STRONG CANADIAN RESULTS FOR COGECO DESPITE A NON-CASH IMPAIRMENT IN ITS EUROPEAN CABLE OPERATIONS INTANGIBLE ASSETS

Press release

For immediate release

Strong Canadian results for COGECO despite a non-cash

impairment in its European cable operations intangible assets

Montreal, April 9, 2009 – Today, COGECO Inc. (TSX: CGO) (“COGECO” or the “Company”) announced its financial

results for the second quarter and first si x months of fiscal 2009, ended February 28, 2009.

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

• Consolidated revenue incre ased by 14.7% to $311.8 million, and by 16.5% to $620.2 million, respectively;

• Consolidated operating income from continuing operations before amortization

(1)

grew by 15.6% to reach

$126.7 million, and by 19.9% to reach $251.4 million;

• In the second quarter of fiscal 2009, the cable subsidiary recorded a non-cash impairment loss of its investment

in Cabovisão in the amount of $399.6 million as a result of recurring competitive pressure resulting in subscriber

losses that are significantly more important than originally anticipated. Net of related income taxes and non-

controlling interest, the impairment loss amounted to $124 millio n;

• Consolidated net loss amounted to $115.3 million in the second quarter, compared to net income of

$15.9 million for the same period of the prior year. Excluding the impairment loss described above, and the

$7.9 million income tax adjustment related to the reduction of federal enacted income tax rates, net of non-

controlling interest, and a loss from discontinued operations of $0.4 million in the second quarter of the prior

year

(1)

, consolidated net income would have amounted to $8.7 million for the second quarter of 2009, compared

to $8.4 million in the prior year, an increase of $0.3 million, or 3%;

• Consolidated net loss amounted to $104.2 million for the first six months, compared to net income of $5.9 million

in the prior year. Excluding the impairment loss described above, the $7.9 million income tax adjustment related

to the reduction of federal enacted income tax rates, net of non-controlling interest, and a loss from discontinued

operations of $18.1 million in the first six months of the prior year, consolidated net income would have

amounted to $19.7 million for the first half of fiscal 2009, compared to $16.1 million in the prior year, an increase

of $3.7 million, or 22.7%;

• Free cash flow

(1)

reached $32.1 million for the quarter and $53.9 million for the first six months, increases of

65.6% and 27.2% over the same periods of the prior year;

• In the cable sector, revenue-generating units (“RGU”)

(2)

grew by 25,626 and 78,340 net additions in the quarter

and first six months, for a total of 2,795,214 RGU at February 28, 2009.

“Our results in the second quarter rest on the solid performance of our Canadian operations both in radio and cable. We

are very pleased with the performance of the radio activities of COGECO. RYTHME FM continues to lead in the Montreal

market in the winter BBM survey and to grow in its other markets. In the Canadian cable operations, we have maintained

our focus and increased the number of RGU by 47,577 units in the quarter, for total net additions of 113,040 RGU so far

(1)

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

comparable to similar measures presented by other companies. For more details, please consult the “Non-GAAP financial measures” section of the

Management’s discussion and analysis.

(2)

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

- 2 -

this year. Our commercial activities, the results of which are in line with our expectations, continue to constitute a

wonderful growth opportunity for Cogeco Cable as shown by the 10-year, $39 million deal with the Toronto District School

Board announced in December by Cogeco Data Services. However, in our European cable operations, Cabovisão’s

competitive position continued to deteriorate in the second quarter due to the unfavourable economic climate and

recurring intense customer promotions and advertising initiatives from competitors in the Portuguese market during the

latter part of the second quarter. In accordance with current accounting standards, management considers that this

situation, as evidenced by the RGU and revenue decline, is more significant and persistent than expected, resulting in a

decrease in the value of Cogeco Cable’s investment in the Portuguese subsidiary. Consequently, Cogeco Cable recorded

a non-cash impairment loss of $399.6 million on the net value of the assets acquired. Cogeco Cable is in the process of

implementing new marketing and other operating initiatives to improve the results of the European operations”, declared

Louis Audet, President and CEO of COGECO.

FINANCIAL HIGHLIGHTS

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008

(1)

Change 2009 2008

(1)

Change

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

(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 311,825 271,894 14.7 620,200 532,149 16.5

Operating income from contin ui ng op erati ons before

amortization

(2)

126,663 109,523 15.6 251,367 209,697 19.9

Operating income from contin ui ng op erati ons 59,878 53,177 12.6 120,519 100,312 20.1

Impairment of goodwill and intan gi bl e assets 399,648 – – 399,648 – –

Income (loss) from continuing operations (115,291)

16,315 – (104,238) 23,971 –

Loss from discontinued operations – (425)

– – (18,057)

–

Net income (l oss) (115,291)

15,890 – (104,238) 5,914 –

Net income excluding the impairment loss, the income tax

adjustment and the loss from discontinued operations

(2)

8,660 8,406 3.0 19,713 16,062 22.7

Cash flow from operating activities from continuing

operations 120,480 92,942 29.6 150,950 139,546 8.2

Cash flow from operations from continuing operations

(2)

100,351 85,374 17.5 195,977 166,751 17.5

Capital expenditures and increase in deferred charges 68,262 66,000 3.4 142,117 124,403 14.2

Free cash flow

(2)

32,089 19,374 65.6 53,860 42,348 27.2

Earnings (loss) per share

Basic

Income (loss) from continuing operations (6.89)

0.98 – (6.23) 1.44 –

Loss from discontinued operations – (0.03)

– – (1.08)

–

Net income (l oss) (6.89)

0.95 – (6.23) 0.35 –

Net income excl uding the impairment loss, the income

tax adjustment and the loss from discontinued

operations

(2)

0.52 0.50 4.0 1.18 0.96 22.9

Diluted

Income (loss) from continuing operations (6.89)

0.97 – (6.23) 1.43 –

Loss from discontinued operations – (0.03)

– – (1.08)

–

Net income (l oss) (6.89)

0.95 – (6.23) 0.35 –

Net income excl uding the impairment loss, the income

tax adjustment and the loss from discontinued

operations

(2)

0.52 0.50 4.0 1.18 0.96 22.9

(1)

Certain comparative figures hav e be en reclas sifi ed to conform to the c ur rent year ’s pres ent ation. Fi nanc ial inf ormatio n for the previous year has been r es tated to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

(2)

The indicated terms do not have standardiz ed def inition s prescr ibed by Canadia n Generally Acc epted Accounting Pri nciples (“GAAP ”) and therefo re, may not be

comparable to similar measures presented by other companies. For more details, please consult the “Non-GAAP financial measures” section of the

Management’s discussion and analysis.

- 3 -

FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute forward-looking information within the meaning of securities laws.

Forward-looking information may relate to COGECO’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 Company’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 believes are reasonable as of the

current date. While management considers these assumptions to be reasonable based on information currently available

to the Company, they may prove to be incorrect. The Company cautions the reader that the current adverse economic

conditions make forward-looking information and the underlying assumptions subject to greater uncertainty and that,

consequently, they may not materialize, or the results may significantly differ from the Company’s expectations. It is

impossible for COGECO to predict with certainty the impact that the current economic downtown 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 Company’s 2008 annual Management’s Discussion and Analysis

(MD&A) that could cause actual results to differ materially from what COGECO 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 Company’s

control. Therefore, future events and results may vary significantly from what management currently foresees. 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 Company is under no obligation (and expressly disclaims any such

obligation), and does not undertake to update or alter this information before the next quarter.

This analysis should be read in conjunction with the Company’s consolidated financial statements, and the notes thereto,

prepared in accordance with Canadian GAAP and the MD&A included in the Company’s 2008 Annual Report. Throughout

this discussion, all amounts are in Canadian dollars unless otherwi se indi cated.

- 4 -

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

CORPORATE STRATEGI ES AND OBJECTIVES

COGECO Inc.’s (“COGECO” or the “Company”) objectives are to maximize shareholder value by increasing profitability

and ensuring continued growth. The strategies employed to reach these objectives, supported by tight controls over costs

and business processes, are specific to each sector. For the cable sector, sustained corporate growth and the continuous

improvement of networks and equipment are the main strategies used. The radio activities focus on continuous

improvement of programming in order to increase market share, and, thereby, profitability. COGECO uses growth of

revenue and operating income before amortization

(1)

, free cash flow

(1)

and revenue-generating units (“RGU”)

(2)

growth in

order to measure its performance against these objectives for the cable sector. Below are the Company’s recent

achievements in furthering the corporate obje ctives.

Tight control over costs and business processes

• For the first six months of fiscal 2009, the Company’s operating costs increased over last year by 14.4%

compared to a revenue growth of 16.5%;

• The Company’s Portuguese subsidiary, Cabovisão, continued to improve its business processes, and at the end

of the second quarter, reinforced controls over its doubtful accounts;

• The design of internal controls over financial reporting as per National Instrument 52-109 is still ongoing. As

discussed in the 2008 annual MD&A, the Company had identified certain material weaknesses in the design of

internal controls over financial reporting and has been working to improve the design and efficiency of internal

controls on some significant processes during the quarter. The documentation and remediation of key internal

controls are progressi ng normally.

Cable sector

Sustained corporate growth

Canadian operations

• Digital Television service:

o During the second quarter, the following Digital and High Definition (“HD”) Television services were

launched:

• TSN2 HD,Teletoon Retro and Sportsnet East HD in Québec.

• Telephony service:

o During the second quarter, the Telephony service was launched in the following cities:

• Callander, Ingleside, Long Sault and Lancaster, Ontario;

• Daveluyville, Chambord, Desbiens, Lac Bouchette, Metabetchouan, Normandin, St-Ferdinand-

d’Halifax, St-Gédéon, Tring Jonction, Amqui, Batiscan, Causapscal, Lac-au-Saumon,

St-Stanislas, St-Ulric, Ste-Anne-de-la-Pérade, Sayab ec et Val-Brillant, Québec.

• High Speed Internet service :

o Launch of a new High Speed Internet (“HSI”) package, HSI Lite Plus, in Ontario and in Québec with

download speeds of up to 3 Mbps and a monthly load bit capacity of 20 GB.

• Cogeco Data Services:

o During the second quarter, announcement of a 10-year, $39 million contract with the Toro nto District

School Board.

European operations

• Bundled offers:

o Cabovisão - Televisão por Cabo, S.A. (“Cabovisão”) realigned some of its bundle offers for certain

customers and is currently as sessing improvem ents to its retention strategies;

• Digital Television service:

o Continued deployment of Cabovisã o’s Digital Television service;

o Launch of SET channel, Sony Entertainment, Animax, Benfica TV, Disney Channel and Disney

Cinemagic;

o Launch of a new HD Set Top Box with Digital Video recording cap abilities (HD + DVR).

• High Speed Internet service:

o During the second quarter, Cabovisão ceased charging for excess consumption for HSI customers.

(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.

- 5 -

Continuous improv ement of networks and equipment

• During the first six months of fiscal 2009, the Company invested approximately $48.3 million in its cable

infrastructure including head-ends and u pgrades and rebuilds.

Other

• Winter’s BBM Canada survey conducted with the Portable People Meter (“PPM”) shows that RYTHME FM has

maintained its leadership position with audiences in the adult and female categories in the Montréal market. The

other RYTHME FM stations and the 93

station in the Québec City continue to expand their audiences.

Discontinued Operations

In October 2007, the Board of Directors of TQS, an indirect subsidiary of the Company, engaged CIBC World Markets to

advise on and assess strategic options for the TQS network in the face of financial difficulties. On December 18, 2007, the

Québec Superior Court issued an order under the Companies’ Creditors Arrangement Act (Canada) protecting TQS, its

subsidiaries and its parent 3947424 Canada Inc. (“TQS Group”) from claims by their creditors. On June 26, 2008, the

Canadian Radio-television and Telecommunications Commission (“CRTC”) approved the proposed transfer of ownership

and control of TQS to Remstar Corporation Inc. (“Remstar”) and on August 29, 2008, the transfer of ownership and

control of TQS to Remstar was completed, which allowed the new ownership group to pursue the broadcasting activities

of TQS.

Effective December 18, 2007, the Company has ceased to consolidate the financial statements of the TQS Group.

Accordingly, the results of operations and cash flows for the three and six month periods ended February 29, 2008, have

been reclassified as discon tinued operations.

The results of the discontinued operations were as follows:

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited)

(unaudited) (unaudited)

(unaudited)

Revenue – 5,741 – 38,499

Operating costs – 5,865 – 35,822

Operating income (loss ) befor e amor tiz atio n – (124) – 2,677

Amortization – 248 – 1,364

Operating income (loss) – (372) – 1,313

Financial expens e – 53 – 291

Impairment of assets – – – 30,298

Loss before income taxes and the following items – (425) – (29,276)

Income taxes – – – –

Non-controlling interest – – – (11,219)

Loss from discontinued operations – (425) – (18,057)

- 6 -

The cash flows of the discontinued ope rations were as follows:

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

($000) 2009 2008 2009 2008

$ $ $ $

(unaudited)

(unaudited) (unaudited)

(unaudited)

Cash flow from operating activities – 1,770 – (3,973)

Cash flow from investing activities – (48) – (133)

Cash flow from financing activities – (1,722) – 4,106

Cash flow from discontinued operations – – – –

Continuing Operations

RGU growth in the cable sector

During the first six months ended February 28, 2009, the consolidated number of RGU increased by 78,340, or 2.9%, to

reach 2,795,214 RGU, on target to attain the Company’s RGU growth projections of 100,000 net additions issued on

October 29, 2008 and revised on April 8, 2009, which represents approximately 3.7%, for the fiscal year ending

August 31, 2009. Please consult the “Fiscal 2009 financial guidelines” se ction for further details.

Revenue and operating income from continuing operations before amortization growth

For the second quarter of fiscal 2009, revenue increased by $39.9 million, or 14.7%, to reach $311.8 million while

operating income before amortization from continuing operations grew by $17.1 million, or 15.6%, to reach $126.7 million.

For the first six months of the year, revenue increased by $88.1 million, or 16.5%, to reach $620.2 million while operating

income before amortization from continuing operations grew by $41.7 million, or 19.9%, to reach $251.4 million. Due to

the difficult environment in the Portuguese cable market, management has revised its guidelines for fiscal 2009 and now

expects that revenue should reach $1,238 million, a decrease of $5 million compared to its original guidelines and

operating income before amortization should decrease by $8 million to reach $505 million. Please consult the “Fiscal 2009

financial guidelines” section for furthe r details.

Free cash flow

In the second quarter of fiscal 2009, COGECO generated free cash flow of $32.1 million compared to $19.4 million for the

same period last year. For the six month period ended February 28, 2009, COGECO generated free cash flow of

$53.9 million compared to $42.3 million in the prior year. These free cash flow increases resulted mainly from the cable

sector and are attributable to an increase in cash flow from operations, resulting primarily from the improvement of the

Company’s operating income before amortization, partly offset by an increase in capital expenditures and by the impact of

the rapid appreciation of the US dollar over the Canadian dollar in the first six months of the year. Due to the difficult

environment in the Portuguese market of the cable segment partly offset by the appreciation of the Euro currency over the

Canadian dollar, management has revised downwards its guidelines for fiscal 2009, and now expects free cash flow to

reach $85 million for fiscal 2009, a decrease of $10 million compared to the original guidelines issued. Please consult the

“Fiscal 2009 financial guid elines” section for further details.

IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS

In the second quarter of fiscal 2009, the competitive position of Cogeco Cable’s subsidiary Cabovisão in the Iberian

Peninsula further deteriorated due to the continuing unfavourable economic climate and recurring intense customer

promotions and advertising initiatives from competitors in the Portuguese market at the end of the second quarter. Please

refer to the “Cable sector” section for further details. In accordance with current accounting standards, management

considers that the continued RGU and local currency revenue decline are more significant and persistent than expected,

resulting in a decrease in the value of Cogeco Cable’s investment in the Portuguese subsidiary. As a result, Cogeco

Cable tested goodwill and all long-lived assets for impairment at February 28, 2009.

Goodwill has to be tested for impairment using a two step approach. The first step consists of determining whether the fair

value of the reporting unit exceeds the net carrying amount of that reporting unit, including goodwill. In the event that the

net carrying amount exceeds the fair value, a second step is performed in order to determine the amount of the

impairment loss. Cogeco Cable has completed its impairment tests on goodwill and has concluded that goodwill was

impaired at February 28, 2009. As a result, a non-cash impairment loss of $339.2 million was recorded in the second

- 7 -

quarter. Fair value of the reporting unit was determined using the discounted cash flow method. Future cash flows are

based on internal forecasts and consequently, considerable management judgement is necessary to estimate future cash

flows. Significant changes in assumptions could result in further impairments of goodwill.

Intangible assets with definite lives, such as customer relationships, must be tested for impairment by comparing the

carrying amount of the asset or group of assets to the expected future undiscounted cash flow to be generated by the

asset or group of assets. Accordingly, Cogeco Cable has completed its impairment test on customer relationships at

February 28, 2009, and has determined that the carrying value of customer relationships exceeds its fair value. As a

result, a non-cash impairment loss of $60.4 million was recorded in the secon d quarter.

The impairment loss affected the Company’s goodwill and customer relationship assets balances as follows at

February 28, 2009:

($000) $

(unaudited)

Goodwill 339,206

Customer relationships 60,442

Future income taxes (16,018)

Impairment loss net of related income taxes 383,630

Non-controlling interest (259,679)

Impairment loss net of related income taxes and non-controlling interest 123,951

OPERATING RESULTS – CONSOLIDATED OVERVIEW

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008

(1)

Change 2009 2008

(1)

Change

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

(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 311,825 271,894 14.7 620,200 532,149 16.5

Operating costs 185,162 162,371 14.0 368,833 322,452 14.4

Operating income from contin ui ng op erati ons before

amortization 126,663 109,523 15.6 251,367 209,697 19.9

Operating margin

(2)

40.6% 40.3% 40.5% 39.4%

(1)

Certain comparative figures hav e be en reclas sifi ed to conform to the c ur rent year ’s pres ent ation. Fi nanc ial inf ormatio n for the previous year has been r es tated to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

(2)

Operating margin does not have a standardize d definition prescribed by Canadia n GAAP and therefore, may not be comparable to simi lar measures presented

by other companies. For more details, please consult the “Non-GAAP financial measur es” section.

Revenue

Fiscal 2009 second-quarter revenue improved, mainly in its cable sector, by $39.9 million, or 14.7%, to reach

$311.8 million, and for the six month period, by $88.1 million, or 16.5%, to reach $620.2 million. Cable revenue, driven by

an increased number of RGU combined with rate increases and the acquisition of MaXess Networx®, FibreWired

Burlington Hydro Communications and Cogeco Data Services (the “recent acquisitions”) in the second half of fiscal 2008

in Canadian operations, and by the appreciation of the Euro over the Canadian dollar in European operations, went up by

$39.8 million, or 15%, and by $87.4 million, or 16.9%, respectively, in the second quarter and first six months of fiscal

2009.

- 8 -

Operating costs

Operating costs increased by $22.8 million, or 14%, to reach $185.2 million in the second quarter and by $46.4 million, or

14.4%, to reach $368.8 million in the first half of fiscal 2009 compared to the prior year. The increase in operating costs

was mainly attributable to the cable sector, due to the servicing of additional RGU and the impact of the recent

acquisitions in Canada, and in Europe due to the appreciation of the Euro over the Canadian dollar and an increase in the

level of uncollectible customer accounts.

Operating income from continuing operation s before amortization

Operating income from continuing operations before amortization grew, essentially by its cable segment, by $17.1 million,

or 15.6%, to reach $126.7 million in the second quarter of fiscal 2009 compared to the corresponding period of the prior

year, and for the six month period ended February 28, 2009, by $41.7 million, or 19.9%, to reach $251.4 million. The

cable sector contributed to the growth by $16.8 million during the second quarter, and $39.2 million during the first half of

the fiscal year.

FIXED CHARGES

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008

(1)

Change 2009 2008

(1)

Change

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

(unaudited) (unaudited) (unaudited) (unaudited)

Amortization 66,785 56,346 18.5 130,848 109,385 19.6

Financial expens e 18,028 17,550 2.7 41,806 33,883 23.4

(1)

Certain comparative figures hav e be en reclas sifi ed to conform to the c ur rent year ’s pres ent ation. Fi nanc ial inf ormatio n for the previous year has been r es tated to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

Fiscal 2009 second quarter and first six-month period, amortization amounted to $66.8 million and $130.8 million,

respectively, compared to $56.3 million and $109.4 million for the corresponding period the year before. The increase in

amortization expense was mainly due the cable sector and attributable to additional capital expenditures arising from

customer premise equipment acquisitions to sustain RGU growth, to the recent acquisitions in the Canadian operations

and to the appreciation of the Euro currency over the Canadian dollar.

Second-quarter and first six-month period financial expense increased by $0.5 million and $7.9 million compared to the

same periods in fiscal 2008 due to the rapid appreciation of the US dollar and the Euro over the Canadian dollar and the

increase in the level of Indebtedness (defined as bank indebtedness, derivative financial instruments and long-term debt).

More specifically, financial expense in the cable sector was adversely impacted by foreign exchange losses amounting to

$0.6 million in the second quarter and $4.4 million in the first six months of fiscal 2009 as the majority of customer premise

equipment is purchased and subsequently paid in US dollars. These losses were essentially due to the unusually high US

dollar volatility, with the Bank of Canada closing rate fluctuating from CA$1.0620 per US dollar at August 31, 2008 to

CA$1.2723 per US dollar at February 27, 2009, reaching a high of CA$1.2935 per US dollar on November 20, 2008. For

the corresponding periods of the prior year, the cable subsidiary recorded a foreign exchange loss of $0.2 million and a

foreign exchange gain of $0.9 million, re spectively.

INCOME TAXES

Fiscal 2009 second-quarter income tax expense amounted to $0.2 million compared to a recovery of $14.4 million in

fiscal 2008. For the first half of the year, income tax expense amounted to $10 million compared to a recovery of

$5.1 million in the prior year. The income tax expenses for the current year include a future income tax recovery of

$16 million related to the impairment loss recorded in the second quarter in the cable sector. Prior year income tax

amounts include the impact of the reduction in corporate income tax rates announced on October 16, 2007 by the

Canadian federal government in its Economic Statement and considered substantively enacted on December 14, 2007

(the “income tax adjustment”). The reduction of these corporate income tax rates reduced future income tax expense by

$24.1 million in the second quarter and first six months of fiscal 2008. Excluding the effects of the impairment loss in the

current year and the tax rate reductions in the prior year, income tax expense would have amounted to $16.2 million for

the second quarter and $26 million for the first six months of fiscal 2009, compared to $9.7 million for the second quarter

and $19 million for the first half of fiscal 2008. The increases in income tax expense for fiscal 2009 are mainly due to the

increase in operating income before amortization surpassing that of the fixed charges.

- 9 -

NON-CONTROLLING INTEREST

The non-controlling interest represents a participation of approximately 67.7% in Cogeco Cable’s results. During the

second quarter of fiscal 2009 the loss attributable to non-controlling interest amounted to $242.7 million, and

$226.8 million for the six months ended February 28, 2009, due to the impairment loss recorded in the cable sector. The

income attributable to non-controlling interest for the comparable periods of the prior year amounted to $33.8 million and

$47.5 million, respectively.

NET INCOME (LOSS)

Fiscal 2009 second-quarter net loss amounted to $115.3 million, or $6.89 per share, compared to net income of

$15.9 million, or $0.95 per share, for the same period last year. Net loss in the first six month period of fiscal 2009

amounted to $104.2 million, or $6.23 per share, compared to net income of $5.9 million, or $0.35 per share, for the same

period last year. Fiscal 2009 net losses in the second quarter and first six months are due to the impairment loss of

$399.6 million recorded in the second quarter of the year, as described in the “Impairment of goodwill and intangible

assets” section. Net of related income taxes and non-controlling interest, the impairment loss reduced net income for the

quarter and first six months by $124 million. The net income amounts of the 2008 fiscal year included an income tax

recovery of $24.1 million resulting from the reduction of corporate income tax rates in the second quarter of fiscal 2008 as

described in the “Income taxes” section, net of non-controlling interest of $16.2 million, for a net impact on income of

$7.9 million, and losses from discontinued operations of $0.4 million and $18.1 million for the quarter and first six months

of fiscal 2008 respectively. Excluding the effect of the above items

(1)

, net income would have amounted to $8.7 million, or

$0.52 per share

(1)

, and $19.7 million, or $1.18 per share, for the quarter and first six months ended February 28, 2009,

respectively, compared to $8.4 million, or $0.50 per share, representing increases of 3% and 4%, and $16.1 million, or

$0.96 per share, representing increases of 22.7% and 22.9%, respectively, for the second quarter and first six months of

the 2008 fiscal year. Net income progression has resulted mainly from the growth in the cable sector of operating income

before amortization exceeding that of fixed charges from the Canadian operations, partly offset by the reduction in

operating income before amortization, the increase in fixed charges and the unfavourable impact of the Euro currency

over the Canadian dollar f or the European operations in the cable sector.

CASH FLOW AND LIQUIDITY

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Operating activities from continuing operations

Cash flow from operations

(1)

100,351 85,374 195,977 166,751

Changes in non-cash operating items 20,129 7,568 (45,027) (27,205)

120,480 92,942 150,950 139,546

Investing activities from continuing operations

(2)

(67,895) (64,743) (140,795) (123,072)

Financing activities from continuing operations

(2)

(36,365) (22,329) 2,411 (58,586)

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

foreign currencies 641 355 1,328 202

Net change in cash and cash equivalents from continuing operations 16,861 6,225 13,984 (41,910)

Net change in cash and cash equivalents from discontinued operations – – – –

Cash and cash equivalents, beginning of period 34,505 18,144 37,472 66,279

Cash and cash equivalents, end of period 51,366 24,369 51,366 24,369

(1)

Cash flow from operations does not have a standardized definition prescribed by Canadian GAAP and therefore, may not be comparable to similar measures

presented by other companies. For more details, please consult the “Non-GAAP financial measures” section.

(2)

Excludes assets acquired under capital leases.

(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.

- 10 -

Fiscal 2009 second quarter cash flow from operations reached $100.4 million, 17.5% higher than the comparable period

last year, primarily due to the increase in operating income before amortization. Changes in non-cash operating items

generated greater cash inflows compared to the same period last year, mainly as a result of increases in accounts

payable and accrued liabilities, and a slight decrease in accounts receivable in the second quarter of fiscal 2009

compared to an increase in accounts receivable in the second quarter of the prior year, partly offset by an increase in

income taxes receivable.

In the first six months of fiscal 2009, cash flow from operations reached $196 million, 17.5% higher than the comparable

period last year, primarily due to the increase in operating income before amortization, partly offset by the increase in

financial expense and current income taxes. Changes in non-cash operating items generated greater cash outflows

compared to the same period last year, mainly as a result of a decrease in income tax liabilities in the current year

compared to an increase in the prior year and a higher increase in income taxes receivable in the first half of the year

compared to the prior year, partly offset by a lower decrease in accounts payable and accrued liabilities and an increase

in accounts receivable in the prior year.

In the second quarter of fiscal 2009, investing activities from continuing operations including assets acquired under capital

leases stood at $67.9 million due to capital expenditures of $62.5 million and from an increase of $5.7 million in deferred

charges and others in the cable sector. The capital expenditures, stemming essentially from the cable sector, increased

compared to the same period last year due to the following factors:

• An increase in support capital spending due to improvements in the information systems to sustain the business

activities and the acquisition of a new facility in the Canadian operations;

• An increase in scalable infrastructure capital spending mainly due to the timing of the expansion and head-end

improvements, system powering and equipment reliability to sustain increased customer demand for HSI and

Telephony services in Canada;

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

• An increase from the appreciation of the US dollar and the Euro o v er the Canadian dollar;

• These increases were partly offset by a decrease in customer premise equipment spending which reflect lower

RGU growth in Canadian operations and net RGU lo sses in European operations;

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

initiatives.

In the first six months of fiscal 2009, investing activities from continuing operations including assets acquired under capital

leases stood at $140.8 million due to capital expenditures of $129.1 million and from an increase of $12.9 million in

deferred charges and others in the cable sector. The capital expenditures, stemming essentially from the cable sector,

increased compared to the same period last year due to the following factors:

• An increase in support capital spending due to improvements in the information systems to sustain the business

activities and the acquisition of a new facility in the Canadian operations, and to the acquisition of a power

generator for Cogeco Data Service s in th e first quarter of the year;

• An increase in customer premise equipment capital spending resulting from RGU growth in Canadian operations

fuelled in part by continued interest for the HD Television service, combined with the deployment of Digital

Television in Portugal, net of RGU losses in the other services in European operations;

• An increase in scalable infrastructure capital spending mainly due to the timing of the expansion and head-end

improvements, system powering and equipment reliability to sustain increased customer demand for HSI and

Telephony services in Canada;

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

• An increase from the appreciation of the US dollar and the Euro o v er the Canadian dollar;

•

Partly offsetting these increases, capital expenditures associated with network upgrades and rebuilds decreased

due to the timing of these initiatives.

Deferred charges and others are mainly attributable to reconnect costs in the cable sector. The increase in deferred

charges and others for the second quarter amounted to $5.7 million compared to $6.2 million for the same period the year

before, and to $12.9 million compared to $13.7 million for the first six months of the year. Slower RGU growth explained

the lower increases recorded in fiscal 2009.

- 11 -

In the second quarter and first six months, the Company generated free cash flows amounting to $32.1 million and

$53.9 million, respectively, compared to $19.4 million and $42.3 million for the same periods of the preceding year. These

free cash flow increases over the comparable periods of the prior year are mainly due to the cable sector and attributable

to an increase in cash flow from operations, resulting primarily from the improvement of the cable sudsidiary’s operating

income before amortization, partly offset by an increase in capital expenditures. The aggregate amount of total capital

expenditures and deferred charges increased by $2.3 million for the quarter ended February 28, 2009, and by

$17.7 million for the first half of fiscal 2009 compared to the corresponding periods of the prior year due to the factors

explained above.

