8 million on July 28, 2009 and to €69.6 million on July 28, 2010. The interest swap rate to hedge the Euro-denominated loans

has been fixed at 2.08% until the maturity of the swap agreement on July 28, 2011. In addition to the interest swap rate of 2.08%, the Corporation will continue

to pay the applicable margin on these Euro-denominated loans in accordance with the Term Revolving Facility.

(3)

Cross-currency swap agreements have resulted in an effective interest rate of 7.24% on the Canadian dollar equivalent of the US denominated debt

(4)

On November 16, 2010, the Corporation completed pursuant to a public debt offering, the issue of $200 million Senior Secured Debentures Series 2 (the

"Debentures") for net proceeds of $198.3 million, net of discounts and transaction costs. These Debentures mature on November 16, 2020 and bear interest at

5.15% per annum payable semi-annually. These debentures are indirectly secured by a first priority fixed and floating charge and a security interest on

substantially all present and future real and personal property and undertaking of every nature and kind of the Corporation and certain of its subsidiaries.

(5)

On December 22, 2010, the Corporation redeemed the 7.73% Senior Secured Notes Series B in the aggregate principal amount of $175 million. As a result, the

aggregate redemption cash consideration that the Corporation paid totalled $183.8 million, excluding accrued interest. The excess of the redemption price over

the aggregate principal amount was recorded as financial expense during the second quarter of fiscal 2011.

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 27

9. Capital Stock

Authorized

Unlimited number of:

Class A Preference shares, without voting rights, redeemable by the Corporation and retractable at the option of the holder at any time at

a price of $1 per share, carrying a cumulative preferential cash dividend at a rate of 11% of the redemption price per year.

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

Multiple voting shares, 10 votes per share.

Subordinate voting shares, 1 vote per share.

Issued

February 28, 2011 August 31, 2010

$ $

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

33,050,824 subordinate voting shares (32,885,337 at August 31, 2010) 897,588 892,332

995,934 990,678

105,459 subordinate voting shares held in trust under the Incentive Share Unit Plan (57,409 at August 31, 2010) (3,787) (1,848)

992,147 988,830

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

Number of shares Amount

Balance at August 31, 2010 32,885,337 892,332

Shares issued for cash under the Employee Stock Option Plan 165,487 4,179

Compensation expense previously recorded in contributed surplus for options exercised – 1,077

Balance at February 28, 2011 33,050,824 897,588

During the first six months, subordinate voting shares held in trust under the Incentive Share Unit Plan transactions were as follows:

Number of shares Amount

Balance, beginning of year 57,409 1,848

Subordinate voting shares acquired 57,203 2,258

Subordinate voting shares distributed to employees (9,153)

(319)

Balance at February 28, 2011 105,459 3,787

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 28

9. Capital Stock (continued)

Stock-based plans

The Corporation offers, for certain executives a Stock Option Plan, which is described in the Corporation’s annual consolidated financial

statements. During the first six months of 2011, the Corporation granted 66,700 stock options (66,174 in 2010) with an exercise price of

$39.00 ($31.82 to $38.86 in 2010) of which 35,800 stock options (33,266 in 2010) were granted to COGECO Inc.’s employees. These

options vest equally over a period of five years beginning one year after the day such options are granted and are exercisable over ten

years. During the three and six month periods ended February 28, 2011, the Corporation charged COGECO Inc. an amount of $57,000

and $115,000 ($62,000 and $177,000 in 2010) with regards to the Corporation’s options granted to COGECO Inc.’s employees. As a

result, a compensation expense of $84,000 and $192,000 ($157,000 and $379,000 in 2010) was recorded for the three and six month

periods ended February 28, 2011.

The weighted average fair value of stock options granted for the six month period ended February 28, 2011 was $9.55 ($8.11 in 2010)

per option. The weighted average fair value of each option granted was estimated at the grant date for purposes of determining stock-

based compensation expense using the binomial option pricing model based on the following assumptions:

2011 2010

% %

Expected dividend yield 1.44 1.49

Expected volatility 29 29

Risk-free interest rate 2.05 2.67

Expected life in years 4.9 4.8

Under the Stock Option Plan, the following options were granted by the Corporation and are outstanding at February 28, 2011:

Outstanding at August 31, 2010 716,760

Granted 66,700

Exercised (165,487)

Forfeited / Cancelled (28,169)

Expired (448)

Outstanding at February 28, 2011 589,356

Exercisable at February 28, 2011 415,945

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 29

9. Capital Stock (continued)

The Corporation also offers a senior executive and designated employee Incentive Share Unit Plan (“ISU Plan”), which is described in the

