Cogeco Communications Inc. — Interim / Quarterly Report 2023

Jan 13, 2023

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Three-month period ended November 30, 2022

COGECO COMMUNICATIONS INC. INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

		Three months ended November 30,
	Notes	2022	2021
(In thousands of Canadian dollars, except per share data)		$	$
Revenue	3	762,300	718,541
Operating expenses	6	389,677	363,674
Management fees – Cogeco Inc.	17	5,400	5,580
Acquisition, integration, restructuring and other costs	7	2,677	18,635
Depreciation and amortization	8	155,299	151,637
Financial expense	9	56,919	44,955
Profit before income taxes		152,328	134,060
Income taxes	10	31,953	17,450
Profit for the period		120,375	116,610
Profit for the period attributable to:
Owners of the Corporation		111,504	106,837
Non-controlling interest		8,871	9,773
		120,375	116,610
Earnings per share
Basic	11	2.45	2.29
Diluted	11	2.44	2.27

COGECO COMMUNICATIONS INC. INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three months ended November 30,
	2022	2021
(In thousands of Canadian dollars)	$	$
Profit for the period	120,375	116,610
Other comprehensive income (loss)
Items to be subsequently reclassified to profit or loss
Cash flow hedging adjustments
Net change in fair value of hedging derivative financial instruments	27,066	10,918
Related income taxes	(7,172)	(2,893)
	19,894	8,025
Foreign currency translation adjustments
Net foreign currency translation differences on net investments in foreign operations	65,929	28,106
Net changes on translation of long-term debt designated as hedges of net investments in foreign operations	(15,484)	(6,825)
Related income taxes	(63)	(53)
	50,382	21,228
	70,276	29,253
Items not to be subsequently reclassified to profit or loss
Defined benefit plans actuarial adjustments
Remeasurement of net defined benefit liability or asset	1,806	473
Related income taxes	(479)	(125)
	1,327	348
	71,603	29,601
Comprehensive income for the period	191,978	146,211
Comprehensive income for the period attributable to:
Owners of the Corporation	169,754	130,774
Non-controlling interest	22,224	15,437
	191,978	146,211

COGECO COMMUNICATIONS INC. INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

	Equity attributable to owners of the Corporation
Years ended August 31, 2015 and 2014	Sharecapital	Share-basedpaymentreserve	Accumulatedothercomprehensiveincome (loss)	Retainedearnings	Equityattributable tonon-controllinginterest	Totalshareholders'equity
(In thousands of Canadian dollars)	$	$	$	$	$	$
	(Note 13)		(Note 14)
Balance at August 31, 2021	958,251	16,889	(17,994)	1,457,998	391,183	2,806,327
Profit for the period	—	—	—	106,837	9,773	116,610
Other comprehensive income for the period	—	—	23,589	348	5,664	29,601
Comprehensive income for the period	—	—	23,589	107,185	15,437	146,211
Issuance of subordinate voting shares under the Stock OptionPlan	105	—	—	—	—	105
Share-based payment (Notes 13 D) and 17)	—	1,690	—	—	—	1,690
Share-based payment previously recorded in share-based paymentreserve for options exercised	15	(15)	—	—	—	—
Dividends (Note 13 C))	—	—	—	(32,715)	—	(32,715)
Purchase and cancellation of subordinate voting shares	(7,699)	—	—	(21,809)	—	(29,508)
Acquisition of subordinate voting shares held in trust under theIncentive and Performance Share Unit Plans	(4,865)	—	—	—	—	(4,865)
Distribution to employees of subordinate voting shares held intrust under the Incentive and Performance Share Unit Plans	4,401	(3,325)	—	(1,076)	—	—
Total distributions to shareholders	(8,043)	(1,650)	—	(55,600)	—	(65,293)
Balance at November 30, 2021	950,208	15,239	5,595	1,509,583	406,620	2,887,245
Balance at August 31, 2022	930,974	19,965	129,606	1,670,535	438,051	3,189,131
Profit for the period	—	—	—	111,504	8,871	120,375
Other comprehensive income for the period	—	—	56,923	1,327	13,353	71,603
Comprehensive income for the period	—	—	56,923	112,831	22,224	191,978
Issuance of subordinate voting shares under the Stock OptionPlan	555	—	—	—	—	555
Share-based payment (Notes 13 D) and 17)	—	1,821	—	—	—	1,821
Share-based payment previously recorded in share-based paymentreserve for options exercised	103	(103)	—	—	—	—
Dividends (Note 13 C))	—	—	—	(35,113)	—	(35,113)
Purchase and cancellation of subordinate voting shares	(14,443)	—	—	(22,840)	—	(37,283)
Acquisition of subordinate voting shares held in trust under theIncentive and Performance Share Unit Plans	(5,889)	—	—	—	—	(5,889)
Distribution to employees of subordinate voting shares held intrust under the Incentive and Performance Share Unit Plans	4,665	(5,584)	—	919	—	—
Total distributions to shareholders	(15,009)	(3,866)	—	(57,034)	—	(75,909)
Balance at November 30, 2022	915,965	16,099	186,529	1,726,332	460,275	3,305,200

COGECO COMMUNICATIONS INC. INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited)