In the second quarter of 2009, Indebtedness affecting cash decreased by $31.5 million due to the free cash flow of

$32.1 million and the increase of non-cash operating items of $20.1 million, net of the increase in cash and cash

equivalents of $16.9 million and the dividend payment of $1.3 million described below. For the same period of the prior

year, Indebtedness affecting cash decreased by $18.2 million due to the free cash flow of $19.4 million, partly offset by a

$1.2 million dividend payment described below.

During the second quarter of fiscal 2009, dividends of $0.08 per share for subordinate and multiple voting shares, totalling

$1.3 million, were paid by the Company, compared to $0.07 per share, totalling $1.2 million in the second quarter of fiscal

2008. Dividends paid by a subsidiary to non-controlling interests amounted to $3.9 million during the second quarter of

fiscal 2009, for consolidated dividend payments of $5.3 million.

In the first half of fiscal 2009, Indebtedness affecting cash increased by $12.3 million due to the reduction of non-cash

operating items of $45 million, the increase in cash and cash equivalents of $13.9 million and the payment of dividends

totalling $2.7 million, partly offset by the free cash flow of $53.9 million. Indebtedness was increased through the issuance

on October 1, 2008, in the cable sector, of Senior Secured Notes, Series A and B and by an increase of $28.1 million in

bank indebtedness, net of the repayment of US$150 million Senior Secured Notes Series A and the related derivative

financial instrument of $56.2 million, both maturing on October 31, 2008, for a total of $238.7 million, and of net

repayments on the cable subsidiary’s revolving loans of $23 million. For the same period of the prior year, Indebtedness

affecting cash decreased by $52.6 million mainly due to the free cash flow of $42.3 million, the reduction of $41.9 million

in cash and cash equivalents partly used to offset the $27.2 million reduction in non-cash operating items, partly offset by

the dividend payment of $2.3 million described below.

During the first six months of fiscal 2009, quarterly dividends of $0.08 per share for subordinate and multiple voting

shares, totalling $2.7 million, were paid by the Company, compared to quarterly dividends of $0.07 per share, totalling

$2.3 million in the first half of the prior year. Dividends paid by a subsidiary to non-controlling interests amounted to

$7.9 million, for consolidated dividend p ayments of $ 10.6 m illion in the six month period ended February 28, 2009.

At February 28, 2009, the Company had a working capital deficiency of $348.8 million compared to $611.8 million as at

August 31, 2008. The decrease in the deficiency is mainly attributable to the cable sector and is due to the repayment of

the US$150 million Senior Secured Notes, Series A and the related derivative financial instrument for a total of

$238.7 million on October 31, 2008 using the proceeds of issuance of the Senior Secured Notes, Series A and B. As part

of the usual conduct of its cable business, COGECO maintains a working capital deficiency due to a low level of accounts

receivable as a large portion of the cable subsidiary’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

Cogeco Cable to use cash and cash e quivalents to reduce Indebtedness.

At February 28, 2009, Cogeco Cable had used $476.8 million of its $885 million Term Facility for a remaining availability

of $408.2 million and the Company had drawn $12.3 million of its $50 million Term Facility, for a remaining availability of

$37.7 million.

The assumptions used in the actuarial valuations performed for the year ended August 31, 2008 were adjusted to reflect

the current rates of return and market conditions, and accordingly, the Company expects the payments required to fund

the actuarial deficit of its defined benefit pension plans to be higher in fiscal 2009 than in fiscal 2008. Based on the

August 31, 2008 actuarial valuations, the Company expects these payments to be approximately $1 million for the 2009

fiscal year.

Transfers of funds from non-wholly owned subsidiaries to COGECO are subject to approval by the subsidiaries’ Board of

Directors and may also be restricted under the terms and conditions of certain debt instruments. In accordance with

applicable corporate and securities laws, significant transfers of funds from COGECO may be subject to approval by

minority shareholders.

- 12 -

FINANCIAL POSITION

Since August 31, 2008, there have been major changes to the balances of “fixed assets”, “intangible assets”, “goodwill”,

“accounts payable and accrued liabilities”, “future income tax assets” “income taxes receivable”, “income tax liabilities”,

“future income tax liabilities”, “cash and cash equivalents”, “Indebtedness” and “non-controlling interest”.

The $28.1 million increase in fixed assets is mainly related to increases in capital expenditures to sustain RGU growth, to

the recent acquisitions in Canada and to the appreciation of the Euro and the US dollar over the Canadian dollar in the

cable sector. The $66.2 million and $326.1 million reductions in intangible assets and goodwill and the $14.2 million

decrease in future income tax liabilities are due to the impairment loss recorded on the cable subsidiary’s investment in

Cabovisão in the second quarter of the year as described in the “Impairment of goodwill and intangible assets” section,

net of the appreciation of the Euro over the Canadian dollar. The $25.9 million decrease in accounts payable and accrued

liabilities and the $13.9 million increase in cash and cash equivalents are related to the timing of payments made to

suppliers and to the fluctuations of the Euro over the Canadian dollar in the cable sector. The $5.7 million reduction in

future income tax assets is due to the utilization of Ontario minimum tax credits and tax loss carry forwards to reduce

current income taxes in the cable sector. The $6.6 million increase in income taxes receivable and the $9.6 million

decrease in income tax liabilities are due to income tax payments relating to fiscal 2008 that were made by the cable

subsidiary in the first quarter of fiscal 2009. Indebtedness has increased by $32.1 million as a result of the factors

previously discussed in the “Cash Flow and Liquidity” section and the unfavourable impact of the appreciation of the US

dollar and the Euro over the Canadian dollar, partly offset by the increase of $34.3 million in the fair value of the cross-

currency swaps related to the Senior Secured Notes Series A issued on October 1, 2008. The $228.2 million decrease in

non-controlling interest is due to the impairment loss recorded on the cable subsidiary’s investment in Cabovisão in the

second quarter of the year as described in the “Impairment of goodwill and intangible assets” section, net of

improvements in the cable subsidiary’s operating results excluding the impairment loss.

A description of COGECO’s share d ata as at March 31, 2009 is presented in the table belo w:

Number of shares/options Amount

($000)

Common shares

Multiple voting shares

Subordinate voting shares

1,842,860

14,898,762

120,058

Options to purchase subordinate voting shares

Outstanding options

Exercisable options

123,358

In the normal course of business, COGECO has incurred financial obligations, primarily in the form of long-term debt,

operating and capital leases and guarantees. COGECO’s obligations, discussed in the 2008 annual MD&A, have not

materially changed since August 31, 2008, except for the new financing in the cable sector discussed in the “Cash Flow

and Liquidity” section.

DIVIDEND DECLARATION

At its April 8, 2009 meeting, the Board of Directors of COGECO declared a quarterly eligible dividend of $0.08 per share

for subordinate and multiple voting shares, payable on May 6, 2009, to shareholders of record on April 22, 2009. The

declaration, amount and date of any future dividend will continue to be considered and approved by the Board of Directors

of the Company based upon the Company’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, their amount and periodicity may vary.

FINANCIAL MANAGEME NT

On January 22, 2009, the Company’s cable subsidiary, Cogeco Cable, entered into a swap agreement with a financial

institution to fix the floating benchmark interest rate with respect to the Euro-denominated Term Loan facilities for a

notional amount of €111.5 million. The interest rate swap to hedge the Term Loans has been fixed at 2.08% until their

maturity at July 28, 2011. The notional value of the swap will decrease in line with the amortization schedule of the Term

Loans. In addition to the interest rate swap of 2.08%, Cogeco Cable will continue to pay the applicable margin on these

Term Loans in accordance with its Term Facility. Since the issuance on January 22, 2009, the fair value of interest rate

swap liability increased by $1.3 million, which is recorded as a decrease of other comprehensive income net of income

taxes of $0.4 million and non-controlling interest of $0.6 million.

- 13 -

On October 1, 2008, Cogeco Cable entered into cross-currency swap agreements to set the liability for interest and

principal payments on its US$190 million Senior Secured Notes, Series A maturing in October 1, 2015. These agreements

have the effect of converting the U.S. interest coupon rate of 7.00% per annum to an average Canadian dollar interest

rate of 7.24% per annum. The exchange rate applicable to the principal portion of the debt has been ﬁxed at CA$1.0625

per US dollar. Since the issuance on October 1, 2008, amounts due under the US$190 million Senior Secured Notes

Series A increased by $39.9 million due to the US dollar’s appreciation over the Canadian dollar. The fair value of cross-

currency swaps increased by a net amount of $35.5 million, of which $39.9 million offsets the foreign exchange loss on

the debt denominated in US dollars. The difference of $4.3 million was recorded as a decrease of other comprehensive

income, net of income taxes of $1.2 million and non-controlling interest of $2.1 million.

Cogeco Cable’s net investment in the self-sustaining foreign subsidiary, Cabovisão, is exposed to market risk attributable

to fluctuations in foreign currency exchange rates, primarily changes in the value 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 net investments in self-sustaining foreign subsidiaries and, accordingly, Cogeco Cable realized

a foreign exchange gain of $11.4 million in the first six months of fiscal 2009, which is presented net of non-controlling

interest of $7.7 million in other comprehensive income. The exchange rate used to convert the Euro into Canadian dollars

for the balance sheet accounts as at February 28, 2009 was $1.6129 per Euro compared to $1.5580 per Euro as at

August 31, 2008. The average exchange rates prevailing during the second quarter and first six months used to convert

the operating results of the European operations were $1.6265 and $1.5864 per Euro, respectively, compared to $1.4741

and $1.4430 per Euro for the same periods of the 2008 fiscal year.

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

into Canadian dollars on European operating results i n the cable sector for the first six months ended February 28, 2009:

Six months ended February 28, 2009 As reported

Exchange rate

impact

($000) $ $

(unaudited) (unaudited)

Revenue 123,304 12,330

Operating income before amort iz ati o n 38,678 3,868

The Company 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 in

the cable sector is purchased and subsequently paid in US dollars. Please consult the “Fixed charges” section of this

MD&A and the Foreign Exchange Risk section in note 14 of the consolidated financial statements for further details.

CABLE SECTOR

CUSTOMER STATISTICS

Net additions (losses) % of Penetration

(1)

Quarters ended Six months ended

February 28, February 28, February 29, February 28, February 29, February 28, February 29,

2009 2009 2008 2009 2008 2009 2008

RGU 2,795,214 25,626 56,196 78,340 139,220 – –

Basic Cable service customers 1,144,074 (9,953)

4,593 (9,155)

17,590 – –

HSI service customers

(2)

650,098 3,030 17,154 17,330 46,254 58.8 56.1

Digital Television service cu stomers 514,917 25,102 17,879 48,719 34,132 45.5 49.1

Telephony service customers

(3)

486,125 7,447 16,570 21,446 41,244 46.5 43.1

(1)

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

(2)

Customers subscribing to the HSI service without the Basic Cable service totalled 85,487 as at February 28, 2009 compared to 81,745 at February 29, 2008.

(3)

Customers subscribing to the Telephony service without the Basic Cable service totalled 31,109 as at February 28, 2009 compared to 22,054 at February 29,

2008.

In the cable sector, second-quarter and first six months RGU net additions were lower th an for the sa me periods las t year

and reflect an early sign of maturation in some services for the Canadian operations and the difficult economic

environment in Portugal. The number of net losses for Basic Cable stood at 9,953 customers for the quarter and 9,155

customers for the first six months, compared to net additions of 4,593 and 17,590 customers, respectively, for the same

periods of the prior year. This decrease is due to net customer losses in the European operations reflecting a continuing

- 14 -

unfavourable economic environment in the Iberian Peninsula, recurring intense customer promotions and advertising

initiatives from competitors for their new respective third leg of the triple-play service during the latter part of the second

quarter in the Portuguese market, net of increases in Canadian operations stemming from continuous improvements to

the service offering, targeted marketing activities and an upswing in subscription activity in border markets due to the

impending over-the-air digital conversion in the United States. The number of net additions to HSI service stood at 3,030

customers for the quarter and 17,330 customers for the first six months, compared to 17,154 and 46,254 customers,

respectively, for the same periods last year. The growth in HSI customer net additions continues to stem from the

enhancement of the product offering, the impact of the bundled offer (Cogeco Complete Connection) of Television, HSI

and Telephony services, and promotional activities in Canadian operations offset by net customer losses in European

operations due to the factors mentioned above. The Digital Television service net additions stood at 25,102 and 48,719

customers, for the quarter and first six months ended February 28, 2009, respectively, compared to 17,879 and 34,132

customers for the same periods in the prior year due to targeted marketing initiatives in the second half of fiscal 2008 and

in 2009 to improve market penetration and to the continuing strong interest for the HD Television service in Canadian

operations, as well as the launch of the Digital Television service in Portugal in the third quarter of fiscal 2008. In the

quarter and first six months, Telephony customers grew by 7,447 and 21,446 customers to reach 486,125 at

February 28, 2009, compared to a growth of 16,570 and 41,244 customers for the same periods of the prior year. The

lower growth is mostly attributable to the increased penetration in areas where the service is already offered and to fewer

new areas where the service was launched in Canadian operations offset by net customer losses in European operations

due to the unfavourable economic environment. Telephony service coverage in Canada, as a percentage of homes

passed, has now reached 89% compared to 80% at February 29, 2008. The service is offered in all of the Company’s

territories in Portugal.

In addition to the launch of new channels and retention strategies during the quarter in the European operations, new

marketing and other operating initiatives are in the process of being implemented, the result of which should help in

reducing cust omer attrition in the upcoming quarters.

OPERATING RESULTS

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008

(1)

Change 2009 2008

(1)

Change

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

(unaudited) (unaudited) (unaudited) (unaudited)

Revenue 304,920 265,102 15.0 604,358 516,935 16.9

Operating costs 176,421 152,765 15.5 350,155 302,261 15.8

Management fees – COGECO Inc. 3,038 3,679 (17.4)

9,019 8,714 3.5

Operating income from contin ui ng op erati ons before

amortization 125,461 108,658 15.5 245,184 205,960 19.0

Operating margin 41.1% 41.0% 40.6% 39.8%

(1)

Certain comparative figures hav e be en reclas sifi ed to conform to the c ur rent year ’s pres ent ation. Fi nanc ial inf ormatio n for the previous year has been r es tated to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

Revenue

Fiscal 2009 second-quarter consolidated revenue improved by $39.8 million, or 15%, to reach $304.9 million, and first six

month consolidated revenue by $87.4 million, or 16.9%, to reach $604.4 million, when compared to the prior year. Driven

by an increased number of RGU combined with rate increases and the acquisition of MaXess Networx®, FibreWired

Burlington Hydro Communications and Cogeco Data Services (the “recent acquisitions”) in the second half of fiscal 2008,

second-quarter Canadian operations revenue went up by $38.5 million, or 18.8%, and for the first six months by

$79.6 million, or 19.8%.

