Today, COGECO Inc. (TSX:CGO) ("COGECO" or the "Company") announced its financial
results for the second quarter and first six months of fiscal 2011, ended
February 28, 2011.


For the second quarter and first six months of fiscal 2011:



--  Revenue increased by 6.6% to reach $350.6 million in the quarter, and by
    5.5% to reach $693.4 million in the first six months; 

--  Operating income before amortization(1) grew by 9.3% to reach $136
    million in the quarter and by 7.6% to reach $273 million in the first
    six months when compared to the same periods of fiscal 2010; 

--  Operating margin(1) increased to 38.8% when compared to 37.8% in the
    quarter, and to 39.4% from 38.6% in the first six months of the year
    when compared to fiscal 2010; 

--  In the second quarter, Cogeco Cable redeemed the $175 million Senior
    Secured Notes Series B, bearing interest at 7.73%, from the net proceeds
    of the issuance, in the first quarter of fiscal 2011, of the $200
    million Senior Secured Debentures Series 2, bearing interest at 5.15%. A
    one-time make-whole premium of $8.8 million was paid on the redemption,
    which increased financial expense during the second quarter and first
    six months; 

--  Net income amounted to $10.6 million essentially the same when compared
    to $10.5 million in the second quarter of the prior year. For the first
    six months of fiscal 2011, net income amounted to $26.6 million,
    compared to $33.3 million in the prior year. In the first half of fiscal
    2010, net income included a favourable income tax adjustment, net of
    non-controlling interest, of $9.6 million related to the reduction of
    Ontario provincial corporate income tax rates for the cable subsidiary.
    Excluding this amount, net income in the first six months of fiscal 2011
    represents a growth of $3 million, or 12.6%, when compared to adjusted
    net income(1) of $23.6 million in the corresponding period of fiscal
    2010; 

--  Free cash flow(1) of $48.2 million was posted in the second quarter,
    $2.4 million, or 5.3% higher than $45.8 million in the comparable period
    of the prior year. In the first six months, free cash flow amounted to
    $23.9 million, compared to $112.9 million in the first half of fiscal
    2010. This reduction is primarily due to the recognition of current
    income tax expense relating to the modifications to Cogeco Cable's
    corporate structure which reduced the future income tax expense
    accordingly and the increase in financial expense; 

--  Quarterly dividends of $0.12 per share were paid to the holders of
    subordinate and multiple voting shares, a quarterly increase of $0.02
    per share, or 20%, when compared to quarterly dividends of $0.10 per
    share in the first half of fiscal 2010. Dividend payments in the first
    six months totalled $0.24 per share in fiscal 2011, compared to $0.20
    per share in fiscal 2010; 

--  On February 1, 2011, the Company concluded its acquisition of Corus
    Entertainment Inc.'s Quebec radio stations (the "Quebec Radio Stations
    Acquisition") for $80 million, subject to customary closing adjustments
    and conditions; 

--  In the cable sector, revenue-generating units ("RGU")(2) grew by 57,079
    net additions in the second quarter and by 147,948 net additions in the
    first six months for a total of 3,327,297 RGU at February 28, 2011. 

(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.                   



"In the second quarter, COGECO has continued to show solid growth in its cable
sector and has finalized the Quebec Radio Stations Acquisition. In the cable
sector, Cogeco Cable increased its customer base with 57,079 RGU net additions
essentially in its Digital Television, HSI and Telephony services from both its
Canadian and European operations during the second quarter. We are on target to
deliver the performance we have projected by providing to our customers a
superior offering through various improvements and the best-in-class customer
service," said Louis Audet, President and CEO of COGECO. "


"With the completion of the acquisition Corus Entertainment Inc.'s Quebec radio
stations on February 1st, 2011, Cogeco Diffusion, COGECO's radio subsidiary,
became one of Quebec's largest radio broadcasters. The integration of the newly
acquired radio stations is going according to plan. Cogeco Diffusion now
operates thirteen (13) radio stations throughout the province of Quebec that
positively contribute to our revenue. Cogeco Diffusion has converted its
Gatineau, Trois-Rivieres and Sherbrooke stations to the CKOI brand. Five (5)
stations strong, the CKOI network now focuses on men 25-54 with music, sports
and local news. Women 25-54 are well served with the RYTHME FM network; its
flagship Montreal station has increased its leadership position in the French
market," declared Mr. Audet. 


ABOUT COGECO

COGECO (www.cogeco.ca) 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, through its subsidiary Cogeco Data Services, data networking,
e-business applications, video conferencing, hosting services, Ethernet, private
line, VoIP, HSI access, data storage, data security and co-location services and
other advanced communication solutions. Through its Cogeco Diffusion subsidiary,
COGECO owns and operates 13 radio stations across most of Quebec with
complementary radio formats serving a wide range of audiences. 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).




Analyst Conference Call:   Friday, April 8, 2011 at 11:00 a.m. (EDT)        
                           Media representatives may attend as listeners    
                           only.                                            
                                                                            
                           Please use the following dial-in number to have  
                           access to the conference call by dialling five   
                           minutes before the start of the conference:      
                                                                            
                           Canada/USA Access Number: 1 800 820-0231         
                           International Access Number: + 1 416 640-5926    
                           Confirmation Code: 5366022                       
                           By Internet at www.cogeco.ca/investors           
                                                                            
                           A rebroadcast of the conference call will be     
                           available until April 15, 2011, by dialling:     
                           Canada and USA access number: 1 888 203-1112     
                           International access number: + 1 647 436-0148    
                           Confirmation code: 5366022                       



FINANCIAL HIGHLIGHTS



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                  Quarters ended February 28, Six months ended February 28, 
                      2011       2010  Change       2011       2010  Change 
($000, except                                                               
 percentages and                                                            
 per share data)         $          $       %          $          $       % 
----------------------------------------------------------------------------
                (unaudited)(unaudited)        (unaudited)(unaudited)        
Operations                                                                  
Revenue            350,644    329,087     6.6    693,410    657,090     5.5 
Operating income                                                            
 before                                                                     
 amortization(1)   135,952    124,363     9.3    272,983    253,626     7.6 
Operating                                                                   
 margin(1)            38.8%      37.8%      -       39.4%      38.6%      - 
Operating income    70,525     58,370    20.8    144,417    121,932    18.4 
Net income          10,645     10,511     1.3     26,620     33,259   (20.0)
Adjusted net                                                                
 income(1)          10,645     10,511     1.3     26,620     23,639    12.6 
                                                                            
----------------------------------------------------------------------------
Cash Flow                                                                   
Cash flow from                                                              
 operating                                                                  
 activities         96,664    117,498   (17.7)   154,236    116,088    32.9 
Cash flow from                                                              
 operations(1)     120,675    120,331     0.3    163,174    255,849   (36.2)
Capital                                                                     
 expenditures                                                               
 and increase in                                                            
 deferred                                                                   
 charges            72,462     74,549    (2.8)   139,261    142,936    (2.6)
Free cash                                                                   
 flow(1)            48,213     45,782     5.3     23,913    112,913   (78.8)
                                                                            
----------------------------------------------------------------------------
Financial                                                                   
 condition(2)                                                               
Fixed assets             -          -       -  1,349,932  1,328,866     1.6 
Total assets             -          -       -  2,856,927  2,744,656     4.1 
Indebtedness(3)          -          -       -  1,034,004    961,354     7.6 
Shareholders'                                                               
 Equity                  -          -       -    403,146    381,635     5.6 
                                                                            
----------------------------------------------------------------------------
RGU growth          57,079     68,782   (17.0)   147,948    158,567    (6.7)
----------------------------------------------------------------------------
Per Share                                                                   
 Data(4)                                                                    
Earnings per                                                                
 share                                                                      
Basic                 0.64       0.63     1.6       1.59       1.99   (20.1)
Diluted               0.63       0.63       -       1.58       1.98   (20.2)
Adjusted                                                                    
 earnings per                                                               
 share(1)                                                                   
Basic                 0.64       0.63     1.6       1.59       1.41    12.8 
Diluted               0.63       0.63       -       1.58       1.41    12.1 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)   The indicated terms do not have standardized definitions prescribed by
      Canadian Generally Accepted Accounting Principles ("GAAP") and        
      therefore, may not be comparable to similar measures presented by     
      other companies. For more details, please consult the "Non-GAAP       
      financial measures" section of the Management's Discussion and        
      Analysis.                                                             
(2)   At February 28, 2011 and August 31, 2010.                             
(3)   Indebtedness is defined as the total of bank indebtedness, promissory 
      note payable, principal on long-term debt and obligations under       
      derivative financial instruments.                                     
(4)   Per multiple and subordinate voting share.                            



FORWARD-LOOKING STATEMENTS

Certain statements in this report may constitute forward-looking information
within the meaning of securities laws. Forward-looking information may relate to
COGECO'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 economic
downturn experienced over the past two years makes forward-looking information
and the underlying assumptions subject to greater uncertainty and that,
consequently, they may not materialize, or the results may significantly differ
from the Company's expectations. It is impossible for COGECO to predict with
certainty the impact that the current economic downturn may have on future
results. Forward-looking information is also subject to certain factors,
including risks and uncertainties (described in the "Uncertainties and main risk
factors" section of the Company's 2010 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 report 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 2010 Annual Report.
Throughout this discussion, all amounts are in Canadian dollars unless otherwise
indicated. 


MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

Second quarter ended February 28, 2011 

CORPORATE STRATEGIES 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 operating income before amortization(1), operating margin(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. 




(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.                   



Cable sector

During the first six months of fiscal 2011, the Company's subsidiary, Cogeco
Cable Inc. ("Cogeco Cable" or the "Cable subsidiary"), invested approximately
$66.3 million in its network infrastructure and equipment to upgrade its
capacity, improve its robustness and extend its territories in order to better
serve and increase its service offerings for new and existing clientele.


RGU growth and service offerings in the cable sector

During the first six months ended February 28, 2011, the number of RGU in the
Cable subsidiary increased by 147,948, or 4.7%, to reach 3,327,297 RGU, mainly
as a result of targeted marketing initiatives in the Canadian operations and
customer acquisition and retention strategies in the European operations
designed to improve penetration, and to the continuing interest for high
definition ("HD") television service. As a result of the sustained growth in the
first half of the fiscal year, Cogeco Cable expects to achieve its fiscal 2011
revised guidelines of 275,000 net additions, representing growth of
approximately 8.6% when compared to August 31, 2010. RGU growth is expected to
stem primarily from the continued strong interest in Digital Television
services, enhanced service offerings, and through promotional activities.


Operating income before amortization and operating margin

For the first half of fiscal 2011, operating income before amortization grew by
$19.4 million, or 7.6%, to reach $273 million, and operating margin increased to
39.4%, from 38.6%, in line to achieve Management's revised projection of $560
million in operating income before amortization for fiscal 2011. 


Free cash flow

For the six month period ended February 28, 2011, COGECO achieved free cash flow
of $23.9 million, compared to $112.9 million for the first half of the previous
fiscal year, a decrease of $89 million. The decrease in free cash flow in the
first six months of fiscal 2011 reflects the timing of the recognition of income
tax liabilities as a result of modifications made to Cogeco Cable's corporate
structure in fiscal 2009. Management expects to achieve its free cash flow
revised guidelines for fiscal 2011 of $80 million.


Other 

BBM Canada's fall 2010 survey and radio broadcast week measures from August 31,
2010 to February, 28, 2011, conducted with the Portable People Meter ("PPM"),
show that Rythme FM has maintained its leadership position in the competitive
Montreal region market. 


On April 30, 2010, the Company concluded an agreement with Corus Entertainment
Inc. ("Corus") to acquire its Quebec radio stations ("Quebec Radio Stations
Acquisition") for $80 million, subject to customary closing adjustments and
conditions, which was concluded on February 1, 2011.


OPERATING RESULTS - CONSOLIDATED OVERVIEW



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                   Quarters ended February 28, Six months ended February 28,
                      2011       2010   Change      2011       2010   Change
($000, except                                                               
 percentages)            $          $        %         $          $        %
----------------------------------------------------------------------------
                (unaudited)(unaudited)        (unaudited)(unaudited)        
                                                                            
Revenue            350,644    329,087      6.6   693,410    657,090      5.5
Operating costs    214,692    204,724      4.9   420,427    403,464      4.2
--------------------------------------        ----------------------        
Operating income                                                            
 before                                                                     
 amortization      135,952    124,363      9.3   272,983    253,626      7.6
--------------------------------------        ----------------------        
Operating margin      38.8%      37.8%              39.4%      38.6%        
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Revenue

Fiscal 2011 second-quarter revenue improved by $21.6 million, or 6.6%, to reach
$350.6 million primarily due to the cable sector and to the one-month results of
the Quebec Radio Stations Acquisition. Revenue amounted to $693.4 million in the
first six months of fiscal 2011, $36.3 million, or 5.5%, higher than in the
first half of fiscal 2010. 


Cable revenue increased by $16.2 million, or 5%, for the second quarter and by
$30.3 million, or 4.8%, in the first half when compared to the same periods of
the prior year. For further details on the Company's operating results, please
refer to the "Cable sector" section. 


Revenue from the radio activities improved by $5.4 million, or 62% in the second
quarter and by $6 million, or 31%, in the first six months, mainly from the
Quebec Radio Stations Acquisition.


Operating costs

For the second quarter and first half of fiscal 2011, operating costs amounted
to $214.7 million and $420.4 million, increases, mainly in the cable sector as
well as from the Quebec Radio Stations Acquisition, of $10 million, or 4.9%, and
of $17 million, or 4.2%, when compared to the prior year. 


Operating costs in the Cable sector increased by $4.4 million, or 2.2%, for the
second quarter and by $11.7 million, or 3%, in the first half when compared to
the same periods of the prior year. For further details on the Company's
operating results, please refer to the "Cable sector" section. 


Operating costs from the radio activities grew by $5.2 million in the second
quarter and $5.1 million in the first six months, representing increases of
77.9% in the quarter and 35.5% in the first six months, mainly from the Quebec
Radio Stations Acquisition.


Operating income before amortization and operating margin

Mainly as a result of growth in the cable sector, operating income before
amortization grew by $11.6 million, or 9.3%, in the second quarter to reach $136
million, and by $19.4 million, or 7.6%, at $273 million for the first half of
fiscal 2011, when compared to the same periods the previous year. COGECO's
second quarter operating margin increased to 38.8%, from 37.8% in the second
quarter of the previous year. For the first six months, COGECO's operating
margin increased to 39.4% from 38.6% in the first half of fiscal 2010. For
further details on the Company's operating results, please refer to the "Cable
sector" section.


FIXED CHARGES



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                  Quarters ended February 28, Six months ended February 28, 
                      2011       2010  Change       2011       2010  Change 
($000, except                                                               
 percentages)            $          $       %          $          $       % 
----------------------------------------------------------------------------
                (unaudited)(unaudited)        (unaudited)(unaudited)        
                                                                            
Amortization        65,427     65,993    (0.9)   128,566    131,694    (2.4)
Financial                                                                   
 expense            24,501     15,187    61.3     41,406     31,464    31.6 
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Second-quarter 2011 amortization amounted to $65.4 million, compared to $66
million for the same period of the prior year. For the first half of fiscal
2011, amortization amounted to $128.6 million, compared to $131.7 million in the
prior year. The decreases are mainly attributable to the Cable subsidiary's
reduction in amortization in the European operations stemming from certain
acquired assets that are now fully amortized and the depreciation of the Euro in
relation to the Canadian dollar in fiscal 2011, partly offset by additional
capital expenditures in the Canadian operations arising from customer premise
equipment acquisitions to support RGU growth.