	Notes	November 30, 2022	August 31, 2022
(In thousands of Canadian dollars)		$	$
Assets
Current
Cash and cash equivalents	15 D)	407,757	370,899
Trade and other receivables		119,223	108,444
Income taxes receivable		5,958	6,501
Prepaid expenses and other		54,210	39,234
Derivative financial instruments		3,469	2,932
		590,617	528,010
Non-current
Other assets		73,684	66,971
Property, plant and equipment		3,132,870	3,027,640
Intangible assets		3,624,797	3,571,221
Goodwill		2,037,983	1,982,498
Derivative financial instruments		122,959	95,537
Deferred tax assets		4,486	6,632
		9,587,396	9,278,509
Liabilities and Shareholders' equity
Liabilities
Current
Bank indebtedness		—	8,633
Trade and other payables		347,071	380,461
Provisions		22,580	26,584
Income tax liabilities		420	39,252
Contract liabilities and other liabilities		61,937	63,958
Government subsidies received in advance		90,368	127,851
Derivative financial instruments		1,650	1,285
Current portion of long-term debt	12	340,606	339,096
		864,632	987,120
Non-current
Long-term debt	12	4,610,038	4,334,373
Contract liabilities and other liabilities		8,821	8,960
Pension plan liabilities and accrued employee benefits		5,258	6,242
Deferred tax liabilities		793,447	752,683
		6,282,196	6,089,378
Shareholders' equity
Equity attributable to owners of the Corporation
Share capital	13 B)	915,965	930,974
Share-based payment reserve		16,099	19,965
Accumulated other comprehensive income	14	186,529	129,606
Retained earnings		1,726,332	1,670,535
		2,844,925	2,751,080
Equity attributable to non-controlling interest		460,275	438,051
		3,305,200	3,189,131
		9,587,396	9,278,509

Subsequent events (Notes 12 and 18)

COGECO COMMUNICATIONS INC. INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended November 30,
	Notes	2022	2021
(In thousands of Canadian dollars)		$	$
			(restated, Note 2)
Cash flows from operating activities
Profit for the period		120,375	116,610
Adjustments for:
Depreciation and amortization	8	155,299	151,637
Financial expense	9	56,919	44,955
Income taxes	10	31,953	17,450
Share-based payment		1,345	1,093
Gain on disposals and write-offs of property, plant and equipment		(70)	(1,093)
Defined benefit plans contributions, net of expense		(130)	78
		365,691	330,730
Changes in other non-cash operating activities	15 A)	(64,416)	13,174
Interest paid		(60,498)	(31,599)
Income taxes paid		(46,618)	(25,360)
		194,159	286,945
Cash flows from investing activities
Acquisition of property, plant and equipment		(234,637)	(145,848)
Business combinations, net of cash and cash equivalents acquired	5	—	(1,427,658)
Subsidies received in advance		181	—
Proceeds on disposals of property, plant and equipment		156	—
		(234,300)	(1,573,506)
Cash flows from financing activities
(Decrease) increase in bank indebtedness		(8,633)	9,440
Net increase (decrease) under the revolving facilities		167,188	(256,463)
Issuance of long-term debt, net of discounts and transaction costs		—	1,611,539
Repayment of notes, debentures and credit facilities		(8,780)	(5,437)
Repayment of lease liabilities		(1,341)	(995)
Issuance of subordinate voting shares	13 B)	555	105
Purchase and cancellation of subordinate voting shares	13 B)	(37,283)	(29,508)
Acquisition of subordinate voting shares held in trust under the Incentive and Performance Share UnitPlans	13 B)	(5,889)	(4,865)
Dividends paid	13 C)	(35,113)	—
		70,704	1,323,816
Effect of exchange rate changes on cash and cash equivalents denominated in a foreign currency		6,295	1,390
Net change in cash and cash equivalents		36,858	38,645
Cash and cash equivalents, beginning of the period		370,899	549,054
Cash and cash equivalents, end of the period	15 D)	407,757	587,699

November 30, 2022 (unaudited) (amounts in tables are in thousands of Canadian dollars, except number of shares or units and per share data)

NATURE OF OPERATIONS

Cogeco Communications Inc. ("Cogeco Communications" or the "Corporation") is a telecommunications corporation operating through its business units Cogeco Connexion and Breezeline. Cogeco Communications provides Internet, video and phone services to residential and business customers in Québec and Ontario in Canada as well as in thirteen states in the United States.

The Corporation is a subsidiary of Cogeco Inc. ("Cogeco"), which as of November 30, 2022 held 34.7% of the Corporation's equity shares, representing 84.1% of the votes attached to the Corporation's voting shares. Cogeco Communications is a Canadian public corporation whose subordinate voting shares are listed on the Toronto Stock Exchange ("TSX") under the trading symbol "CCA".

The Corporation's registered office is located at 1 Place Ville Marie, Suite 3301, Montréal, Québec, H3B 3N2.

1. BASIS OF PRESENTATION

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standards ("IAS") 34, Interim financial reporting, as issued by the International Accounting Standards Board ("IASB") and do not include all the information required for annual financial statements. Certain information and footnote disclosure normally included in annual financial statements were omitted or condensed where such information is not considered material to the understanding of the Corporation's interim financial information. As such, these condensed interim consolidated financial statements should be read in conjunction with the Corporation's 2022 annual consolidated financial statements.

The condensed interim consolidated financial statements have been prepared with the same accounting policies and methods of computation followed by the Corporation in its 2022 annual consolidated financial statements. The accounting policies have been applied consistently to all periods presented in the condensed interim consolidated financial statements. Certain comparative amounts in the condensed interim consolidated financial statements have been reclassified in order to conform to the fiscal 2023 consolidated financial statements presentation.

The condensed interim consolidated financial statements have been prepared on a going concern basis using historical cost, except for financial instruments and derivative financial instruments, cash-settled share-based payment arrangements and pension plan assets, which are measured at fair value, and for defined benefit obligation and provisions, which are measured at present value.

Financial information is presented in Canadian dollars, which is the functional currency of the Corporation.

The results of operations for the interim period are not necessarily indicative of the results of operations for the full year. The Corporation does not expect seasonality to be a material factor in its quarterly results.

The condensed interim consolidated financial statements were approved by the Board of Directors of the Corporation at its meeting held on January 12, 2023.

