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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| TVA Group Inc | TSX:TVA.B | Toronto | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.05 | 4.39% | 1.19 | 1.20 | 1.29 | 1.19 | 1.13 | 1.15 | 4,300 | 20:07:06 |
From Jul 2019 to Jul 2024
MONTREAL, CANADA announces that the Company reported net income of $12.8 million, or $0.49 per share, for the second quarter of 2008, compared with net income of $16.6 million, or $0.61 per share, for the corresponding quarter of 2007.
Hot Features
Premium
Operating highlights for the second quarter:
- Drop of $1.5 million in the Television sector's operating income against
the same quarter of 2007, resulting essentially from the negative impact
of an accrual of $5.7 million related to disputed regulatory fees.
- On a comparative basis, normalized operating income(1) for the
Television sector posted growth of 18.0% over the operating income for
the same quarter of 2007, generated mainly by TVA Network.
- Jump of 53.2% in the Publishing sector's operating income against the
corresponding quarter last year, increasing from $2.2 million in 2007 to
$3.3 million in 2008.
- The Distribution sector's operating income remained relatively stable at
$605,000 against $753,000 for the corresponding period of 2007.
- Redemption and cancellation of 3,000,642 Class B shares at $17.00 per
share.
As a result, the Company's consolidated operating income was $21.7 million, compared with operating income of $22.0 million for the same quarter of 2007.
Since the beginning of the fiscal year, the Company has generated net income of $18.5 million, or $0.70 per share, compared with $17.5 million, or $0.65 per share, for the corresponding period of 2007.
"Considering the slowdown in the Canadian advertising market, we are satisfied with the contribution made by our three business segments in the second quarter of fiscal 2008. Excluding the adjustment for the disputed regulatory fees, TVA Group's normalized operating income(1) saw growth of 21% over the second quarter of 2007. With a market share of 27 and 24 of the market's 30 best-watched programs, TVA Network achieved advertising revenue growth of 1.7% in an extension of the unusual economic environment in Quebec's French-language television market. In addition, advertising and subscription revenues from specialty channels each grew 13% compared with the same period of 2007," said Pierre Dion, President and Chief Executive Officer of TVA Group Inc.
(1) Normalized operating income consists of the operating income for the
period adjusted to take into account the disputed regulatory fees for
the current period only. Management is using this measure to obtain
comparable data in order to evaluate the Company's performance.
"In the Publishing sector, despite a 3.2% decrease in our advertising revenues, the stringent management of our operating expenses allowed the sector to achieve an exceptional profit margin of 16.0%, compared with 10.4% for the same quarter of 2007. Lastly, in the Distribution sector, the drop in operating income is essentially due to the higher volume of sales made last year on foreign markets," concluded Mr. Dion.
Cash flows from operating activities were $21.0 million for the second quarter, against $17.7 million for the corresponding year-ago period. This increase is mainly due to the change in non-cash working capital items, including the favourable change in accounts receivable and from the accounts payable and accrued liabilities.
TVA Group's Board of Directors today declared a dividend of $0.05 per share, payable on September 2, 2008 to Class A and B shareholders of record as at August 18, 2008. This dividend is designated to be an eligible dividend, as provided under subsection 89(14) of the Income Tax Act and its provincial counterpart.
TVA Group Inc., a subsidiary of Quebecor Media Inc., is an integrated communications company involved in television, the production and distribution of audiovisual products, and in magazine publishing. TVA Group is one of the largest private sector producers and the largest private sector broadcaster of French-language entertainment, information and public affairs programming, and magazine publishing in North America. TVA also operates SUN TV, a conventional station in Toronto. The Company's Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B.
The unaudited consolidated financial statements with notes and Management's Discussion and Analysis can be consulted on TVA's Web site at: www.tva.canoe.ca.