Financial expense amounted to $24.5 million in the second quarter compared to
$15.2 million in the prior year. In the first six months of fiscal 2011,
financial expense amounted to $41.4 million, compared to $31.5 million in the
first half of the prior year. Financial expense increases are primarily due to
the payment, in the cable sector, of a make-whole premium amounting to $8.8
million on the early repayment, on December 22, 2010, of the $175 million Senior
Secured Notes Series B due on October 31, 2011, partly offset by the impact of
the lower interest rate on the $200 million Senior Secured Debentures Series 2
issued on November 16, 2010 by Cogeco Cable and the financial expense impact
from fluctuations in the level of bank indebtedness. 


INCOME TAXES

Fiscal 2011 second-quarter income tax expense amounted to $14.3 million,
compared to $12.5 million in the prior year. The increase of $1.8 million, or
14%, is mainly due to operating income before amortization growth, partly offset
by an increase in financial expense and the previously announced annual declines
in the enacted Canadian federal and provincial income tax rates.


For the first six months, income tax expense amounted to $32.5 million, compared
to an income tax recovery of $1.3 million in the prior year. The income tax
recovery in the first six months of the prior year included the impact, in the
cable sector, of the reduction in corporate income tax rates announced on March
26, 2009 by the Ontario provincial government and considered substantively
enacted on November 16, 2009 (the "reduction of Ontario provincial corporate
income tax rates"), which reduced future income tax expense by $29.8 million.
Excluding this prior year impact, income tax expense would have amounted to
$28.5 million for the first six months of fiscal 2010. The increases in fiscal
2011 income tax expense are mainly due to the operating income before
amortization growth combined with the decrease in amortization, partly offset by
the increase in financial expense and the previously announced annual declines
in the enacted Canadian federal and provincial income tax rates.


NON-CONTROLLING INTEREST

The non-controlling interest represents a participation of approximately 67.8%
in Cogeco Cable's results. During the three and six month periods ended February
28, 2011, the net income attributable to non-controlling interest amounted to
$21.2 million and $43.9 million, respectively, due to the cable sector's
positive results, compared to $20.2 million in the second quarter of fiscal
2010, and $58.5 million in the first half of fiscal 2010 mainly as a result of
the income tax recovery from the reduction of Ontario provincial corporate
income tax rates.


NET INCOME

Fiscal 2011 second quarter net income amounted to $10.6 million, or $0.64 per
share, essentially the same when compared to $10.5 million, or $0.63 per share
for the same period in 2010, as the growth in operating income before
amortization in the second quarter of fiscal 2011 was offset by the make-whole
premium on early repayment of debt described in the "Fixed charges" section
amounting to $2 million net of income taxes and non-controlling interest.


Net income in the first half of fiscal 2011 amounted to $26.6 million, or $1.59
per share. In the comparable period of fiscal 2010, net income amounted to $33.3
million, or $1.99 per share which included the reduction of Ontario provincial
corporate income tax rates described in the "Income Taxes" section. Excluding
this prior year effect, fiscal 2011 net income increased by $3 million, or
12.6%, and $0.18 per share, or 12.8%, when compared to adjusted net income(1) of
$23.6 million, or $1.41 per share(1), for the first half of fiscal 2010. Net
income progression has resulted mainly from the growth in operating income
before amortization and the decrease in amortization expense, partly offset by
make-whole premium on early repayment of debt of $2 million net of income taxes
and non-controlling interest. 


CASH FLOW AND LIQUIDITY



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                            Quarters ended February        Six months ended 
                                                28,            February 28, 
                                   2011        2010        2011        2010 
($000)                                $           $           $           $ 
----------------------------------------------------------------------------
                             (unaudited) (unaudited) (unaudited) (unaudited)
Operating activities                                                        
  Cash flow from operations     120,675     120,331     163,174     255,849 
  Changes in non-cash                                                       
   operating items              (24,011)     (2,833)     (8,938)   (139,761)
----------------------------------------------------------------------------
                                 96,664     117,498     154,236     116,088 
----------------------------------------------------------------------------
Investing activities(1)        (148,345)    (74,447)   (215,144)   (142,673)
----------------------------------------------------------------------------
Financing activities(1)        (119,631)    (42,694)     51,636       4,759 
----------------------------------------------------------------------------
Effect of exchange rate                                                     
 changes on cash and cash                                                   
 equivalents denominated in                                                 
 a foreign currency                  94      (1,102)       (135)       (900)
----------------------------------------------------------------------------
Net change in cash and cash                                                 
 equivalents                   (171,218)       (745)     (9,407)    (22,726)
----------------------------------------------------------------------------
Cash and cash equivalents,                                                  
 beginning of period            197,653      17,477      35,842      39,458 
----------------------------------------------------------------------------
Cash and cash equivalents,                                                  
 end of period                   26,435      16,732      26,435      16,732 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)    Excludes assets acquired under capital leases.                       



Fiscal 2011 second quarter cash flow from operations reached $120.7 million,
essentially the same when compared to $120.3 million in the second quarter of
the prior year. Changes in non-cash operating items required cash outflows of
$24 million, mainly as a result of decreases in accounts payable and accrued
liabilities and income tax liabilities, combined with increases in accounts
receivable and prepaid expenses and other. In the prior year, changes in
non-cash operating items required cash outflows of $2.8 million, mainly as a
result of increases in income taxes receivable and accounts receivable, partly
offset by increases in accounts payable and accrued liabilities and deferred and
prepaid revenue and other liabilities.


In the first six months of fiscal 2011, cash flow from operations reached $163.2
million, $92.7 million, or 36.2%, lower than the comparable period last year.
This reduction is primarily due to the recognition of current income tax expense
relating to the modifications to Cogeco Cable's corporate structure which
reduced the future income tax expense accordingly and the increase in financial
expense. Changes in non-cash operating items required cash outflows of $8.9
million, mainly as a result of a decrease in accounts payable and accrued
liabilities and an increase in accounts receivable, partly offset by an increase
in income tax liabilities. In the prior year, changes in non-cash operating
items required cash outflows of $139.8 million, mainly as a result of decreases
in accounts payable and accrued liabilities and income tax liabilities and
increases in income taxes receivable and accounts receivable.


In the second quarter of fiscal 2011, investing activities amounted to $148.3
million as a result of the net outflows related to the Quebec Radio Stations
Acquisition for an amount of $75.9 million described below, capital expenditures
and the increase in deferred charges. This represents an increase of $73.9
million, or 99.3% when compared to $74.4 million for the corresponding period of
last year. In the first half of fiscal 2011, investing activities amounted to
$215.1 million compared to $142.7 million in the first six months of fiscal
2010, an increase of $72.5 million, or 50.8%. 




(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.                                



On April 30, 2010, the Company concluded an agreement with Corus to acquire its
Quebec radio stations for $80 million, subject to customary closing adjustments
and conditions, including approval by the CRTC. On June 30, 2010, the Company
submitted its application for approval of the Quebec Radio Stations Acquisition
to the CRTC. On December 17, 2010, the CRTC approved the transaction essentially
as proposed. On January 11, 2011, the Company was served with an application by
Astral to the Court for leave to appeal the CRTC decision approving the
transaction, and a related application by Astral for a stay of execution of that
decision until final judgement of the Court. On February 21, 2011 the Court has
rejected applications filed by Astral in the matter of the Quebec Radio Stations
Acquisition. The transaction with Corus was concluded on February 1, 2011.


Pursuant to this acquisition, and as part of the CRTC's decision on the
Company's transfer application, the Company has put up for sale two radio
stations acquired in the transaction, CFEL-FM in the Quebec City market and
CJTS-FM in the Sherbrooke market. Accordingly, the assets and liabilities of the
two acquired radio stations put up for sale have been classified as held for
sale in the preliminary purchase price allocation presented below. In addition
to the two acquired radio stations above, and also as part of the CRTC's
decision, the Company has put up for sale radio station CJEC-FM, which it owned
prior to the Quebec Radio Stations Acquisition, in the Quebec City market. Radio
stations for which divestiture has been required by the CRTC, and the sale
process, are managed by a trustee approved by the CRTC pursuant to a voting
trust agreement. 


This acquisition was accounted for using the purchase method. The results have
been consolidated as of the acquisition date. The preliminary allocation of the
purchase price of the acquisition, pending the completion of the valuation of
the net assets acquired, is as follows: 




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                          $ 
----------------------------------------------------------------------------
                                                                 (unaudited)
Consideration                                                               
Paid                                                                        
  Purchase of shares                                                 75,000 
  Acquisition costs                                                   1,530 
----------------------------------------------------------------------------
                                                                     76,530 
                                                                            
Promissory note payable, non-interest bearing                               
 and due on February 1, 2012                                          5,000 
Investment previously accounted for                                     200 
Acquisition costs previously recorded as                                    
 deferred charges                                                       435 
Preliminary working capital adjustment payable                        4,000 
----------------------------------------------------------------------------
                                                                     86,165 
----------------------------------------------------------------------------
                                                                            
Net assets acquired                                                         
Cash and cash equivalents                                               647 
Accounts receivable                                                  14,132 
Income tax receivable                                                    92 
Prepaid expenses and other                                              527 
Current future income tax assets                                      1,018 
Fixed assets                                                         11,497 
Deferred charges and other                                               99 
Broadcasting licenses                                                48,193 
Goodwill                                                             27,227 
Non-current future income taxes assets                                2,272 
Non-current assets held for sale                                      9,531 
Accounts payable and accrued liabilities                                    
 assumed                                                             (9,058)
Income tax liabilities assumed                                         (194)
Current liabilities related to assets held for                              
 sale                                                                  (797)
Deferred and prepaid income and other                                       
 liabilities                                                         (7,390)
Non-current future income taxes liabilities                         (10,656)
Non-current liabilities related to assets held                              
 for sale                                                              (975)
----------------------------------------------------------------------------
                                                                     86,165 
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Capital expenditures amounted to $70.2 million in the second quarter, a decrease
of $1.9 million, or 2.6%, when compared to $72.1 million in the second quarter
of the prior fiscal year. The most significant variations are in the cable
sector and are due to the following factors: 




--  Decreases in upgrades and rebuilds and in line extensions which
    surpassed the increase in scalable infrastructure. This net decrease
    stems from the timing of the various initiatives undertaken by Cogeco
    Cable in order to expand its network and improve its capacity; 
--  An increase in customer premise equipment spending mainly due to the
    timing of equipment purchases to support RGU growth in the Canadian
    operations, which offset the decrease in customer premise equipment
    spending reflecting lower RGU growth in the European operations and the
    depreciation of the value of the Euro relative to the Canadian dollar. 



In the first half of fiscal 2011, capital expenditures amounted to $133.5
million, a decrease of $3.8 million, or 2.7%, when compared to $137.3 million in
the second quarter of the prior fiscal year. The most significant variations are
in the cable sector and are due to the following factors: 




--  A decrease in customer premise equipment spending mainly due to lower
    RGU growth in the European operations and the depreciation of the value
    of the Euro relative to the Canadian dollar, partly offset by an
    increase in customer premise equipment spending to support RGU growth in
    the Canadian operations; 
--  Decreases in upgrades and rebuilds and in line extensions stemming from
    the timing of the various initiatives undertaken by Cogeco Cable in
    order to expand its network and improve its capacity; 
--  An increase in scalable infrastructure in the Canadian operations to
    improve network capacity in existing areas served; 



In the second quarter, free cash flow amounted to $48.2 million, compared to
$45.8 million in the comparable period of fiscal 2010, representing an increase
of $2.4 million, or 5.3%. The growth in free cash flow over the prior year is
due to the increase in operating income before amortization in the second
quarter of fiscal 2011, partly offset by the increase in financial expense. 


In the first six months, free cash flow amounted to $23.9 million, a decrease of
$89 million, or 78.8%, when compared to $112.9 million in the first half of
fiscal 2010. The decline in free cash flow over the prior year is due to an
increase of $104.2 million in current income tax expense in the cable sector
stemming from modifications to Cogeco Cable's corporate structure and the
increase in financial expense, which offset the increase in operating income
before amortization and the decrease in capital expenditures in the first half
of fiscal 2011.


In the second quarter of fiscal 2011, Indebtedness affecting cash decreased by
$116.6 million mainly due to the decrease in cash and cash equivalents of $171.2
million and the free cash flow of $48.2 million, partly offset by the Quebec
Radio Stations Acquisition for a net amount of $75.9 million, the cash outflows
of $24 million from the changes in non-cash operating items and the dividend
payment of $7.6 million described below. Indebtedness mainly decreased through
the repayment, on December 22, 2010, of Cogeco Cable's $175 million Senior
Secured Notes Series B due on October 31, 2011 and the related make-whole
premium on early repayment, partly offset by a net increase of $59.9 million on
the Company's Term Revolving Facilities. In the second quarter of the prior
year, Indebtedness affecting cash decreased by $37.1 million mainly due to the
free cash flow of $45.8 million, partly offset by the dividend payment of $6.3
million described below and the decrease in non-cash operating items of $2.8
million. Indebtedness mainly decreased through a net repayment of $36.5 million
on Cogeco Cable's Term Facility.


During the second quarter of fiscal 2011, a dividend of $0.12 per share was paid
by the Company to the holders of subordinate and multiple voting shares,
totalling $2 million, compared to a dividend of $0.10 per share, or $1.7 million
the year before. In addition, dividends paid by a subsidiary to non-controlling
interests in the second quarter of fiscal 2011 amounted to $5.6 million, for
consolidated dividend payments of $7.6 million, compared to $4.6 million, for
consolidated dividend payments of $6.3 million in the second quarter of the
prior year. 


In the first half of fiscal 2011, indebtedness affecting cash increased by $65.5
million mainly due to the Quebec Radio Stations Acquisition for a net amount of
$75.9 million, the dividend payments totalling $15.2 million described below and
the cash outflows of $8.9 million from the changes in non-cash operating items.
The increase was partly offset by the free cash flow of $23.9 million generated
in the first half of the fiscal year and the decrease in cash and cash
equivalents of $9.4 million. Indebtedness mainly increased through the issuance,
on November 16, 2010, of Senior Secured Debentures Series 2 ("Fiscal 2011
debentures") for net proceeds of $198.3 million and a net increase of $46.1
million on the Company's Term Revolving Facilities. The increase was partly
offset by the repayment of the $175 million Senior Secured Notes Series B
described above. For the comparable period of fiscal 2010, Indebtedness
affecting cash increased by $19.5 million mainly due to the decrease in non-cash
operating items of $139.8 million and the dividend payment of $12.6 million
described below, partly offset by the free cash flow of $112.9 million and the
decrease in cash and cash equivalents of $22.7 million. Indebtedness mainly
increased through an increase of $49.6 million in bank indebtedness, partly
offset by net repayments totalling $28.1 million on the Company's Term
Facilities, including net repayments of $21.6 million by the cable subsidiary. 