November 30, 2022 (unaudited)

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

2. ACCOUNTING POLICY DEVELOPMENTS

A) CHANGE IN ACCOUNTING POLICIES

Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows)

During the third quarter of fiscal 2022, the Corporation changed the presentation of the cash from subsidies received in advance, following the application of the IFRS Interpretations Committee's agenda decision Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows). These funds, which were previously presented as Restricted cash, were reclassified as Cash and cash equivalents in the Corporation's consolidated statements of financial position and consolidated statements of cash flows, on a retrospective basis. The application of this agenda decision had no impact on the ultimate recognition of the subsidies, for which Property, plant and equipment continues to be recorded net of subsidies, within the consolidated statement of financial position.

The changes in presentation for the comparative period presented in these condensed interim consolidated financial statements are summarized as follows:

Consolidated statements of cash flows

Three months ended November 30, 2021	As previouslyreported	Effect of change inpresentation	As currentlyreported
	$	$	$
Cash flows from investing activities
Acquisition of property, plant and equipment (1)	(141,028)	(4,820)	(145,848)
Net change in cash and cash equivalents	43,465	(4,820)	38,645
Cash and cash equivalents, beginning of the period (2)	365,520	183,534	549,054
Cash and cash equivalents, end of the period	408,985	178,714	587,699

(1) The application of this agenda decision resulted in an increase of $4.8 million in Acquisition of property, plant and equipment, in the Corporation's interim consolidated statement of cash flows for the three-month period ended November 30, 2021, as subsidies received in advance were previously presented as a reduction of Acquisition of property, plant and equipment based on the costs incurred in connection with these subsidized projects over the total expected costs.

(2) At August 31, 2021, restricted cash totalling $183.5 million was reclassified to Cash and cash equivalents, in the Corporation's consolidated statements of financial position and consolidated statements of cash flows.

(unaudited)

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

B) FUTURE CHANGES TO STANDARDS, INTERPRETATIONS AND AMENDMENTS TO STANDARDS AND INTERPRETATIONS

New standards, interpretations and amendments to standards and interpretations were issued by the IASB or the IFRS Interpretations Committee, but have not yet been applied in preparing these condensed interim consolidated financial statements. The following issued amendments to standards may have an impact on future consolidated financial statements of the Corporation:

Classification of Liabilities as Current or Non-current andNon-current Liabilities with Covenants - Amendments toIAS 1, Presentation of Financial Statements

In January 2020, the IASB issued Classification of Liabilities as Current or Noncurrent (Amendments to IAS 1) to clarify the criterion for classifying a liability asnon-current relating to the right to defer settlement of the liability for at leasttwelve months after the reporting period. In October 2022, the IASB issued Noncurrent Liabilities with Covenants (Amendments to IAS 1) to clarify how conditionswith which an entity must comply within twelve months after the reporting periodaffect the classification of a liability. The amendments also require an entity todisclose additional information in the notes to the financial statements to enablestakeholders to understand the risk that non-current liabilities could becomerepayable within twelve months after the reporting date. The amendments areeffective for annual reporting periods beginning on or after January 1, 2024, withearlier application permitted. The Corporation is currently assessing the impact ofthese amendments on its consolidated financial statements.

Disclosure of Accounting Policies - Amendments to IAS 1,Presentation of Financial Statements, and IFRS PracticeStatement 2

In February 2021, the IASB amended IAS 1 to require entities to disclose theirmaterial accounting policy information rather than their significant accountingpolicies. Further amendments to IAS 1 are made to explain how an entity canidentify a material accounting policy. The amendments are effective for annualreporting periods beginning on or after January 1, 2023, with earlier applicationpermitted. The Corporation is currently assessing the impact of these amendmentson its accounting policies disclosure.

3. REVENUE

					Three months ended November 30,
		Canadian telecommunications		American telecommunications		Consolidated
	2022	2021	2022	2021	2022	2021
	$	$	$	$	$	$
Residential (1) (2) (3)	312,008	295,569	336,251	317,313	648,259	612,882
Commercial (3)	43,362	43,296	44,768	40,379	88,130	83,675
Other (2)	16,714	16,182	9,197	5,802	25,911	21,984
	372,084	355,047	390,216	363,494	762,300	718,541

(1) Includes revenue from Internet, video and phone residential customers, as well as bulk residential customers.

(2) During the fourth quarter of fiscal 2022, the Corporation modified its definition of Internet service customers in order to be consistent with industry practices. As per the new definition, Internet service customers include only customers who have their Internet service installed, operated and billed directly by the Corporation. The previous definition also included wholesale Internet customers, now presented in Other. This change has been applied retrospectively to the comparative figures.

(3) During the first quarter of fiscal 2023, the Corporation changed the presentation of the revenue related to certain bulk accounts, from residential to commercial. This change has been applied retrospectively to the comparative figures, and consequently a $4.1 million revenue reclassification was reflected in the first quarter of fiscal 2022, for a total reclassification of $15.7 million for fiscal 2022.

November 30, 2022

(unaudited)

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

4. OPERATING SEGMENTS

The Corporation's results are reported in two operating segments: Canadian telecommunications and American telecommunications. In the fourth quarter of fiscal 2022, the Corporation renamed its Canadian and American "broadband services" segments as Canadian and American "telecommunications" segments. Other than the name, no changes were made to the segments' composition. The reporting structure reflects how the Corporation manages its business activities to make decisions about resources to be allocated to the segments and to assess their performance.

The Canadian and American telecommunications segments provide a wide range of Internet, video and phone services primarily to residential customers, as well as business services across their coverage areas. The Canadian telecommunications activities are carried out by Cogeco Connexion in the provinces of Québec and Ontario and the American telecommunications activities are carried out by Breezeline in 13 states: Connecticut, Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New York, Ohio, Pennsylvania, South Carolina, Virginia and West Virginia.