Definition of operating income
In its analysis of operating results, the Company defines operating income or operating loss as earnings (loss) before amortization, financial expenses, restructuring costs of operations, impairment of intangible assets, gain on acquisition and disposal of business, (recovery) income taxes, non-controlling interest and equity in income of companies subject to significant influence. Operating income or operating loss, as defined above, is not a measure of results that is consistent with Canadian Generally Accepted Accounting Principles ("GAAP"). Neither is it intended to be regarded as an alternative to other financial performance measures or to the statement of cash flows as a measure of liquidity. This measure is not intended to represent funds available for debt service, dividend payment, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for other performance measures prepared in accordance with Canadian GAAP. Operating income is used by the Company because management believes it is a meaningful measurement of performance.
This measure is commonly used by senior management and the Board of Directors to evaluate the consolidated results of the Company and its sector's results. Measurements such as operating income are also commonly used by the investment community to analyze and compare the performance of companies in the industries in which we are engaged. The Company's definition of operating income may not be identical to similarly titled measures reported by other companies.
Forward-looking Information Disclaimer
The statements in this news release that are not historical facts may be forward-looking statements and are subject to important known and unknown risks, uncertainties and assumptions which could cause the Company's actual results for future periods to differ materially from those set forth in the forward-looking statements. Forward-looking statements generally can be identified by the use of the conditional, the use of forward-looking terminology such as "propose," "will," "expect," "may," "anticipate," "intend," "estimate," "plan," "foresee," "believe" or the negative of these terms or variations of them or similar terminology. Certain factors that may cause actual results to differ from current expectations include seasonality, operational risks (including pricing actions by competitors), capital investment risks, environmental risks, credit risk, government regulation risks, governmental assistance risks and general changes in the economic environment. Investors and others are cautioned that the foregoing list of factors that may affect future results is not exhaustive and that undue reliance should not be placed on any forward-looking statements. For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the Company's public filings available at www.sedar.com and www.tva.canoe.ca including, in particular, the "Risks and Uncertainties" section of the Company's Management's Discussion and Analysis for the year ended December 31, 2007.
The forward-looking statements in this news release reflect the Company's expectations as of August 1st, 2008, and are subject to change after this date. The Company expressly disclaims any obligation or intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by the applicable securities laws.
TVA GROUP INC.
Consolidated statements of income and comprehensive income
(unaudited)
(in thousands of dollars, except per share amounts)
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Three-month periods Six-month periods
ended June 30 ended June 30
--------------------------------------------------------------------------
2008 2007 2008 2007
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Operating revenues $111,054 $106,467 $217,514 $199,793
Operating, selling and
administrative expenses
(note 14) 89,356 84,428 184,424 175,030
Amortization of fixed
assets, intangible
assets and start-up
costs 3,461 3,292 6,776 6,480
Financial expenses
(note 3) 261 1,136 978 2,173
Restructuring costs of
operations (note 4) 184 232 184 1,212
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Income before income
taxes, non-controlling
interest and equity in
income of companies
subject to significant
influence $17,792 $17,379 $25,152 $14,898
Income taxes (recovery)
(note 5) 5,694 1,861 8,065 (358)
Non-controlling interest (459) (678) (995) (1,456)
Equity in income of
companies subject to
significant influence (261) (372) (433) (792)
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NET INCOME AND
COMPREHENSIVE INCOME $12,818 $16,568 $18,515 $17,504
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EARNINGS PER SHARE BASIC
AND DILUTED (note 9 c) $0.49 $0.61 $0.70 $0.65
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See accompanying notes to consolidated financial statements
Consolidated statements of retained earnings
(unaudited)
(in thousands of dollars)
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Six-month periods
ended June 30
--------------------------------------------------------------------------
2008 2007
--------------------------------------------------------------------------
Balance, at beginning of period $95,610 $62,631
Net income 18,515 17,504
Dividends paid (2,702) (2,702)
Share redemption - excess of purchase price
over net carrying value (note 9b) (36,193) -
--------------------------------------------------------------------------
Balance, at end of period $75,230 $77,433
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See accompanying notes to consolidated financial statements
TVA GROUP INC.