During the first six months of fiscal 2011, quarterly dividends of $0.12 per
share, for a total of $0.24 per share, were paid to the holders of subordinate
and multiple voting shares, totalling $4 million, compared to quarterly
dividends of $0.10 per share, for a total of $0.20 per share, or $3.4 million
the year before. In addition, dividends paid by a subsidiary to non-controlling
interests in the first half of fiscal 2011 amounted to $11.2 million, for
consolidated dividend payments of $15.2 million, compared to $9.2 million for
consolidated dividend payments of $12.6 million in the first half of the prior
year. 


As at February 28, 2011, the Company had a working capital deficiency of $164.2
million compared to $202.9 million as at August 31, 2010. The decrease in the
deficiency is mainly attributable to the cable sector and caused by decreases in
accounts payable and accrued liabilities and future income tax liabilities,
combined with an increase in accounts receivable. This decrease was partly
offset by an increase in income tax liabilities and a decrease in cash and cash
equivalents. As part of the usual conduct of its business, COGECO maintains a
working capital deficiency due to a low level of accounts receivable as a large
portion of Cogeco Cable's customers pay before their services are rendered,
unlike accounts payable and accrued liabilities, which are paid after products
are delivered or services are rendered, thus enabling the cable subsidiary to
use cash and cash equivalents to reduce Indebtedness.


At February 28, 2011, the Company had used $74 million of its $100 million Term
Revolving Facility for a remaining availability of $26 million. Cogeco Cable had
used $101.8 million of its $750 million Term Revolving Facility for a remaining
availability of $648.2 million.


Transfers of funds from non-wholly owned subsidiaries to COGECO are subject to
approval by the subsidiaries' Boards 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.


FINANCIAL POSITION

Since August 31, 2010, there have been significant changes to the balances of
"income tax liabilities", "future income tax liabilities", "future income tax
assets", "accounts payable and accrued liabilities", "long-term debt", "cash and
cash equivalents", "broadcasting licences", "goodwill", "assets held for sale",
"accounts receivable", "fixed assets", "derivative financial instruments",
"deferred and prepaid revenue and other liabilities", "promissory note payable"
and "non-controlling interest".


The increase of $74.9 million in income tax liabilities and the decreases of
$43.2 million in future income tax liabilities and $7.1 million in future income
tax assets primarily reflect the timing of the recognition of income tax
liabilities as a result of modifications made to Cogeco Cable's corporate
structure, combined with the impact of the Quebec Radio Stations Acquisition.
The $55.9 million decrease in accounts payable and accrued liabilities is
related to the timing of supplier payments, partly offset by the Quebec Radio
Stations Acquisition. The increase of $51 million in long-term debt and the $9.4
million decrease in cash and cash equivalents are due to the factors previously
discussed in the "Cash Flow and Liquidity" section combined with the
fluctuations in foreign exchange rates. The increases of $48.2 million in
broadcasting licences, $27 million in goodwill and $10.3 million in assets held
for sale stem from the Quebec Radio Stations Acquisition. The $30.8 million
increase in accounts receivable is due to the Quebec Radio Stations acquisition
combined with the increase in revenues and the timing of payments received from
customers. The $21.1 million increase in fixed assets reflects the assets
acquired in the Quebec Radio Stations Acquisition and the capital expenditures
discussed in the "Cash Flow and Liquidity" section which surpassed the
amortization expense and the impact of the depreciation of the Euro in relation
to the Canadian dollar. The $20 million decrease in derivative financial
instruments is due to the factors discussed in the "Financial management"
section. The increases of $8 million in deferred and prepaid revenue and other
liabilities and $5 million in promissory note payable are mainly due to the
Quebec Radio Stations acquisition. The $34.2 million increase in non-controlling
interest is due to improvements in the cable subsidiary's operating results in
the current fiscal year.


A description of COGECO's share data as at March 31, 2011 is presented in the
table below:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                               Number of              Amount
                                                  shares              ($000)
----------------------------------------------------------------------------
Common shares                                                               
Multiple voting shares                         1,842,860                  12
Subordinate voting shares                     14,989,338             121,976
----------------------------------------------------------------------------
----------------------------------------------------------------------------



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 2010 Annual Report, have not
materially changed since August 31, 2010, except as mentioned below.


On November 16, 2010, Cogeco Cable completed, pursuant to a public debt
offering, the issue of $200 million Senior Secured Debentures Series 2 for net
proceeds of $198.3 million, net of discounts and transaction costs. These
debentures mature on November 16, 2020 and bear interest at 5.15% per annum,
payable semi-annually. These debentures are indirectly secured by a first
priority fixed and floating charge and a security interest on substantially all
present and future real and personal property and undertaking of every nature
and kind of Cogeco Cable and certain of its subsidiaries. The net proceeds of
sale of the debentures were used to redeem in full, on December 22, 2010, Cogeco
Cable's Senior Secured Notes Series B due October 31, 2011 for an amount of $175
million plus accrued interest and make-whole premium, and the remainder for
working capital and general corporate purposes.


The Company benefits from Term Revolving Facility of up to $100 million with a
group of financial institutions led by a large Canadian bank, which acts as
agent for the banking syndicate. The Term Revolving Facility of up to $100
million includes a swingline limit of $7.5 million, is extendable by additional
one-year periods on an annual basis, subject to lenders' approval, and if not
extended, matures three years after its issuance or the last extension, as the
case may be. The Term Revolving Facility is composed of two tranches of $50
million each, one of which was subject to the completion of the Quebec Radio
Stations Acquisition and which became available on February 1, 2011 with the
conclusion of the transaction. The Term Revolving Facility was extended at that
same date and currently matures on February 1, 2014. The Term Revolving Facility
can be repaid at any time without penalty. The Term Revolving Facility is
indirectly secured by a first priority fixed and floating charge and a security
interest on substantially all present and future real and personal property and
undertaking of every nature and kind of the Company and certain of its
subsidiaries, excluding the capital stock and assets of the Company's
subsidiary, Cogeco Cable, and guaranteed by its subsidiaries excluding Cogeco
Cable. Under the terms and conditions of the credit agreement, the Company must
comply with certain restrictive covenants. Generally, the most significant
restrictions are related to permitted investments, dividends on multiple and
subordinate voting shares and reimbursement of long-term debt as well as
incurrence and maintenance of certain financial ratios primarily linked to the
operating income before amortization, financial expense and total indebtedness.
The Term Revolving Facility bears interest, at the Company's option, on bankers'
acceptance, LIBOR in Euros or in US dollars, bank prime rate or US base rate
plus the applicable margin, and commitment fees are payable on the unused
portion.


DIVIDEND DECLARATION

At its April 7, 2011 meeting, the Board of Directors of COGECO declared a
quarterly eligible dividend of $0.12 per share for subordinate and multiple
voting shares, payable on May 5, 2011, to shareholders of record on April 21,
2011. The declaration, amount and date of any future dividend will continue to
be considered and approved by the Board of Directors of the 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 frequency may vary.


FINANCIAL MANAGEMENT

Cogeco Cable has entered into a swap agreement with a financial institution to
fix the floating benchmark interest rate with respect to a portion of the
Euro-denominated loans outstanding under the Term Revolving Facility, and
previously the Term Facility, for a notional amount of EUR111.5 million, which
has been reduced to EUR95.8 million on July 28, 2009, and to EUR69.6 million on
July 28, 2010. The interest rate swap to hedge these loans has been fixed at
2.08% until the maturity of the swap agreement on July 28, 2011. In addition to
the interest rate swap of 2.08%, Cogeco Cable will continue to pay the
applicable margin on these loans in accordance with its Term Revolving Facility.
In the first six months of fiscal 2011, the fair value of interest rate swap
increased by $0.8 million, which is recorded as an increase of other
comprehensive income, net of income taxes and non-controlling interest, compared
to a decrease of $0.2 million which was recorded as a decrease of other
comprehensive income, net of income taxes and non-controlling interest, in the
prior year.


Cogeco Cable has also entered into cross-currency swap agreements to set the
liability for interest and principal payments on its US$190 million Senior
Secured Notes Series A maturing on October 1, 2015. These agreements have the
effect of converting the U.S. interest coupon rate of 7.00% per annum to an
average Canadian dollar interest rate of 7.24% per annum. The exchange rate
applicable to the principal portion of the debt has been fixed at $1.0625 per US
dollar. In the first half of fiscal 2011, amounts due under the US$190 million
Senior Secured Notes Series A decreased by $18.1 million due to the US dollar's
depreciation relative to the Canadian dollar. The fair value of cross-currency
swaps decreased by a net amount of $20.9 million, of which a decrease of $18.1
million offsets the foreign exchange gain on the debt denominated in US dollars.
The difference of $2.8 million was recorded as a decrease of other comprehensive
income, net of income taxes and non-controlling interest. In the first six
months of the prior year, amounts due under the US$190 million Senior Secured
Notes Series A decreased by $8.1 million due to the US dollar's depreciation
over the Canadian dollar. The fair value of cross-currency swaps decreased by a
net amount of $7.2 million, of which $8.1 million offsets the foreign exchange
gain on the debt denominated in US dollars. The difference of $0.9 million was
recorded as an increase of other comprehensive income, net of income taxes and
non-controlling interest.


Furthermore, Cogeco Cable's net investment in self-sustaining foreign
subsidiaries is exposed to market risk attributable to fluctuations in foreign
currency exchange rates, primarily changes in the values of the Canadian dollar
versus the Euro. This risk is mitigated since the major part of the purchase
price for Cabovisao was borrowed directly in Euros. This debt is designated as a
hedge of a net investment in self-sustaining foreign subsidiaries and,
accordingly, Cogeco Cable recorded a foreign exchange loss of $1.4 million in
the first six months of fiscal 2011, compared to $5 million in the comparable
period of the prior year, which is deferred and recorded in the consolidated
statement of comprehensive income, net of non-controlling interest. The exchange
rate used to convert the Euro currency into Canadian dollars for the balance
sheet accounts as at February 28, 2011 was $1.3406 per Euro compared to $1.3515
per Euro as at August 31, 2010. The average exchange rates prevailing during the
second quarter and first six months of fiscal 2011 used to convert the operating
results of the European operations were $1.3369 per Euro and $1.3601 per Euro,
respectively, compared to $1.4905 per Euro and $1.5318 per Euro in the
comparable periods of fiscal 2010. Since Cogeco Cable's consolidated financial
statements are expressed in Canadian dollars but a portion of its business is
conducted in the Euro currency, exchange rate fluctuations can increase or
decrease revenue, operating income before amortization, net income and the
carrying value of assets and liabilities.


The following table shows the Canadian dollar impact of a 10% fluctuation in the
average exchange rate of the Euro currency into Canadian dollars on European
operating results for the six month period ended February 28, 2011: 




----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended February 28, 2011          As reported Exchange rate impact
($000)                                                $                    $
----------------------------------------------------------------------------
                                            (unaudited)          (unaudited)
                                                                            
Revenue                                          85,324                8,532
Operating income before                                                     
 amortization                                     8,417                  842
----------------------------------------------------------------------------
----------------------------------------------------------------------------



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



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                        % of
                                      Net additions (losses)  Penetration(1)
                                 Quarters                                   
                           ended February         Six months                
                                      28, ended February 28,    February 28,
       February 28, 2011    2011     2010      2011     2010    2011    2010
----------------------------------------------------------------------------
RGU            3,327,297  57,079   68,782   147,948  158,567       -       -
Basic Cable                                                                 
 service                                                                    
 customers     1,140,855  (1,543)    (794)    6,083    7,563       -       -
HSI service                                                                 
 customers       753,700  10,992   16,861    31,456   39,576    67.4    63.6
Digital                                                                     
 Television                                                                 
 service                                                                    
 customers       790,585  29,666   26,243    71,315   58,463    69.9    59.0
Telephony                                                                   
 service                                                                    
 customers       642,157  17,964   26,472    39,094   52,965    59.4    53.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)   As a percentage of Basic Cable service customers in areas served.     



In the cable sector, second quarter and first six-month RGU net additions
amounted to 57,079 and 147,948, respectively, compared to 68,782 and 158,567 RGU
in the comparable periods of the previous fiscal year.


Fiscal 2011 second-quarter and first six month RGU net additions were lower than
in the comparable periods of the prior year, as the RGU growth generated by the
Canadian operations, despite higher penetration rates, category maturity and
aggressive competition, was offset by lower RGU growth in the European
operations. Economic conditions in Portugal continued to be difficult, and
Management has not yet detected clear signs of a sustained economic recovery.
Consequently, Cogeco Cable continues to closely control costs and is focusing on
generating RGU growth in the near term. 


Basic Cable service customers net losses stood at 1,543 for the quarter,
compared to 794 in the second quarter of the prior year. For the first six
months, Basic Cable service customers increased by 6,083, compared to 7,563 in
the prior year. In the quarter, Telephony service customers grew by 17,964
compared to 26,472 for the same period last year, and the number of net
additions to the HSI service stood at 10,992 customers compared to 16,861
customers in the second quarter of the prior year. For the first six months, net
additions of Telephony service customers amounted to 39,094 compared to 52,965
for the same period last year, and the number HSI service customers grew by
31,456 compared to 39,576 in the first half of the prior year. HSI and Telephony
net additions continue to stem from the enhancement of the product offering, the
impact of the bundled offer (Cogeco Complete Connection) of Television, HSI and
Telephony services in the Canadian operations, and promotional activities. For
the three and six-month periods ended February 28, 2011, additions to the
Digital Television service stood at 29,666 and 71,315 customers, compared to
26,243 and 58,463 for the comparable periods of the prior year. Digital
Television service net additions are due to targeted marketing initiatives to
improve penetration, the launch of new HD channels and the continuing interest
for HD television service.


OPERATING RESULTS 



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                   Quarters ended February 28, Six months ended February 28,
                       2011       2010  Change       2011       2010  Change
($000, except                                                               
 percentages)             $          $       %          $          $       %
----------------------------------------------------------------------------
                (unaudited)(unaudited)        (unaudited)(unaudited)        
                                                                            
Revenue             336,569    320,397     5.0    668,088    637,762     4.8
Operating costs     199,669    195,106     2.3    395,116    383,524     3.0
Management fees                                                             
 - COGECO Inc.        2,528      2,678   (5.6)      9,172      9,019     1.7
--------------------------------------        ----------------------        
Operating income                                                            
 before                                                                     
 amortization       134,372    122,613     9.6    263,800    245,219     7.6
--------------------------------------        ----------------------        
Operating margin      39.9%      38.3%              39.5%      38.4%        
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Revenue 

Fiscal 2011 second-quarter revenue improved by $16.2 million, or 5%, to reach
$336.6 million, when compared to the prior year. For the first half of fiscal
2011, revenue amounted to $668.1 million, $30.3 million, or 4.8% higher when
compared to $637.8 million in the comparable period of fiscal 2010.