Corporation’s annual consolidated financial statements. During the first six months of 2011, the Corporation granted 58,088 (63,666 in

2010) Incentive Share Units ("ISUs”) of which 10,000 (9,981 in 2010) ISUs were granted to COGECO Inc.’s employees. The Corporation

establishes the value of the compensation related to the ISUs granted based on the fair value of the Corporation’s subordinate voting

shares at the date of grant and a compensation expense is recognized over the vesting period, which is three years less one day. A trust

was created for the purpose of purchasing these shares on the stock market in order to guard against stock price fluctuation. The

Corporation instructed the trustee to purchase 57,203 (55,094 in 2010) subordinate voting shares of the Corporation on the stock market.

These shares were purchased for cash consideration aggregating $2,258,000 ($1,744,000 in 2010) and are held in trust for the

participants until they are fully vested. The trust, considered as a variable interest entity, is consolidated in the Corporation’s financial

statements with the value of the acquired shares presented as subordinate voting shares held in trust under the ISU Plan in reduction of

capital stock. A compensation expense of $503,000 and $681,000 ($122,000 and $166,000 in 2010) was recorded for the three and six

month periods ended February 28, 2011 related to this plan. During the three and six month periods ended February 28, 2011, the

Corporation charged COGECO Inc. an amount of $58,000 and $97,000 ($28,000 and $37,000 in 2010) with regards to the Corporation’s

ISUs granted to COGECO Inc.’s employees. Under the ISU Plan, the following ISUs were granted by the Corporation and are

outstanding at February 28, 2011:

Outstanding at August 31, 2010 57,409

Granted 58,088

Distributed (9,153)

Forfeited / Cancelled (885)

Outstanding at February 28, 2011 105,459

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 of 2011, 4,521 (4,422 in 2010) Deferred Share Units (“DSUs”) were awarded to the

participants in connection with the DSU Plan. A compensation expense of $136,000 and $175,000 ($72,000 and $141,000 in 2010) was

recorded for the three and six month periods ended February 28, 2011 for the liability related to this plan. Under the DSU Plan, the

following DSUs were issued by Cogeco Cable Inc. and are outstanding at February 28, 2011:

Outstanding at August 31, 2010 10,855

Issued 4,521

Dividend equivalents 109

Outstanding at February 28, 2011 15,485

10. Accumulated Other Comprehensive Income

Translation of a net

investment in self-

sustaining foreign

subsidiaries

Cash flow

hedges Total

$ $ $

Balance as at August 31, 2010 15,439 2,920 18,359

Other comprehensive loss (1,352) (992) (2,344)

Balance as at February 28, 2011 14,087 1,928 16,015

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 30

11. Statements of Cash Flows

a) Changes in non-cash operating items

Three months ended February 28, Six months ended February 28,

2011 2010 2011 2010

$ $ $ $

Accounts receivable (9,292) (7,844) (12,464) (11,096)

Income taxes receivable (223) (9,608) 1,565 (30,139)

Prepaid expenses and other (3,989) (348) (828) (1,522)

Accounts payable and accrued liabilities (7,654) 8,227 (69,841) (62,582)

Income tax liabilities (5,506) 82 73,412 (40,197)

Deferred and prepaid revenue and other liabilities 508 5,210 570 7,408

(26,156) (4,281) (7,586) (138,128)

b) Cash and cash equivalents

February 28, 2011 August 31, 2010

$ $

Cash 12,670 35,842

Cash equivalents

(1)

13,406 –

26,076 35,842

(1)

At February 28, 2011, term deposit of €10,000,000, bearing interest at 1.40%, maturing on March 14, 2011.

c) Other information

Three months ended February 28, Six months ended February 28,

2011 2010 2011 2010

$ $ $ $

Fixed asset acquisitions through capital leases ― – ― 141

Financial expense paid 21,338 10,676 42,335 31,614

Income taxes paid (received) 237 940 (2,410) 39,564

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 31

12. Employee Future Benefits

The Corporation and its Canadian subsidiaries offer to their employees contributory defined benefit pension plans, defined contribution

pension plans or a collective registered retirement savings plan, which are described in the Corporation’s annual consolidated financial

statements. The total expense related to these plans is as follows:

Three months ended February 28, Six months ended February 28,

2011 2010 2011 2010

$ $ $ $

Contributory defined benefit pension plans 513

377 935 754

Defined contribution pension plan

and collective registered retirement

savings plan 1,306 1,080 2,541 2,175

1,819 1,457 3,476 2,929

13. 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 counterparty 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 counterparties 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 counterparties in order to minimize the risk of counterparties

default under the agreements. At February 28, 2011, management believes that the credit risk relating to its derivative financial

instruments is minimal, since the lowest credit rating of the counterparties 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.