Fiscal 2009 second-quarter European operations revenue increased by $1.3 million, or 2.2%, to reach $61.2 million, and

first six month revenue by $7.8 million, or 6.7%, to reach $123.3 million, compared to the same period last year. The

increase is due to the strength of the Euro against the Canadian dollar, despite a RGU loss in the first six months of the

year. Revenue from the European operations in the local currency for the second quarter amounted to €37.6 million, a

decrease of €3 million, or 7.4%, and to €77.8 million, a decrease of €2.3 million, or 2.8% for the first six months.

- 15 -

Operating costs

For the second quarter and first six months of fiscal 2009, operating costs, excluding management fees payable to

COGECO Inc., increased by $23.7 million and $47.9 million to reach $176.4 million and $350.2 million, respectively,

increases of 15.5% and 15.8% compared to the prior year. Operating costs increased due to the servicing of additional

RGU and the impact of the recent acquisitions in Canada, and in Europe due to the appreciation of the Euro over the

Canadian dollar and an increase in the level of uncollectible customer accounts. Operating costs of the European

operations in local current amounted to €26.7 million for the second quarter and €53.3 million for the first six months,

increases of €0.9 million, or 3.5%, and €0.5 million, or 0.9% over the comparable perio ds of the prior year.

Operating income before amortization

Fiscal 2009 second quarter and first six-month operating income before amortization increased by $16.8 million, or 15.5%,

to reach $125.5 million, and by $39.2 million, or 19%, to reach $245.2 million, respectively, mainly as a result of various

rate increases, recent acquisitions, and RGU growth generating additional revenues in the Canadian operations which

outpaced operating cost increases. Operating income before amortization for the Canadian operations rose by

$20.9 million, or 24.1%, to reach $107.6 million in the second quarter, and by $39.9 million, or 23.9%, to reach

$206.5 million in the first six months of fiscal 2009. Operating income before amortization for the European operations

decreased to $17.8 million from $21.9 million, and to $38.7 million from $39.3 million in the first six months of fiscal 2009,

representing decreases of 18.7% and 1.6%, respectively, and in the local currency, amounted to €10.9 million for the

second quarter, a decrease of €3.9 million or 26.4%, and to €24.4 million, a decrease of €2.7 million, or 10.1% for the first

half of the year.

Cogeco Cable’s second quarter operating margin remained essentially the same at 41.1% compared to 41% for the same

period of the prior year. The operating margin in Canada improved to 44.2% from 42.3% which offset the decrease in the

European operating margin to 29.1% from 36.6%. For the first six months of fiscal 2009, the consolidated operating

margin improved to 40.6% from 39.8% with the Canadian operating margin improving to 42.9% from 41.5% and the

European operating margi n decrea sin g to 31.4% from 34% the year before.

FISCAL 2009 FINANCIAL GUIDELINES

As a result of the continuing unfavourable economic climate and the renewal of marketing initiatives from competitors in

the Portuguese market of the cable sector, the Company’s subsidiary, Cogeco Cable, recorded a non-cash impairment

loss amounting to $399.6 million on its net investment in its Portuguese subsidiary, Cabovisão, in the second quarter of

fiscal 2009. Net of related income taxes and non-controlling interest, the impairment loss had an unfavourable impact of

$124 million on net income in the second quarter of 2009. For further details, please see the “Impairment of goodwill and

intangible assets” section. Furthermore, the European operations financial results in the cable sector have been revised

downwards to take into consideration the current situation in the Portuguese market described above and the exchange

rate used for the fiscal 2009 revised projections for the European operations has been increased to $1.60 per Euro

compared to $1.50 per Euro for the original guideline s .

Finally, the Canadian operations of the cable sector and the radio activities continue to show solid results and

management expects to meet their initial projections for the 2009 fiscal year.

Consolidated

Revised projections

April 8, 2009 Projections

Fiscal 2009

(in millions of dollars) $ $

Financial guidelines

Revenue 1,238 1,243

Operating income before amort iz ati o n 505 513

Net income (l oss) (87)

Free cash flow

85 95

- 16 -

Cable sector

Revised projections

April 8, 2009 Projections

Fiscal 2009

(in millions of dollars, except net customer additions and operating margin) $ $

Financial guidelines

Revenue 1,205 1,210

Operating income before amort iz ati o n 500 508

Operating margin 42% 42%

Financial expens e 70 70

Amortization 270 275

Current income taxes 50 50

Capital expenditures and deferred charges 300 300

Free cash flow 80 90

Net customer additions guidelines

RGU 100,000

100,000

Other sector

Revised projections

April 8, 2009 Projections

Fiscal 2009

(in millions of dollars) $ $

Financial guidelines

Revenue 33 33

Operating income before amort iz ati o n 5 5

UNCERTAINTIES AND M AIN RISK FACTORS

There has been no significant change in the uncertainties and main risk factors faced by the Company since

August 31, 2008, except as described below. A detailed description of the uncertainties and main risk factors faced by

COGECO can be found in the 2008 annual MD&A.

Cogeco Cable’s footprint includes certain regions in Ontario (Burlington and Windsor) and in Portugal (Palmela) where the

automobile industry is a significant driver of economic activity. The sharp downturn experienced by the automobile

industry in recent months may have an adverse impact on the level of economic activity and consumer expenditures on

goods and services within those communities. In previous recessionary periods, demand for cable telecommunications

services has generally proved to be resilient. However, there is no assurance that demand will remain resilient in a

prolonged global recession.

Despite Cogeco Cable’s strong balance sheet and the proactive management of debt maturities, the present situation in

financial markets and the credit crisis may result in reduced availability of capital in both the debt and equity markets in

the coming years. As Cogeco Cable’s current credit facilities and other sources of financing reach their respective

maturities, the terms of bank and other debt facilities may be less favourable upon renewal.

Market conditions may also have an impact on the Company’s defined benefit pension plans as there is no assurance that

the actual rate of return on plan assets will approximate the assumed rate of return used in the most recent actuarial

valuation. Market driven changes may impact the assumptions used in future actuarial valuations and could result in the

Company being required to make contributions in the future that differ significantly from the current contributions to the

Company’s defined benefit pension pla ns.

The Company 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 the collection or repayment of these instruments

which could result in a significant impact on the Company’s financial expense. At February 28, 2009, 76% of Cogeco

Cable’s debt is at fixed interest rates.

- 17 -

The current volatility of currency exchange and interest rate in the financial markets is unusually high and could lead to an

increase in the level of risk on hedging instruments to which Cogeco Cable is a party should one or more of the

counterparts to these instruments become financially distressed and unable to meet their obligat ions.

It is anticipated that digital terrestrial television services will be launched in Portugal in the second half of the current year.

This development may result in some attrition of Basic Cable television service customers, and consequently have an

adverse impact on RGU in the cabl e sector.

ACCOUNTING POLICIES AND ESTIMATES

There has been no significant change in COGECO’s accounting policies, estimates and future accounting

pronouncements since August 31, 2008, except as described below. A description of the Company’s policies and

estimates can be found in the 2008 annual MD&A.

Capital disclosures and financial instruments

Effective September 1, 2008, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”) Handbook

Section 1535, Capital Disclosures, Section 3862, Financial Instruments – Disclosures and Section 3863, Financial

Instruments – Presentation.

Capital disclosures

Section 1535 of the CICA Handbook requires that an entity disclose information that enables users of its financial

statements to evaluate the entity’s objectives, policies and processes for managing capital, including disclosures of any

externally imposed capital requirements and the consequences for non-compliance. These new disclosures are included

in note 14 of the Company’s interim consolidated financial statements.

Financial instruments

Section 3862 on financial instrument disclosures requires the disclosure of information about the significance of financial

instruments for the entity's financial position and performance and the nature and extent of risks arising from financial

instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages

those risks.

Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the

classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the classification

of related interest, dividends, gains and losses, and circumstances in which financial assets and financial liabilities are

offset.

The adoption of these standards did not have any impact on the classification and measurements of the Company’s

financial instruments. The new disclosures pursuant to these new Sections are included in note 14 of the Company’s

interim consolidated financial statement s.

Credit risk and fair value of financial assets and financial liabilities

On January 20, 2009, the Emerging Issues Committee (“EIC”) of the Canadian Accounting Standards Board issued EIC

Abstract 173, Credit Risk and Fair Value of Financial Assets and Financial Liabilities, which establishes guidance

requiring an entity to consider its own credit risk as well as the credit risk of the counterparty in determining the fair value

of financial assets and financial liabilities, including derivative instruments. EIC 173 is applicable to all financial assets and

liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009

and is applicable to the Company for its second quarter of fiscal 2009 with retrospective application, without restatement

of prior periods, to the beginning of its current fiscal year. The adoption of this new abstract during the second quarter

decreased derivative financial instruments assets by $3.5 million, decreased future income tax liabilities by $1 million,

decreased non-controlling interest by $1.8 million and decreased accumulated other comprehensive income by

$0.8 million at December 1, 2008 and had no significant impact on the consolidated balance sheet at September 1, 2008.

General standards of financial sta tement presentation

The CICA amended Section 1400 of the CICA Handbook, General Standards of Financial Statement Presentation, to

include a requirement for management to make an assessment of the entity’s ability to continue as a going concern when

preparing financial statements. These changes, including the related disclosure requirements, were adopted by the

Company on September 1, 2008 and had no impact on the interim consolidated financial statements.

- 18 -

FUTURE ACCOUNTING PRO NOUN CEMENTS

Business combinations, consolidated financial statements and non-controlling interests

During January 2009, the CICA issued Handbook Section 1582, Business C ombinatio ns, which replaces Section 1581 of

the same name, and Sections 1601, Consolidated Financial Statements and 1602, Non-Controlling Interests, which

together replace Section 1600, Consolidated Financial Statements. These new Sections harmonize significant aspects of

Canadian accounting standards with the International Financial Reporting Standards (“IFRS”) that will be mandated for

entities with fiscal year beginning on or a fter January 1, 2011.

Section 1582 requires that all business acquisitions be measured at the fair value of the acquired entity at the acquisition

date even if the business combination is achieved in stages, or if less than 100 percent of the equity interest in the

acquiree is owned at the acquisition date, and expands the definition of a business subject to an acquisition. The Section

also establishes new guidance on the measurement of consideration given and the recognition and measurement of

assets acquired and liabilities assumed in a business combination. Furthermore, under this new guidance, acquisition

costs, which were previously included as a component of the consideration given, and any negative goodwill resulting

from the allocation of the purchase price, which was allocated as a reduction of non-current assets acquired under the

previous standard, will be recorded in earnings in the current period. This new Section will be applied prospectively and

will only impact the Company’s consolidated financial statements for future acquisitions concluded in periods subsequent

to the date of adoption.

Sections 1601 and 1602 dealing with consolidated financial statements require an entity to measure non-controlling

interest upon acquisition either at fair value or at the non-controlling interest's proportionate share of the acquiree's

identifiable net assets. The new Sections also require non-controlling interest to be presented as a separate component of

shareholders' equity.

The new standards will apply as of the beginning of the first annual reporting period beginning on or after January 1, 2011,

with simultaneous early adoption permitted. Early adoption may reduce the amount of restatement required upon

conversion to IFRS. The Company is currently assessing the impact of these new Sections on its consolidated financial

statements.

Harmonization of Canadian and International accounting standards

In March 2006, the Accounting Standards Board of the CICA released its new strategic plan, which proposed to abandon

Canadian GAAP and effect a complete convergence to the International Financial Reporting Standards (“IFRS”) for

publicly accountable entities.

In April 2008, the CICA published an exposure draft as guidance which requires the transition to IFRS to replace

Canadian GAAP as currently employed by Canadian publicly accountable enterprises. The changeover will occur no later

than fiscal years beginning on or after January 1, 2011. Accordingly, the Company expects that its first interim

consolidated financial statements presented in accordance with IFRS will be for the three-month period ending

November 30, 2011, and its first annual consolidated financial statements presented in accordance with IFRS will be for

the year ending August 31, 2012.

IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition,

measurement and disclosure requirements. The Company has established a project team including representatives from

various areas of the organization to plan and complete the transition to IFRS. This team reports periodically to the Audit

Committee, who oversees the IFRS implementation project on behalf of the Board of Directors. The Company will be

assisted by external advisors as required.

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

specific areas of operations:

• Scoping and diagnostic phase —This phase involves performing a high-level impact assessment to identify key

areas that are expected to be impacted by the transition to IFRS. The result of these procedures is the ranking of

IFRS impacts in order of priority in order to assess the timing and complexity of transition efforts that will be

required in subse quent phases.

• Impact analysis, evaluation and design phase — In this phase, each area identified from the scoping and

diagnostic phase will be addressed in order of descending priority, with project teams established as deemed

necessary. This phase involves specification of changes required to existing accounting policies, information

systems and business processes, together with an analysis of policy choices permitted under IFRS and the

development of draft IFRS financial statement content.

- 19 -

• Implementation and review phase — This phase includes execution of changes to information systems and

business processes, completing formal authorization processes to approve recommended accounting policy

changes and training programs across the organization, as necessary. It will culminate in the collection of

financial information necessary to compile IFRS-compliant financial statements, embedding IFRS in business

processes, eliminating any unnecessary data collection processes and finally the approval by the Audit

Committee of the IFRS financial statements. Implementation also involves delivery of further training to staff as

revised systems begin to take effect.

The Company completed the scoping and diagnostic phase in February 2009, and is now conducting the impact analysis,

evaluation and design phase. As implications of the conversion are identified, information technology and data system

impacts as well as impacts on business activities will be assessed. The Company’s analysis of IFRS and comparison with

currently applied accounting principles has identified a number of differences that may require information system

changes or which are likely to have a material impact on the financial statements of the Company.

Set out below are the main areas where changes in accounting policies are expected to have a significant impact on the

Company’s consolidated financial statements. The list below should not be regarded as a complete list of changes that

will result from transition to IFRS. It is intended to highlight those areas that the Company believes to be the most

significant; however, analysis of changes is still in process and the selection of accounting policies where choices are

available under IFRS has not been completed. We note that the regulatory bodies that promulgate Canadian GAAP and

IFRS have significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRS and

their impact on the Company’s consolidated financial statements in future years. The future impacts of IFRS will also

depend on the particular circumstances prevailing in those years. The standards listed below are those existing based on

current Canadian GAAP and IFRS. At this stage, the Company is not able to reliably quantify the impacts expected on its

consolidated financial state ments for these differences. They are as follows:

• Presentation of Financial Statements (IAS 1)

• Income Taxes (IAS 12)

• Property, Plant and Equipment (IAS 16)

• Revenue (IAS 18)

• Impairment of Assets (IAS 36)

• Business Combinations (IFRS 3)

Furthermore, IFRS 1, First-Time Adoption of International Financial Reporting Standards, provides entities adopting IFRS

for the first time with a number of optional exemptions and mandatory exceptions to the general requirement for full

retrospective application of IFRS which may differ from the requirements of the sections listed above. The Company is

analyzing the various accounting policy choices available and will implement those determined to be most appropriate in

the Company’s circumstances. The Company has not yet determined the aggregate financial impact of adopting IFRS 1

on its consolidated financial statements.

The conversion project is progressing according to the plan establi she d by management.