Driven by RGU growth combined with an increase in sales and rentals of home
terminal devices stemming from the strong growth in Digital Television services,
rate increases implemented in the second half of fiscal 2010 and the revenue
related to the new levy amounting to 1.5% of gross Cable Television service
revenue imposed by the CRTC in order to finance the new Local Programming
Improvement Fund ("LPIF"), the Canadian operations' second-quarter revenue rose
by $23.1 million, or 8.5%, to reach $294.5 million, and first six-month revenue
increased by $47 million, or 8.8%, at $582.8 million.


In the second quarter of fiscal 2011 the European operations' revenue decreased
by $6.9 million, or 14.1%, at $42.1 million. First six-month revenue amounted to
$85.3 million, $16.6 million, or 16.3%, less than in the prior year. These
declines in revenue were mainly due to the depreciation of the Euro in relation
to the Canadian dollar and reflect the impact of retention strategies
implemented in the second half of fiscal 2009 in order to offset the recurring
intense promotions and advertising initiatives from competitors in the
Portuguese market. Revenue from the European operations in the local currency
for the three and six-month periods ended February 28, 2011 amounted to EUR31.5
million and EUR62.7 million, decreases of EUR1.4 million, or 4.2%, and EUR3.8
million, or 5.7%, respectively, when compared to the same periods of the prior
year. 


Operating costs

For the second quarter of fiscal 2011, operating costs, excluding management
fees payable to COGECO Inc., increased by $4.6 million, to reach $199.7 million,
an increase of 2.3% compared to the prior year. For the first six months,
operating costs, excluding management fees payable to COGECO Inc. amounted to
$395.1 million, $11.6 million, or 3% higher than in the first half of fiscal
2010.


In the Canadian operations, for the three and six months ended February 28,
2011, operating costs excluding management fees payable to COGECO Inc. increased
by $7.6 million, or 4.9%, at $161.8 million, and by $18.5 million, or 6.2%, at
$318.2 million, respectively. The increases in operating costs are mainly
attributable to servicing additional RGU, the launch of new HD channels and
additional marketing initiatives.


As for the European operations, fiscal 2011 second-quarter operating costs
decreased by $3 million, or 7.4%, at $37.9 million. 2011 first-half operating
costs decreased by $6.9 million, or 8.2%, at $76.9 million. These decreases were
mainly due to the decline of the value of the Euro over the Canadian dollar
which surpassed increases in operating costs related to additional marketing
initiatives and the launch of new HD channels by Cabovisao. Operating costs of
the European operations for the second quarter and first six months in the local
currency amounted to EUR28.4 million, an increase of EUR0.9 million, or 3.3%,
and EUR56.5 million, an increase of EUR1.8 million, or 3.4%, respectively, when
compared to the corresponding periods of the prior year. 


Operating income before amortization and operating margin

Fiscal 2011 second-quarter operating income before amortization increased by
$11.8 million, or 9.6%, to reach $134.4 million. Cogeco Cable's second-quarter
operating margin increased to 39.9% from 38.4% in the comparable period of the
prior year. For the first six months of fiscal 2011, operating income before
amortization amounted to $263.8 million, an increase of $18.6 million, or 7.6%,
when compared to the first half of fiscal 2010. The operating margin increased
to 39.5% in the first half of fiscal 2011 from 38.4% in the first six months of
the prior year.


Operating income before amortization in the Canadian operations rose by $15.6
million, or 13.6%, to reach $130.2 million in the second quarter, mainly due to
the increased revenue exceeding the growth in operating costs. Cogeco Cable's
Canadian operations' operating margin increased to 44.2% in the second quarter
compared to 42.2% for the same period of the prior year. In the first half of
fiscal 2011, operating income before amortization amounted to $255.4 million,
$28.4 million, or 12.5%, higher than in the first half of the prior year. The
operating margin increased to 43.8% from 42.4% when compared to the first six
months of fiscal 2010. The growth in the operating margin for both periods stems
from rate increases and RGU growth. 


For the European operations, operating income before amortization decreased to
$4.1 million in the second quarter from $8 million for the same period of the
prior year, representing a decrease of $3.9 million, or 48.3%. In the first six
months, operating income before amortization decreased by $9.8 million, or
53.7%, at $8.4 million. The reductions are mainly due to decreases in revenue
which outpaced the decreases in operating costs. European operations' operating
margin decreased to 9.9% in the second quarter and first six months of fiscal
2011 from 16.4% in the second quarter and 17.8% in the first six months of
fiscal 2010. Operating income before amortization in the local currency amounted
to EUR3.1 million compared to EUR5.4 million in the second quarter of the prior
year, representing a decrease of 42.3%, and EUR6.2 million compared to EUR11.8
million in the first six months, representing a decrease of 47.7%.


CONTROLS AND PROCEDURES 

The President and Chief Executive Officer ("CEO") and the Senior Vice President
and Chief Financial Officer ("CFO"), together with Management, are responsible
for establishing and maintaining adequate disclosure controls and procedures and
internal controls over financial reporting, as defined in NI 52-109. COGECO's
internal control framework is based on the criteria published in the report
"Internal Control-Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission and is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with Canadian GAAP.


The CEO and CFO, supported by Management, evaluated the design of the Company's
disclosure controls and procedures and internal controls over financial
reporting as at February 28, 2011, and have concluded that they were adequate.
Furthermore, no significant changes to the internal controls over financial
reporting occurred during the quarter ended February 28, 2011.


However, in the first quarter of fiscal 2011, the Company introduced a new
financial suite under an integrated Oracle platform. This project was required
in order to adequately support the implementation of the International Financial
Reporting Standards ("IFRS") and to remain current with the operational platform
used by the Company. Following the introduction of this new financial suite,
internal controls over financial reporting have been updated in order to support
adequate disclosure controls and procedures. 


UNCERTAINTIES AND MAIN RISK FACTORS 

There has been no significant change in the uncertainties and main risk factors
faced by the Company since August 31, 2010. A detailed description of the
uncertainties and main risk factors faced by COGECO can be found in the 2010
Annual Report. 


ACCOUNTING POLICIES AND ESTIMATES

There has been no significant change in COGECO's accounting policies, estimates
and future accounting pronouncements since August 31, 2010, except as described
below. A description of the Company's policies and estimates can be found in the
2010 Annual Report.


Future accounting pronouncements

Adoption of International accounting standards

In March 2006, the Canadian Accounting Standards Board ("AcSB") of the Canadian
Institute of Chartered Accountants ("CICA") released its new strategic plan,
which proposed to abandon Canadian GAAP and effect a complete convergence to the
IFRS for Canadian publicly accountable entities. This plan was confirmed in
subsequent exposure drafts issued in April 2008, March 2009 and October 2009.
The changeover will occur no later than fiscal years beginning on or after
January 1, 2011. Accordingly, the Company's first interim consolidated financial
statements presented in accordance with IFRS will be for the quarter ending
November 30, 2011, and its first annual consolidated financial statements
presented in accordance with IFRS will be for the year ending August 31, 2012.


IFRS uses a conceptual framework similar to Canadian GAAP, but there are
significant differences in recognition, measurement and disclosure requirements.
The 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, which oversees the IFRS
implementation project on behalf of the Board of Directors. The Company is
assisted by external advisors as required.


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




---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                                                           
Phase          Area of    Key activities                     Status        
               impact                                                      
---------------------------------------------------------------------------
Scoping and    Pervasive  Perform a high-level impact        Completed     
diagnostic                assessment to identify key areas                 
                          that are expected to be impacted                 
                          by the transition to IFRS.                       
                                                                           
                          Rank IFRS impacts in order of                    
                          priority to assess the timing and                
                          complexity of transition efforts                 
                          that will be required in                         
                          subsequent phases.                               
---------------------------------------------------------------------------
Impact         For each   Identify the specific changes      Completed     
analysis,      area       required to existing accounting                  
evaluation and identified policies.                                        
design         in the                                                      
               scoping and                                                 
               diagnostic                                                  
               phase                                                       
                                                                           
                          Analyse policy choices permitted                 
                          under IFRS.                                      
                          Present analysis and                             
                          recommendations on accounting                    
                          policy choices to the Audit                      
                          Committee.                                       
               ------------------------------------------------------------
               Pervasive  Identify impacts on information    Completed     
                          systems and business processes.                  
                                                                           
                          Prepare draft IFRS consolidated                  
                          financial statement template.                    
                          Identify impacts on internal                     
                          controls over financial reporting                
                          and other business processes.                    
---------------------------------------------------------------------------
Implementation For each   Test and execute changes to        Completed     
and review     area       information systems and business                 
               identified processes.                                       
               in the                                                      
               scoping and                                                 
               diagnostic                                                  
               phase                                                       
                          -------------------------------------------------
                          Obtain formal approval of required In progress - 
                          accounting policy changes and      to be         
                          selected accounting policy         completed in  
                          choices.                           fiscal 2011   
                          -------------------------------------------------
                          Communicate impact on accounting   To be         
                          policies and business processes to completed     
                          external stakeholders.             during fiscal 
                                                             2011          
               ------------------------------------------------------------
               Pervasive  Gather financial information       In progress - 
                          necessary for opening balance      to be         
                          sheet and comparative IFRS         completed in  
                          financial statements.              fiscal 2011   
                                                                           
                          Update and test internal control                 
                          processes over financial reporting               
                          and other business processes.                    
                          -------------------------------------------------
                          Collect financial information      In progress - 
                          necessary to compile IFRS-         to be         
                          compliant financial statements.    completed     
                                                             during fiscal 
                                                             2012          
                                                                           
                          Provide training to employees and                
                          end-users across the organization.               
                          Prepare IFRS compliant financial                 
                          statements.                                      
                          Obtain the approval from the Audit               
                          Committee of the IFRS consolidated               
                          financial statements.                            
                          -------------------------------------------------
                          Continually review IFRS and        To be         
                          implement changes to the standards completed     
                          as they apply to the Company.      throughout    
                                                             transition and
                                                             post-         
                                                             conversion    
                                                             periods       
                                                                           
---------------------------------------------------------------------------
---------------------------------------------------------------------------



The Company's project for the transition from Canadian GAAP to IFRS is
progressing according to the established plan and the Company expects to meet
its target date for migration. 


Multiple deliverable revenue arrangements

In December 2009, the Emerging Issues Committee ("EIC") of the Canadian AcSB
issued a new abstract concerning multiple deliverable revenue arrangements,
EIC-175, Multiple deliverable revenue arrangements, which amended EIC-142,
Revenue arrangements with multiple deliverables. EIC-175 requires a vendor to
allocate arrangement consideration at the inception of the arrangement to all
deliverables using the relative selling price method, thereby eliminating the
use of the residual value method. The amendment also changes the level of
evidence of the standalone selling price required to separate deliverables when
more objective evidence of the selling price is not available. EIC-175 should be
adopted prospectively to revenue arrangements entered into or materially
modified in the first annual fiscal period beginning on or after January 1,
2011, with early adoption permitted. The Company has elected not to early-adopt
this EIC, and in light of the adoption of International accounting standards
taking effect at that same date, this EIC will not be applicable to the Company.


NON-GAAP FINANCIAL 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", "free cash flow", "operating income before amortization",
"operating margin", "adjusted net income", and "adjusted earnings per share".


Cash flow from operations and free cash flow

Cash flow from operations is used by COGECO'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 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.


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




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                     Quarters ended        Six months ended 
                                       February 28,            February 28, 
                                   2011        2010        2011        2010 
($000)                                $           $           $           $ 
----------------------------------------------------------------------------
                             (unaudited) (unaudited) (unaudited) (unaudited)
                                                                            
Cash flow from operating                                                    
 activities                      96,664     117,498     154,236     116,088 
Changes in non-cash                                                         
 operating items                 24,011       2,833       8,938     139,761 
----------------------------------------------------------------------------
Cash flow from operations       120,675     120,331     163,174     255,849 
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Free cash flow is calculated as follows:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                     Quarters ended        Six months ended 
                                       February 28,            February 28, 
                                   2011        2010        2011        2010 
($000)                                $           $           $           $ 
----------------------------------------------------------------------------
                             (unaudited) (unaudited) (unaudited) (unaudited)
                                                                            
Cash flow from operations       120,675     120,331     163,174     255,849 
Acquisition of fixed assets     (70,200)    (72,094)   (133,507)   (137,276)
Increase in deferred charges     (2,262)     (2,455)     (5,754)     (5,519)
Assets acquired under                                                       
 capital leases - as per                                                    
 note 12 c)                           -           -           -        (141)
----------------------------------------------------------------------------
Free cash flow                   48,213      45,782      23,913     112,913 
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Operating income before amortization and operating margin

Operating income 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 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 available, before taxes, to pay for its fixed costs,
such as interest on Indebtedness. Operating margin is calculated by dividing
operating income before amortization by revenue.


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




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                     Quarters ended        Six months ended 
                                       February 28,            February 28, 
                                   2011        2010        2011        2010 
($000, except percentages)            $           $           $           $ 
----------------------------------------------------------------------------
                             (unaudited) (unaudited) (unaudited) (unaudited)
                                                                            
Operating income                 70,525      58,370     144,417     121,932 
Amortization                     65,427      65,993     128,566     131,694 
----------------------------------------------------------------------------
Operating income before                                                     
 amortization                   135,952     124,363     272,983     253,626 
----------------------------------------------------------------------------
Revenue                         350,644     329,087     693,410     657,090 
----------------------------------------------------------------------------
Operating margin                   38.8%       37.8%       39.4%       38.6%
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Adjusted net income and adjusted earnings per share

Adjusted net income and adjusted earnings per share are used by COGECO's
management and investors to evaluate what would have been the net income and
earnings per share excluding unusual adjustments. This allows the Company to
isolate the unusual adjustments in order to evaluate the net income and earnings
per share from ongoing activities.


