Solid Financial Results for COGECO Inc.'s First Quarter of

Solid Financial Results for COGECO Inc.'s First Quarter of Fiscal
2013 
- 11.6% growth of its operating income before depreciation and
amortization(1) 
- 5.9% increase in revenue 
- Continued leading position in the Montreal radio market 
MONTREAL, QUEBEC -- (Marketwire) -- 01/14/13 -- Today, COGECO Inc.
(TSX:CGO) ("COGECO" or the "Corporation") announced its financial
results for the first quarter of fiscal 2013, ended November 30,
2012, in accordance with the International Financial Reporting
Standards ("IFRS"). 
For the first quarter of fiscal 2013: 


 
--  Revenue increased by 5.9% to reach $366.6 million; 
    
--  Operating income before depreciation and amortization increased by 11.6%
    to $156.6 million when compared to the first quarter of fiscal 2012; 
    
--  Profit for the period from continuing operations amounted to $47.1
    million in the first quarter when compared to $44.5 million for the same
    period of the previous fiscal year. Profit progression for the quarter
    is mostly attributable to the increase in operating income before
    depreciation and amortization, partly offset by the acquisition costs
    related to the Atlantic Broadband ("ABB") acquisition and the increase
    in income taxes in the Cable segment; 
    
--  Profit for the period amounted to $47.1 million in the first quarter
    when compared to $47.9 million for the same period of the previous
    fiscal year. This variation is mostly attributable to the Cable segment
    and due to an increase in income taxes, the acquisition costs related to
    the ABB acquisition and last year's profit from the disposition of the
    Portuguese subsidiary, Cabovisao - Televisao por Cabo, S.A.
    ("Cabovisao"), reported as discontinued operations and disposed of on
    February 29, 2012, partly offset by the improvement in operating income
    before depreciation and amortization; 
    
--  Free cash flow(1)reached $18.6 million for the quarter compared to $26.3
    million in the comparable quarter of the prior year. Free cash flow
    decreased in the first quarter over the prior year due to the increase
    in current income tax expense, the acquisition costs related to ABB
    acquisition, the defined benefit pension plans contributions as well as
    
the increase in acquisition of property, plant and equipment, partly
    offset by the improvement of operating income before depreciation and
    amortization; 
    
--  A quarterly dividend of $0.19 per share was paid to the holders of
    subordinate and multiple voting shares, an increase of $0.01 per share,
    or 5.6%, when compared to a dividend of $0.18 per share paid in the
    first quarter of fiscal 2012; 
    
--  In the Cable segment, primary service units ("PSU")(2)grew by 15,080 in
    the quarter. At November 30, 2012, the total consolidated PSU amounted
    to 2,478,887 of which 494,674 comes from the conclusion of the
    acquisition of ABB on November 30th; 
    
--  On December 21, 2012, the Corporation's subsidiary, Cogeco Cable Inc,
    announced an agreement to acquire all of the issued and outstanding
    shares of PEER 1 Network Enterprises Inc. ("PEER 1") by way of takeover
    bid (the "offer") valued at approximately $635 million. The offer is
    supported by a committed financing from the National Bank of Canada in
    the amount of $650 million. PEER 1 is one of the world's leading
    internet infrastructure providers, specializing in managed hosting,
    dedicated servers, cloud services and co-location. This acquisition
    combined with Cogeco Cable's existing data centre facilities will
    increase the scale and scope by adding the capability to serve
    approximately 10,000 additional businesses worldwide through 19 data
    centres and 21 points-of- presence across North America and Europe. PEER
    1's primary network centre and head office are located in Vancouver. The
    offer will be subject to usual closing conditions and Cogeco Cable
    expects the transaction to be completed in the second quarter of fiscal
    2013; 
    
--  On November 30, 2012, the Corporation's subsidiary, Cogeco Cable Inc.,
    completed the acquisition of Atlantic Broadband ("ABB"), an independent
    cable system operator formed in 2003, serving about 495,000 PSU's and
    providing Analogue and Digital Television, as well as HSI and Telephony
    services. The transaction, valued at US$1.36 billion, was financed
    through a combination of cash on hand, a draw-down on its existing Term
    Revolving Facility of approximately US$588 million and US$660 million of
    borrowings under a new committed non -recourse debt financing at ABB.
    Ranked the 12th-largest cable television system operator in the United
    States, ABB operates cable systems in Western Pennsylvania, Southern
    Florida, Maryland, Delaware and South Carolina. 
    