NON-GAAP FINANCI AL MEASURES

This section describes non-GAAP financial measures used by COGECO throughout this MD&A. It also provides

reconciliations between these non-GAAP measures and the most comparable GAAP financial measures. These financial

measures do not have standard definitions prescribed by Canadian GAAP and may not be comparable with similar

measures presented by other companies. These measures include “cash flow from operations from continuing

operations”, “free cash flow”, “operating income from continuing operations before amortization”, “operating margin”, “net

income excluding the impairment loss, the income tax adjustment and the loss from discontinued operations”, and

“earnings per share excluding the impairment loss, the income tax adjustment and the loss from discontinued operation s”.

Cash flow from operations from continuing operations and free cash flow

Cash flow from operations from continuing operations is used by COGECO’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

Company to isolate the cash flows from operating activities from the impact of cash management decisions. Cash flow

from operations from continuing operations is subsequently used in calculating the non-GAAP measure “free cash flow”.

Free cash flow is used by COGECO’s management and investors to measure COGECO’s ability to repay debt, distribute

capital to its shareholders and finance its growth.

- 20 -

The most comparable Canadian GAAP financial measure is cash flow from operating activities from continuing

operations. Cash flow from operations from continuing operations is calculated as follows:

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Cash flow from operating activities from continuing operations 120,480 92,942 150,950 139,546

Changes in non-cash operating items (20,129) (7,568) 45,027 27,205

Cash flow from operations from continuing operations 100,351 85,374 195,977 166,751

Free cash flow is calculated as follows:

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Cash flow from operations from continuing operations 100,351 85,374 195,977 166,751

Acquisition of fixed assets (62,161) (58,533) (127,870) (109,346)

Increase in deferred charges (5,779) (6,094) (12,986) (13,611)

Assets acquired under capital leases – as per note 12 b) (322) (1,373) (1,261) (1,446)

Free cash flow 32,089 19,374 53,860 42,348

Operating income from continuing operation s before amortization and operating margin

Operating income from continuing operations before amortization is used by COGECO’s management and investors to

assess the Company’s ability to seize growth opportunities in a cost effective manner, to finance its ongoing operations

and to service its debt. Operating income from continuing operations 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

Company's revenue which is left over, before taxes, to pay for its fixed costs, such as interest on Indebtedness. Operating

margin is calculated by dividing operating income fro m continuing operations before amortization by revenu e.

The most comparable Canadian GAAP financial measure is operating income from continuing operations. Operating

income from continuing operations before amortization and operating margin are calculated as follows:

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008

(1)

2009 2008

(1)

($000, except percentages) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Operating income from continuing operations 59,878 53,177 120,519 100,312

Amortization 66,785 56,346 130,848 109,385

Operating income from continuing operations before amortization 126,663 109,523 251,367 209,697

Revenue 311,825 271,894 620,200 532,149

Operating margin 40.6% 40.3% 40.5% 39.4%

(1)

Certain comparative figures hav e be en reclas sifi ed to conform to the c ur rent year ’s pres ent ation. Fi nanc ial inf ormatio n for the previous year has been r es tated to

reflect the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

- 21 -

Net income excluding the impairment loss, the income tax adjustment and the loss from discontinued operations

and earnings per share excluding the impairment loss, the income tax adjustment and the loss from discontinued

operations

Net income excluding the impairment loss, the income tax adjustment and the loss from discontinued operations and

earnings per share excluding the impairment loss, the income tax adjustment and the loss from discontinued operations

are used by COGECO’s management and investors to evaluate what would have been the net income and earnings per

share excluding these adjustments. This allows the Company to isolate the unusual adjustments in order to evaluate the

net income and earnings per sh are from ongoing activities.

The most comparable Canadian GAAP financial measures are net income and earnings per share. These above-

mentioned non-GAAP financial measures are calculated as follows:

Quarters ended Six months ended

February 28, February 29, February 28, February 29,

2009 2008 2009 2008

($000) $ $ $ $

(unaudited) (unaudited) (unaudited) (unaudited)

Net income (loss) (115,291)

15,890 (104,238)

5,914

Adjustments:

Impairment loss net of related income taxes and non-controlling

interest 123,951 – 123,951 –

Income tax adjustment net of non-controlling interest – (7,909)

– (7,909)

Loss from discontinued operations – 425 – 18,057

Net income excluding the impairment loss, the income tax

adjustment and the loss from discontinued operations 8,660 8,406 19,713 16,062

Weighted average number of multiple voting and subordinate voting

shares outstanding 16,741,230 16,673,921 16,740,692 16,673,286

Effect of dilutive stock options

9,963 74,013 15,175 78,084

Weighted average number of diluted multiple voting and subordinate

voting shares outstanding 16,751,193 16,747,934 16,755,867 16,751,370

Earnings per share excluding the impairment loss, the income

tax adjustment and the loss from discontinued operations

Basic 0.52 0.50 1.18 0.96

Diluted 0.52 0.50 1.18 0.96

ADDITIONAL INFORMATION

This MD&A was prepared on April 8, 2009. Additional information relating to the Company, including its Annual

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

ABOUT COGECO

COGECO is a diversified communications company. Through its Cogeco Cable subsidiary, COGECO provides its

residential customers with Audio, Analogue and Digital Television, as well as HSI and Telephony services using its two-

way broadband cable networks. Cogeco Cable also provides, to its commercial customers, data networking, e-business

applications, video conferencing, hosting services, Ethernet, private line, VoIP, HSI access, dark fibre, data storage, date

security and co-location services and other advanced communication solutions. Through its Cogeco Diffusion subsidiary,

COGECO owns and operates the RYTHME FM radio stations in Montréal, Québec City, Trois-Rivières and Sherbrooke,

as well as the 93

station in Québec City. COGECO’s subordinate voting shares are listed on the Toronto Stock Exchange

(TSX: CGO). The subordinate voting shares of Cogeco Cable are also listed on the Toronto Stock Exchange (TSX: CCA).

– 30 –

- 22 -

Source: COGECO Inc.

Pierre Gagné

Vice President, Finance and Chief Financial Officer

Tel.: 514-764-4700

Information: Media

Marie Carrier

Director, Corporate Communications

Tel.: 514-764-4700

Analyst Conference Call: Thursday, April 9, 2009 at 11:00 A.M. (EDT )

Media representatives may attend as listeners only.

Please use the following dial-in number to have access to the conference call by dialing

five minutes before the start of the conference:

Canada/USA Access Nu mber: 1 800-820-0231

International Access Number: +1 416-640-5926

Confirmation Code: 7471071

By Internet at www.cogeco.ca/investors

A rebroadcast of the conference call will be available until April 17, by dialing:

Canada and USA access number: 1 888-203-1112

International access number: +1 6 47-436-0148

Confirmation code: 7471071

- 23 -

Supplementary Quarterly Financial Information

(unaudited)

Quarters ended February 28/29, November 30, August 31, May 31,

($000, except percentages and per

share data)

2009

2008

(1)

2008

2007

(1)

2008

(1)

2007

(1)

2008

(1)

2007

(1)

Revenue 311,825 271,894 308,375 260,255 292,873 251,300 283,878 249,424

Operating income from contin ui ng

operations before amortization

(2)

126,663 109,523 124,704 100,174 122,019 100,755 117,206 94,533

Operating margin

(2)

40.6% 40.3% 40.4% 38.5% 41.7% 40.1% 41.3% 37.9%

Amortization 66,785 56,346 64,063 53,039 61,775 54,723 58,564 47,725

Operating income from contin ui ng

operations

59,878 53,177 60,641 47,135 60,244 46,032 58,642 46,808

Financial expens e 18,028 17,550 23,778 16,333 19,066 19,084 17,748 20,345

Impairment of goodwill and intan gi bl e

assets 399,648 – – – – – – –

Income taxes 175 (14,426) 9,848 9,277 9,849 (7,480) 10,285 8,055

Loss (gain) on dilution 22 (25) 26 107 19 (27,011) 3 64

Non-controlling interest (242,704) 33,763 15,936 13,762 21,559 24,240 21,068 13,318

Income from continuing operations (115,291) 16,315 11,053 7,656 9,656 37,097 9,538 5,025

Loss from discontinued operations – (425) – (17,632)

– (6,713) – (1,966)

Net income (l oss) (115,291) 15,890 11,053 (9,976)

9,656 30,384 9,538 3,059

Net income excluding the impair me nt

loss, the income tax adjustment and

the loss from discontinu ed

operations

(2)(3)

8,660 8,406 11,053 7,656 9,656 5,309 9,538 5,025

Cash flow from operations from

continuing operations

(2)

100,351 85,374 95,626 81,377 99,969 78,153 96,068 76,862

Cash flow from operating activities from

continuing operations 120,480 92,942 30,470 46,604 146,052 107,155 112,893 51,669

Free cash flow

(2)

32,089 19,374 21,771 22,974 20,981 9,131 37,107 19,052

Earnings (loss) per share

Basic

Income from continuing operations (6.89) 0.98 0.66 0.46 0.58 2.23 0.57 0.30

Loss from discontinued operations – (0.03) – (1.06)

– (0.40) – (0.12)

Net income (l oss) (6.89) 0.95 0.66 (0.60)

0.58 1.83 0.57 0.18

Net income excluding the

impairment loss, the income tax

adjustment and the loss from

discontinued operations

(2)(3)

0.52 0.50 0.66 0.46 0.58 0.32 0.57 0.30

Diluted

Income from continuing operations (6.89) 0.97 0.66 0.46 0.58 2.21 0.57 0.30

Loss from discontinued operations – (0.03) – (1.06)

– (0.40) – (0.12)

Net income (l oss) (6.89) 0.95 0.66 (0.60)

0.58 1.81 0.57 0.18

Net income excluding the

impairment loss, the income tax

adjustment and the loss from

discontinued operations

(2)(3)

0.52 0.50 0.66 0.46

0.58 0.32 0.57 0.30

(1)

Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information for the four quarters of fiscal 2008 and

third and fourth quarters of fiscal 2007 reflects the presentation of foreign exchange gains or losses as financial expense instead of operating costs.

(2)

The indicated terms do not have standardiz ed def inition s prescr ibed by Canadia n Generally Acc epted Accounting Pri nciples (“GAAP ”) and therefo re, may not be

comparable to similar measures presented by other companies. For more details, please consult the “Non-GAAP financial measures” section of the

Management’s discussion and analysis.

(3)

Net income for the quarter ended Au gust 31, 2007 has bee n adjusted to remov e a $27 million gain o n dilution resulting fr om shares iss ued by a subsidiary an d

income tax adjustments of $4.8 million, net of non-controlling interest, related to the recognition of benefits stemming from prior years’ income tax losses and

minimum income tax paid, and a reduction of Canadian federal enacted income tax rates in addition to the adjustments described in the “Non-GAAP financial

measures” section of the Management’s discussion and analysis.

The cable sector’s operating results are not generally subject to material seasonal ﬂuctuations. However, the loss in Basic

Cable service customers is usually greater, and the addition of HSI service customers is generally lower in the third

quarter, mainly because students leave their campus at the end of the school year. Cogeco Cable offers its services in

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

and Rimouski in Canada, and Aveiro, Covilhã, Evora, Guarda and Coimbra in Portugal.

COGECO INC. - 24 -

Customer Statistics

February 28, August 31,

2009 2008

Homes Passe

Ontario

1,039,95

5 1,029,121

Québec 509,701 502,490

Canada 1,549,65

6 1,531,611

Portugal 902,570 895,923

Total 2,452,22

6 2,427,534

Revenue Generating Unit

Ontario 1,458,928 1,387,054

Québec 646,020 604,854

Canada 2,104,948 1,991,908

Portugal 690,266 724,966

Total 2,795,21

4 2,716,874

Basic Cable Service Customer

Ontario 602,552 596,229

Québec 265,330 260,865

Canada 867,882 857,094

Portugal 276,192 296,135

Total 1,144,07

4 1,153,229

Discretionnary Service Customer

Ontario 496,416 493,858

Québec 223,190 215,820

Canada 719,606 709,678

Portugal - -

Total 719,606 709,678

Pay TV Service Customer

Ontario 108,279 97,753

Québec 51,639 47,075

Canada 159,918 144,828

Portugal 70,710 57,715

Total 230,628 202,543

High Speed Internet Service Customer

Ontario 371,572 352,553

Québec 131,922 120,914

Canada 503,494 473,467

Portugal 146,604 159,301

Total 650,098 632,768

Digital Television Service Customers

Ontario 313,886 288,345

Québec 164,773 153,401

Canada 478,659 441,746

Portugal 36,258 24,452

Total 514,917 466,198

Telephony Service Customer

Ontario 170,918 149,927

Québec 83,995 69,674

Canada 254,913 219,601

Portugal 231,212 245,078

Total 486,12

5 464,679

- 25 -

COGECO INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(unaudited)

Three months ended Six months ended

(In thousands of dollars, except per share data) February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Revenue 311,825 271,894 620,200 532,149

Operating costs 185,162 162,371 368,833 322,452

Operating income from continuing operations before

amortization

126,663

109,523

251,367

209,697

Amortization (note 3) 66,785 56,346 130,848 109,385

Operating income from continuing operations 59,878 53,177 120,519 100,312

Financial expense (note 4) 18,028 17,550 41,806 33,883

Impairment of goodwill and intangible assets (note 5) 399,648 ─ 399,648 ─

Income (loss) from continuing operations before income

taxes and the following items

(357,798)

35,627

(320,935)

66,429

Income taxes (note 6) 175 (14,426)

10,023 (5,149)

Loss (gain) on dilution resulting from shares issued by a subsidiary

22 (25)

48 82

Non-controlling interest (242,704)

33,763 (226,768)

47,525

Income (loss) from continuing operations (115,291)

16,315 (104,238)

23,971

Loss from discontinued operations (note 15) ─ (425)

─ (18,057)

Net income (loss) (115,291)

15,890 (104,238)

5,914

Earnings (loss) per share (note 7)

Basic

Income (loss) from continuing operations (6.89)

0.98 (6.23)

1.44

Loss from discontinued operations ─ (0.03)

─ (1.08)

Net income (loss) (6.89)

0.95 (6.23)

0.35

Diluted

Income (loss) from continuing operations (6.89)

0.97 (6.23)

1.43

Loss from discontinued operations ─ (0.03)

─ (1.08)

Net income (loss) (6.89)

0.95 (6.23)

0.35

- 26 -

COGECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

Three months ended Six months ended

(In thousands of dollars) February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Net income (loss) (115,291)

15,890 (104,238)

5,914

Other comprehensive income

Unrealized gains (losses) on derivative financial instruments

designated as cash flow hedges, net of income tax expense

of $1,401,000 and $3,836,000 and non-controlling interest of

$4,907,000 and $20,606,000 (income tax recovery of

$44,000 and $1,187,000 and non-controlling interest of

$1,013,000 and $5,513,000 in 2008)

2,342

(485)

9,842

(2,638)

Reclassification to net income of realized losses (gains) on

derivative financial instruments designated as cash flow

hedges, net of income tax expenses of $902,000 and

$5,225,000 and non-controlling interest of $3,929,000 and

$23,140,000 (income tax recovery of $319,000 and

$1,664,000 and non-controlling interest of $1,367,000 and

$6,159,000 in 2008)