The most comparable Canadian GAAP financial measures are net income and earnings
per share. These above-mentioned non-GAAP financial measures are calculated as
follows:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                     Quarters ended        Six months ended 
                                       February 28,            February 28, 
                                   2011        2010        2011        2010 
($000, except number of                                                     
 shares and per share data)           $           $           $           $ 
----------------------------------------------------------------------------
                             (unaudited) (unaudited) (unaudited) (unaudited)
                                                                            
Net income                       10,645      10,511      26,620      33,259 
Adjustments:                                                                
Reduction of Ontario                                                        
 provincial corporate income                                                
 tax rates, net of non-                                                     
 controlling interest                 -           -           -      (9,620)
----------------------------------------------------------------------------
Adjusted net income              10,645      10,511      26,620      23,639 
----------------------------------------------------------------------------
                                                                            
Weighted average number of                                                  
 multiple voting and                                                        
 subordinate voting shares                                                  
 outstanding                 16,713,884  16,714,030  16,721,074  16,721,865 
Effect of dilutive stock                                                    
 options                         10,283      14,436      11,060      11,152 
Effect of dilutive                                                          
 subordinate voting shares                                                  
 held in trust under the                                                    
 Incentive Share Unit Plan       95,358      71,862      84,627      63,745 
----------------------------------------------------------------------------
Weighted average number of                                                  
 diluted multiple voting and                                                
 subordinate voting shares                                                  
 outstanding                 16,819,525  16,800,328  16,816,761  16,796,762 
----------------------------------------------------------------------------
                                                                            
Adjusted earnings per share                                                 
  Basic                            0.64        0.63        1.59        1.41 
  Diluted                          0.63        0.63        1.58        1.41 
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Supplementary Quarterly Financial Information 



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Quarters ended(1)                      February 28,            November 30, 
($000, except percentages                                                   
 and per share data)               2011        2010        2010        2009 
----------------------------------------------------------------------------
                             (unaudited) (unaudited) (unaudited) (unaudited)
                                                                            
Revenue                         350,644     329,087     342,766     328,003 
Operating income before                                                     
 amortization                   135,952     124,363     137,031     129,263 
Operating margin                   38.8%       37.8%       40.0%       39.4%
Operating income                 70,525      58,370      73,892      63,562 
Net income                       10,645      10,511      15,975      22,748 
Adjusted net income              10,645      10,511      15,975      13,128 
Cash flow from operating                                                    
 activities                      96,664     117,498      57,572      (1,410)
Cash flow from operations       120,675     120,331      42,499     135,518 
Capital expenditures and                                                    
 increase in deferred                                                       
 charges                         72,462      74,549      66,799      68,387 
Free cash flow                   48,213      45,782     (24,300)     67,131 
Earnings per share(2)                                                       
  Basic                            0.64        0.63        0.95        1.36 
  Diluted                          0.63        0.63        0.95        1.35 
Adjusted earnings per                                                       
 share(2)                                                                   
  Basic                            0.64        0.63        0.95        0.79 
  Diluted                          0.63        0.63        0.95        0.78 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Quarters ended(1)                        August 31,                 May 31, 
($000, except percentages                                                   
 and per share data)               2010        2009        2010        2009 
----------------------------------------------------------------------------
                             (unaudited) (unaudited) (unaudited) (unaudited)
                                                                            
Revenue                         333,671     316,284     330,933     316,310 
Operating income before                                                     
 amortization                   137,785     144,654     127,928     126,624 
Operating margin                   41.3%       45.7%       38.7%       40.0%
Operating income                 73,942      76,244      64,008      62,623 
Net income                       12,265      14,631      10,740      10,704 
Adjusted net income              12,265       7,647      10,740       9,157 
Cash flow from operating                                                    
 activities                     198,492     177,032     110,756      99,873 
Cash flow from operations       127,230     108,744     119,140      92,718 
Capital expenditures and                                                    
 increase in deferred                                                       
 charges                        108,515      94,002      69,511      60,302 
Free cash flow                   18,715      14,742      49,629      32,416 
Earnings per share(2)                                                       
  Basic                            0.73        0.87        0.64        0.64 
  Diluted                          0.73        0.87        0.64        0.64 
Adjusted earnings per                                                       
 share(2)                                                                   
  Basic                            0.73        0.46        0.64        0.55 
  Diluted                          0.73        0.46        0.64        0.55 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)   The addition of quarterly information may not correspond to the annual
      total due to rounding.                                                
(2)   Per multiple and subordinate voting share.                            



ADDITIONAL INFORMATION

This MD&A was prepared on April 7, 2011. Additional information relating to the
Company, including its Annual Report and Annual Information Form, is available
on the SEDAR website at www.sedar.com.


SEASONAL VARIATIONS

Cogeco Cable's operating results are not generally subject to material seasonal
fluctuations. However, the customer growth in the Basic Cable and HSI services
are generally lower in the second half of the fiscal year as a result of a
decrease in economic activity due to the beginning of the vacation period, the
end of the television seasons, and students leaving their campuses at the end of
the school year. Cogeco Cable offers its services in several university and
college towns such as Kingston, Windsor, St. Catharines, Hamilton, Peterborough,
Trois-Rivieres and Rimouski in Canada, and Aveiro, Covilha, Evora, Guarda and
Coimbra in Portugal. Furthermore, the operating margin in the third and fourth
quarters is generally higher as the maximum amount payable to COGECO under the
management agreement is usually reached in the second quarter of the year. As
part of the management agreement between Cogeco Cable and COGECO, Cogeco Cable
pays management fees to COGECO equivalent to 2% of its revenue subject to an
annual maximum amount, which is adjusted annually to reflect the increase in the
Canadian Consumer Price index. As the fiscal 2011 maximum amount of $9.2 million
has been reached in the second quarter, Cogeco Cable will not pay management
fees in the second half of fiscal 2011. Similarly, as the maximum amount of $9
million was paid in the first six months of fiscal 2010, Cogeco Cable paid no
management fees in the second half of the previous fiscal year.




SIGNED                             SIGNED                               
Jan Peeters                        Louis Audet                          
Chairman of the Board              President and Chief Executive Officer
                                                                        
COGECO Inc.                                                             
Montreal, Quebec                                                        
April 8, 2011                                                           



INTERIM FINANCIAL STATEMENTS

Second quarter ended February 28, 2011



COGECO INC.                                                                 
CONSOLIDATED STATEMENTS OF INCOME                                           
(unaudited)                                                                 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                   Three months ended      Six months ended 
                                         February 28,          February 28, 
(In thousands of dollars, except                                            
 per share data)                      2011       2010       2011       2010 
                                         $          $          $          $ 
----------------------------------------------------------------------------
                                                                            
Revenue                            350,644    329,087    693,410    657,090 
Operating costs                    214,692    204,724    420,427    403,464 
----------------------------------------------------------------------------
                                                                            
Operating income before                                                     
 amortization                      135,952    124,363    272,983    253,626 
Amortization (note 4)               65,427     65,993    128,566    131,694 
----------------------------------------------------------------------------
                                                                            
Operating income                    70,525     58,370    144,417    121,932 
Financial expense (note 5)          24,501     15,187     41,406     31,464 
----------------------------------------------------------------------------
                                                                            
Income before income taxes and                                              
 the following items                46,024     43,183    103,011     90,468 
Income taxes (note 6)               14,277     12,525     32,521     (1,293)
Gain on dilution resulting from                                             
 the issuance of shares by a                                                
 subsidiary                            (56)       (18)       (61)       (18)
Non-controlling interest            21,158     20,165     43,931     58,520 
----------------------------------------------------------------------------
                                                                            
Net income                          10,645     10,511     26,620     33,259 
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings per share (note 7)                                                 
  Basic                               0.64       0.63       1.59       1.99 
  Diluted                             0.63       0.63       1.58       1.98 
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



COGECO INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited) 



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                   Three months ended      Six months ended 
                                         February 28,          February 28, 
(In thousands of dollars)             2011       2010       2011       2010 
                                         $          $          $          $ 
----------------------------------------------------------------------------
                                                                            
Net income                          10,645     10,511     26,620     33,259 
----------------------------------------------------------------------------
Other comprehensive income                                                  
 (loss)                                                                     
  Unrealized losses on                                                      
   derivative financial                                                     
   instruments designated as                                                
   cash flow hedges, net of                                                 
   income tax recovery of                                                   
   $2,334,000 and $3,300,000                                                
   ($333,000 and $2,474,000 in                                              
   2010) and non-controlling                                                
   interest of $8,050,000 and                                               
   $11,346,000 ($782,000 and                                                
   $3,333,000 in 2010)              (3,816)      (373)    (5,387)    (1,591)
  Reclassification to net income                                            
   of unrealized losses on                                                  
   derivative financial                                                     
   instruments designated as                                                
   cash flow hedges, net of                                                 
   income tax recovery of                                                   
   $1,411,000 and $2,328,000                                                
   ($79,000 and $1,086,000 in                                               
   2010) and non-controlling                                                
   interest of $6,155,000 and                                               
   $10,667,000 ($345,000 and                                                
   $4,731,000 in 2010)               2,922        165      5,074      2,258 
  Unrealized gains (losses) on                                              
   translation of a net                                                     
   investment in self-sustaining                                            
   foreign subsidiaries, net of                                             
   non-controlling interest of                                              
   $943,000 and $1,185,000                                                  
   ($17,813,000 and $15,969,000                                             
   in 2010)                            447     (8,503)      (568)    (7,621)
  Unrealized gains (losses) on                                              
   translation of long-term debt                                            
   designated as hedges of a net                                            
   investment in self-sustaining                                            
   foreign subsidiaries, net of                                             
   non-controlling interest of                                              
   $560,000 and $271,000                                                    
   ($13,988,000 and $12,573,000                                             
   in 2010)                           (266)     6,676        130      6,000 
----------------------------------------------------------------------------
                                      (713)    (2,035)      (751)      (954)
----------------------------------------------------------------------------
Comprehensive income                 9,932      8,476     25,869     32,305 
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



COGECO INC. 
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS 
(unaudited) 



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                           Six months ended 
                                                               February 28, 
(In thousands of dollars)                                  2011        2010 
                                                              $           $ 
----------------------------------------------------------------------------
                                                                            
Balance at beginning, as previously reported            253,169     211,922 
Changes in accounting policies                               --      (7,894)
----------------------------------------------------------------------------
Balance at beginning, as restated                       253,169     204,028 
Net income                                               26,620      33,259 
Excess of the value attributed to the incentive                             
 share units at issuance (price paid for the                                
 acquisition of the subordinate voting shares) over                         
 the price paid for the acquisition of the                                  
 subordinate voting shares (value attributed to the                         
 incentive share units at issuance)                          45        (430)
Dividends on multiple voting shares                        (442)       (366)
Dividends on subordinate voting shares                   (3,572)     (2,988)
----------------------------------------------------------------------------
Balance at end                                          275,820     233,503 
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



COGECO INC. 
CONSOLIDATED BALANCE SHEETS
(unaudited)



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                    February 28,  August 31,
(In thousands of dollars)                                   2011        2010
                                                               $           $
----------------------------------------------------------------------------
Assets                                                                      
Current                                                                     
  Cash and cash equivalents (note 12 b))                  26,435      35,842
  Accounts receivable (note 14)                          105,344      74,560
  Income taxes receivable                                 43,935      45,400
  Prepaid expenses and other                              15,258      14,189
  Future income tax assets                                 5,308       6,133
  Assets held for sale (note 15)                             436           -
----------------------------------------------------------------------------
                                                         196,716     176,124
                                                                            
Investments                                                  539         739
Fixed assets                                           1,349,932   1,328,866
Deferred charges                                          27,483      27,960
Intangible assets (note 8)                             1,088,804   1,042,998
Goodwill (note 8)                                        171,692     144,695
Derivative financial instruments                               -       5,085
Future income tax assets                                  11,883      18,189
Assets held for sale (note 15)                             9,878           -
----------------------------------------------------------------------------
                                                                            
                                                       2,856,927   2,744,656
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities and Shareholders' equity                                        
Liabilities                                                                 
Current                                                                     
  Bank indebtedness                                            -       2,328
  Accounts payable and accrued liabilities               192,911     248,775
  Income tax liabilities                                  75,450         558
  Deferred and prepaid revenue                            45,414      45,602
  Derivative financial instrument                            356       1,189
  Promissory note payable, non-interest bearing and                         
   due on February 1, 2012 (note 2)                        5,000           -
  Current portion of long-term debt (note 9)               2,454       2,329
  Future income tax liabilities                           38,017      78,267
  Liabilities related to assets held for sale (note                         
   15)                                                     1,280           -
----------------------------------------------------------------------------
                                                         360,882     379,048
                                                                            
Long-term debt (note 9)                                1,003,575     952,741
Derivative financial instruments                          15,781           -
Deferred and prepaid revenue and other liabilities        20,377      12,234
Pension plan liabilities and accrued employees                              
 benefits                                                 12,496      10,568
Future income tax liabilities                            235,740     238,699
Liabilities related to assets held for sale (note                           
 15)                                                         976           -
----------------------------------------------------------------------------
                                                       1,649,827   1,593,290
----------------------------------------------------------------------------
Non-controlling interest                                 803,954     769,731
----------------------------------------------------------------------------
                                                                            
Shareholders' equity                                                        
Capital stock (note 10)                                  119,332     119,527
Contributed surplus                                        2,811       3,005
Retained earnings                                        275,820     253,169
Accumulated other comprehensive income (note 11)           5,183       5,934
----------------------------------------------------------------------------
                                                         403,146     381,635
----------------------------------------------------------------------------
                                                                            
                                                       2,856,927   2,744,656
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 COGECO INC.                                                                
 CONSOLIDATED STATEMENTS OF CASH FLOWS                                      
 (Unaudited)                                                                
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                     Three months ended    Six months ended 
                                           February 28,        February 28, 
(In thousands of dollars)                2011      2010      2011      2010 
                                            $         $         $         $ 
--------------------------------------------------------------------------- 
                                                                            
Cash flow from operating activities                                         
Net income                             10,645    10,511    26,620    33,259 
Adjustments for:                                                            
  Amortization (note 4)                65,427    65,993   128,566   131,694 
  Amortization of deferred                                                  
   transaction costs and discounts                                          
   on long-term debt                      983       780     1,761     1,542 
  Future income taxes                  19,431    22,232   (42,468)   28,636 
  Non-controlling interest             21,158    20,165    43,931    58,520 
  Gain on dilution resulting from                                           
   the issuance of shares by a                                              
   subsidiary                             (56)      (18)      (61)      (18)
  Stock-based compensation (note 10)    1,315       856     1,993     1,564 
  Loss (gain) on disposals and                                              
   write-offs of fixed assets           1,084       (36)    1,404        62 
  Other                                   688      (152)    1,428       590 
--------------------------------------------------------------------------- 
                                      120,675   120,331   163,174   255,849 
Changes in non-cash operating items                                         
 (note 12 a))                         (24,011)   (2,833)   (8,938) (139,761)
--------------------------------------------------------------------------- 
                                       96,664   117,498   154,236   116,088 
--------------------------------------------------------------------------- 
                                                                            
Cash flow from investing activities                                         
Acquisition of fixed assets (note 12                                        
 c))                                  (70,200)  (72,094) (133,507) (137,276)
Increase in deferred charges           (2,262)   (2,455)   (5,754)   (5,519)
Business acquisition, net of cash                                           
 and cash equivalents acquired (note                                        
 2)                                   (75,883)        -   (75,883)        - 
Other                                       -       102         -       122 
--------------------------------------------------------------------------- 
                                     (148,345)  (74,447) (215,144) (142,673)
--------------------------------------------------------------------------- 
                                                                            
Cash flow from financing activities                                         
Increase (decrease) in bank                                                 
 indebtedness                            (740)    3,305    (2,328)   49,629 
Net increases (repayments) under the                                        
 Term Facilities and Term Revolving                                         
 Facilities                            59,903   (39,495)   46,103   (28,070)
Issuance of long-term debt, net of                                          
 discounts and transaction costs          (25)        -   198,295         - 
Repayments of long-term debt         (175,703)     (862) (176,529)   (2,086)
Issuance of subordinate voting                                              
 shares (note 10)                         629       353       629       353 
Acquisition of subordinate voting                                           
 shares held in trust under the                                             
 Incentive Share Unit Plan (note 10)        -         -    (1,282)   (1,049)
Dividends on multiple voting shares      (221)     (182)     (442)     (366)
Dividends on subordinate voting                                             
 shares                                (1,786)   (1,494)   (3,572)   (2,988)
Issuance of shares by a subsidiary                                          
 to non-controlling interest            3,889       283     4,179       283 
Acquisition by a subsidiary from                                            
 non-controlling interest of                                                
 subordinate voting shares held in                                          
 trust under the Incentive Share                                            
 Unit Plan (note 10)                        -         -    (2,258)   (1,744)
Dividends paid by a subsidiary to                                           
 non-controlling interest              (5,577)   (4,602)  (11,159)   (9,203)
--------------------------------------------------------------------------- 
                                     (119,631)  (42,694)   51,636     4,759 
--------------------------------------------------------------------------- 
                                                                            
Effect of exchange rate changes on                                          
 cash and cash equivalents                                                  
 denominated in a foreign currency         94    (1,102)     (135)     (900)
--------------------------------------------------------------------------- 
Net change in cash and cash                                                 
 equivalents                         (171,218)     (745)   (9,407)  (22,726)
--------------------------------------------------------------------------- 
Cash and cash equivalents at                                                
 beginning                            197,653    17,477    35,842    39,458 
--------------------------------------------------------------------------- 
Cash and cash equivalents at end       26,435    16,732    26,435    16,732 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                            
See supplemental cash flow information in note 12.                          
                                                                            
                                                                            
                                                                            
COGECO INC.                                                                 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                              
February 28, 2011                                                           
(unaudited)                                                                 
(amounts in tables are in thousands of dollars, except number of shares and 
per share data)                                                             

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


While management believes that the disclosures presented are adequate, these
unaudited interim consolidated financial statements and notes should be read in
conjunction with COGECO Inc.'s annual consolidated financial statements for the
year ended August 31, 2010. These unaudited interim consolidated financial
statements have been prepared using the same accounting policies and methods as
the most recent annual consolidated financial statements. 