 
(1)  The indicated terms do not have standard definitions prescribed by IFRS
     and therefore, may not be comparable to similar measures presented by  
     other companies. For more details, please consult the "Non-IFRS        
     financial measures" section of the Management's discussion and         
     analysis.                                                              
                                                                            
(2)  Represents the sum of Television, High Speed Internet ("HSI") and      
     Telephony service customers.                                           

 
"COGECO Inc. reported very good financial results for its first
quarter. Our Cable segment's growth on both revenue and operating
income before amortization clearly demonstrates that the combination
of our customer service efforts, our marketing strategies, along with
our strong cost control initiatives have produced the expected
positive effec ts on our financial results," declared Louis Audet,
President and Chief Executive Officer of COGECO." 
Louis Audet continued by saying, "As for our entrance into the
American market, it is with great enthusiasm that we concluded the
acquisition of ABB on November 30, 2012. ABB and Cogeco Cable have
much in common thanks to the combined expertise of both our
management teams; we foresee an excellent potential for growth." 
"In addition, I am pleased to report that we have completed the
integration of Cogeco Metromedia. As for the radio activities, the
most recent surveys confirm our continuing strong leadership position
in the Montreal market, as well as solid performances by most of our
stations in our regional markets." 
FINANCIAL HIGHLIGHTS 