Consolidated balance sheets
(in thousands of dollars)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
June 30, Dec. 31,
2008 2007
(unaudited) (audited)
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ASSETS
Current assets
Cash $2,218 $3,225
Accounts receivable 93,228 107,854
Current income tax assets 1,878 946
Investments in televisual products and films 37,968 45,906
Inventories and prepaid expenses 5,969 5,969
Future income tax assets 3,573 4,629
--------------------------------------------------------------------------
144,834 168,529
Investments in televisual products and films 33,611 27,253
Investments (note 7) 31,918 31,571
Fixed assets 80,946 77,275
Future income tax assets - 2,319
Other assets 9,385 9,102
Licences and others intangible assets 69,724 69,732
Goodwill 71,981 71,981
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442,399 $457,762
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdraft $2,547 $2,435
Accounts payable and accrued liabilities 75,494 85,812
Current income tax liabilities 3,096 11,037
Broadcast and distribution rights payable 20,561 23,054
Deferred revenue 8,175 6,613
Deferred credit 413 471
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110,286 129,422
Broadcast rights payable 3,567 3,965
Long-term debt 99,422 56,333
Future income tax liabilities (note 5) 37,545 39,334
Others long term liabilities (note 7) 136 731
Non-controlling interest and redeemable
preferred shares (note 8) 12,463 13,458
--------------------------------------------------------------------------
263,419 243,243
Shareholders' equity
Capital stock (note 9) 99,930 115,137
Contributed surplus 3,820 3,772
Retained earnings 75,230 95,610
--------------------------------------------------------------------------
178,980 214,519
Contingency (note 14)
--------------------------------------------------------------------------
$442,399 $457,762
--------------------------------------------------------------------------
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See accompanying notes to consolidated financial statements
TVA GROUP INC.
Consolidated statements of cash flows
(unaudited)
(in thousands of dollars)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Three-month periods Six-month periods
ended June 30 ended June 30
--------------------------------------------------------------------------
2008 2007 2008 2007
--------------------------------------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $12,818 $16,568 $18,515 $17,504
Non-cash items
Amortization 3,482 3,315 6,820 6,524
Equity in income of
companies subject to
significant influence (261) (372) (433) (792)
Non-controlling interest (459) (678) (995) (1,456)
Tax benefits relating to
tax deductions (note 5) - (3,670) - (3,670)
Future income taxes 660 35 1,508 (1,303)
Others (128) (31) (189) (675)
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Cash flows provided by
current operations 16,112 15,167 25,226 16,132
Net change in non-cash
items 4,876 2,542 (7,073) 15,369
--------------------------------------------------------------------------
Cash flows from operating
activities 20,988 17,709 18,153 31,501
--------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to fixed
assets (4,899) (2,784) (7,370) (6,282)
Business acquisition
(note 6) - - - (2,625)
Deferred charges - - (400) -
Changes in investments
(note 7) - - (489) -
--------------------------------------------------------------------------
Cash flows from investing
activities (4,899) (2,784) (8,259) (8,907)
--------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Bank overdraft (3,247) (1,930) 112 4,000
Increase (decrease) in
long-term debt 39,925 (11,787) 43,089 (25,065)
Class B Share redemption
(note 9 b) (51,400) - (51,400) -
Issuance of shares of a
subsidiary (note 8) - 1,300 - 1,300
Dividends paid (1,351) (1,351) (2,702) (2,702)
--------------------------------------------------------------------------
Cash flows from financing
activities (16,073) (13,768) (10,901) (22,467)
--------------------------------------------------------------------------
Net change in cash 16 1,157 (1,007) 127
Cash, at beginning of
period 2,202 1,926 3,225 2,956
--------------------------------------------------------------------------
Cash, at end of period $2,218 $3,083 2,218 $3,083
--------------------------------------------------------------------------
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SUPPLEMENTAL INFORMATION
Interests paid net of
interests income
received $133 $1,535 $1,007 $2,205
Income taxes paid
(received) 4,079 183 15,438 (2,349)
Additions to fixed assets
financed by accounts
payable and accrued
liabilities at end of
period $4,260 $1,116
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--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
TVA GROUP INC.