(1,876)

654

(11,055)

2,947

Unrealized gain on translation of a net investment in self-

sustaining foreign subsidiaries, net of non-controlling interest

of $12,339,000 and $16,453,000 ($9,505,000 and

$16,499,000 in 2008)

5,890

4,545

7,856

7,891

Unrealized losses on translation of long-term debts designated

as hedges of a net investment in self-sustaining foreign

subsidiaries, net of non-controlling interest of $6,469,000 and

$8,742,000 ($6,012,000 and $10,325,000 in 2008)

(3,088)

(2,875)

(4,174)

(4,938)

3,268 1,839 2,469 3,262

Comprehensive income (loss) (112,023)

17,729 (101,769)

9,176

- 27 -

COGECO INC.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

(unaudited)

Six months ended

(In thousands of dollars) February 28, 2009 February 29, 2008

$ $

Balance at beginning, as previously reported 295,808 274,946

Changes in accounting policies ─ 424

Balance at beginning, as restated 295,808 275,370

Net income (loss) (104,238) 5,914

Dividends on multiple voting shares (295) (258)

Dividends on subordinate voting shares (2,384) (2,076)

Balance at end 188,891 278,950

- 28 -

COGECO INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands of dollars) February 28, 2009 August 31, 2008

$ $

Assets

Current

Cash and cash equivalents 51,366 37,472

Accounts receivable 65,944 64,910

Income taxes receivable 10,170 3,569

Prepaid expenses 13,115 13,271

Future income tax assets 4,254 8,661

144,849 127,883

Investments 739 739

Fixed assets 1,289,666 1,261,610

Deferred charges 58,200 57,841

Intangible assets (note 8) 1,050,162 1,116,382

Goodwill (note 8) 161,669 487,805

Derivative financial instruments 34,285 ─

Future income tax assets 5,922 7,221

2,745,492 3,059,481

Liabilities and Shareholders' equity

Liabilities

Current

Bank indebtedness 38,420 10,302

Accounts payable and accrued liabilities 233,094 259,038

Income tax liabilities 11,229 20,793

Deferred and prepaid income 32,496 32,859

Derivative financial instruments ─ 79,791

Current portion of long-term debt (note 9) 178,445 336,858

493,684 739,641

Long-term debt (note 9) 1,013,535 737,055

Deferred and prepaid income and other liabilities 12,636 11,859

Pension plan liabilities and accrued employees benefits 11,278 9,645

Future income tax liabilities 242,086 256,307

Non-controlling interest 655,739 883,948

2,428,958 2,638,455

Shareholders' equity

Capital stock (note 10) 120,070 120,049

Treasury shares (note 10) (1,847) (1,522)

Contributed surplus 1,987 1,727

Retained earnings 188,891 295,808

Accumulated other comprehensive income (note 11) 7,433 4,964

316,534 421,026

2,745,492 3,059,481

- 29 -

COGECO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Three months ended Six months ended

(In thousands of dollars) February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Cash flow from operating activities

Income (loss) from continuing operations (115,291) 16,315 (104,238) 23,971

Adjustments for:

Amortization (note 3)

66,785 56,346 130,848 109,385

Amortization of deferred transaction costs

634 751 1,351 1,473

Impairment of goodwill and intangible assets (note 5)

399,648 ─ 399,648 ─

Future income taxes (note 6)

(10,086) (22,918) (7,262) (17,740)

Non-controlling interest

(242,704) 33,763 (226,768) 47,525

Loss (gain) on dilution resulting from shares issued by a subsidiary

22 (25) 48 82

Stock-based compensation

775 682 864 1,070

Loss (gain) on disposal of fixed assets

(19) (105) 204 237

Other

587 565 1,282 748

100,351 85,374 195,977 166,751

Changes in non-cash operating items (note 12 a)) 20,129 7,568 (45,027) (27,205)

Cash flow from operating activities from continuing operations 120,480 92,942 150,950 139,546

Cash flow from operating activities from discontinued operations (note 15) ─ 1,770 ─ (3,973)

120,480 94,712 150,950 135,573

Cash flow from investing activities

Acquisition of fixed assets (note 12 b)) (62,161) (58,533) (127,870) (109,346)

Increase in deferred charges (5,779) (6,094) (12,986) (13,611)

Other 45 (116) 61 (115)

Cash flow from investing activities from continuing operations (67,895) (64,743) (140,795) (123,072)

Cash flow from investing activities from discontinued operations (note 15) ─ (48) ─ (133)

(67,895) (64,791) (140,795) (123,205)

Cash flow from financing activities

Increase in bank indebtedness 4,659 17,570 28,118 17,776

Net repayments under the term facilities (35,243) (35,104) (29,949) (69,135)

Issuance of long-term debt, net of transaction costs ─ ─ 254,771 51

Repayments of long-term debt and settlement of derivative financial

instruments

(880)

(644)

(240,627)

(1,276)

Issue of subordinate voting shares 21 61 21 61

Acquisition of treasury shares (325) ─ (325) (468)

Dividends on multiple voting shares (148) (129) (295) (258)

Dividends on subordinate voting shares (1,192) (1,038) (2,384) (2,076)

Issue of shares by a subsidiary to non-controlling interest 686 236 964 3,292

Dividends paid by a subsidiary to non-controlling interest (3,943) (3,281) (7,883) (6,553)

Cash flow from financing activities from continuing operations (36,365) (22,329) 2,411 (58,586)

Cash flow from financing activities from discontinued operations (note 15) ─ (1,722) ─ 4,106

(36,365) (24,051) 2,411 (54,480)

Effect of exchange rate changes on cash and cash equivalents

denominated in foreign currencies

641

355

1,328

202

Net change in cash and cash equivalents 16,861 6,225 13,894 (41,910)

Cash and cash equivalents at beginning 34,505 18,144 37,472 66,279

Cash and cash equivalents at end 51,366 24,369 51,366 24,369

See supplemental cash flow information in note 12.

- 30 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

1. Basis of Presentation

In the opinion of management, the accompanying unaudited interim consolidated financial statements, prepared in

accordance with Canadian generally accepted accounting principles, present fairly the financial position of

COGECO Inc. (“the Company”) at February 28, 2009 and August 31, 2008 as well as its results of operations and its

cash flows for the three and six month periods e nded February 28, 2009 and February 29, 2008.

While management believes that the disclosures presented are adequate, these unaudited interim consolidated

financial statements and notes should be read in conjunction with COGECO Inc.’s annual consolidated financial

statements for the year ended August 31, 2008. These unaudited interim consolidated financial statements follow the

same accounting policies as the most recent annual consolidated financial statements, except for the adoption of the

new accounting policies described below.

Adoption of new accounting policies

Capital disclosure s and financial instruments

Effective September 1, 2008, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”)

Handbook Section 1535, Capital Disclosures, Section 3862, Financial Instruments – Disclosures and Section 3863,

Financial Instruments – Presentation.

Capital disclosures

Section 1535 of the CICA Handbook requires that an entity disclose information that enables users of its financial

statements to evaluate the entity’s objectives, policies and processes for managing capital, including disclosures of

any externally imposed capital requirements and the consequences for non-compliance. These new disclosures are

included in note 14.

Financial instruments

Section 3862 on financial instrument disclosures requires the disclosure of information about the significance of

financial instruments for the entity's financial position and performance and the nature and extent of risks arising from

financial instruments to which the entity is exposed during the period and at the balance sheet date, and how the

entity manages those risks.

Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals

with the classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the

classification of related interest, dividends, gains and losses, and circumstances in which financial assets and

financial liabilities are offset.

The adoption of these standards did not have any impact on the classification and measurements of the Company’s

financial instruments. The new disclosures pursua nt to these new Sections are included in no te 14.

General standards of financial statement presentation

The CICA amended Section 1400 of the CICA Handbook, General Standards of Financial Statement Presentation, to

include a requirement for management to make an assessment of the entity’s ability to continue as a going concern

when preparing financial statements. These changes, including the related disclosure requirements, were adopted by

the Company on September 1, 200 8 and had no impact on the interim consolidated financial statements.

- 31 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

1. Basis of Presentation (continued)

Credit risk and fair value of financial assets and financial liabilities

On January 20, 2009, the Emerging Issues Committee (“EIC”) of the Canadian Accounting Standards Board issued

EIC Abstract 173, Credit Risk and Fair Value of Financial Assets and Financial Liabilities, which establishes guidance

requiring an entity to consider its own credit risk as well as the credit risk of the counterparty in determining the fair

value of financial assets and financial liabilities, including derivative instruments. EIC 173 is applicable to all financial

assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after

January 20, 2009 and is applicable to the Company for its second quarter of fiscal 2009 with retrospective application,

without restatement of prior periods, to the beginning of its current fiscal year. The adoption of this new abstract

during the second quarter decreased derivative financial instruments assets by $3.5 million, decreased future income

tax liabilities by $1 million, decreased non-controlling interest by $1.8 million and decreased accumulated other

comprehensive income by $0.8 million at December 1, 2008 and had no significant impact on the consolidated

balance sheet at September 1, 2008.

Future accounting pronouncement

Business combinations, consolidated financial statements a nd non-controlling interests

During January 2009, the CICA issued Handbook Section 1582, Business Combinations, which replaces Section

1581 of the same name, and Sections 1601, Consolidated Financial Statements and 1602, Non-Controlling Interests,

which together replace Section 1600, Consolidated Financial Statements. These new Sections harmonize significant

aspects of Canadian accounting standards with the International Financial Reporting Standards (“IFRS”) that will be

mandated for entities for fiscal year beginning on or after January 1, 2011.

Section 1582,requires that all business acquisition be measured at the fair value of the acquired entity at the

acquisition date even if the business combination is achieved in stages, or if less than 100 percent of the entity

interest in the acquiree is owned at the acquisition date, and expands the definition of a business subject to an

acquisition. The Section also establishes new guidance on the measurement of consideration given and the

recognition and measurement of assets acquired and liabilities assumed in a business combination. Furthermore,

under this new guidance, acquisition costs, which were previously included as a component of the consideration

given, and any negative goodwill resulting from the allocation of the purchase price, which was allocated as a

reduction of non-current assets acquired under the previous standard, will be recorded in earnings in the current

period. This new Section will be applied prospectively and will only impact the Company’s consolidated financial

statements for future acquisition s concluded in period s subsequent to the date of adoption.

Sections 1601 and 1602 dealing with consolidated financial statements require an entity to measure non-controlling

interest upon acquisition either at fair value or at the non-controlling interest's proportionate share of the acquiree's

identifiable net assets. The new Sections also require non-controlling interest to be presented as a separate

component of shareholde rs' equity.

The new standards will apply as of the beginning of the first annual reporting period beginning on or after January 1,

2011, with simultaneous early adoption permitted. Early adoption may reduce the amount of restatement required

upon conversion to IFRS. The Company is currently assessing the impact of these new Sections on its consolidated

financial statements.

- 32 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

1. Basis of Presentation (continued)

Harmonization of Canadian and International accounting standards

In March 2006, the Accounting Standards Board of the CICA released its new strategic plan, which proposed to

abandon Canadian GAAP and effect a complete conv ergence to the IFRS for publicly accountable entities.

In April 2008, the CICA published an exposure draft as guidance which requires the transition to IFRS to replace

Canadian GAAP as currently employed by Canadian publicly accountable enterprises. The changeover will occur no

later than fiscal years beginning on or after January 1, 2011. Accordingly, the Company expects that its first interim

consolidated financial statements presented in accordance with IFRS will be for the three-month period ending

November 30, 2011, and its first annual consolidated financial statements presented in accordance with IFRS will be

for the year ending August 31, 2012.

IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition,

measurement and disclosure requirements. The Company has established a project team including representatives

from various areas of the organization to plan and complete the transition to IFRS. This team reports periodically to

the Audit Committee, who oversees the IFRS implementation project on behalf of the Board of Directors. The

Company will be assisted by external advisors as required.

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

specific areas of operations:

• Scoping and diagnostic phase — This phase involves performing a high-level impact assessment to identify key

areas that are expected to be impacted by the transition to IFRS. The result of these procedures is the ranking of

IFRS impacts in order of priority to assess the timing and complexity of transition efforts that will be required in

subsequent phases.

• Impact analysis, evaluation and design phase — In this phase, each area identified from the scoping and

diagnostic phase will be addressed in order of descending priority, with project teams established as deemed

necessary. This phase involves specification of changes required to existing accounting policies, information

systems and business processes, together with an analysis of policy choices permitted under IFRS and the

development of draft IFRS financial statement co ntent.

• Implementation and review phase — This phase includes execution of changes to information systems and

business processes, completing formal authorization processes to approve recommended accounting policy

changes and training programs across the organization, as necessary. It will culminate in the collection of

financial information necessary to compile IFRS-compliant financial statements, embedding IFRS in business

processes, eliminating any unnecessary data collection processes and finally the approval by the Audit

Committee of the IFRS consolidated financial statements. Implementation also involves additional staff training

with the deployment of revised systems.

The Company completed the scoping and diagnostic phase in February 2009, and is now conducting the impact

analysis, evaluation and design phase. As implications of the conversion are identified, the impact on information

technology, data system and business activities will be assessed. The Company’s analysis of the IFRS and the

comparison with currently applied accounting principles has identified a number of differences that may require

information system changes or which are likely to have a material impact on the consolidated financial statements of

the Company.

- 33 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

1. Basis of Presentation (continued)

Set out below are the main areas where changes in accounting policies are expected to have a significant impact on

the Company’s consolidated financial statements. The list below should not be regarded as a complete list of changes

that will result from transition to the IFRS. It is intended to highlight areas that the Company believes to be the most

significant; however, analysis of changes is still in process and the selection of accounting policies where choices are

available under IFRS has not been completed. We note that the regulatory bodies that promulgate the Canadian

GAAP and the IFRS have significant ongoing projects that could affect the ultimate differences between Canadian

GAAP and IFRS and their impact on the Company’s consolidated financial statements in future years. The future

impacts of the IFRS will also depend on the particular circumstances prevailing in those years. The standards listed

below are those existing based on current Canadian GAAP and IFRS. At this stage, the Company is not able to

reliably quantify the expected impacts of these differences on its consolidated financial statements. They are as

follows:

• Presentation of Financial Statements (IAS 1)

• Income Taxe s (IAS 12)

• Property, Plant and Equipment (IAS 16)

• Revenue (IAS 18)

• Impairment of Assets (IAS 36)

• Business Combinations (IFRS 3)

Furthermore, IFRS 1, First-Time Adoption of International Financial Reporting Standards, provides entities adopting

IFRS for the first time with a number of optional exemptions and mandatory exceptions to the general requirement for

full retrospective application of IFRS which may differ from the requirements of the sections listed above. The

Company is analyzing the various accounting policy choices available and will implement those determined to be

most appropriate in the Company’s circumstances. The Company has not yet determined the aggregate financial

impact of adopting IFRS 1 on its consolidated finan cial statements.

The conversion project is progressing according to the established plan.