 
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                                                Quarters ended November 30, 
(in thousands of dollars, except PSU                                        
 growth, percentages and per share data)       2012         2011     Change 
                                                  $            $          % 
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Operations                                                                  
Revenue                                     366,608      346,023        5.9 
Operating income before depreciation and                                    
 amortization(1)                            156,580      140,261       11.6 
Operating income                             83,277       74,642       11.6 
Profit for the perio
d from continuing                                       
 operations                                  47,095       44,524        5.8 
Profit for the period from discontinued                                     
 operations                                       -        3,399          - 
Profit for the period                        47,095       47,923       (1.7)
Profit for the period attributable to                                       
 owners of the Corporation                   18,487       18,770       (1.5)
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Cash Flow                                                                   
Cash flow from operating activities          (6,005)       9,570          - 
Cash flow from operations(1)                101,790      104,739       (2.8)
Acquisitions of property, plant and                                         
 equipment, intangible and other assets      83,155       78,404        6.1 
Free cash flow(1)                            18,635       26,335      (29.2)
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Financial Condition(2)                                                      
Property, plant and equipment             1,565,872    1,343,904       16.5 
Total assets                              4,531,151    3,103,919       46.0 
Indebtedness(3)                           2,451,921    1,180,971          - 
Equity attributable to owners of the                                        
 Corporation                                411,061      397,799        3.3 
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Primary service units ("PSU") growth(4)      15,080       46,179      (67.3)
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Per Share Data(5)                                                           
Earnings per share attributable to                                          
 owners of the Corporation                                                  
  From continuing and discontinued                                          
   operations                                                               
    Basic                                      1.11         1.12      (0.09)
    Diluted                                    1.10         1.11      (0.09)
  From continuing operations                                                
    Basic                                      1.11         1.06        4.7 
    Diluted                                    1.10         1.05        4.8 
  From discontinued operations                                              
    Basic                                         -         0.07          - 
    Diluted                                       -         0.06          - 
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(1)  The indicated terms do not have standardized definitions prescribed by 
     International Financial Reporting Standards ("IFRS") and therefore, may
     not be comparable to similar measures presented by other companies. For
     more details, please consult the "Non-IFRS financial measures" section 
     of the Management's discussion and analysis ("MD&A").                  
(2)  At November 30, 2012 and August 31, 2012.                              
(3)  Indebtedness is defined as the total of bank indebtedness, principal on
     long-term debt, balance due on business acquisitions and obligations   
     under derivative financial instruments.                                
(4)  Represents the sum of Television, High Speed Internet ("HSI") and      
     Telephony service customers.                                           
(5)  Per multiple and subordinate voting share.                             
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FORWARD-LOOKING STATEMENTS 
Certain statements in this Management's Discussion and Analysis
("MD&A") 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
Corporation's future operating results and economic performance and
its objectives and strategies are forward-looking statements. These
statements are based on certain factors and assumptions including
expected growth, results of operations, performance and business
prospects and opportunities, which COGECO believes are reasonable as
of the current date. While management considers these assumptions to
be reasonable based on information currently available to the
Corporation, they may prove to be incorrect. The Corporation cautions
the reader that the economic downturn experienced over the past few
years makes forward-looking information and the underlying
assumptions subject to greater uncertainty and that, consequently,
they may not materialize, or the results may significantly differ
from the Corporation's expectations. It is impossible for COGECO to
predict with certainty the impact that the current economic
uncertainties may have on future results. Forward-looking information
is also subject to certain factors, including risks and uncertainties
(described in the "Uncertainties and main risk factors" section of
the Corporation's 2012 annual 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 Corporation's control.
Therefore, future events and results may vary significantly from what
management currently foresee. The reader should not place undue
importance on forward-looking information and should not rely upon
this information as of any other date. While management may elect to,
the Corporation is under no obligation (and expressly disclaims any
such obligation), and does not undertake to update or alter this
information before the next quarter. 
All amounts are stated in Canadian dollars unless otherwise
indicated. This report should be read in conjunction with the
Corporation's condensed interim consolidated financial statements and
the notes thereto, prepared in accordance with the International
Financial Reporting Standards ("IFRS") and the MD&A included in the
Corporation's 2012 Annual Report. 
CORPORATE OBJECTIVES AND STRATEGIES 
COGECO's objectives are to provide outstanding service to its
customers and maximize shareholder value by increasing profitability
and ensuring continued revenue growth. The strategies employed to
reach these objectives, supported by tight controls over costs and
business processes, are specific to each segment. The main strategies
used to reach COGECO's objectives in the Cable segment focus on
sustained corporate growth and continuous improvement of networks and
equipment. The radio activities focus on continuous improvement of
its programming in order to increase its market share and thereby its
profitability. The Corporation measures its performance, with regard
to these objectives by monitoring operating income before
depreciation and amortization(1), PSU(2) growth and free cash
flow(1). 
KEY PERFORMANCE INDICATORS 
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION 
First-quarter operating income before depreciation and amortization
increased by 11.6% when compared to the same period of fiscal 2012 to
reach $156.6 million. As a result of the acquisition of Atlantic
Broadband ("ABB") in the
 Cable segment, management revised upwards
its November 1, 2012 projections for fiscal 2013. Operating income
before depreciation and amortization is now expected to reach $750
million from $630 million. For further details, please consult the
fiscal 2013 revised projections in the "Fiscal 2013 financial
guidelines" section. 
FREE CASH FLOW 
For the three-month period ended November 30, 2012, COGECO reports
free cash flow of $18.6 million, compared to $26.3 million for the
first three months of the previous fiscal year, representing a
decrease of $7.7 million. This variance is mostly attributable to the
increase in current income tax expense, the acquisition costs related
to Atlantic Broadband ("ABB") acquisition, the contributions on
defined benefit pension plans as well as the increase in acquisition
of property, plant and equipment, partly offset by the improvement of
operating income before depreciation and amortization. Giving effect
to the acquisition of ABB in the Cable segment, the revised
guidelines of operating income before depreciation and amortization
and the reduction in acquisition of property, plant and equipment in
Canada, management also revised its free cash flow projections from
$115 million to $175 million. For further details, please consult the
fiscal 2013 revised projections in the "Fiscal 2013 financial
guidelines" section. 
CABLE SEGMENT 
PSU growth and penetration of service offerings 
During the three-month period ended November 30, 2012, PSU reach
2,478,887 of which 494,674 comes from the recently completed
acquisition of ABB. In the Cable Service segment in Canada, PSU
increased at a lower pace to 15,080, mainly as a result of a more
competitive environment and tightening of customer credit controls,
thus containing collection and bad debt expenses. Cogeco Cable
maintains targeted marketing initiatives to increase the penetration
level of its services and still benefits from the continuing interest
for high definition ("HD") television service. Consequently and
combined with the acquisition of ABB, Cogeco Cable revised downwards
its guidelines from 50,000 PSU, as issued on November 1, 2012, to
35,000 PSU. PSU growth is expected to stem primarily from HSI and
Telephony services, the continued strong interest in Digital
Television services, enhanced service offerings, and through
promotional activities. For further details, please consult the
fiscal 2013 revised projections in the "Fiscal 2013 financial
guidelines" section. 
BUSINESS DEVELOPMENTS AND OTHER 
BBM Canada's fall 2012 survey in the Montreal region, conducted with
the Portable People Meter ("PPM"), reported that 98.5 FM is the
leading radio station in the Montreal French market amongst all
listeners and men two years old and over ("2+"), while Rythme FM has
maintained its leadership position in the female 2+ segment.
Regarding the Montreal English market, The Beat is the leading radio
station in the female 35-64 segment. In the other Quebec regions, our
radio stations registered good ratings. 
On December 21, 2012, the Corporation's subsidiary, Cogeco Cable Inc,
announced an agreement to acquire all of the issued and outstanding
shares of PEER 1 Network Enterprises Inc. ("PEER 1") by way of
takeover bid (the "offer") valued at approximately $635 million. The
offer is supported by a committed financing from the National Bank of
Canada in the amount of $650 million. PEER 1 is one of the world's
leading internet infrastructure providers, specializing in managed
hosting, dedicated servers, cloud services and co-location. This
acquisition combined with Cogeco Cable's existing data centre
facilities will increase the scale and scope by adding the capability
to serve approximately 10,000 additional businesses worldwide through
19 data centres and 21 points-of-presence across North America and
Europe. PEER 1's primary network centre and head office are located
in Vancouver. The offer will be subject to usual closing conditions
and Cogeco Cable expects the transaction to be completed in the
second quarter of fiscal 2013. 
On November 30, 2012, the Corporation's subsidiary, Cogeco Cable
Inc., completed the acquisition of ABB, an independent cable system
operator formed in 2003, serving about 495,000 PSU and providing
Analogue and Digital Television, as well as HSI and Telephony
services. The acquisition is an attractive entry point into the US
market, providing a significant increase in PSU base with further
growth potential, a high quality network infrastructure and the
ability for the Corporation's management to leverage its core
knowledge and operational experience. The transaction valued at
US$1.36 billion was financed through a combination of cash on hand, a
draw-down on the existing Term Revolving Facility of approximately
US$588 million and US$660 million of borrowings under a new committed
non-recourse debt financing at ABB. 