Future accounting pronouncements

Multiple deliverable revenue arrangements

In December 2009, the Emerging Issues Committee ("EIC") of the Canadian
Accounting Standards Board issued a new abstract concerning multiple deliverable
revenue arrangements, EIC-175, Multiple deliverable revenue arrangements, which
amended EIC-142, Revenue arrangements with multiple deliverables. EIC-175
requires a vendor to allocate arrangement consideration at the inception of the
arrangement to all deliverables using the relative selling price method, thereby
eliminating the use of the residual value method. The amendment also changes the
level of evidence of the standalone selling price required to separate
deliverables when more objective evidence of the selling price is not available.
EIC-175 should be adopted prospectively to revenue arrangements entered into or
materially modified in the first annual fiscal period beginning on or after
January 1, 2011, with early adoption permitted. The Company has elected not to
early-adopt this EIC, and in light of the adoption of International accounting
standards taking effect at that same date, this EIC will not be applicable to
the Company.




2.  Business acquisition 



On April 30, 2010, the Company concluded an agreement with Corus Entertainment
Inc. ("Corus") to acquire its Quebec radio stations for $80 million, subject to
customary closing adjustments and conditions, including approval by the Canadian
Radio-television and Telecommunications Commission ("CRTC"). On June 30, 2010,
the Company submitted its application for approval of the acquisition to the
CRTC. On December 17, 2010, the CRTC approved the transaction essentially as
proposed. On January 11, 2011, the Company was served with an application by
Astral Media Radio Inc. ("Astral") to the Federal Court of Appeal ("Court") for
leave to appeal the CRTC decision approving the transaction, and a related
application by Astral for a stay of execution of that decision until final
judgement of the Court. On February 21, 2011 the Court rejected applications
filed by Astral in the matter of COGECO's acquisition of the Corus radio
stations in Quebec. The transaction with Corus was concluded on February 1,
2011.


Pursuant to this acquisition, and as part of CRTC's decision on the Company's
transfer application, the Company has put up for sale two radio stations
acquired, CFEL-FM in the Quebec City market and CJTS-FM in the Sherbrooke
market. Accordingly, the assets and liabilities of the two acquired radio
stations put up for sale have been classified as held for sale in the
preliminary purchase price allocation presented below. In addition to the two
acquired radio stations above, and also as part of the CRTC's decision, the
Company has put up for sale radio station CJEC-FM, which it owned prior to the
acquisition, in the Quebec City market. Radio stations for which divestiture has
been required by the CRTC, and the sale process, are managed by a trustee
approved by the CRTC pursuant to a voting trust agreement. 


This acquisition was accounted for using the purchase method. The results have
been consolidated as of the acquisition date. The preliminary allocation of the
purchase price of the acquisition, pending the completion of the valuation of
the net assets acquired, is as follows:




------------------------------------------------------------------------- 
------------------------------------------------------------------------- 
                                                                        $ 
------------------------------------------------------------------------- 
                                                                          
Consideration                                                             
Paid                                                                      
  Purchase of shares                                               75,000 
  Acquisition costs                                                 1,530 
------------------------------------------------------------------------- 
                                                                   76,530 
                                                                          
Promissory note payable, non-interest bearing and due on                  
 February 1, 2012                                                   5,000 
Investment previously accounted for                                   200 
Acquisition costs previously recorded as deferred charges             435 
Preliminary working capital adjustment payable                      4,000 
------------------------------------------------------------------------- 
                                                                   86,165 
------------------------------------------------------------------------- 
                                                                          
Net assets acquired                                                       
Cash and cash equivalents                                             647 
Accounts receivable                                                14,132 
Income tax receivable                                                  92 
Prepaid expenses and other                                            527 
Current future income tax assets                                    1,018 
Fixed assets                                                       11,497 
Deferred charges and other                                             99 
Broadcasting licenses                                              48,193 
Goodwill                                                           27,227 
Non-current future income taxes assets                              2,272 
Non-current assets held for sale                                    9,531 
Accounts payable and accrued liabilities assumed                   (9,058)
Income tax liabilities assumed                                       (194)
Current liabilities related to assets held for sale                  (797)
Deferred and prepaid income and other liabilities                  (7,390)
Non-current future income taxes liabilities                       (10,656)
Non-current liabilities related to assets held for sale              (975)
------------------------------------------------------------------------- 
                                                                   86,165 
                                                                          
------------------------------------------------------------------------- 
------------------------------------------------------------------------- 

3.  Segmented Information 



The Company's activities are divided into two business segments: Cable and
other. The Cable segment is comprised of Cable Television, High Speed Internet,
Telephony and other telecommunications services, and the other segment is
comprised of radio and head office activities, as well as eliminations. The
Cable segment's activities are carried out in Canada and in Europe. 


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




--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                            Other and                       
                               Cable     eliminations          Consolidated 
--------------------------------------------------------------------------- 
Three months                                                                
 ended February                                                             
 28,                 2011       2010     2011    2010       2011       2010 
                        $          $        $       $          $          $ 
--------------------------------------------------------------------------- 
                                                                            
Revenue           336,569    320,397   14,075   8,690    350,644    329,087 
Operating costs   202,197    197,784   12,495   6,940    214,692    204,724 
Operating                                                                   
 income before                                                              
 amortization     134,372    122,613    1,580   1,750    135,952    124,363 
Amortization       65,079     65,839      348     154     65,427     65,993 
Operating                                                                   
 income            69,293     56,774    1,232   1,596     70,525     58,370 
Financial                                                                   
 expense           24,125     15,033      376     154     24,501     15,187 
Income taxes       14,017     11,952      260     573     14,277     12,525 
Gain on                                                                     
 dilution                                                                   
 resulting from                                                             
 the issuance                                                               
 of shares by a                                                             
 subsidiary           (56)       (18)       -       -        (56)       (18)
Non-controlling                                                             
 interest          21,158     20,165        -       -     21,158     20,165 
Net income         10,049      9,642      596     869     10,645     10,511 
--------------------------------------------------------------------------- 
Total assets                                                                
 (1)            2,694,331  2,702,819  162,596  41,837  2,856,927  2,744,656 
Fixed assets                                                                
 (1)            1,333,314  1,325,077   16,618   3,789  1,349,932  1,328,866 
Intangible                                                                  
 assets (1)     1,015,271  1,017,658   73,533  25,340  1,088,804  1,042,998 
Goodwill (1)      144,465    144,695   27,227       -    171,692    144,695 
Acquisition of                                                              
 fixed assets                                                               
 (2)               68,152     71,924    2,048     170     70,200     72,094 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                            
(1) At February 28, 2011 and August 31, 2010.                               
(2) Includes fixed assets acquired through capital leases that are excluded 
    from the consolidated statements of cash flows.                         
                                                                            
                                                                            
                                                                            
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                            Other and                       
                               Cable     eliminations          Consolidated 
--------------------------------------------------------------------------- 
Six months                                                                  
 ended February                                                             
 28,                 2011       2010     2011    2010       2011       2010 
                        $          $        $       $          $          $ 
--------------------------------------------------------------------------- 
                                                                            
Revenue           668,088    637,762   25,322  19,328    693,410    657,090 
Operating costs   404,288    392,543   16,139  10,921    420,427    403,464 
Operating                                                                   
 income before                                                              
 amortization     263,800    245,219    9,183   8,407    272,983    253,626 
Amortization      128,069    131,404      497     290    128,566    131,694 
Operating                                                                   
 income           135,731    113,815    8,686   8,117    144,417    121,932 
Financial                                                                   
 expense           40,825     31,174      581     290     41,406     31,464 
Income taxes       30,118     (3,814)   2,403   2,521     32,521     (1,293)
Gain on                                                                     
 dilution                                                                   
 resulting from                                                             
 the issuance                                                               
 of shares by a                                                             
 subsidiary           (61)       (18)       -       -        (61)       (18)
Non-controlling                                                             
 interest          43,931     58,520        -       -     43,931     58,520 
Net income         20,918     27,953    5,702   5,306     26,620     33,259 
--------------------------------------------------------------------------- 
Total assets                                                                
 (1)            2,694,331  2,702,819  162,596  41,837  2,856,927  2,744,656 
Fixed assets                                                                
 (1)            1,333,314  1,325,077   16,618   3,789  1,349,932  1,328,866 
Intangible                                                                  
 assets (1)     1,015,271  1,017,658   73,533  25,340  1,088,804  1,042,998 
Goodwill (1)      144,465    144,695   27,227       -    171,692    144,695 
Acquisition of                                                              
 fixed assets                                                               
 (2)              131,361    137,081    2,146     336    133,507    137,417 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                            
(1) At February 28, 2011 and August 31, 2010.                               
(2) Includes fixed assets acquired through capital leases that are excluded 
    from the consolidated statements of cash flows.                         



The following tables set out certain geographic market information based on
client location:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                        February 28,            February 28,
                                    2011        2010        2011        2010
                                       $           $           $           $
----------------------------------------------------------------------------
                                                                            
Revenue                                                                     
  Canada                         308,583     280,120     608,086     555,118
  Europe                          42,061      48,967      85,324     101,972
----------------------------------------------------------------------------
                                 350,644     329,087     693,410     657,090
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                    February 28,  August 31,
                                                            2011        2010
                                                               $           $
----------------------------------------------------------------------------
                                                                            
Fixed assets                                                                
  Canada                                               1,130,111   1,098,760
  Europe                                                 219,821     230,106
----------------------------------------------------------------------------
                                                       1,349,932   1,328,866
----------------------------------------------------------------------------
                                                                            
Intangible assets                                                           
  Canada                                               1,088,804   1,042,998
  Europe                                                       -           -
----------------------------------------------------------------------------
                                                       1,088,804   1,042,998
----------------------------------------------------------------------------
                                                                            
Goodwill                                                                    
  Canada                                                 143,470     116,243
  Europe                                                  28,222      28,452
----------------------------------------------------------------------------
                                                         171,692     144,695
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------

4.  Amortization 

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                        February 28,            February 28,
                                    2011        2010        2011        2010
                                       $           $           $           $
----------------------------------------------------------------------------
                                                                            
Fixed assets                      61,525      62,117     120,785     123,818
Deferred charges                   2,708       2,681       5,394       5,488
Intangible assets                  1,194       1,195       2,387       2,388
----------------------------------------------------------------------------
                                  65,427      65,993     128,566     131,694
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------

5.  Financial expense 

--------------------------------------------------------------------------
--------------------------------------------------------------------------
                               Three months ended        Six months ended 
                                     February 28,            February 28, 
                                 2011        2010        2011        2010 
                                    $           $           $           $ 
--------------------------------------------------------------------------
                                                                          
Interest on long-term debt     24,563      15,788      40,455      31,689 
Foreign exchange gains         (1,133)       (391)     (1,465)       (879)
Amortization of deferred                                                  
 transaction costs                456         407         945         814 
Other                             615        (617)      1,471        (160)
--------------------------------------------------------------------------
                               24,501      15,187      41,406      31,464 
                                                                          
--------------------------------------------------------------------------
--------------------------------------------------------------------------

6.  Income Taxes 

--------------------------------------------------------------------------
--------------------------------------------------------------------------
                               Three months ended        Six months ended 
                                     February 28,            February 28, 
                                 2011        2010        2011        2010 
                                    $           $           $           $ 
--------------------------------------------------------------------------
                                                                          
Current                        (5,154)     (9,707)     74,989     (29,929)
Future                         19,431      22,232     (42,468)     28,636 
--------------------------------------------------------------------------
                               14,277      12,525      32,521      (1,293)
                                                                          
--------------------------------------------------------------------------
--------------------------------------------------------------------------



The following table provides the reconciliation between income taxes at the
Canadian statutory federal and provincial income tax rates and the consolidated
income tax expense (recovery):




--------------------------------------------------------------------------
--------------------------------------------------------------------------
                               Three months ended        Six months ended 
                                     February 28,            February 28, 
                                 2011        2010        2011        2010 
                                    $           $           $           $ 
--------------------------------------------------------------------------
                                                                          
Income before income taxes     46,024      43,183     103,011      90,468 
Combined income tax rate        28.91%      31.46%      28.91%      31.44%
Income taxes at combined                                                  
 income tax rate               13,306      13,585      29,781      28,447 
Adjustments for losses or                                                 
 income subject to lower                                                  
 or higher tax rates           (1,489)     (3,247)     (2,442)     (5,669)
Decrease in future income                                                 
 taxes as a result of                                                     
 decrease in substantively                                                
 enacted tax rates                  -           -           -     (29,782)
Utilization of pre-                                                       
 acquisition tax losses             -           -           -       4,432 
Income taxes arising from                                                 
 non-deductible expenses          160          97         330         306 
Effect of foreign income                                                  
 tax rate differences           2,172       1,877       4,633       2,124 
Other                             128         213         219      (1,151)
--------------------------------------------------------------------------
Income taxes at effective                                                 
 income tax rate               14,277      12,525      32,521      (1,293)
                                                                          
--------------------------------------------------------------------------
--------------------------------------------------------------------------

7.  Earnings per Share 



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




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                        February 28,            February 28,
                                    2011        2010        2011        2010
                                       $           $           $           $
----------------------------------------------------------------------------
                                                                            
Net income                        10,645      10,511      26,620      33,259
----------------------------------------------------------------------------
                                                                            
Weighted average number of                                                  
 multiple voting and                                                        
 subordinate voting shares                                                  
 outstanding                  16,713,884  16,714,030  16,721,074  16,721,865
Effect of dilutive stock                                                    
 options (1)                      10,283      14,436      11,060      11,152
Effect of dilutive                                                          
 subordinate voting shares                                                  
 held in trust under the                                                    
 Incentive Share Unit Plan        95,358      71,862      84,627      63,745
----------------------------------------------------------------------------
Weighted average number of                                                  
 diluted multiple voting and                                                
 subordinate voting shares                                                  
 outstanding                  16,819,525  16,800,328  16,816,761  16,796,762
----------------------------------------------------------------------------
Earnings per share                                                          
Basic                               0.64        0.63        1.59        1.99
Diluted                             0.63        0.63        1.58        1.98
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



(1) For the three and six month periods ended February 28, 2011, no stock
options (32,782 in 2010) were excluded from the calculation of diluted earnings
per share because the exercise price of the options was greater than the average
share price of the subordinate voting shares. 