Notes to consolidated financial statements
Three-month and six-month periods ended June 30, 2008 and 2007 (unaudited)
(Amounts presented in the tables are expressed in thousands of dollars, except per-share and per-option amounts)
1. FINANCIAL STATEMENT PRESENTATION
These consolidated financial statements have been prepared in conformity with Canadian Generally Accepted Accounting Principles ("GAAP"). With the exception of the accounting policies presented in Note 2 for the current quarter, the same accounting policies described in the consolidated financial statements included in the latest annual report of TVA Group Inc. ("the Company") have been used. However, these consolidated financial statements do not include all disclosures required under Canadian GAAP for an annual report and accordingly should be read in conjunction with the Company's latest annual consolidated financial statements and the notes thereto.
Some of the Company's businesses experience significant seasonality effects due to, among other things, seasonal advertising patterns and their influence on people's viewing, reading and listening habits. Because the Company depends on the sale of advertising for a significant portion of its revenue, operating results are also sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising expenditures. Accordingly, the results of operations for interim periods should not necessarily be considered indicative of full-year results due to the seasonality of certain operations.
2. CHANGES IN ACCOUNTING POLICIES
On January 1st, 2008, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Section 3031, Inventories which requires that additional details be provided regarding the determination and recognition of inventories and the information to be presented. The adoption of this new section does not have any significant effect on its consolidated financial statements.
On January 1st, 2008, the Company also adopted Sections 3862, Financial Instruments - Disclosures, 3863, Financial Instruments - Presentation and Section 1535, Capital Disclosures. The disclosures required by the new standards are presented in note 13.
3. FINANCIAL EXPENSES
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--------------------------------------------------------------------------
Three-month periods Six-month periods
ended June 30 ended June 30
--------------------------------------------------------------------------
2008 2007 2008 2007
--------------------------------------------------------------------------
Interest on long-term debt $779 $1,145 $1,518 $2,321
Dividends on redeemable
preferred shares 263 930 530 1,860
Interest revenue on
convertible bonds issued
by an affiliated company (255) (900) (513) (1,800)
Interest revenue (572) (67) (624) (271)
Amortization of deferred
financing charges 22 22 44 44
Foreign exchange loss 24 6 23 19
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$261 $1,136 $978 $2,173
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4. RESTRUCTURING COSTS OF OPERATIONS
During the second quarter of 2008, the Company recorded a provision for restructuring costs of $184,000 following the elimination of position in the Television sector.
During the corresponding quarter of 2007, the Company recorded a provision for restructuring costs in the amount of $232,000 following the elimination of positions in the Publishing sector.
During the first six months of 2007, the Company recorded a provision for restructuring costs in the amount of $1,212,000. A provision of $451,000 was recorded following the elimination of positions in the Publishing sector and a provision of $761,000 was recorded for new litigation relating to the production activities of its former subsidiary, TVA Acquisition Inc.
5. INCOME TAXES (RECOVERY)
During the second quarter of 2007, following the federal government's adoption of Bill C-33,which provides for the modification of the deduction multiple for tax deductions, the Company recognized into income tax benefits an amount of $3,670,000 that had been recorded as an income tax liabilities pending the official enactment of the Bill by taxation authorities. Moreover, following the reductions in federal income taxe rates for 2011 and subsequents years and in light of the evolution of tax auditing, jurisprudence and tax legislation, the Company reduced, during the second quarter of 2007, its future income tax liabilities by $569,000. For the six-months period of 2007, these reductions in recorded future income tax liabilities represent $2,057,000.
6. BUSINESS ACQUISITION
On January 8, 2007, the Company made the final payment of the purchase price for the conventional television station in Toronto, SUN TV, including a working capital adjustment of $2,625,000.
7. INVESTMENT
During the first quarter of 2008, the Company made an additional capital investment of $490,000 in the pay-per-view service, Canal Indigo S.E.N.C. in which it already has a participating interest of 20%. The interests of each of the partners remained unchanged. Moreover, on February 15, 2008, the Company concluded an agreement to acquire the totality of the remaining interests in Canal Indigo S.E.N.C. for total consideration of $105,000. On July 18, 2008, the CRTC approved this transaction and this one will be finalized during the next months.