 
(1)  The indicated terms do not have standardized definitions prescribed by 
     IFRS and therefore, may not be comparable to similar measures presented
     by other companies. For more details, please consult the "Non-IFRS     
     financial measures" section.                                           
                                                                            
(2)  Represents the sum of Television, High Speed Internet ("HSI") and      
     Telephony service customers.                                           

 
Ranked the 12th-largest cable television system operator in the
United States ("USA"), ABB operates cable systems in Western
Pennsylvania, Southern Florida, Maryland, Delaware and South
Carolina. 
OPERATING AND FINANCIAL RESULTS 
OPERATING RESULTS 


 
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Quarters ended November 30,                     2012        2011      Change
(in thousands of dollars, except                                            
 percentages)                                      $           $           %
----------------------------------------------------------------------------
Revenue                                      366,608     346,023         5.9
Operating expenses                           210,028     205,762         2.1
----------------------------------------------------------------            
Operating income before depreciation and                                    
 amortization                                156,580     140,261        11.6
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REVENUE 
Fiscal 2013 first-quarter revenue increased by $20.6 million, or
5.9%, to reach $366.6 million, when compared to the same period last
year, primarily due to the Cable segment and the revenue generated by
Metromedia CMR Plus Inc. ("Metromedia"), acquired during the second
quarter of fiscal 2012. 
In the Cable segment, fiscal 2013 first-quarter revenue increased by
$12.5 million, or 4%, to reach $327.9 million, when compared to the
same period last year. For further details on the Cable segment's
revenue, please refer to the "Cable segment" section. 
In the first quarter of fiscal 2013, revenue from the radio and
advertising representation house activities improved by $8.1 million,
or 26.5%, mainly as a result of the revenue generated by Metromedia,
acquired during the second quarter of fiscal 2012. 
OPERATING EXPENSES 
For the first quarter of fiscal 2013, operating expenses amounted to
$210 million, an increase of $4.3 million, or 2.1%, when compared to
the prior year. 
Operating expenses in the Cable segment decreased by $2.3 million, or
1.3%, when compared to the same period of fiscal 2012. For further
details on the Cable segment's operating expenses, please refer to
the "Cable segment" section. 
Operating expenses from the radio, advertising representation house
and head office activities grew by $6.5 million, or 22.3%, in the
first quarter mainly as a result of operating expenses generated by
Metromedia, acquired in the second quarter of fiscal 2012. 
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION 
Mainly as a result of higher growth from revenue than operating
expenses stemming primarily from the Cable segment, operating income
before depreciation and amortization grew by $16.3 million, or 11.6%,
in the first quarter to reach $156.6 million, when compared to the
same period of the previous year. For further details on Cogeco
Cable's operating results, please refer to the "Cable segment"
section. 
FIXED CHARGES 