8.  Goodwill and Other Intangible Assets 

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                    February 28,  August 31,
                                                            2011        2010
                                                               $           $
----------------------------------------------------------------------------
                                                                            
Customer relationships                                    25,719      28,106
Broadcasting licenses                                     73,313      25,120
Customer base                                            989,772     989,772
----------------------------------------------------------------------------
                                                       1,088,804   1,042,998
Goodwill                                                 171,692     144,695
----------------------------------------------------------------------------
                                                       1,260,496   1,187,693
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------

a.   Intangible assets 



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



--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                              Customer Broadcasting    Customer             
                         relationships     licenses        Base       Total 
                                     $            $           $           $ 
--------------------------------------------------------------------------- 
                                                                            
Balance at August 31,                                                       
 2010                           28,106       25,120     989,772   1,042,998 
Business acquisition                                                        
 (note 2)                            -       48,193           -      48,193 
Amortization (note 4)           (2,387)           -           -      (2,387)
--------------------------------------------------------------------------- 
Balance at February 28,                                                     
 2011                           25,719       73,313     989,772   1,088,804 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 






b.  Goodwill 



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



--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                          $ 
--------------------------------------------------------------------------- 
                                                                            
Balance at August 31, 2010                                          144,695 
Business acquisition (note 2)                                        27,227 
Foreign currency translation adjustment                                (230)
--------------------------------------------------------------------------- 
Balance at February 28, 2011                                        171,692 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 

9.  Long-Term Debt 

--------------------------------------------------------------------------
--------------------------------------------------------------------------
                                         Interest       FebruaryAugust 31,
                            Maturity         rate       28, 2011      2010
                                                %              $         $
--------------------------------------------------------------------------
                                                                          
Parent company                                                            
Term Revolving Facility         2014(1)      3.32(2)      74,000         -
Obligations under capital                                                 
 lease                          2013         9.29             62        72
                                                                          
Subsidiaries                                                              
Term Revolving Facility                                                   
  Revolving loan -                                                        
   EUR70,000,000                                                          
   (EUR90,000,000 at                                                      
   August 31, 2010)             2014         3.00(2,3)    93,842   121,635
Senior Secured Notes                                                      
  Series A -                                                              
   US$190,000,000               2015         7.00(4)     183,424   201,387
  Series B                      2018         7.60         54,628    54,609
Senior Secured Debentures                                                 
 Series 1                       2014         5.95        297,697   297,379
Senior Secured Debentures                                                 
 Series 2 (5)                   2020         5.15        198,334         -
Senior Secured Notes                                                      
 Series B                       2011(6)      7.73              -   174,738
Senior Unsecured Debenture      2018         5.94         99,817    99,806
Obligations under capital                  6.71 -                         
 leases                         2013         9.93          4,216     5,429
Other                           2011            -              9        15
--------------------------------------------------------------------------
                                                       1,006,029   955,070
Less current portion                                       2,454     2,329
--------------------------------------------------------------------------
                                                       1,003,575   952,741
                                                                          
--------------------------------------------------------------------------
--------------------------------------------------------------------------
                                                                          

1.  The Company benefits from a Term Revolving Facility of up to $100
    million with a group of financial institutions led by a large Canadian
    bank, which acts as agent for the banking syndicate. The Term Revolving
    Facility of up to $100 million includes a swingline limit of $7.5
    million, is extendable by additional one-year periods on an annual
    basis, subject to lenders' approval, and if not extended, matures three
    years after its issuance or the last extension, as the case may be. The
    Term Revolving Facility is composed of two tranches of $50 million each,
    one of which was subject to the completion of the acquisition of Corus
    Quebec radios stations and which became available on February 1, 2011
    with the conclusion of the transaction. The Term Revolving Facility was
    extended at that same date and currently matures on February 1, 2014.
    The Term Revolving Facility can be repaid at any time without penalty.
    The Term Revolving Facility is indirectly secured by a first priority
    fixed and floating charge and a security interest on substantially all
    present and future real and personal property and undertaking of every
    nature and kind of the Company and certain of its subsidiaries,
    excluding the capital stock and assets of the Company's subsidiary,
    Cogeco Cable Inc., and guaranteed by its subsidiaries excluding Cogeco
    Cable Inc. Under the terms and conditions of the credit agreement, the
    Company must comply with certain restrictive covenants. Generally, the
    most significant restrictions are related to permitted investments,
    dividends on multiple and subordinate voting shares and reimbursement of
    long-term debt as well as incurrence and maintenance of certain
    financial ratios primarily linked to the operating income before
    amortization, financial expense and total indebtedness. The Term
    Revolving Facility bears interest, at the Company's option, on bankers'
    acceptance, LIBOR in Euros or in US dollars, bank prime rate or US base
    rate plus the applicable margin, and commitment fees are payable on the
    unused portion. 
2.  Interest rate on debt as at February 28, 2011, including applicable
    margin. 
3.  On January 21, 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 a portion of Euro-
    denominated loans outstanding under the Term Revolving Facility, and
    previously the Term Facility for a notional amount of EUR111.5 million
    which have been reduced to EUR95.8 million on July 28, 2009 and to
    EUR69.6 million on July 28, 2010. The interest swap rate to hedge the
    Euro-denominated loans has been fixed at 2.08% until the swap agreement
    maturity of July 28, 2011. In addition to the interest swap rate of
    2.08%, the Company's subsidiary will continue to pay the applicable
    margin on these Euro-denominated loans in accordance with the Term
    Revolving Facility. 
4.  Cross-currency swap agreements have resulted in an effective interest
    rate of 7.24% on the Canadian dollar equivalent of the US denominated
    debt of the Company's subsidiary, Cogeco Cable Inc. 
5.  On November 16, 2010 the Company's subsidiary, Cogeco Cable Inc.,
    completed pursuant to a public debt offering, the issue of $200 million
    Senior Secured Debentures Series 2 (the "Debentures") for net proceeds
    of $198.3 million net of discounts and transaction costs. These
    Debentures mature on November 16, 2020 and bear interest at 5.15% per
    annum payable semi-annually. These debentures are indirectly secured by
    a first priority fixed and floating charge and a security interest on
    substantially all present and future real and personal property and
    undertaking of every nature and kind of the Company's subsidiary and
    certain of its subsidiaries. 
6.  On December 22, 2010, the Company's subsidiary, Cogeco Cable Inc.,
    redeemed the 7.73% Senior Secured Notes Series B in the aggregate
    principal amount of $175 million. As a result, the aggregate redemption
    cash consideration that the Company's subsidiary paid totalled $183.8
    million excluding accrued interest. The excess of the redemption price
    over the aggregate principal amount was recorded as financial expense
    during the second quarter of fiscal 2011. 

10. Capital Stock 



Authorized

Unlimited number of: 

Preferred shares of first and second rank, could be issued 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.

Issued



--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                  February 28,   August 31, 
                                                          2011         2010 
                                                             $            $ 
--------------------------------------------------------------------------- 
                                                                            
1,842,860 multiple voting shares                            12           12 
14,989,338 subordinate voting shares (14,959,338                            
 at August 31, 2010)                                   121,976      121,347 
--------------------------------------------------------------------------- 
                                                       121,988      121,359 
95,358 subordinate voting shares held in trust                              
 under the Incentive Share Unit Plan (71,862 at                             
 August 31, 2010)                                       (2,656)      (1,832)
--------------------------------------------------------------------------- 
                                                       119,332      119,527 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 



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



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                       Number of            
                                                          shares      Amount
                                                                           $
----------------------------------------------------------------------------
                                                                            
Balance at August 31, 2010                            14,959,338     121,347
Shares issued for cash under the Employee Stock                             
 Option Plan                                              30,000         629
----------------------------------------------------------------------------
Balance at February 28, 2011                          14,989,338     121,976
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



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




--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                      Number of             
                                                         shares      Amount 
                                                                          $ 
--------------------------------------------------------------------------- 
                                                                            
Balance, beginning of year                               71,862       1,832 
Subordinate voting shares acquired                       36,085       1,282 
Subordinate voting shares distributed to employees      (12,589)       (458)
--------------------------------------------------------------------------- 
Balance at February 28, 2011                             95,358       2,656 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 



Stock-based plans

The Company and its subsidiary, Cogeco Cable Inc., offer, for certain executives
Stock Option Plans, which are described in the Company's annual consolidated
financial statements. During the first six months of 2011 and 2010, no stock
options were granted to employees by COGECO Inc. However, the Company's
subsidiary, Cogeco Cable Inc., granted 66,700 stock options (66,174 in 2010)
with an exercise price of $39.00 ($31.82 to $38.86 in 2010), of which 35,800
stock options (33,266 in 2010) were granted to COGECO Inc.'s employees. These
options vest over a period of five years beginning one year after the day such
options are granted and are exercisable over ten years. As a result, a
compensation expense of $141,000 and $307,000 ($219,000 and $556,000 in 2010)
was recorded for the three and six month periods ended February 28, 2011. 


The fair value of stock options granted by the Company's subsidiary, Cogeco
Cable Inc., for the six months period ended February 28, 2011 was $9.55 ($8.11
in 2010) per option. The weighted average fair value was estimated at the grant
date for purposes of determining stock-based compensation expense using the
binomial option pricing model based on the following assumptions:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                            2011        2010
                                                               %           %
----------------------------------------------------------------------------
                                                                            
Expected dividend yield                                     1.44        1.49
Expected volatility                                           29          29
Risk-free interest rate                                     2.05        2.67
Expected life in years                                       4.9         4.8
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Under the Company's Stock Option Plan, the following options were granted and
are outstanding at February 28, 2011: 




--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                            
--------------------------------------------------------------------------- 
                                                                            
Outstanding at August 31, 2010                                       62,382 
Exercised                                                           (30,000)
Expired                                                             (32,382)
--------------------------------------------------------------------------- 
Outstanding at February 28, 2011                                          - 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 



Under Cogeco Cable Inc.'s Stock Option Plan, the following options were granted
and are outstanding at February 28, 2011: 




--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                            
--------------------------------------------------------------------------- 
                                                                            
Outstanding at August 31, 2010                                      716,760 
Granted                                                              66,700 
Exercised                                                          (165,487)
Forfeited / Cancelled                                               (28,169)
Expired                                                                (448)
--------------------------------------------------------------------------- 
Outstanding at February 28, 2011                                    589,356 
--------------------------------------------------------------------------- 
Exercisable at February 28, 2011                                    415,945 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 



The Company and its subsidiary, Cogeco Cable Inc., also offers senior executive
and designated employee Incentive Share Unit Plans ("ISU Plans") which are
described in the Company's annual consolidated financial statements. During the
first six months of 2011, the Company granted 36,460 (41,571 in 2010) Incentive
Share Units ("ISUs") and Cogeco Cable Inc. granted 58,088 ISUs (63,666 in 2010)
of which, 10,000 ISUs (9,981 in 2010) were granted to Cogeco Inc.'s employees.
The Company and its subsidiary established the value of the compensation related
to the ISUs granted based on the fair value of the subordinate voting shares at
the date of grant and a compensation expense is recognized over the vesting
period, which is three years less one day. Two trusts were created for the
purpose of purchasing these shares on the stock market in order to guard against
stock price fluctuations. The Company and its subsidiary instructed the trustees
to purchase 36,085 and 57,203 subordinate voting shares (41,571 and 55,094 in
2010) on the stock market. These shares were purchased for cash consideration of
$1,282,000 ($1,049,000 in 2010) and $2,258,000 ($1,744,000 in 2010),
respectively, and are held in trust for participants until they are completely
vested. These trusts, considered as variable interest entities, are consolidated
in the Company's financial statements with the value of the acquired shares
presented as subordinate voting shares held in trusts under the ISU Plans in
reduction of capital stock or non-controlling interest. A compensation expense
of $783,000 and $1,186,000 ($315,000 and $502,000 in 2010) was recorded for the
three and six month periods ended February 28, 2011 related to these plans.


Under the Company's ISU Plan, the following ISUs were granted and are
outstanding at February 28, 2011:




--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                            
Outstanding at August 31, 2010                                       71,862 
Granted                                                              36,460 
Distributed                                                         (12,589)
--------------------------------------------------------------------------- 
Outstanding at February 28, 2011                                     95,733 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 



Under Cogeco Cable Inc.'s ISU Plan, the following ISUs were granted and are
outstanding at February 28, 2011:




--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                            
Outstanding at August 31, 2010                                       57,409 
Granted                                                              58,088 
Distributed                                                          (9,153)
Forfeited / Cancelled                                                  (885)
--------------------------------------------------------------------------- 
Outstanding at February 28, 2011                                    105,459 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 



The 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 of 2011 and 2010, the Company
and its subsidiary issued respectively 6,302 and 4,521 (6,987 and 4,422 in 2010)
Deferred Share Units ("DSUs") to the participants in connection with the DSU
Plans. A compensation expense of $391,000 and $500,000 ($322,000 and $506,000 in
2010) was recorded for the three and six month periods ended February 28, 2011
for the liabilities related to these plans.