The Corporation and its chief operating decision maker assess the performance of each operating segment based on adjusted EBITDA, which is equal to Revenue less Operating expenses. Transactions between operating segments are measured at the amounts agreed to between the parties.

Following the application of the IFRS Interpretations Committee issued agenda decision Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows) during the third quarter of fiscal 2022, the Corporation changed the label of its "Acquisition of property, plant and equipment" measure to "Net capital expenditures". Net capital expenditures exclude non-cash acquisition of right-of-use assets and the purchases of spectrum licences, and are presented net of government subsidies, including subsidies received in advance recognized as a reduction of the cost of property, plant and equipment. Subsidies received in advance are recognized as a reduction of property, plant and equipment based on the costs incurred in connection with the high-speed Internet network expansion construction projects over the total expected costs. Refer to Note 15 B) for a reconciliation of net capital expenditures to cash payments for acquisition of property, plant and equipment as reported in the consolidated statements of cash flows.

The column in the tables below entitled "Corporate and eliminations" is comprised of the corporate activities and consolidation elimination entries.

				Three months ended November 30, 2022
	Canadiantelecommunications	Americantelecommunications	Corporate andeliminations	Consolidated
	$	$	$	$
Revenue	372,084	390,216	—	762,300
Operating expenses	173,451	207,710	8,516	389,677
Management fees – Cogeco Inc.	—	—	5,400	5,400
Adjusted EBITDA	198,633	182,506	(13,916)	367,223
Acquisition, integration, restructuring and other costs				2,677
Depreciation and amortization				155,299
Financial expense				56,919
Profit before income taxes				152,328
Income taxes				31,953
Profit for the period				120,375
Net capital expenditures	115,238	80,408	1,325	196,971

(unaudited)

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

			Three months ended November 30, 2021
	Canadiantelecommunications$	Americantelecommunications$	Corporate andeliminations$	Consolidated$
Revenue	355,047	363,494	—	718,541
Operating expenses	167,186	187,730	8,758	363,674
Management fees – Cogeco Inc.	—	—	5,580	5,580
Adjusted EBITDA	187,861	175,764	(14,338)	349,287
Acquisition, integration, restructuring and other costs				18,635
Depreciation and amortization				151,637
Financial expense				44,955
Profit before income taxes				134,060
Income taxes				17,450
Profit for the period				116,610
Net capital expenditures	67,471	73,227	330	141,028

5. BUSINESS COMBINATION

FISCAL 2022

Acquisition of WideOpenWest's Ohio broadband systems

On September 1, 2021, Breezeline completed the acquisition of the broadband systems of WideOpenWest, Inc. located in Ohio ("Ohio broadband systems") for a purchase price of $1.418 billion (US$1.125 billion), subject to customary post-closing adjustments. The transaction was executed through an asset purchase agreement. The purchase price and transaction costs were financed through the issuance of a US$900 million senior secured Term B loan maturing in September 2028 and excess cash on hand. During the fourth quarter of fiscal 2022, the Corporation finalized the purchase price allocation.

6. OPERATING EXPENSES

	Three months ended November 30,
	2022
	$	$
Salaries, employee benefits and outsourced services	121,303	105,771
Service delivery costs	200,187	196,637
Customer related costs	30,094	27,079
Other external purchases	38,093	34,187
	389,677	363,674

(unaudited)

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

7. ACQUISITION, INTEGRATION, RESTRUCTURING AND OTHER COSTS

	Three months ended November 30,
	2022	2021
	$	$
Acquisition and integration costs	583	18,635
Restructuring costs	816	—
Configuration and customization costs related to cloud computing arrangements	1,278	—
	2,677	18,635

8. DEPRECIATION AND AMORTIZATION

		Three months ended November 30,
	2022	2021
	$	$
Depreciation of property, plant and equipment (1)	141,090	137,190
Amortization of intangible assets	14,209	14,447
	155,299	151,637

(1) Includes depreciation of right-of-use assets amounting to $1.9 million for the three-month period of fiscal 2023 ($1.3 million in fiscal 2022).

9. FINANCIAL EXPENSE

	Three months ended November 30,
	2022	2021
	$	$
Interest on long-term debt, excluding interest on lease liabilities	55,395	42,636
Interest on lease liabilities	398	310
Net foreign exchange loss	2,420	1,272
Amortization of deferred transaction costs related to the revolving facilities	164	183
Other	(1,458)	554
	56,919	44,955

November 30, 2022

(unaudited)

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

10. INCOME TAXES

		Three months ended November 30,
	2022	2021
	$	$
Current	8,376	14,563
Deferred	23,577	2,887
	31,953	17,450

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

	Three months ended November 30,
	2022	2021
	$	$
Profit before income taxes	152,328	134,060
Combined Canadian income tax rate	26.5 %	26.5 %
Income taxes at combined Canadian income tax rate	40,367	35,526
Difference in operations' statutory income tax rates	(242)	(127)
Impact on income taxes arising from non-deductible expenses and non-taxable profit	551	(103)
Tax impacts related to foreign operations	(9,763)	(6,561)
Other (1)	1,040	(11,285)
Income taxes at effective income tax rate	31,953	17,450
Effective income tax rate	21.0 %	13.0 %

(1) For the three-month period ending November 30, 2021, primarily related to the reduction of the blended state income tax rate applied to the U.S. temporary tax differences, following the Ohio broadband systems acquisition in the first quarter of fiscal 2022.