 
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Quarters ended November 30                      2012        2011     Change 
(in thousands of dollars, except                                            
 percentages)                                      $           $          % 
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Depreciation and amortization                 66,041      65,619        0.6 
Financial expense                             17,014      17,778       (4.3)
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For the first quarter of fiscal 2013, depreciation and amortization
expense was essentially the same at $66 million when compared to
$65.6 million for the same period of the prior year resulting mainly
from higher acquisition of property, plant and equipment offset by
additional depreciation expense recorded in fiscal 2012 related to
the reduction of useful lives for certain home terminal devices. 
Fiscal 2013 first-quarter financial expense decreased by $0.8
million, or 4.3%, at $17 million, when compared to $17.8 million in
the prior year. Financial expense decrease is primarily attributable
to the foreign exchange loss of $1.5 million recorded in fiscal 2012
in the Cable segment. 
INCOME TAXES 
Fiscal 2013 first-quarter income tax expense amounted to $19.2
million, compared to $12.3 million in the prior year. The increase is
mostly attributable to the improvement in operating income before
depreciation and amortization and by a reduction of income taxes, in
fiscal 2012, from the implementation of certain tax measures of the
2011 federal budget limiting the tax deferrals for corporations with
a significant interest in a partnership. 
PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS 
For the three-month period ended November 30, 2012, profit for the
period from continuing operations amounted to $47.1 million of which
$18.5 million, or $1.11 per share, is attributable to owners of the
Corporation. For the comparable period of fiscal 2012, profit for the
period from continuing operations amounted to $44.5 million of which
$17.7 million, or $1.06 per share, is attributable to owners of the
Corporation. The variance for the quarter is mostly attributable to
the Cable segment and due to an increase in operating income before
depreciation and amortization, partly offset by the acquisition costs
related to ABB acquisition and the increase in income taxes explained
above. 
PROFIT FOR THE PERIOD 
For the period ended November 30, 2012, profit for the period
amounted to $47.1 million compared to $47.9 million in fiscal 2012.
Fiscal 2013 first-quarter profit for the period attributable to
owners of the Corporation amounted to $18.5 million, or $1.11 per
share compared to $18.8 million, or $1.12 per share for the
comparable period of prior year. This variation is mostly
attributable to the Cable segment and due to the acquisition costs
related to ABB acquisition, the increase in income taxes explained
above and the profit from the Portuguese subsidiary, Cabovisao -
Televisao por Cabo, S.A. ("Cabovisao"), reported as discontinued
operations, in the Cable segment for fiscal 2012, partly offset by
the improvement in operating income before depreciation and
amortization. 
The non-controlling interest represents a participation of
approximately 67.9% in Cogeco Cable's results. For fiscal 2013
first-quarter, the profit for the period attributable to
non-controlling interest amounted to $28.6 million compared to $29.2
million in fiscal 2012. 
FINANCING ACTIVITIES 
In the normal course of business, COGECO has incurred financial
obligations, primarily in the form of long-term debt, operating and
finance leases and guarantees. COGECO's obligations, as discussed in
the 2012 Annual Report, have not materially changed since August 31,
2012, except as mentioned below. 
In connection with the acquisition of ABB on November 30, 2012,
Cogeco Cable concluded, through two of its US subsidiaries, First
Lien Credit Facilities totalling US$710 million with a syndicate of
banks and other institutional lenders in three tranche and draw down
by an amount of US$660 million of which US$641.5 million was used to
repay ABB's secured debt and $US18.5 million to pay for some of the t
ransaction costs. The first tranche, a Term Loan A Facility amounting
to US$240 million, which will mature on November 30, 2017, the second
tranche, a Term Loan B Facility amounting to US$420 million, which
will mature on November 30, 2019 and the third tranche, a Revolving
Credit Facility of US$50 million unused at November 30, 2012,
including a swingline of US$15 million, which will mature on November
30, 2017. Interest rates on the First Lien Credit Facilities are
based on LIBOR plus the applicable margin, with a LIBOR floor of
1.00% for the Term Loan B Facility. Starting on December 31, 2013,
the Term Loan A Facility is subject to quarterly amortization of
1.25% in the first year, 2.5% in the second year and 3.0% in the
third and fourth years. Starting on December 31, 2012, the Term Loan
B Facility is subject to quarterly amortization of 0.25% until its
maturity date. In addition to the fixed amortization schedule and
commencing in the first quarter of fiscal 2015, loans under the Term
Loan Facilities shall be prepaid according to a Prepayment Percentage
of excess cash flow generated during the prior fiscal year. The First
Lien Credit Facilities are non-recourse to Cogeco Cable and its
Canadian subsidiaries and are indirectly secured by a first priority
fixed and floating charge on substantially all present and future
real and personal property and undertaking of every nature and kind
of the Cogeco Cable's US subsidiaries. The provisions under these
facilities provide for restrictions on the operations and activities
of the Cogeco Cable's US subsidiaries. Generally, the most
significant restrictions relate to permitted indebtedness and
investments, distributions and maintenance of certain financial
ratios. 
DIVIDEND DECLARATION 
At its January 14, 2013 meeting, the Board of Directors of COGECO
declared a quarterly eligible dividend of $0.19 per share for
multiple voting and subordinate voting shares, payable on February
11, 2013, to shareholders of record on January 28, 2013. The
declaration, amount and date of any future dividend will continue to
be considered and approved by the Board of Directors of the
Corporation based upon the Corporation's financial condition, results
of operations, capital requirements and such other factors as the
Board of Directors, at its sole discretion, deems relevant. There is
therefore no assurance that dividends will be declared, and if
declared, the amount and frequency may vary. 
CABLE SEGMENT  
CUSTOMER STATISTICS 


 
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                                                         CANADA             
                                            --------------------------------
                                               Net additions            % of
                                                    (losses)  penetration(1)
                                              Quarters ended        November
           Consolidated      USA      CANADA    November 30,             30,
                   November 30, 2012           2012     2011    2012    2011
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PSU           2,478,887  494,674   1,984,213 15,080   46,179                
Television                                                                  
 service                                                                    
 customers    1,105,443  244,404     861,039 (2,076)   4,452    52.1    54.2
HSI service                                                                 
 customers      817,019  171,640     645,379 10,845   17,285    39.0    38.0
Telephony                                                                   
 service                                                                    
 customers      556,42
5   78,630     477,795  6,311   24,442    28.9    27.2
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(1)  As a percentage of homes passed.                                       

 
Canada 
Fiscal 2013 first-quarter PSU net additions were lower than in the
comparable period of the prior year mainly as a result of service
category maturity, competitive offers and tightening of our credit
controls and processes. The net customer losses for Television
service customers stood at 2,076 compared to 4,452 net additions for
the same period of the prior year. Television service customer net
losses are mainly due to the promotional offers of competitors for
the video service combined with the tightening of customer credit
controls. Fiscal 2013 first-quarter HSI service customers grew by
10,845 compared to 17,285 in the first quarter of the prior year, and
the number of net additions to the Telephony service stood at 6,311
customers compared to 24,442 customers for the same period of the
prior year. HSI and Telephony net additions continue to stem from the
enhancement of the product offering, the impact of the bundled offer
(Cogeco Complete Connection) of Television, HSI and Telephony
services, and promotional activities. 
OPERATING RESULTS 