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 32

13. Financial and Capital Management (continued)

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 than usual but it is difficult to predict the impact this could have on the Corporation’s account

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 large customer. At February 28, 2011, no customer balance represents a significant portion of

the Corporation’s consolidated trade accounts receivable. 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 its market areas in Canada and Europe, there is no significant concentration of credit risk. The following

table provides further details on the Corporation’s accounts receivable balances:

February 28, 2011 August 31, 2010

$ $

Trade accounts receivable 75,606 67,189

Allowance for doubtful accounts (6,844) (7,478)

68,762 59,711

Other accounts receivable 10,696 7,353

79,458 67,064

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, 2011 August 31, 2010

$ $

Net trade accounts receivable not past due 51,305 42,817

Net trade accounts receivable past due 17,457 16,894

68,762 59,711

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, 2011, the available amount of the Corporation’s Term Revolving Facility was $648.2 million. Management believes that the committed

Term Revolving Facility will, until its maturity in July 2014, provide sufficient liquidity to manage its long-term debt maturities and support

working capital requirements.

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 33

13. Financial and Capital Management (continued)

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

2011 2012 2013 2014 2015 Thereafter Total

$ $ $ $ $ $ $

Accounts payable and accrued liabilities

(1)

147,131 – – – – – 147,131

Long-term debt

(2)

– – – 393,842 – 539,566 933,408

Derivative financial instruments

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

Cash inflows (Canadian dollar

equivalent of US dollar) – – – – – (184,566) (184,566)

Obligations under capital leases

(3)

1,396 2,296 889 7 – – 4,588

148,527 2,296 889 393,849 – 556,875 1,102,436

(1)

Excluding accrued interest.

(2)

Principal excluding obligations under capital leases.

(3)

Including interest.

The following table is a summary of interest payable on long-term debt (excluding interest on capital leases) that is due for each of the

next five years and thereafter, based on the principal amount and interest rate prevailing on the outstanding debt at February 28, 2011

and their respective maturities:

2011 2012 2013 2014 2015 Thereafter Total

$ $ $ $ $ $ $

Interest payments on long-term debt 27,000 54,001 54,001 53,649 33,336 95,548 317,535

Interest payments on derivative

financial instruments 8,892 14,614 14,614 14,614 14,614 7,306 74,654

Interest receipts on derivative financial

instruments (7,626) (12,920) (12,920) (12,920) (12,920) (6,459) (65,765)

28,266 55,695 55,695 55,343 35,030 96,395 326,424

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, 2011, all of the Corporation’s

long-term debt was at fixed rate, except for the Corporation’s Term Revolving Facility. However, on January 21, 2009, the Corporation

entered into a swap agreement with a financial institution to fix the floating benchmark interest rate with respect to a portion of the Euro-

denominated loans outstanding under the Term Revolving Facility and previously the Term Facility, for a notional amount of

€111.5 million which have been reduced to €95.8 million on July 28, 2009 and to €69.6 million on July 28, 2010. The interest swap rate to

hedge the Euro-denominated loans has been fixed at 2.08% until the swap agreement maturity of July 28, 2011. In addition to the interest

swap rate of 2.08%, the Corporation will continue to pay the applicable margin on the revolving loans in accordance with the Term

Revolving 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 Revolving Facility is

approximately nil based on the outstanding debt at February 28, 2011 and taking into consideration the effect of the interest rate swap

agreement.

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 34

13. Financial and Capital Management (continued)

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 Euros. At February 28, 2011, cash and cash equivalents in US dollars amounted to US$18,144,000

(US$13,613,000 at August 31, 2010) while accounts payable denominated in US dollars amounted to US$3,656,000 (US$15,850,000 at

August 31, 2010). At February 28, 2011, Euro-denominated bank indebtedness amounted to €205,000 (cash and cash equivalents of

€187,000 at August 31, 2010) while there were no accounts payable denominated in Euros at February 28, 2011 and at August 31,

2010. Due to their short-term nature, the risk arising from fluctuations in foreign exchange rates is usually not significant. The impact of a

10% change in the foreign exchange rates (US dollar and Euro) would change financial expense by approximately $1.4 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 Cabovisão was borrowed directly in Euros. At February 28, 2011, the net investment amounted to