11. EARNINGS PER SHARE

The following table provides the components used in the calculation of basic and diluted earnings per share:

	Three months ended November 30,
	2022	2021
	$	$
Profit for the period attributable to owners of the Corporation	111,504	106,837
Weighted average number of multiple and subordinate voting shares outstanding	45,471,778	46,596,034
Effect of dilutive stock options (1)	47,039	218,189
Effect of dilutive incentive share units	74,644	69,347
Effect of dilutive performance share units	97,484	94,017
Weighted average number of diluted multiple and subordinate voting shares outstanding	45,690,945	46,977,587

(1) For the first quarter of fiscal 2023, 555,165 stock options (179,530 in fiscal 2022) were excluded from the calculation of diluted earnings per share as the exercise price of the options was greater than the average share price of the subordinate voting shares.

November 30, 2022

(unaudited)

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

12. LONG-TERM DEBT

	November 30, 2022$	August 31, 2022$
Notes, debentures and credit facilities	4,906,928	4,629,842
Lease liabilities	43,716	43,627
	4,950,644	4,673,469
Less current portion	340,606	339,096
	4,610,038	4,334,373

A) NOTES, DEBENTURES AND CREDIT FACILITIES

	Maturity	Interestrate		November 30, 2022	August 31, 2022
		%		$	$
Corporation
Term Revolving Facility (a)
Revolving loan	January 2027	6.15 (1)		30,000	—
Revolving loan – US$182 million (US$81 million at August 31, 2022)	January 2027	5.40 (1) (2)		245,846	106,199
Senior Secured Notes
Series A - US$25 million	September 2024	4.14		33,739	32,742
Series B - US$150 million	September 2026	4.29		202,288	196,313
Senior Secured Notes - US$215 million	June 2025	4.30		290,023	281,450
Senior Secured Notes	September 2031	2.99		497,066	496,993
Senior Secured Debentures Series 4	May 2023	4.18		299,820	299,730
U.S. subsidiaries
First Lien Credit Facilities
Senior Secured Term Loan B Facility
Tranche 1 - US$1,588.5 million (US$1,592.8 million at August 31, 2022)	January 2025	6.07 (1) (3)		2,119,685	2,060,614
Tranche 2 - US$893.3 million (US$895.5 million at August 31, 2022)	September 2028	6.57 (1) (4)		1,188,461	1,155,801
Senior Secured Revolving Facility	July 2024		— (4)	—	—
				4,906,928	4,629,842
Less current portion				334,941	333,818
				4,571,987	4,296,024

(1) Interest rate on debt includes the applicable credit spread.

(2) An amount of US$182 million drawn under the Corporation's Term Revolving Facility was hedged until January 11, 2023, using a cross-currency swap agreement which sets the amount redeemable at maturity at $243.5 million and the effective interest rate on the Canadian dollar equivalent at 4.86%.

(3) As of November 30, 2022, a U.S. subsidiary had entered into interest rate swap agreements to fix the interest rate on an amount of US$770 million of the Senior Secured Term Loan B Facility - Tranche 1. These agreements have the effect of converting the floating US LIBOR base rate into fixed rates ranging from 2.017% to 2.262%, plus an applicable credit spread, for maturities between January 31, 2023 and November 30, 2024. Taking into account these agreements, the effective interest rate on Tranche 1 of the Senior Secured Term Loan B Facility is 5.13%.

(4) As of November 30, 2022, a U.S. subsidiary had entered into interest rate swap agreements to fix the interest rate on an amount of US$800 million of the Senior Secured Term Loan B Facility - Tranche 2. These agreements have the effect of converting the floating US LIBOR base rate, or the 50 bps LIBOR floor if higher, into fixed rates ranging from 1.2237% to 1.4631%, plus an applicable credit spread, for maturities between October 31, 2025 and July 31, 2027. Taking into account these agreements, the effective interest rate on Tranche 2 of the Senior Secured Term Loan B Facility is 4.11%.

At November 30, 2022, the Corporation had $157.9 million of performance and payment bonds outstanding, issued in accordance with the rules established by Infrastructure Ontario in connection with Ontario's Accelerated High Speed Internet Program (AHSIP).

a) On December 21, 2022, Cogeco Communications amended its $750 million Term Revolving Facility to extend the maturity by one additional year to January 24, 2028. The amendment also replaces LIBOR with the Secured Overnight Financing Rate ("SOFR") as the benchmark interest rate.

November 30, 2022

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

B) OTHER INFORMATION

At November 30, 2022, the Corporation's weighted average interest rate on all debt, excluding the amortization of deferred transaction costs and commitment fees but including the impact of interest rate swaps, was 4.5%.

13. SHARE CAPITAL

A) AUTHORIZED

Unlimited number of:

Class A Preference shares, without voting rights, redeemable by the Corporation and retractable at the option of the holder at any time at a price of $1 per share, carrying a cumulative preferential cash dividend at a rate of 11% of the redemption price per year.

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

Multiple voting shares, 10 votes per share.

Subordinate voting shares, 1 vote per share.

B) ISSUED AND PAID

	November 30,2022	August 31,2022
	$	$
15,691,100 multiple voting shares	98,346	98,346
29,579,332 subordinate voting shares (30,081,467 at August 31, 2022)	834,479	848,264
	932,825	946,610
86,849 subordinate voting shares held in trust under the Incentive Share Unit Plan (77,367 at August 31, 2022)	(7,270)	(7,020)
116,759 subordinate voting shares held in trust under the Performance Share Unit Plan (94,216 at August 31, 2022)	(9,590)	(8,616)
	915,965	930,974

During the first three months of fiscal 2023, subordinate voting share transactions were as follows:

	Number of shares	Amount
		$
Balance at August 31, 2022	30,081,467	848,264
Shares issued for cash under the Stock Option Plan	10,035	555
Share-based payment previously recorded in share-based payment reserve for options exercised	—	103
Purchase and cancellation of subordinate voting shares (1)	(512,170)	(14,443)
Balance at November 30, 2022	29,579,332	834,479

(1) During the first three months of fiscal 2023, under its normal course issuer bid program, the Corporation purchased and cancelled 512,170 (274,000 in 2022) subordinate voting shares with an average stated value of $14.4 million ($7.7 million in 2022), for consideration of $37.3 million ($29.5 million in 2022). The excess of the purchase price over the average stated value of the shares totalled $22.8 million ($21.8 million in 2022) and was charged to retained earnings.