 
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Quarters ended November 30,                     2012        2011     Change 
(in thousands of dollars, except                                            
 percentages)                                      $           $          % 
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Revenue                                      327,911     315,424        4.0 
Operating expenses                           174,204     176,459       (1.3)
Management fees - COGECO Inc.                  6,581       7,142       (7.9)
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Operating income before depreciation and                                    
 amortization                                147,216     131,823       11.6 
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Operating margin                               44.9%       41.8%            
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REVENUE 
Fiscal 2013 first-quarter revenue increased by $12.5 million, or 4%,
to reach $327.9 million, when compared to the same period last year,
primarily by rate increases implemented in June and July 2012 and PSU
growth. 
OPERATING EXPENSES AND MANAGEMENT FEES 
For the first quarter of fiscal 2013, operating expenses decreased by
$2.3 million, to reach $174.2 million, a decrease of 1.3% compared to
prior year. The decrease in operating expenses is mainly attributable
to deployment and support costs incurred in fiscal 2012 related to
the migration of Television service customers from analogue to
digital, partly offset by PSU growth. 
Management fees paid to COGECO Inc. amounted to $6.6 million, 7.9%
lower when compared to $7.1 million in fiscal 2012. Management fees
have decreased due to the sale of Cabovisao on February 29, 2012. 
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND OPERATING
MARGIN 
Fiscal 2013 first-quarter operating income before depreciation and
amortization increased by $15.3 million, or 11.6%, to reach $147.1
million as a result of revenue growth and lower operating expenses.
Cogeco Cable's first-quarter operating margin increased to 44.9% from
41.8% in the comparable period of the prior year. 
FISCAL 2013 FINANCIAL GUIDELINES 
As a result of revised projections in the Cable segment described
below, the Corporation revised its consolidated projections for the
2013 fiscal year. Revenue is now expected to reach $1.730 billion, an
increase of $240 million when compared to the November 1, 2012
projections. Operating income before depreciation and amortization
should increase from $630 million to $750 million and financial
expense should increase from $69 million to $102 million.
Acquisitions of property, plant and equipment, intangible and other
assets should increase by approximately $24 million and free cash
flow should reach $175 million, an increase of $60 million from
November 1, 2012 projections. Profit for the year attributable to the
owners of the Corporation should reach $75 million compared to $65
million. 


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                   Revised          Original
                                               projections       projections
                                          January 14, 2013  November 1, 2012
                                               Fiscal 2013       Fiscal 2013
(in millions of dollars)                                 $                 $
----------------------------------------------------------------------------
                                                                            
Financial guidelines                                                        
  Revenue                                            1,730             1,490
  Operating income before depreciation                                      
   and amortization                                    750               630
  Financial expense                                    101                69
  Current income tax expense                            94                96
  Profit for the year                                  227               195
  Profit for the year attributable to                                       
   owners of the Corporation                            75                65
  Acquisitions of property, plant and                                       
   equipment, intangible and other                                          
   assets                                              373               350
  Free cash flow(1)                                    175               115
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)  Free cash flow is calculated as operating income before depreciation   
     and amortization less integration, restructuring and acquisition costs,
     financial expense, current income tax expense and acquisitions of      
     property, plant and equipment, intangible and other assets.            

 
CABLE SEGMENT 
Giving effect to the recent acquisition of ABB on November 30, 2012,
Cogeco Cable revised its financial guidelines for the 2013 fiscal
year issued on November 1, 2012 to include a nine-month period of
ABB's financial projections. Projections for the Enterprise services
were maintained as initially projected. In the Cable services segment
in Canada, guidelines remained essentially the same, except for
revenue and acquisitions of property, plant and equipment which
should be lower than originally expected due to lower PSU growth as a
result of current uncertain economic environment, the service
category maturity and competitive offers. Nonetheless, management
expects revenue to reach $1.590 billion, representing a growth of
$240 million, or 17.8%, when compared to those issued on November 1,
2012. PSU progression should reduce from 50,000 to 35,000, including
ABB nine-month operations. Operating income before depreciation and
amortization should increase by $121 million to reach $735 million
reflecting the ABB acquisition and the cost reduction initiatives
implemented in Canada during the current fiscal year and,
consequently operating margin should incr
ease from 45.5% to 46.2%.
Depreciation and amortization of property, plant and equipment and
intangible assets should increase from $290 million to $330 million
and acquisition of property, plant and equipment, intangible and
other assets should increase by $20 million to take into
consideration the ABB nine-month operations, partly offset by the
reduction in the Cable services segment in Canada. Financial expense
should amount to $96 million, an increase of $32 million, as a result
of the cost of financing of ABB acquisition. Fiscal 2013 free cash
flow is expected to amount to $170 million, an increase of $65
million, or 61.9%, when compared to the free cash flow projection
issued on November 1, 2012, stemming primarily from the nine-month
operations of ABB combined with the reduction in acquisitions of
property, plant and equipment, intangible and other assets explained
above. Profit for the year is expected to amount to $225 million, $35
million higher than the November 1, 2012 projections, mainly as a
result of the ABB's expected financial results for the nine-month
operations. 
Fiscal 2013 revised financial guidelines are as follows: 