- 34 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

2. Segmented Information

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

Cable Other and eliminations Consolidated

Three months ended

February 28,

2009

February 29,

2008

February 28,

2009

February 29,

2008

February 28,

2009

February 29,

2008

$ $

Revenue 304,920

265,102

6,905

6,792 311,825

271,894

Operating costs 179,459

156,444

5,703

5,927 185,162

162,371

Operating income from continuing operations

before amortization

125,461

108,658

1,202

865

126,663

109,523

Amortization 66,644

55,989

141

357 66,785

56,346

Operating income from continuing operations 58,817

52,669

1,061

508 59,878

53,177

Financial expense 17,988

17,136

414 18,028

17,550

Impairment of goodwill and intangible assets 399,648

─

─ 399,648

─

Income taxes (250)

(14,378)

425

(48)

175

(14,426)

Loss (gain) on dilution resulting from shares

issued by a subsidiary

(25)

─

(25)

Non-controlling interest (242,704)

33,763

─

─ (242,704)

33,763

Income (loss) from continuing operations (115,887)

16,173

596

142 (115,291)

16,315

Loss from discontinued operations ─

─

(425)

─

(425)

Total assets

(1)

2,703,164

3,019,155

42,328

40,326 2,745,492

3,059,481

Fixed assets

(1)

1,286,150

1,257,965

3,516

3,645 1,289,666

1,261,610

Intangible assets

(1)

1,024,822

1,091,042

25,340

25,340 1,050,162

1,116,382

Goodwill

(1)

161,669

487,805

─

─ 161,669

487,805

Acquisition of fixed assets

(2)

62,342

59,874

141

32 62,483

59,906

(1)

At February 28, 2009 and August 31, 2008.

(2)

Includes capital leases that are excluded from the consolidated statements of cash flows.

- 35 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

2. Segmented Information (continued)

Cable Other and eliminations Consolidated

Six months ended

February 28,

2009

February 29,

2008

February 28,

2009

February 29,

2008

February 28,

2009

February 29,

2008

$ $

Revenue 604,358

516,935

15,842

15,214 620,200

532,149

Operating costs 359,174

310,975

9,659

11,477 368,833

322,452

Operating income from continuing operations

before amortization

245,184

205,960

6,183

3,737

251,367

209,697

Amortization 130,566

108,676

282

709 130,848

109,385

Operating income from continuing operations 114,618

97,284

5,901

3,028 120,519

100,312

Financial expense 41,382

33,013

424

870 41,806

33,883

Impairment of goodwill and intangible assets 399,648

─

─ 399,648

─

Income taxes 8,606

(6,003)

1,417

854 10,023

(5,149)

Loss on dilution resulting from shares issued

by a subsidiary

─

Non-controlling interest (226,768)

47,525

─

─ (226,768)

47,525

Income (loss) from continuing operations (108,298)

22,667

4,060

1,304 (104,238)

23,971

Loss from discontinued operations ─

─

(18,057)

─

(18,057)

Total assets

(1)

2,703,164

3,019,155

42,328

40,326 2,745,492

3,059,481

Fixed assets

(1)

1,286,150

1,257,965

3,516

3,645 1,289,666

1,261,610

Intangible assets

(1)

1,024,822

1,091,042

25,340

25,340 1,050,162

1,116,382

Goodwill

(1)

161,669

487,805

─

─ 161,669

487,805

Acquisition of fixed assets

(2)

128,948

110,601

183

191 129,131

110,792

(1)

At February 28, 2009 and August 31, 2008.

(2)

Includes capital leases that are excluded from the consolidated statements of cash flows.

- 36 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

2. Segmented Information (continued)

The following tables set out certain geog raphic market information base d on client location:

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Revenue

Canada 250,585 211,960 496,896 416,623

Europe 61,240 59,934 123,304 115,526

311,825 271,894 620,200 532,149

Three months ended February 28, 2009 August 31, 2008

$ $ $ $

Fixed assets

Canada 979,510 944,328

Europe 310,156 317,282

1,289,666 1,261,610

Intangible assets

Canada 1,050,162 1,052,608

Europe ─ 63,774

1,050,162 1,116,382

Goodwill

Canada 116,890 116,890

Europe 44,779 370,915

161,669 487,805

3. Amortization

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Fixed assets 56,650 47,972 111,056 92,994

Deferred charges 6,071 5,826 11,859 11,400

Intangible assets 4,064 2,548 7,933 4,991

66,785 56,346 130,848 109,385

- 37 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

4. Financial expense

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Interest on long-term debt 17,029 16,989 37,299 33,832

Foreign exchange losses (gains) 619 177 4,403 (858)

Amortization of deferred transaction costs 407 407 814 814

Other (27)

(23)

(710) 95

18,028 17,550 41,806 33,883

5. Impairment of goodwill and intangible assets

Three months ended

Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Impairment of goodwill 339,206 ─ 339,206 ─

Impairment of intangible assets 60,442 ─ 60,442 ─

399,648 ─ 399,648 ─

In the second quarter of fiscal 2009, the competitive position of Cabovisão in the Iberian Peninsula further

deteriorated due to the continuing unfavourable economic climate and recurring intense customer promotions and

advertising initiatives from competitors in the Portuguese market at the end of the second quarter. In accordance with

current accounting standards, management considers that the continued RGU and local currency revenue decline,

are more significant and persistent than expected, resulting in a decrease in the value of the Company’s subsidiary’s

investment in the Portuguese subsidiary. As a result, the Company’s subsidiary tested goodwill and all long-lived

assets for impairment at February 28, 2009.

Goodwill has to be tested for impairment using a two step approach. The first step consists of determining whether the

fair value of the reporting unit exceeds the net carrying amount of that reporting unit, including goodwill. In the event

that the net carrying amount exceeds the fair value, a second step is performed in order to determine the amount of

the impairment loss. The Company’s subsidiary has completed its impairment tests on goodwill and has concluded

that goodwill was impaired at February 28, 2009. As a result, an impairment loss of $339.2 million was recorded in the

second quarter. Fair value of the reporting unit was determined using the discounted cash flow method. Future cash

flows are based on internal forecasts and consequently, considerable management judgement is necessary to

estimate future cash flows. Significant changes in a ssumption s could result in further impairments of goodwill.

Intangible assets with definite lives, such as customer relationships, must be tested for impairment by comparing the

carrying amount of the asset or group of assets to the expected future undiscounted cash flow to be generated by the

asset or group of assets. Accordingly, the Company’s subsidiary has completed its impairment test on customer

relationships at February 28, 2009, and has determined that the carrying value of customer relationships exceeds its

fair value. As a result, an impairment loss of $60.4 million was recorded in the second quarter.

- 38 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

6. Income Taxes

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Current 10,261 8,492 17,285 12,591

Future (10,086)

(22,918)

(7,262) (17,740)

175 (14,426)

10,023 (5,149)

The following table provides a reconciliation between Canadian statutory federal and provincial income taxes and the

consolidated income tax expen se:

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Income (loss) before income taxes (357,798)

35,627 (320,935) 66,429

Combined income tax rate 32.49 % 32.82 % 32.48 % 33.38 %

Income taxes at combined income tax rate (116,249)

11,694 (104,283) 22,175

Adjustments for loss or income subject to lower or

higher tax rates

(686)

(880)

(350)

Decrease in future income taxes as a result of

decreases in substantively enacted tax rates

─

(24,146)

─

(24,146)

Decrease in income tax recovery arising from the

non-deductible impairment of goodwill

89,890

─

89,890

─

Decrease in income tax recovery arising from non-

deductible expenses

157

180

274

304

Effect of foreign income tax rate differences 25,632 (2,213)

24,028 (3,377)

Other 1,431 22 994 245

Income taxes at effective income tax rate 175 (14,426)

10,023 (5,149)

- 39 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

7. Earnings (Loss) per Share

The following table provides a reconciliation between basic and dilu ted earnings (loss) per share:

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Income (loss) from continuing operations (115,291) 16,315 (104,238) 23,971

Loss from discontinued operations ─ (425) ─ (18,057)

Net income (loss) (115,291) 15,890 (104,238) 5,914

Weighted average number of multiple voting and

subordinate voting shares outstanding

16,741,230

16,673,921

16,740,836

16,673,286

Effect of dilutive stock options

(1)

─ 74,013 ─ 78,084

Weighted average number of diluted multiple voting

and subordinate voting shares outstanding

16,741,230

16,747,934

16,740,836

16,751,370

Earnings (loss) per share

Basic

Income (loss) from continuing operations (6.89) 0.98 (6.23) 1.44

Loss from discontinued operations ─ (0.03) ─ (1.08)

Net income (loss) (6.89) 0.95 (6.23) 0.35

Diluted

Income (loss) from continuing operations (6.89) 0.97 (6.23) 1.43

Loss from discontinued operations ─ (0.03) ─ (1.08)

Net income (loss) (6.89) 0.95 (6.23) 0.35

(1)

The weighted average dilutive number of subordinate voting shares, which were anti-dilutive for the three and six month periods ended February 28, 2009,

amounted to 9,963 and 15,175. For the three and six month periods ended February 28, 2009, 32,782 stock options (33,182 and 16,591 in 2008) were

excluded from the calculation of diluted earnings per share as the exercise price of the options was greater than the average share price of the subordinate

voting shares.

- 40 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

8. Goodwill and Intangible Assets

February 28, 2009 August 31, 2008

$ $

Customer relationships 35,270 101,490

Broadcasting licenses

25,120 25,120

Customer base

989,772 989,772

1,050,162 1,116,382

Goodwill

161,669 487,805

1,211,831 1,604,187

a) Intangible assets

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

Customer

relationships

Broadcasting

licenses

Customer

Base

Total

$ $ $ $

Balance at August 31, 2008 101,490 25,120 989,772 1,116,382

Amortization (7,933)

─ ─ (7,933)

Foreign currency translation adjustment 2,155 ─ ─ 2,155

Impairment (note 5) (60,442)

─ ─ (60,442)

Balance at February 28, 2009 35,270 25,120 989,772 1,050,162

b) Goodwill

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

Balance at August 31, 2008 487,805

Foreign currency translation adjustment 13,070

Impairment (note 5) (339,206)

Balance at February 28, 2009 161,669

- 41 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

9. Long-Term Debt

Maturity Interest rate February 28, 2009 August 31, 2008

% $ $

Parent company

Term Facility 2011

(1)

3.85

(2)

11,808 18,748

Obligations under capital leases 2013 6.61 – 9.29 108 77

Subsidiaries

Term Facility

Term loan – €94,096,350 2011 2.31

(2)(5)

151,173

145,832

Term loan – €17,358,700 2011 2.31

(2)(5)

27,862

26,881

Revolving loan – €117,500,000 (€126,000,000 at August 31, 2008) 2011 2.44

(2)

189,516

196,308

Revolving loan 2011 1.86

(2)

84,839

94,375

Senior Secured Debentures Series 1 2009 6.75 149,931

149,814

Senior Secured Notes

Series A – US$150 million 2008 6.83

(3)

─

159,233

Series B 2011 7.73 174,434

174,338

Senior Secured Notes

(4)

Series A – US$190 million 2015 7.00 240,180

─

Series B 2018 7.60 54,560

─

Senior Unsecured Debenture 2018 5.94 99,777

99,768

Obligations under capital leases 2013 6.47 – 9.93 7,754 8,492

Other ─ ─ 38 47

1,191,980 1,073,913

Less current portion 178,445 336,858

1,013,535 737,055

(1)

In December 2008, the Term Facility has been extended for an additional year.

(2)

Average interest rate on debt at February 28, 2009, including stamping fees.

(3)

Cross-currency swap agreements have resulted in an effective interest rate of 7.254% on the Canadian dollar equivalent of the US denominated debt of the

Company’s subsidiary, Cogeco Cable Inc.

(4)

On October 1, 2008, the Company’s subsidiary, Cogeco Cable Inc., issued US$190 million Senior Secured Notes Series A maturing October 1, 2015, and

$55 million Senior Secured Notes Series B maturing October 1, 2018, net of transaction costs of $2.1 million. The Senior Secured Notes Series B bear

interest at the coupon rate of 7.60% per annum, payable semi-annually. The Company’s subsidiary has entered into cross-currency swap agreements to fix

the liability for interest and principal payments on the Senior Secured Notes Series A in the amount of US$190 million, which bear interest at the coupon rate

of 7.00% per annum, payable semi-annually. Taking into account these agreements, the effective interest rate on the Senior Secured Notes Series A is 7.24%

and the exchange rate applicable to the principal portion of the US dollar-denominated debt has been fixed at $1.0625.

(5)

On January 22, 2009, the Company’s subsidiary, Cogeco Cable Inc., entered into a swap agreement with a financial institution to fix the floating benchmark

interest rate with respect to the Euro-denominated Term Loan facilities for a notional amount of €111.5 million. The interest swap rate to hedge the Term

Loans has been fixed at 2.08% until their maturity of July 28, 2011. The notional value of the swap will decrease in line with the amortization schedule of the

Term Loans. In addition to the interest swap rate of 2.08%, the Company’s subsidiary will continue to pay the applicable margin on these Term Loans in

accordance with the Term Facility.

- 42 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

10. Capital Stock

Authorized, an unlimited number

Preferred shares of first and second rank, issuable in series and non-voting, except when specified in the Articles of

Incorporation of the Company or in the Law.

Multiple voting shares, 20 votes per share.

Subordinate voting share, 1 vote per share.

February 28, 2009 August 31, 2008

$ $

Issued

1,842,860 multiple voting shares 12 12

14,898,762 subordinate voting shares (14,897,586 at August 31, 2008) 120,058 120,037

120,070 120,049

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

Number of shares Amount

Balance at August 31, 2008 14,897,586 120,037

Shares issued for cash under the Employee Stock Purchase Plan 1,176 21

Balance at February 28, 2009 14,898,762 120,058

Stock-based plans

The Company offers, for the benefit of its employees and those of its subsidiaries, an Employee Stock Purchase Plan

and a Stock Option Plan for certain executives, which are described in the Company’s annual consolidated financial

statements. During the first six months of 2009 and 2008, no stock options were granted to employees by COGECO

Inc. However, the Company’s subsidiary, Cogeco Cable Inc., granted 133,381 stock options (99,084 in 2008) with an

exercise price of $34.46 ($45.59 to $49.82 in 2008), of which 29,711 stock options (22,683 in 2008) were granted to

COGECO Inc.’s employees. The Company records compensation expense for options granted on or after

September 1, 2003. As a result, a compensation expense of $174,000 and $275,000 ($587,000 and $907,000 in

2008) was recorded for the three a nd six month periods ended Feb ruary 28, 2009.

- 43 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

10. Capital Stock (continued)

The fair value of stock options granted by the Company’s subsidiary, Cogeco Cable Inc., for the six months period

ended February 28, 2009 was $8.96 ($12.86 in 2008) per option. The fair value was estimated at the grant date for

purposes of determining the stock-based compensation expense using the binomial option pricing model based on

the following assumptions:

2009 2008

% %

Expected dividend yield

1.40 0.90

Expected volatility

29 27

Risk-free interest rate

4.22 4.25

Expected life in years

4.0 4.0

At February 28, 2009, the Company had outstanding stock options providing for the subscription of 123,358

subordinate voting shares. These stock options can be exercised at various prices ranging from $20.95 to $37.50 and

at various dates up to October 1 9, 2011.