8. NON-CONTROLLING INTEREST
On June 6, 2007, a subsidiary of the Company, Sun TV Company, in which the Company has a 75% interest and that operates the SUN TV television station, obtained from its non-controlling shareholder an investment in its capital stock of $1,300,000. The respective pourcentage interests in Sun TV Company remain unchanged.
9. CAPITAL STOCK
a) Number of shares outstanding
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June 30, 2008 Dec. 31, 2007
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Class A common shares 4,320,000 4,320,000
Class B shares 19,704,206 22,704,848
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24,024,206 27,024,848
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b) Shares redemption
Substantial issuer bid
On March 31, 2008, the Company filed a substantial issuer bid to redeem for cancellation up to 2,000,000 of its participating Class B non-voting shares, or about 8.8% of the total number of its issued and outstanding shares, for a fixed price of $17.00 per share. The offer was to expire on May 14, 2008; however, the Company filed a notice to amend and extend its initial offer in order to bring the number of shares redeemable under the offer to a maximum of 3,000,000 Class B shares and the offer was thereby extended until June 2, 2008. A total of 9,189,542 Class B shares were deposited as at the expiration of the offer.
Taking into account the proration factor, adjustments for odd lot purchases and to avoid the creation of new irregular lots, the Company took up 3,000,642 Class B shares, for a total consideration of $51,010,914, plus $389,000 in transaction fees, paid through the credit agreement. The Class B shares redeemed for cancellation under this issuer bid represented 13.2% of the 22,704,848 Class B shares issued and outstanding before the redemption.
c) Earnings per share
The following table provides the calculation of basic and diluted earnings per share:
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Three-month periods Six-month periods
ended June 30 ended June 30
--------------------------------------------------------------------------
2008 2007 2008 2007
--------------------------------------------------------------------------
Net income $12,818 $16,568 $18,515 $17,504
Weighted average number
of shares outstanding 26,101,574 27,024,848 26,563,211 27,024,848
Effect of dilutive stock
options 45,534 17,675 24,350 7,540
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Weighted average number
of diluted shares
outstanding 26,147,108 27,042,523 26,587,561 27,032,388
Basic and diluted
earnings per share $0.49 $0.61 $0.70 $0.65
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10. STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Three-month periods Six-month periods
ended June 30, 2008 ended June 30, 2008
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Conventional Quebecor Conventional Quebecor
Class B Media Inc. Class B Media Inc.
stock stock stock stock
options options options options
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Balance at beginning 983 693 259 755 983 693 328 159
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Exercised - (1 077) - (69 481)
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Balance as at June 30,
2008 983 693 258 678 983 693 258 678
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During the first quarter of 2008, the Company increased the number of Class B shares that could be issued under the Class B stock option plan for managers from 1,400,000 to 2,200,000.
Of the options outstanding as at June 30, 2008, 133,761 conventional Class B stock options at an average exercise price of $19.54 and 1,446 Quebecor Media Inc. stock options at an average exercise price of $30.47 can be exercised.
11. GUARANTEES
The maximum exposure in respect of the guaranteed portion of the residual values of certain assets under operating leases to the benefit of the lessor is approximately $981,000. As at June 30, 2008, the Company did not record any liability related to these guarantees.
12. PENSION PLANS AND OTHER RETIREMENT BENEFITS
The Company maintains defined benefit and defined contribution pension plans for its employees. In addition, under an old plan, the Company maintains for certain retired employees other retirement benefits, such as health, life and dental insurance plans. Total costs for these benefits are as follows:
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Three-month periods Six-month periods
ended June 30 ended June 30
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2008 2007 2008 2007
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Pension plans
Defined benefit plans $718 $896 $1,400 $1,887
Defined contribution
plans 675 448 1,247 1,059
Other retirement benefits $47 $47 $94 $93
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13. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Company's risk management policy is established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policy is reviewed, when necessary, to reflect changes in market conditions and the Company's activities.