November 30, 2022

(unaudited)

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

Normal course issuer bid

On November 24, 2022, Cogeco Communications received the approval of the Toronto Stock Exchange to amend its normal course issuer bid (the "NCIB") in order to increase the maximum number of its subordinate voting shares that may be repurchased for cancellation from 1,500,000 to 1,960,905, representing 10% of the 19,609,056 subordinate voting shares that constituted the public float of the Corporation's issued and outstanding subordinate voting shares as of the reference date of April 22, 2022. The current NCIB covers the period from May 4, 2022 to May 3, 2023. No other terms of the NCIB have been amended.

Under its previous NCIB that commenced on May 4, 2021 and ended on May 3, 2022, the Corporation could purchase for cancellation a maximum of 2,068,000 subordinate voting shares.

The Corporation has also entered into an automatic share purchase plan ("ASPP") with a designated broker to allow for the purchase of subordinate voting shares under the NCIB at times when the Corporation would ordinarily not be permitted to purchase shares due to regulatory restrictions or self-imposed blackout periods. Such purchases are executed by the broker based on parameters established by the Corporation prior to the pre-established ASPP period.

Subordinate voting shares held in trust

During the first three months of fiscal 2023, the transactions pertaining to the subordinate voting shares held in trust under the Incentive Share Unit Plan ("ISU Plan") and the Performance Share Unit Plan ("PSU Plan") were as follows:

		ISU Plan		PSU Plan
	Number of shares	$	Amount Number of shares	Amount$
Balance at August 31, 2022	77,367	7,020	94,216	8,616
Subordinate voting shares acquired	30,590	2,165	52,612	3,724
Subordinate voting shares distributed to employees	(21,108)	(1,915)	(30,069)	(2,750)
Balance at November 30, 2022	86,849	7,270	116,759	9,590

C) DIVIDENDS

During the three-month period ended November 30, 2022, a quarterly eligible dividend of $0.776 per share, for a total of $35.1 million, was declared and paid to the holders of multiple and subordinate voting shares, compared to a declared quarterly eligible dividend of $0.705 per share, for a total of $32.7 million, during the three-month period ended November 30, 2021. No dividend was paid during the three-month period ended November 30, 2021, as the dividend was payable on December 9, 2021.

		Three months ended November 30,
	2022	2021
	$	$
Dividends on multiple voting shares	12,176	11,062
Dividends on subordinate voting shares	22,937	21,653
	35,113	32,715

At its January 12, 2023 meeting, the Board of Directors of Cogeco Communications declared a quarterly eligible dividend of $0.776 per share for multiple and subordinate voting shares, payable on February 9, 2023 to shareholders of record on January 26, 2023.

D) SHARE-BASED PAYMENT PLANS

The Corporation offers an Employee Stock Purchase Plan for the benefit of its employees and those of its subsidiaries and a Stock Option Plan to its executive officers and designated employees. No more than 10% of the outstanding subordinate voting shares are available for issuance under these plans. Furthermore, the Corporation offers an Incentive Share Unit Plan and a Performance Share Unit Plan for executive officers and designated employees, and a Deferred Share Unit Plan ("DSU Plan") for members of the Board of Directors. A detailed description of these plans can be found in the 2022 annual consolidated financial statements of the Corporation.

(unaudited)

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

Changes in the outstanding number of stock options were as follows:

	Options	Weighted averageexercise price
		$
Outstanding at August 31, 2022	874,165	86.52
Granted	151,028	69.48
Exercised (1)	(10,035)	55.35
Cancelled	(13,985)	98.97
Outstanding at November 30, 2022	1,001,173	84.09
Exercisable at November 30, 2022	560,985	80.06

(1) The weighted average share price for options exercised during the three-month period was $72.19.

The weighted average fair value of stock options granted for the three-month period ended November 30, 2022 was $11.69 per option. The weighted average fair value of each option granted was estimated at the grant date for purposes of determining share-based payment expense using the Black-Scholes option pricing model based on the following weighted-average assumptions:

	%
Expected dividend yield	4.33
Expected volatility	25.67
Risk-free interest rate	3.39
Expected life (in years)	5.1

Changes in the outstanding number of ISUs, PSUs and DSUs were as follows:

	ISUs	PSUs	DSUs
Outstanding at August 31, 2022	75,375	94,589	72,166
Granted/Issued (1)	28,004	39,851	—
Performance-based additional units granted	—	1,941	—
Distributed/Redeemed	(21,108)	(30,069)	—
Cancelled	(3,867)	(4,253)	—
Dividend equivalents	—	1,071	757
Outstanding at November 30, 2022	78,404	103,130	72,923

(1) The weighted average fair value of the ISUs and PSUs granted during the three-month period was $69.48.