€169,312,000 (€182,104,000 at August 31, 2010) while long-term debt denominated in Euros amounted to €70,000,000 (€90,000,000 at

August 31, 2010). The exchange rate used to convert the Euro currency into Canadian dollars for the balance sheet accounts at

February 28, 2011 was $1.3406 per Euro compared to $1.3515 per Euro at August 31, 2010. The impact of a 10% change in the

exchange rate of the Euro into Canadian dollars would change financial expense by approximately $0.4 million and other comprehensive

income by approximately $13.3 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 Corporation has

determined the fair value of its financial instruments as follows:

a) The carrying amount of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximates

fair value because of the short-term nature of these instruments.

b) Interest rates under the terms of the Corporation’s Term Revolving Facility are based on bankers’ acceptance, LIBOR, EURIBOR,

bank prime rate loan or US base rate loan plus applicable margin. Therefore, the carrying value approximates fair value for the Term

Revolving Facility, since the Term Revolving Facility has conditions similar to those currently available to the Corporation.

c) The fair value of the Senior Secured Debentures Series 1 and 2, Senior Secured Notes Series A and B and Senior Unsecured

Debenture are based upon current trading values for similar financial instruments.

d) The fair values of obligations under capital leases are not significantly different from their carrying amounts.

The carrying value of all the Corporation’s financial instruments approximates fair value, except as otherwise noted in the following table:

February 28, 2011 August 31, 2010

Carrying value Fair value Carrying value Fair value

$ $ $ $

Long-term debt 931,958 993,230 954,983 1,050,696

COGECO CABLE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

(unaudited)

(amounts in tables are in thousands of dollars, except number of shares and per share data)

Interim Financial Statements COGECO CABLE INC. Q2 2011 35

13. Financial and Capital Management (continued)

In accordance with CICA Handbook Section 3862, Financial instruments – disclosures, all financial instruments recognized at fair value

on the consolidated balance sheet must be classified based on the three fair value hierarchy levels, which are as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices)

or indirectly (i.e., derived from prices); and

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Corporation considers that its derivative financial instruments are classified as Level 2 under the fair value hierarchy. The fair value

of derivative financial instruments are estimated using valuation models that reflect projected future cash flows over contractual terms of

the derivative financial instruments and observable market data, such as interest and currency exchange rate curves.

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 Revolving 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, 2011 and August 31, 2010, 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 to monitor and manage the Corporation’s capital structure:

February 28, 2011 August 31, 2010

Net indebtedness

(1)

/ shareholders’ equity 0.8 0.8

Net indebtedness

(1)

/ operating income before amortization

(2)

1.8 1.8

Operating income before amortization

(2)

/ financial expense

(2)

7.1 7.9

(1)

Net indebtedness is defined as the total of bank indebtedness, principal on long-term debt and obligations under derivative financial instruments, less cash and cash

equivalents.

(2)

Calculation based on operating income before amortization and financial expense for the twelve-month periods ended February 28, 2011 and August 31, 2010.

Shareholders’ Report COGECO CABLE INC. Q2 2011 36

CUSTOMER STATISTICS

(unaudited)

February 28, 2011 August 31, 2010

Homes passed

Canada 1,604,702 1,593,743

Portugal

(1)

905,624 905,359

Total 2,510,326 2,499,102

Homes connected

(2)

Canada 993,649 979,590

Portugal 268,721 269,194

Total 1,262,370 1,248,784

Revenue-generating units

(3)

Canada 2,474,207 2,350,577

Portugal 853,090 828,772

Total 3,327,297 3,179,349

Basic Cable service customers

Canada 880,755 874,505

Portugal 260,100 260,267

Total 1,140,855 1,134,772

High Speed Internet service customers

Canada 586,479 559,057

Portugal 167,221 163,187

Total 753,700 722,244

Digital Television service customers

Canada 614,782 559,418

Portugal 175,803 159,852

Total 790,585 719,270

Telephony service customers

Canada 392,191 357,597

Portugal 249,966 245,466

Total 642,157 603,063

(1)

The Corporation is currently assessing the number of homes passed.

(2)

Represents the sum of Basic Cable service customers and High Speed Internet (“HSI”) and Telephony service customers who do not subscribe to the Basic Cable

service.

(3)

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

Back to press release

Press release details

SOLID SECOND QUARTER RESULTS FOR COGECO CABLE

SUSTAINABILITY

Cogeco Fund

Contact us