From its use of financial instruments, the Company is exposed to credit risk, liquidity risk, market risks relating to foreign exchange fluctuations and to interest rate fluctuations.
i) Fair value of financial instruments
The carrying amount of accounts receivable from external and related parties (classified as receivables) and accounts payable and accrued charges to external or related parties (classified as other liabilities) approximates their fair value since these items will be realized or paid within one year. As at June 30, 2008, the fair value of the long-term debt was equivalent to the book value because it bears interest at variable rates.
ii) Credit risk management
The Company is exposed to credit losses resulting from defaults by third parties. In the normal course of business, the Company regularly evaluates the financial position of its clients and reviews the credit history of each new client. As at June 30, 2008, no clients had balances representing a significant portion of the Company's consolidated trade receivables. The Company establishes an allowance for doubtful accounts in response to the specific credit risk of its clients. The Company's accounts receivable balance is divided among various clients, primarily advertising agencies. The Company does not believe that it is exposed to an unusual or significant level of customer credit risk. As at June 30, 2008, 7,9% of the accounts receivable had been unpaid for more than 120 days after the date of invoicing. Moreover, the allowance for doubtful accounts amounted to $4,197,000 as of June 30, 2008 ($3,578,000 as of December 31, 2007).
iii) Liquidity risk management
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due or to meet them at excessive cost. The Company ensures that it has sufficient cash flows from continuing operations and available sources of financing to meet planned cash requirements for capital investments, working capital, interest payments, debt repayments, pension plan contributions, dividends and shares redemption.
The Company has at its disposal a maximum amount of $160,000,000 under a credit agreement consisting of a revolving-term bank loan bearing interest at floating rates based on the banker's acceptance rate or Canadian bank prime rate, plus a variable margin based on the ratio of total debt to operating income (or earnings before interests, taxes and amortizations). The credit agreement matures on June 15, 2010 and is repayable in full on that date.
vi) Market risk
Market risk is the risk that changes in market prices due to foreign exchange rates and interest rates will affect the Company's income or the value of its financial instruments. The objective of market risk management is to mitigate and control exposures within acceptable parameters.
Foreign currency risk
The Company is exposed to limited foreign currency risk on sales and expenses that are denominated in a foreign currency other than Canadian dollars due to the insubstantial volume of such transactions undertaken. The majority of these transactions are denominated in U.S. dollars, mainly for the acquisition of certain distribution rights, for capital expenditures and for certain foreign denominated sales. The Company has determined in view of its limited transactions denominated in a foreign currency, its limited exposure to foreign currency risk does not necessitate the use of hedging. Accordingly, the Company's sensitivity to the variation of foreign currency rates is not significant.
An increase or a decrease of 1% in the exchange rate of a Canadian dollar into a U.S. dollar would have an impact on earnings before taxes or capital expenditures less than $100,000 on a yearly basis.
Interest rate risk
The Company is exposed to interest rate risk on its long-term debt because its financing bears interest at variable rates.
An increase (decrease) of 100 basis points in Canadian banker's acceptances rate at the reporting date would have increased (decreased) interest expenses by $994,000 on an annual basis using debt level prevailing as of June 30, 2008.
Considering the low exposure to markets risk, the company does not use derivative financial instruments. However, the Company regularly reviews its situation to ensure that its exposure to these risks has not changed.
Capital management
The Company's primary objectives in managing capital are:
- to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders.
- to maintain an optimal capital base in order to support the capital requirements of is various activities sectors, including growth opportunities and to maintain investor and creditor confidence.
The Company manages its capital structure in accordance with the characteristics of the assets of its underlying sectors and according to its planned requirements. The Company has the ability to manage its capital structure by issuing new debts or by repaying existing debt with cash generated internally, by controlling the amounts it returns to shareholders under the dividends or shares redemption or by issuing capital stock and by making adjustment to its capital expenditures program. Since the last financial year, the Company has not changed its strategy regarding the management of its capital structure.