The following table shows the compensation expense recorded with regard to the Corporation's share-based payment plans:

		Three months ended November 30,
	2022	2021
	$	$
Stock options	242	221
ISUs	564	459
PSUs	517	308
DSUs	(376)	(479)
	947	509

(unaudited)

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

14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

	Cash flow hedgereserve$	Foreign currencytranslation$	Total$
Balance at August 31, 2021	(30,870)	12,876	(17,994)
Other comprehensive income	8,025	15,564	23,589
Balance at November 30, 2021	(22,845)	28,440	5,595
Balance at August 31, 2022	71,315	58,291	129,606
Other comprehensive income	19,894	37,029	56,923
Balance at November 30, 2022	91,209	95,320	186,529

15. ADDITIONAL CASH FLOWS INFORMATION

A) CHANGES IN OTHER NON-CASH OPERATING ACTIVITIES

	Three months ended November 30,
	2022	2021
	$	$
Trade and other receivables	(8,269)	(7,649)
Prepaid expenses and other	(14,427)	(1,482)
Other assets	(3,919)	(2,188)
Trade and other payables	(29,590)	25,628
Provisions	(4,574)	756
Contract liabilities and other liabilities	(3,637)	(1,891)
	(64,416)	13,174

B) ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT

The following table shows the reconciliation between the cash payments for acquisition of property, plant and equipment, as reported within the investing section in the consolidated statements of cash flows, and the net capital expenditures, as presented in Note 4. Net capital expenditures are presented net of government subsidies, including the subsidies received in advance recognized as a reduction of the cost of property, plant and equipment.

		Three months ended November 30,
	2022	2021
	$	$
		(restated, Note 2)
Acquisition of property, plant and equipment	234,637	145,848
Subsidies received in advance recognized as a reduction of the cost of property, plant and equipment during the period	(37,666)	(4,820)
Net capital expenditures	196,971	141,028

(unaudited)

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

C) CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES

		Long-term debt
Three months ended November 30, 2022	Bankindebtedness	Notes, debenturesand credit facilities	Lease liabilities	Total
	$	$	$	$
Balance at August 31, 2022	8,633	4,629,842	43,627	4,682,102
Decrease in bank indebtedness	(8,633)	—	—	(8,633)
Net increase under the revolving facilities	—	167,188	—	167,188
Repayment of notes, debentures and credit facilities	—	(8,780)	—	(8,780)
Repayment of lease liabilities	—	—	(1,341)	(1,341)
Total cash flows (used in) from financing activities excluding equity	(8,633)	158,408	(1,341)	148,434
Interest paid on lease liabilities	—	—	(398)	(398)
Total cash flow changes	(8,633)	158,408	(1,739)	148,036
Effect of changes in foreign exchange rates	—	115,339	603	115,942
Amortization of discounts, transaction costs and other	—	3,339	—	3,339
Net increase in lease liabilities	—	—	1,225	1,225
Total non-cash changes	—	118,678	1,828	120,506
Balance at November 30, 2022	—	4,906,928	43,716	4,950,644

D) CASH AND CASH EQUIVALENTS

	November 30,2022	August 31,2022
	$	$
Cash	249,110	177,299
Cash with restrictions on use (1)	90,368	127,851
Cash equivalents (2)	68,279	65,749
	407,757	370,899

(1) In connection with government subsidies received in advance, pertaining mainly to Cogeco Connexion's high-speed Internet network expansion projects. (2) Comprised of bank term deposits.

16. FINANCIAL INSTRUMENTS

A) FINANCIAL RISK MANAGEMENT

Management's objectives are to protect the Corporation and its subsidiaries against material economic exposures and variability of results, and against certain financial risks including credit, liquidity, interest rate, foreign exchange and market risks which are described in the Corporation's 2022 annual consolidated financial statements.

Credit risk

The Corporation is exposed to credit risk arising from the derivative financial instruments, cash and cash equivalents and trade accounts receivable, the maximum exposure of which is represented by the carrying amounts reported on the condensed interim consolidated statements of financial position.

November 30, 2022

(unaudited)

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

The Corporation reduces the credit risk with regard to the derivative financial instruments by completing transactions with financial institutions that carry a high credit rating. At November 30, 2022, management believes this credit risk to be minimal, since the lowest credit rating of the counterparties to the agreements is "A-" by Standard & Poor's rating services ("S&P").

Cash equivalents consist mainly of short-term, highly liquid investments. The Corporation has deposited the cash and cash equivalents with reputable financial institutions, for which management believes the risk of loss to be remote.

To mitigate the credit risk in relation to its trade accounts receivable, the Corporation continuously monitors the financial condition of its customers and reviews the credit history or worthiness of each new large customer. The Corporation has credit policies in place and has established various credit controls, including credit checks, deposits on accounts and advance billing, and has also established procedures to suspend the availability of services when customers have fully utilized approved credit limits or have violated existing payment terms. Furthermore, a large portion of the Corporation's customers are billed and pay before the services are rendered. The Corporation believes that its allowance for doubtful accounts is sufficient to cover the related credit risk. Since the Corporation has a large and diversified clientele dispersed throughout its market areas in Canada and the United States, there is no significant concentration of credit risk.

Liquidity risk

At November 30, 2022, the Corporation had used $276.0 million of its $750 million Term Revolving Facility for a remaining availability of $474.0 million. In addition, the U.S. subsidiaries benefit from a Senior Secured Revolving Facility of $202.6 million (US$150 million), of which $3.7 million (US$2.7 million) was used at November 30, 2022 for a remaining availability of $199.0 million (US$147.3 million).

Interest rate risk

The Corporation is exposed to interest rate risk on its floating interest rate instruments. Interest rate fluctuations will have an effect on the repayment of these instruments. At November 30, 2022, all of the Corporation's long-term debt was at fixed rate, except for the amounts drawn under the Term Revolving Facility and First Lien Credit Facilities which are subject to floating interest rates.

To reduce the risk on the floating interest rate instruments and mitigate the impact of interest rate variations, the Corporation's U.S. subsidiary entered into fixed interest rate swap agreements. The following table shows the interest rate swaps outstanding at November 30, 2022:

Type of hedge	Notional amount	Receive interest rate	Pay interest rate (1)	Maturity	Hedged item
Cash flow	US$770 million	US LIBOR base rate	2.017% - 2.262%	January 2023 -November 2024	Senior Secured Term Loan B - Tranche 1
Cash flow	US$800 million	US LIBOR base ratewith a 50 bps floor	1.224% - 1.463%	October 2025 -July 2027	Senior Secured Term Loan B - Tranche 2

(1) The interest rate does not include the applicable credit spread.