The Company also offers a senior executives and designated employee incentive unit plan (the “Incentive Share Unit

Plan”) which is described in the Company’s annual consolidated financial statements. During the first six months, the

Company granted 17,702 Incentive Share Units (12,852 in 2008). These shares were purchased for a cash

consideration of $325,000 ($468,000 in 2008) and are held in trust for participants until they are completely vested.

The trust, considered as a variable interest entity, is consolidated in the Company’s financial statements with the

value of the acquired shares presented as treasury shares in reduction of capital stock. A compensation expense of

$130,000 and $238,000 ($95,000 and $163,000 in 2008) was recorded for the three and six month periods ended

February 28, 2009 related to this plan.

The Company and its subsidiary, Cogeco Cable Inc., offer deferred share unit plans (“DSU Plans”) which are

described in the Company’s annual consolidated financial statements. During the first six months, 11,113 and 6,282

deferred share units were awarded to the participants in connection with the DSU Plans by the Company and its

subsidiary, respectively. Expenses of $471,000 and $351,000 were recorded for the three and six month periods

ended February 28, 2009 for the liabilities related to these plans.

11. Accumulated Other Comprehensive Income

Translation of a net

investment in self-

sustaining foreign

subsidiaries

Cash flow hedges

Total

$ $ $

Balance at August 31, 2008 5,064 (100)

4,964

Other comprehensive income (loss) 3,682 (1,213)

2,469

Balance at February 28, 2009 8,746 (1,313)

7,433

- 44 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

12. Statements of Cash Flows

a) Changes in non-cash operating items

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Accounts receivable 2,695 (2,380)

(494) (4,279)

Income taxes receivable (3,637)

380 (6,522) 1,207

Prepaid expenses (1,163)

(640)

174 1,196

Accounts payable and accrued liabilities 15,646 6,428 (28,998) (32,366)

Income tax liabilities 7,416 5,908 (9,585) 8,190

Deferred and prepaid income and other liabilities (828)

(2,128)

398 (1,153)

20,129 7,568 (45,027) (27,205)

b) Other information

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Fixed asset acquisitions through capital leases 322 1,373 1,261 1,446

Interest paid 12,219 11,550 33,970 32,744

Income taxes paid 6,479 2,662 33,395 3,140

13. Employees Future Benefits

The Company and its Canadian subsidiaries offer their employees contributory defined benefit pension plans, a

defined contribution pension plan or collective registered retirement savings plans, which are described in the

Company’s annual con solidated financial statements. The total expenses related to these plans are as follows:

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Contributory defined benefit pension plans 747 658 1,494 1,316

Defined contribution pension plan and collective

registered retirement savings plans

903

714

1,826

1,422

1,650 1,372 3,320 2,738

- 45 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

14. Financial and Capital Management

a) Financial management

Management’s objectives are to protect COGECO 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 Company if a customer or counterpart to a financial asset fails to

meet its contractual obligations. The Company is exposed to credit risk arising from the derivative financial

instruments, cash and cash equivalents and trade accounts receivable, the maximum exposure of which is

represented by the carrying amounts reported on the balance sheet.

Credit risk from the derivative financial instruments arises from the possibility that counterparts to the cross-currency

swap and interest rate swap agreements may default on their obligations in instances where these agreements have

positive fair values for the Company. The Company reduces this risk by completing transactions with financial

institutions that carry a credit rating equal to or superior to its own credit rating. The Company assesses the

creditworthiness of the counterparts in order to minimize the risk of counterparts default under the agreements. At

February 28, 2009, management believes that the credit risk relating to its swaps is minimal, since the lowest credit

rating of the counterparts to the agreements is A

–

Cash and cash equivalents consist mainly of highly liquid investments, such as money market deposits. The

Company has deposited the cash and cash equivalents with reputable financial institutions, from which management

believes the risk of loss to be remote.

The Company is also exposed to credit risk in relation to its trade accounts receivable. In the current global economic

environment, the Company’s credit exposure is higher but it is difficult to predict the impact this could have on the

Company’s accounts receivable balances. To mitigate such risk, the Company continuously monitors the financial

condition of its customers and reviews the credit history or worthiness of each new major customer. At February 28,

2009, no customer balance represents a significant portion of the Company’s consolidated trade receivables. The

Company 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 Company believes that its allowance for doubtful accounts is sufficient to cover the related

credit risk. The Company 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

Company has a large and diversified clientele dispersed throughout in it’s market area in Canada and Portugal, there

is no significant concentration of credit risk. The following table provides further details on the Company’s accounts

receivable balances:

February 28, 2009 August 31, 2008

$ $

Trade accounts receivable 78,181 73,160

Allowance for doubtful accounts

(17,164) (13,181)

61,017 59,979

Other accounts receivable

4,927 4,931

65,944 64,910

- 46 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

14. Financial and Capital Management (continued)

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 Cogeco Cable Inc.’s customers are billed in advance and are required to

pay before their services are rendered. The Company considers amount outstanding at the due date as trade

accounts receivable past due.

February 28, 2009 August 31, 2008

$ $

Net trade accounts receivable not past due 43,302 43,659

Net trade accounts receivable past due

17,715 16,320

61,017 59,979

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The

Company manages liquidity risk through the management of its capital structure and access to different capital

markets. It also manages liquidity risk by continuously monitoring actual and projected cash flows to ensure sufficient

liquidity to meet its obligations when due. At February 28, 2009, the available amount of the Company’s Term

Facilities was $445.9 million. Management believes that the committed Term Facilities will, until their maturities in July

2011 and December 2011, provide sufficient liquidity to manage its long-term debt maturities and support working

capital requirements.

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

2009 2010 2011 2012 2013 Thereafter Total

(six months) (twelve months) (twelve months) (twelve months) (twelve months)

$ $ $ $ $ $ $

Bank indebtedness 38,420 ─ ─ ─ ─ ─ 38,420

Accounts payable and accrued liabilities 233,094 ─ ─ ─ ─ ─ 233,094

Long-term debt

(1)

175,311 42,180 386,829 187,000 ─ 396,737 1,188,057

Derivative financial instruments

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

Cash inflows (Canadian dollar

equivalent of US dollar)

─

(241,737)

Obligations under capital leases

(2)

2,349 3,216 2,013 1,281 69 ─ 8,928

449,174 45,396 388,842 188,281 69 356,875 1,428,637

(1)

Principal excluding obligations under capital leases.

(2)

Including interest.

- 47 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

14. Financial and Capital Management (continued)

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

due for each of the next five years and thereafter, based on the principal and interest rate prevailing on the current

debt at February 28 and their respective maturities:

2009 2010 2011 2012 2013 Thereafter Total

(six months) (twelve months) (twelve months) (twelve months) (twelve months)

$ $ $ $ $ $ $

Interest payments on long-term debt 28,175 50,718 49,091 29,427 27,038 83,214 267,663

Interest payments on derivative

financial instruments

9,787

18,880

17,523

14,614

30,445

105,863

Interest receipts on derivative financial

instruments

(10,490)

(20,412)

(19,302)

(16,922)

(35,253)

(119,301)

27,472 49,186 47,312 27,119 24,730 78,406 254,225

Interest rate risk

The Company is exposed to interest rate risks for both fixed interest rate and ﬂoating interest rate instruments.

Fluctuations in interest rates will have an effect on the valuation and collection or repayment of these instruments. At

February 28, 2009, all of the Company’s long-term debt was at fixed rate, except for the Company’s Term Facilities.

On January 22, 2009, the Company’s subsidiary, Cogeco Cable Inc., entered into a swap agreement with a financial

institution to fix the floating benchmark interest rate with respect to the Euro-denominated Term Loan facilities for a

notional amount of €111.5 million. The interest swap rate to hedge the Term Loans has been fixed at 2.08% until their

maturity of July 28, 2011. The notional value of the swap will decrease in line with the amortization schedule of the

Term Loans. In addition to the interest swap rate of 2.08%, the Company subsidiary will continue to pay the applicable

margin on these Term Loans in accordance with the Term Facility. The Company’s subsidiary elected to apply cash

flow hedge accounting on this derivative financial instrument. The sensitivity of the Company’s annual financial

expense to a variation of 1% in the interest rate applicable to the Term Facilities is approximately $2.9 million based

on the current debt at February 28, 2009 and takin g in to consideration the effect of the interest rate swap agreement.

Foreign exchange risk

The Company is exposed to foreign exchange risk related to its long-term debt denominated in US dollars. In order to

mitigate this risk, the Company 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 Company’s subsidiary, Cogeco Cable Inc., 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 Company’s subsidiary elected to apply

cash flow hedge accounting on these derivative financial instruments.

- 48 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

14. Financial and Capital Management (continued)

The Company 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, 2009, bank indebtedness denominated in US

dollars amounted to US$1,451,000 (US$286,000 at August 31, 2008) while accounts payable denominated in US

dollars amounted to US$7,580,000 (US$16,121,000 at August 31, 2008). At February 28, 2009, Euro-denominated

cash and cash equivalents amounted to €736,000 (€219,000 at August 31, 2008) while accounts payable

denominated in Euros amounted to €134,000 (€163,000 at August 31, 2008). Due to their short-term nature, the risk

arising from fluctuations in foreign exchange rates is usually not significant, except for the unusual high volatility of the

US dollar compared to the Canadian dollar during the first six months of fiscal 2009. During the six month period

ended February 28, 2009, the exchange rate increased from $1.0620 at August 31, 2008, to $1.2723 at

February 27, 2009, reaching a high of $1.2935 on November 20, 2008. The impact of a 10% change in the foreign

exchange rates (US dollar and Euros) would change financial expense by appro x imately $1.1 million.

Furthermore, the Company’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-Televisão por Cabo,

S.A. was borrowed directly in Euros. At February 28, 2009, the net investment amounted to €196,758,000

(€446,051,000 at August 31, 2008) while long-term debt denominated in Euros amounted to €228,955,000

(€237,455,000 at August 31, 2008). The exchange rate used to convert the Euro currency into Canadian dollars for

the balance sheet accounts at February 28, 2009 was $1.6129 per Euro compared to $1.5580 per Euro at

August 31, 2008. The impact of a 10% change in the exchange rate of the Euro into Canadian dollars would change

financial expense by approximately $1 million and other comprehensive income by approximately $1.7 million.

Fair value

Fair value is the amount at which willing parties would accept to exchange a financial instrument based on the current

market for instruments with the same risk, principal and remaining maturity. Fair values are estimated at a specific

point in time, by discounting expected cash flows at rates for debts of the same remaining maturities and conditions.

These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and

therefore, cannot be determined with precision. In addition, income taxes and other expenses that would be incurred

on disposition of these financial instruments are not reflected in the fair values. As a result, the fair values are not

necessarily the net amounts that would be realized if these instruments were settled. The carrying value of all of the

Company’s financial instru ments approximates fair value, except as otherwise noted in the following table:

February 28, 2009 August 31, 2008

Carrying value Fair value Carrying value Fair value

Long-term debt 1,191,980 1,161,464 1,073,913 1,068,469

- 49 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

14. Financial and Capital Management (continued)

b) Capital management

The Company’s objectives in managing capital are to ensure sufficient liquidity to support the capital requirements of

its various businesses, including growth opportunities. The Company manages its capital structure and makes

adjustments in light of general economic conditions, the risk characteristics of the underlying assets and the

Company’s working capital requirements. Management of the capital structure involves the issuance of new debt, the

repayment of existing debts using cash g enerated by operations and the level of distribution to sharehold ers.

The capital structure of the Company is composed of shareholders’ equity, bank indebtedness, long-term debt and

assets or liabilities related to derivative financial instru ments.

The provisions under the Term Facilities provide for restrictions on the operations and activities of the Company.

Generally, the most significant restrictions relate to permitted investments and dividends on multiple and subordinate

voting shares, as well as incurrence and maintenance of certain financial ratios primarily linked to the operating

income before amortization, financial expense and total Indebtedness. At February 28, 2009, the Company was in

compliance with all debt covenants a nd was not subject to any other externally imposed capital requirements.

The following table summarizes certain of the key ratios used by management to monitor and manage the Company’s

capital structure:

February 28, 2009 August 31, 2008

Net indebtedness

(1)

/ Shareholders’ equity 3.6 2.7

Net indebtedness

(1)

/ Operating income before amortization

(2)

2.3 2.5

Operating income before amortization / Financial expense

(3)

2.9 6.3

(1)

Net indebtedness is defined as the total of bank indebtedness, long-term debt and derivative financial instrument liability, less cash and cash equivalents and

assets related to derivative financial instruments.

(2)

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

(3)

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

2008.

- 50 -

COGECO INC.

Notes to Consolidated Financial Statements

February 28, 2009

(unaudited)

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

15. Discontinued Operations

In October 2007, the Board of Directors of TQS, an indirect subsidiary of the Company, engaged CIBC World Markets

to advise on and assess strategic options for the TQS network in the face of financial difficulties. On December 18,

2007, the Québec Superior Court issued an order under the Companies’ Creditors Arrangement Act (Canada)

protecting TQS, its subsidiaries and its parent 3947424 Canada Inc. (“TQS Group”) from claims by their creditors. On

June 26, 2008, the Canadian Radio-television and Telecommunications Commission (“CRTC”) approved the

proposed transfer of ownership and control of TQS to Remstar Corporation Inc. (“Remstar”) and on August 29, 2008,

the transfer of ownership and control of TQS to Remstar was completed, which allowed the new ownership group to

pursue the broadcasting activities of TQS.

Effective December 18, 2007, the Company has ceased to consolidate the financial statements of the TQS Group.

Accordingly, the results of operations and cash flows for the three month period ended November 30, 2007, has been

reclassified as disco ntinued operations. The results of the discontin ued operations were as follows:

Three months ended Six months ended

February 28, 2009 February 29, 2008 February 28, 2009 February 29, 2008

$ $ $ $

Revenue ─ 5,741 ─ 38,499

Operating costs ─ 5,865 ─ 35,822

Operating income (loss) before amortization ─ (124)

─ 2,677

Amortization ─ 248 ─ 1,364

Operating income (loss) ─ (372)

─ 1,313

Financial expense ─ 53 ─ 291

Impairment of assets ─ ─ ─ 30,298

Loss before income taxes and the following items ─ (425)

─ (29,276)

Income taxes ─ ─ ─ ─

Non-controlling interest ─ ─ ─ (11,219)

Loss from discontinued operations ─ (425)

─ (18,057)

16. Comparative figures

Certain comparative figures have been reclassified to conform to the current year’s presentation to reflect the

reclassification of foreign exchange gains or losses from operating costs to financial expense.

Back to press release

Press release details

STRONG CANADIAN RESULTS FOR COGECO DESPITE A NON-CASH IMPAIRMENT IN ITS EUROPEAN CABLE OPERATIONS INTANGIBLE ASSETS

SUSTAINABILITY

Cogeco Fund

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