The capital structure of the Company is composed of shareholder equity, bank overdraft, long-term debt, non-controlling interest, redeemable preferred shares at the option of the holder, less cash.
Except for the maintenance of certain financial ratios required in the credit agreement, the Company is not subject to any others externally imposed capital requirements As at June 30, 2008, the Company was in compliance with the conditions of its credit agreement.
14. CONTINGENCY
In 2003 and 2004, a number of companies, including TVA Group Inc., brought a suit against the Crown before the Federal Court, alleging that the Part II licence fees that broadcasters are required to pay annually constitute, in fact and in law, a tax, not authorized by the Broadcasting Act. On December 14, 2006, the Federal Court ruled that these fees did indeed constitute an illegal tax, that the Canadian Radio-television and Telecommunications Commission ("CRTC") was to cease collection of such fees, and concluded that the plaintiff companies were not entitled to a reimbursement of the amounts already paid. The plaintiffs and the defendant both filed an appeal before the Federal Court of Appeal. On October 1, 2007, the CRTC issued a document stating that it would comply with the decision that was rendered and that it would not collect, in 2007 or in any subsequent years, the Part II licence fees payable on November 30 of each year unless a Superior Court overturned the Federal Court decision. In the third quarter of 2007, in light of these facts and the Federal Court decision, the Company reversed its liability of $3,238,000 relating to the Part II licence fees for the period from September 1st, 2006 to September 30, 2007 and ceased to record these fees for subsequent periods.
On April 29, 2008, the Federal Court of Appeal handed down its decision and, on the basis of its position that the Part II licence fees are a valid regulatory charge rather than a tax, overturned the December 14, 2006 decision of the Federal Court. The plaintiff companies disputed the decision and filed an application for leave to appeal to the Supreme Court of Canada. The CRTC publicly stated that it would not attempt to collect the Part II licence fees before the earliest of the following: a) the Supreme Court of Canada denies leave to appeal, or b) the Supreme Court of Canada upholds the Federal Court of Appeal ruling, or c) the matter is settled between the parties. The Company's management believes in the soundness of its application for leave to appeal to the Supreme Court. However, given the Federal Court of Appeal decision that confirms the right of the CRTC to collect the Part II licence fees to which the Company is subject, the Company recorded in the second quarter of 2008 a total liability of $5,710,000 relating to the Part II licence fees for the period from September 1st, 2006 to June 30, 2008.
15. SEGMENTED INFORMATION
The following table includes information on operating income, as well as information on assets:
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Three-month periods Six-month periods
ended June 30 ended June 30
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2008 2007 2008 2007
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Operating revenues
Television $86,664 $81,835 $169,944 $155,103
Publishing 20,640 20,759 39,901 38,595
Distribution 4,359 5,169 9,408 8,974
Intersegment items (609) (1,296) (1,739) (2,879)
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111,054 106,467 217,514 199,793
Operating, selling and
administrative expenses
Television 68,939 62,653 142,644 132,091
Publishing 17,336 18,603 34,926 35,329
Distribution 3,754 4,416 8,786 10,428
Intersegment items (673) (1,244) (1,932) (2,818)
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89,356 84,428 184,424 175,030
Income before amortization,
financial expenses,
restructuring costs of
operations, income taxes,
non-controlling interest
and equity in income of
companies subject to
significant influence
Television 17,725 19,182 27,300 23,012
Publishing 3,304 2,156 4,975 3,266
Distribution 605 753 622 (1,454)
Intersegment items 64 (52) 193 (61)
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$21,698 $22,039 $33,090 $24,763
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The intersegment items mentioned above represent the elimination of normal
course business transactions made between the Company's business segments
regarding revenues, expenses and unrealized profit.
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June 30, 2008 December 31, 2007
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Total assets
Television $331,638 $342,500
Publishing 83,455 84,237
Distribution 16,044 19,763
Unallocated items 11,262 11,262
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$442,399 $457,762
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Contacts: Source: TVA GROUP INC. Denis Rozon, CA Vice-President and Chief Financial Officer 514-598-2808
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