The sensitivity of the Corporation's annual financial expense to an increase of 1% in the interest rate applicable to the unhedged portion of these facilities would represent an increase of approximately $15.1 million based on the outstanding debt and swap agreements at November 30, 2022.

Foreign exchange risk

The Corporation is exposed to foreign exchange risk with respect to the interest, amounting to $182.3 million, associated with its notes, debentures and credit facilities denominated in US dollars. The impact of a 10% increase in the exchange rate of the US dollar to the Canadian dollar would increase financial expense by approximately $18.2 million based on the outstanding debt and swap agreements at November 30, 2022.

Furthermore, a foreign currency exposure arises from the Corporation's net investment in its U.S. subsidiary, as a result of the translation of the net investment into the Corporation's functional currency. A portion of the Corporation's net investment in its U.S. subsidiary is hedged by the Corporation's US dollar denominated Senior Secured Notes, which the Corporation has designated as hedges of the net investment, while a portion is economically hedged by its U.S. subsidiary's US dollar denominated First Lien Credit Facilities.

The exchange rate used to translate the US dollar currency to the Canadian dollar for the consolidated statement of financial position accounts at November 30, 2022 was $1.3508 ($1.3111 at August 31, 2022) per US dollar. A 10% decrease in the exchange rate of the US dollar to the Canadian dollar would decrease other comprehensive income by approximately $121.6 million.

November 30, 2022

(unaudited)

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

B) FAIR VALUE OF FINANCIAL INSTRUMENTS

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

	November 30, 2022			August 31, 2022
	Carrying value	Fair value	Carrying value	Fair value
	$	$	$	$
Notes, debentures and credit facilities	4,906,928	4,732,917	4,629,842	4,507,568

C) CAPITAL MANAGEMENT

The Corporation's objectives in managing capital are to ensure sufficient liquidity to support the capital requirements of its various businesses, including development of the business by acquisition, internal growth opportunities and innovation. The Corporation manages its capital structure and makes adjustments in light of general economic conditions, the regulatory environment, the risk characteristics of the underlying assets and the Corporation's working capital requirements. Management of the capital structure involves the issuance of new debt, the repayment of existing debt, the issuance or repurchase of equity and distributions to shareholders.

The capital structure of the Corporation is composed of shareholders' equity, cash and cash equivalents, bank indebtedness and long-term debt.

At November 30, 2022 and August 31, 2022, the Corporation was in compliance with all of its debt covenants and was not subject to any other externally imposed capital requirements.

The following table summarizes certain of the key ratios used to monitor and manage the Corporation's capital structure. Net indebtedness reflects the US denominated debt converted at the exchange rate at the end of the period, while adjusted EBITDA and financial expense reflect the average exchange rate throughout the corresponding 12-month period.

As at, or for the 12-month periods ended	November 30, 2022	August 31, 2022
Components of debt and coverage ratios
Net indebtedness	4,672,763	4,489,330
Adjusted EBITDA	1,410,998	1,393,062
Financial expense	199,581	187,617
Debt and coverage ratios
Net indebtedness / adjusted EBITDA	3.3	3.2
Adjusted EBITDA / financial expense	7.1	7.4

Net indebtedness is a measure used by management to assess the Corporation's financial leverage, as it represents the debt net of the available unrestricted cash and cash equivalents. The reconciliation of net indebtedness to long-term debt is as follows:

	November 30, 2022	August 31, 2022
Long-term debt, including the current portion	4,950,644	4,673,469
Discounts, transaction costs and other	39,508	50,276
Long-term debt before discounts, transaction costs and other	4,990,152	4,723,745
Bank indebtedness	—	8,633
Cash and cash equivalents, excluding cash with restrictions on use (1)	(317,389)	(243,048)
Net indebtedness	4,672,763	4,489,330

(1) See Note 15 D).

November 30, 2022

(unaudited)

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

17. RELATED PARTY TRANSACTIONS

Cogeco Communications is a subsidiary of Cogeco, which as of November 30, 2022 held 34.7% of the Corporation's equity shares, representing 84.1% of the votes attached to the Corporation's voting shares.

Cogeco provides executive and administrative services to the Corporation under a Management Services Agreement (the "Agreement"). The methodology used to establish the management fees is based on the costs incurred by Cogeco plus a reasonable mark-up. Provision is made for future adjustments upon the request of either Cogeco or the Corporation from time to time during the term of the Agreement. For the three-month period ended November 30, 2022, management fees paid to Cogeco amounted to $5.4 million, compared to $5.6 million for the same period of fiscal 2022.

No direct remuneration is payable to Cogeco's executive officers by the Corporation. However, during the three-month periods ended November 30, 2022 and 2021, the Corporation granted stock options and PSUs to these executive officers, as executive officers of Cogeco Communications, as shown in the following table:

	Three months ended November 30,
	2022	2021
Stock options	79,348	72,200
PSUs	14,283	10,100

The following table shows the amounts that the Corporation charged Cogeco with regard to the Corporation's stock options and PSUs granted to these executive officers, as well as DSUs issued to Board directors of Cogeco:

		Three months ended November 30,
	2022	2021
	$	$
Stock options	355	332
PSUs	143	370
DSUs	(100)	(118)
	398	584

18. SUBSEQUENT EVENT

In December 2022, Cogeco Communications entered into a 20-year senior unsecured non-revolving facility, having an aggregate principal amount of up to $38.1 million, with the Canada Infrastructure Bank. The credit facility can only be drawn to finance the network expansion projects undertaken in connection with Ontario's Accelerated High Speed Internet Program.