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                  Revised          Original 
                                              projections       projections 
                                         January 14, 2013  November 1, 2012 
                                              Fiscal 2013       Fiscal 2013 
(in millions of dollars, except net                                         
 customer additions and operating                                           
 margin)                                                $                 $ 
----------------------------------------------------------------------------
                                                                            
Financial guidelines                                                        
  Revenue                                           1,590             1,350 
  Operating income before depreciation                                      
   and amortization                                   735               614 
  Operating margin                                   46.2%             45.5%
  Depreciation and amortization                       330               290 
  Financial expense                                    96                64 
  Current income tax expense                           92                95 
  Profit for the year                                 225               190 
  Acquisitions of property, plant and                                       
   equipment, intangible and other                                          
   assets                                             370               350 
  Free cash flow(1)                                   170               105 
Net customer addition guidelines                                            
  PSU growth                                       35,000            50,000 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)  Free cash flow is calculated as operating income before depreciation   
     and amortization less integration, restructuring and acquisition costs,
     financial expense, current income tax expense and acquisitions of      
     property, plant and equipment, intangible and other assets.            

 
NON-IFRS FINANCIAL MEASURES 
This section describes non-IFRS financial measures used by COGECO
throughout this MD&A. It also provides reconciliations between these
non-IFRS measures and the most comparable IFRS financial measures.
These financial measures do not have standard definitions prescribed
by IFRS and therefore, may not be comparable to similar measures
presented by other companies. These measures include "cash flow from
operations", "free cash flow", "operating income before depreciation
and amortization" and "operating margin". 
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 activities,
amortization of deferred transaction costs and discounts on long-term
debt, income taxes paid, current income tax expense, financial
expense paid and financial expense. This allows the Corporation to
isolate the cash flows from operating activities from the impact of
cash management decisions. Cash flow from operations is subsequently
used in calculating the non-IFRS measure, "free cash flow". Free cash
flow is used, by COGECO's management and investors, to measure its
ability to repay debt, distribute capital to its shareholders and
finance its growth. 
The most comparable IFRS measure is cash flow from operating
activities. Cash flow from operations is calculated as follows: 


 
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                             Quarters ended 
                                                               November 30, 
                                                          2012         2011 
(in thousands of dollars)                                    $            $ 
--------------------------------------------------------------------------- 
Cash flow from operating activities                     (6,005)       9,570 
Changes in non-cash operating activities                87,508       74,686 
Amortization of deferred transaction costs and                              
 discounts on long-term debt                               856          762 
Income taxes paid                                       44,248       37,984 
Current income tax expense                             (26,112)     (21,319)
Financial expense paid                                  18,309       20,834 
Financial expense                                      (17,014)     (17,778)
--------------------------------------------------------------------------- 
Cash flow from operations                              101,790      104,739 
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                            
                                                                            
Free cash flow is calculated as follows:                                    
                                                                            
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                             Quarters ended 
                                                               November 30, 
                                                          2012         2011 
(in thousands of dollars)                                    $            $ 
--------------------------------------------------------------------------- 
Cash flow from operations                              101,790      104,739 
Acquisition of property, plant and equipment           (78,514)     (74,460)
Acquisition of intangible and other assets              (4,641)      (3,944)
--------------------------------------------------------------------------- 
Free cash flow                                          18,635       26,335 
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 

 
OPERATING INCOME BEFOR
E DEPRECIATION AND AMORTIZATION 
Operating income before depreciation and amortization is used by
COGECO's management and investors to assess the Corporation's ability
to seize growth opportunities in a cost effective manner, to finance
its ongoing operations and to service its debt. Operating income
before depreciation and 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. 
The most comparable IFRS financial measure is operating income.
Operating income before depreciation and amortization and operating
margin are calculated as follows: 


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                              Quarters ended
                                                                November 30,
                                                            2012        2011
(in thousands of dollars, except percentages)                  $           $
----------------------------------------------------------------------------
Operating income                                          83,277      74,642
Depreciation and amortization                             66,041      65,619
Integration, restructuring and acquisitions costs          7,262           -
----------------------------------------------------------------------------
Operating income before depreciation and                                    
 amortization                                            156,580     140,261
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION 