Under the Company's DSU Plan, the following DSUs were issued and are outstanding
at February 28, 2011:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Outstanding at August 31, 2010                                        21,630
Issued                                                                 6,302
Dividend equivalents                                                     161
----------------------------------------------------------------------------
Outstanding at February 28, 2011                                      28,093
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Under Cogeco Cable Inc.'s DSU Plan, the following DSUs were issued and are
outstanding at February 28, 2011:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Outstanding at August 31, 2010                                        10,855
Issued                                                                 4,521
Dividend equivalents                                                     109
----------------------------------------------------------------------------
Outstanding at February 28, 2011                                      15,485
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------

11. Accumulated Other Comprehensive Income 

--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                     Translation of                         
                                              a net                         
                                      investment in                         
                                              self-                         
                                         sustaining                         
                                            foreign   Cash flow             
                                       subsidiaries      hedges       Total 
                                                  $           $           $ 
--------------------------------------------------------------------------- 
                                                                            
Balance as at August 31, 2010                 4,993         941       5,934 
Other comprehensive income (loss)              (438)       (313)       (751)
--------------------------------------------------------------------------- 
Balance as at February 28, 2011               4,555         628       5,183 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 

12. Statements of Cash Flows 

a.  Changes in non-cash operating items 

--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                   Three months ended      Six months ended 
                                         February 28,          February 28, 
                                      2011       2010       2011       2010 
                                         $          $          $          $ 
--------------------------------------------------------------------------- 
                                                                            
Accounts receivable                (12,046)    (6,186)   (17,158)   (11,680)
Income taxes receivable               (469)   (10,485)     1,540    (30,999)
Prepaid expenses and other          (3,837)      (190)      (544)    (1,295)
Accounts payable and accrued                                                
 liabilities                        (2,670)     8,869    (68,063)   (63,920)
Income tax liabilities              (5,493)       (51)    74,721    (39,275)
Deferred and prepaid revenue and                                            
 other liabilities                     504      5,210        566      7,408 
--------------------------------------------------------------------------- 
                                   (24,011)    (2,833)    (8,938)  (139,761)
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 

b.  Cash and cash equivalents 

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                    February 28,  August 31,
                                                            2011        2010
                                                               $           $
----------------------------------------------------------------------------
                                                                            
Cash                                                      13,029      35,842
Cash equivalents (1)                                      13,406           -
----------------------------------------------------------------------------
                                                          26,435      35,842
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) At February 28, 2011, term deposit of EUR10,000,000, bearing interest at
    1.40%, maturing on March 14, 2011.                                      

c.  Other information 

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                      Three months ended    Six months ended
                                            February 28,        February 28,
                                          2011      2010     2011       2010
                                             $         $        $          $
----------------------------------------------------------------------------
                                                                            
Fixed asset acquisitions through                                            
 capital leases                              -         -        -        141
Financial expense paid                  21,516    10,792   42,625     31,839
Income taxes paid (received)               828     1,679   (1,249)    41,196
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------

13. Employee Future Benefits 



The Company and its Canadian subsidiaries offer to their employees contributory
defined benefit pension plans, defined contribution pension plans or collective
registered retirement savings plans, which are described in the Company's annual
consolidated financial statements. The total expense related to these plans is
as follows:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                      Three months ended    Six months ended
                                            February 28,        February 28,
                                          2011      2010      2011      2010
                                             $         $         $         $
----------------------------------------------------------------------------
                                                                            
Contributory defined benefit pension                                        
 plans                                   1,007       870     1,922     1,740
Defined contribution pension plans                                          
 and collective registered                                                  
 retirement savings plans                1,344     1,112     2,621     2,238
----------------------------------------------------------------------------
                                         2,351     1,982     4,543     3,978
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 counterparty 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 counterparties to the cross-currency swap and interest rate
swap agreements may default on their obligations in instances where these
agreements have positive fair values for the 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 counterparties in order to minimize the risk of
counterparties default under the agreements. At February 28, 2011, management
believes that the credit risk relating to its derivative financial instruments
is minimal, since the lowest credit rating of the counterparties to the
agreements is "A". 


Cash and cash equivalents consist mainly of highly liquid investments, such as
money market deposits. The 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 than usual 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 large customer. At February
28, 2011, no customer balance represents a significant portion of the Company's
consolidated trade accounts receivable. 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 its market areas in Canada and Europe, there is no significant
concentration of credit risk. The following table provides further details on
the Company's accounts receivable balances:




--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                       February  August 31, 
                                                       28, 2011        2010 
                                                              $           $ 
--------------------------------------------------------------------------- 
                                                                            
Trade accounts receivable                                99,191      76,243 
Allowance for doubtful accounts                          (8,462)     (8,531)
--------------------------------------------------------------------------- 
                                                         90,729      67,712 
Other accounts receivable                                14,615       6,848 
--------------------------------------------------------------------------- 
                                                        105,344      74,560 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 



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,  August 31,
                                                            2011        2010
                                                               $           $
----------------------------------------------------------------------------
                                                                            
Net trade accounts receivable not past due                59,711      46,291
Net trade accounts receivable past due                    31,018      21,421
----------------------------------------------------------------------------
                                                          90,729      67,712
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



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, 2011, the available amount of the Company's Term Revolving
Facilities was $674.2 million. Management believes that the committed Term
Revolving Facilities will, until their maturities in February 2014 and July
2014, provide sufficient liquidity to manage its long-term debt maturities and
support working capital requirements.


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




--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                   2011   2012   2013     2014   2015 Thereafter      Total 
                      $      $      $        $      $          $          $ 
--------------------------------------------------------------------------- 
                                                                            
Accounts                                                                    
 payable and                                                                
 accrued                                                                    
 liabilities(1) 175,007      -      -        -      -          -    175,007 
Promissory note                                                             
 payable              -  5,000      -        -      -          -      5,000 
Long-term debt                                                              
 (2)                  9      -      -  467,842      -    539,566  1,007,417 
Other                                                                       
 liabilities          -  1,272  1,231    1,183  1,145      2,180      7,011 
Derivative                                                                  
 financial                                                                  
 instruments                                                                
Cash outflows                                                               
 (Canadian                                                                  
 dollar)              -      -      -        -      -    201,875    201,875 
Cash inflows                                                                
 (Canadian                                                                  
 dollar                                                                     
 equivalent of                                                              
 US dollar)           -      -      -        -      -   (184,566)  (184,566)
Obligations                                                                 
 under capital                                                              
 leases (3)       1,409  2,322    915       13      -          -      4,659 
--------------------------------------------------------------------------- 
                176,425  8,594  2,146  469,038  1,145    559,055  1,216,403 
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 

1.  Excluding accrued interest 
2.  Principal excluding obligations under capital leases. 
3.  Including interest. 



The following table is a summary of interest payable on long-term debt
(excluding interest on capital leases) that is due for each of the next five
years and thereafter, based on the principal amount and interest rate prevailing
on the outstanding debt at February 28, 2011 and their respective maturities:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                            There-          
                 2011     2012     2013     2014     2015    after    Total 
                    $        $        $        $        $        $        $ 
----------------------------------------------------------------------------
                                                                            
Interest                                                                    
 payments on                                                                
 long-term                                                                  
 debt          28,229   56,458   56,458   54,673   33,336   95,548  324,702 
Interest                                                                    
 payments on                                                                
 derivative                                                                 
 financial                                                                  
 instruments    8,892   14,614   14,614   14,614   14,614    7,306   74,654 
Interest                                                                    
 receipts on                                                                
 derivative                                                                 
 financial                                                                  
 instruments   (7,626) (12,920) (12,920) (12,920) (12,920)  (6,459) (65,765)
----------------------------------------------------------------------------
               29,495   58,152   58,152   56,367   35,030   96,395  333,591 
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



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, 2011, all of the Company's long-term debt was at fixed rate, except
for the Company's Term Revolving Facilities. However, on January 21, 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 a portion of the Euro-denominated loans outstanding under the Term Revolving
Facility and previously the Term Facility, for a notional amount of EUR111.5
million which have been reduced to EUR95.8 million on July 28, 2009 and to
EUR69.6 million on July 28, 2010. The interest swap rate to hedge the
Euro-denominated loans has been fixed at 2.08% until the swap agreement maturity
on July 28, 2011. In addition to the interest swap rate of 2.08%, the Company's
subsidiary will continue to pay the applicable margin on these in accordance
with the Term Revolving 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 Revolving Facilities is approximately $0.7 million
based on the outstanding debt at February 28, 2011 and taking into 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.


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, 2011, cash and cash equivalents denominated in US dollars
amounted to US$18,144,000 (US$13,613,000 at August 31, 2010) while accounts
payable denominated in US dollars amounted to US$3,656,000 (US$15,850,000 at
August 31, 2010). At February 28, 2011, Euro-denominated bank indebtedness
amounted to EUR205,000 (cash and cash equivalents of EUR187,000 at August 31,
2010) while there were no accounts payable denominated in Euros at February 28,
2011 and August 31, 2010. Due to their short-term nature, the risk arising from
fluctuations in foreign exchange rates is usually not significant. The impact of
a 10% change in the foreign exchange rates (US dollar and Euro) would change
financial expense by approximately $1.4 million.


Furthermore, Cogeco Cable Inc.'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 value of the Canadian dollar
versus the Euro. This risk is mitigated since the major part of the purchase
price for Cabovisao was borrowed directly in Euros. At February 28, 2011, the
net investment amounted to EUR169,312,000 (EUR182,104,000 at August 31, 2010)
while long-term debt denominated in Euros amounted to EUR70,000,000
(EUR90,000,000 at August 31, 2010). The exchange rate used to convert the Euro
currency into Canadian dollars for the balance sheet accounts at February 28,
2011 was $1.3406 per Euro compared to $1.3515 per Euro at August 31, 2010. The
impact of a 10% change in the exchange rate of the Euro into Canadian dollars
would change financial expense by approximately $0.4 million and other
comprehensive income by approximately $13.3 million net of non-controlling
interest of $9 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 Company has determined the fair value of its financial instruments
as follows:




a.  The carrying amount of cash and cash equivalents, accounts receivable,
    bank indebtedness and accounts payable and accrued liabilities
    approximates fair value because of the short-term nature of these
    instruments. 

b.  Interest rates under the terms of the Company's Term Revolving
    Facilities are based on bankers' acceptance, LIBOR, EURIBOR, bank prime
    rate loan or US base rate loan plus applicable margin. Therefore, the
    carrying value approximates fair value for the Term Revolving Facilities
    since the Term Revolving Facilities have financing conditions similar to
    those currently available to the Company. 

c.  The fair value of the Senior Secured Debentures Series 1 and 2, Senior
    Secured Notes Series A and B and Senior Unsecured Debenture are based
    upon current trading values for similar financial instruments. 

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



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




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                   February 28, 2011         August 31, 2010
                                Carrying                Carrying            
                                   value  Fair value       value  Fair value
                                       $           $           $           $
----------------------------------------------------------------------------
                                                                            
Long-term debt                 1,006,029   1,067,301     955,070   1,050,783
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



In accordance with CICA Handbook Section 3862, Financial instruments -
disclosures, all financial instruments recognized at fair value on the
consolidated balance sheet must be classified based on the three fair value
hierarchy levels, which are as follows:




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

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

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



The Company considers that its derivative financial instruments are classified
as Level 2 under the fair value hierarchy. The fair value of derivative
financial instruments are estimated using valuation models that reflect
projected future cash flows over contractual terms of the derivative financial
instruments and observable market data, such as interest and currency exchange
rate curves. 




b.  Capital management 



The 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 generated by operations and the level of distribution
to shareholders.


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


The provisions under the Term Revolving 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, 2011, and August 31,
2010, the Company was in compliance with all debt covenants and was not subject
to any other externally imposed capital requirements.


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




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                    February 28,  August 31,
                                                            2011        2010
----------------------------------------------------------------------------
                                                                            
Net indebtedness (1) / shareholders' equity                  2.5         2.4
Net indebtedness (1) / operating income before                              
 amortization (2)                                            1.9         1.8
Operating income before amortization (2) / financial                        
 expense (2)                                                 7.1         7.9
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Net indebtedness is defined as the total of bank indebtedness, principal
    on long-term debt and obligations under derivative financial            
    instruments, less cash and cash equivalents.                            
(2) Calculation based on operating income before amortization and financial 
    expense for the twelve-month periods ended February 28, 2011 and August 
    31, 2010.                                                               

15. Assets held for sale 



Pursuant to the acquisition of Corus Quebec radio stations (see note 2), and as
part of the CRTC's decision on the Company's transfer application, the Company
has put up for sale two radio stations acquired in the transaction, CFEL-FM in
the Quebec City market and CJTS-FM in the Sherbrooke market. In addition to the
two acquired radio stations above, and also as part of the CRTC's decision, the
Company has put up for sale radio station CJEC-FM, which it owned prior to the
acquisition, in the Quebec City market. Radio stations for which divestiture has
been required by the CRTC, and the sale process, is being managed by a trustee
approved by the CRTC pursuant to a voting trust agreement. Accordingly, the
assets and liabilities of the three radio stations put up for sale have been
classified as held for sale as of February 1, 2011 in the Company's consolidated
balance sheet.


The assets and liabilities related to the three radio stations held for sale as
at February 28, 2011, were as follows:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                           $
----------------------------------------------------------------------------
                                                                            
Accounts receivable                                                      436
----------------------------------------------------------------------------
Current assets held for sale                                             436
----------------------------------------------------------------------------
                                                                            
Fixed assets                                                           2,138
Goodwill and other intangible assets                                   7,740
----------------------------------------------------------------------------
Non-current assets held for sale                                       9,878
----------------------------------------------------------------------------
                                                                            
Accounts payable and accrued liabilities                               1,241
Income tax liabilities                                                    21
Deferred and prepaid revenue                                              18
----------------------------------------------------------------------------
Current liabilities related to assets held for sale                    1,280
----------------------------------------------------------------------------
                                                                            
Other liabilities                                                         43
Future income tax liabilities                                            933
----------------------------------------------------------------------------
Non-current liabilities related to assets held for sale                  976
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Cable Sector Customer Statistics
(unaudited)



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                    February 28,  August 31,
                                                            2011        2010
----------------------------------------------------------------------------
                                                                            
Homes passed                                                                
Canada                                                 1,604,702   1,593,743
Portugal(1)                                              905,624     905,359
Total                                                  2,510,326   2,499,102
----------------------------------------------------------------------------
                                                                            
Homes connected(2)                                                          
Canada                                                   993,649     979,590
Portugal                                                 268,721     269,194
Total                                                  1,262,370   1,248,784
----------------------------------------------------------------------------
                                                                            
Revenue-generating units(3)                                                 
Canada                                                 2,474,207   2,350,577
Portugal                                                 853,090     828,772
Total                                                  3,327,297   3,179,349
----------------------------------------------------------------------------
                                                                            
Basic Cable service customers                                               
Canada                                                   880,755     874,505
Portugal                                                 260,100     260,267
Total                                                  1,140,855   1,134,772
----------------------------------------------------------------------------
                                                                            
High Speed Internet service customers                                       
Canada                                                   586,479     559,057
Portugal                                                 167,221     163,187
Total                                                    753,700     722,244
----------------------------------------------------------------------------
                                                                            
Digital Television service customers                                        
Canada                                                   614,782     559,418
Portugal                                                 175,803     159,852
Total                                                    790,585     719,270
----------------------------------------------------------------------------
                                                                            
Telephony service customers                                                 
Canada                                                   392,191     357,597
Portugal                                                 249,966     245,466
Total                                                    642,157     603,063
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Cogeco Cable is currently assessing the number of homes passed.         
(2) Represents the sum of Basic Cable service customers and High Speed      
    Internet ("HSI") and Telephony service customers who do not subscribe to
    the Basic Cable service.                                                
(3) Represents the sum of Basic Cable, HSI, Digital Television and Telephony
    service customers.

Pacific Imperial Mines (TSXV:PPM)
Historical Stock Chart
Von Mai 2024 bis Jun 2024 Click Here for more Pacific Imperial Mines Charts.
Pacific Imperial Mines (TSXV:PPM)
Historical Stock Chart
Von Jun 2023 bis Jun 2024 Click Here for more Pacific Imperial Mines Charts.