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Quarters ended                    November 30,             August 31,       
(in thousands of dollars,                                                   
 except percentages and per                                                 
 share data)                       2012         2011       2012         2011
                                      $            $          $            $
----------------------------------------------------------------------------
Revenue                         366,608      346,023    356,685      331,045
Operating income before                                                     
 depreciation and                                                           
 amortization                   156,580      140,261    163,617      152,434
Operating income                 83,277       74,642     95,943      101,304
Income taxes                     19,168       12,340     33,625       21,804
Profit for the period from                                                  
 continuing operations           47,095       44,524     44,900       63,870
Profit (loss) for the period                                                
 from discontinued                                                          
 operations                           -        3,399          -        6,219
Profit (loss) for the period     47,095       47,923     44,900       70,089
Profit (loss) for the period                                                
 attributable to owners of                                                  
 the                                                                        
Corporation                      18,487       18,770     13,889       23,317
Cash flow from operating                                                    
 activities                      (6,005)       9,570    203,193      217,792
Cash flow from operations       101,790      104,739    119,612      148,228
Acquisitions of property,                                                   
 plant and equipment,                                                       
 intangible                                                                 
and other assets                 83,155       78,404    124,638      122,441
Free cash flow                   18,635       26,335     (5,026)      25,787
Earnings (loss) per share(1)                                                
  From continuing and                                                       
   discontinued operations                                                  
    Basic                          1.11         1.12       0.83         1.39
    Diluted                        1.10         1.11       0.83         1.39
  From continuing operations                                                
    Basic                          1.11         1.06       0.83         1.27
    Diluted                        1.10         1.05       0.83         1.27
  From discontinued                                                         
   operations                                                               
    Basic                             -         0.07          -         0.12
    Diluted                           -         0.06          -         0.12
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                        February   February 
Quarters ended                      May 31,                  29,        28, 
(in thousands of dollars,                                                   
 except percentages and per                                                 
 share data)                        2012       2011         2012       2011 
                                       $          $            $          $ 
----------------------------------------------------------------------------
Revenue                          358,032    330,258      345,613    307,532 
Operating income before                                                     
 depreciation and                                                           
 amortization                    158,446    142,025      144,518    132,140 
Operating income                  95,473     90,242       58,931     68,597 
Income taxes                      22,278     19,252       13,372     12,465 
Profit for the period from                                                  
 continuing operations            55,373     54,371       29,449     31,656 
Profit (loss) for the period                                                
 from discontinued                                                          
 operations                            -   (233,573)      52,047     (9,223)
Profit (loss) for the period      55,373   (179,202)      81,496     22,433 
Profit (loss) for the period                                                
 attributable to owners of                                                  
 the                                                                        
Corporation                       19,303    (56,303)      25,089        634 
Cash flow from operating                                                    
 activities                      109,546    141,106      126,455     90,891 
Cash flow from operations        117,606    129,327      105,153    103,309 
Acquisitions of property,                                                   
 plant and equipment,                                                       
 intangible                                                                 
and other assets                  88,141     63,807       8
7,186     62,873 
Free cash flow                    29,465     65,520       17,967     40,436 
Earnings (loss) per share(1)                                                
  From continuing and                                                       
   discontinued operations                                                  
    Basic                           1.15      (3.36)        1.50       0.04 
    Diluted                         1.15      (3.36)        1.49       0.04 
  From continuing operations                                                
    Basic                           1.15       1.13         0.50       0.22 
    Diluted                         1.15       1.13         0.50       0.21 
  From discontinued                                                         
   operations                                                               
    Basic                              -      (4.49)        1.00      (0.18)
    Diluted                            -      (4.49)        0.99      (0.18)
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                               
(1)  Per multiple and subordinate voting share.                

 
ABOUT COGECO 
COGECO is a diversified communications corporation. Through its
Cogeco Cable subsidiary, COGECO provides its residential customers
with Analogue and Digital Television, High Speed Internet ("HSI") and
Telephony services. Cogeco Cable is also present in the United States
through its subsidiary, Atlantic Broadband, whose head office is
located in Quincy, Massachusetts. Atlantic Broadband is ranked the
12th largest cable television system operator in the United States
and, serves the following areas: Western Pennsylvania, Southern
Florida, Maryland, Delaware and South Carolina. Cogeco Cable provides
as well 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, co-location services, managed IT services,
cloud services and other advanced communication solutions. Through
its subsidiary, Cogeco Diffusion, COGECO owns and operates 13 radio
stations across most of Quebec with complementary radio formats
serving a wide range of audiences as well as Cogeco News, its news
agency. Cogeco Diffusion also operates Metromedia, an advertising
representation house specialized in the public transit sector that
holds exclusive advertising rights in the Province of Quebec where it
also represents its business partners active across other Canadian
markets. 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). 
ADDITIONAL INFORMATION 
For additional information relating to the Corporation, including its
Annual Information Form, and for a detailed analysis of COGECO's
results for the first quarter of 2013, please refer to the Management
Discussion and Analysis and condensed consolidated financial
statements of COGECO, available on the SEDAR website at
www.sedar.com. 


 
Analyst Conference Call:  Tuesday, January 15, 2013 at 9:30 a.m. (Eastern   
                          Standard Time) 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: 4571052                        
                          By Internet at www.cogeco.ca/investors            
                                                                            
                          A rebroadcast of the conference call will be      
                          available until January 22, 2013, by dialling:    
                          Canada and US access number: 1 888-203-1112       
                          International access number: + 1 647-436-0148     
                          Confirmation code: 4571052                        

Contacts:
Source:  COGECO Inc.
Pierre Gagne
Senior Vice President and Chief Financial Officer
514-764-4700 
Information:  Media
Rene Guimond
Vice-President, Public Affairs and Communications
514-764-4700
 
 
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