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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 |
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TVA Group Inc. ("the Company") (TSX:TVA.B) announces that it reported net income
of $6.4 million, or $0.27 per share, for the third quarter of 2009, compared
with net income of $12.0 million, or $0.50 per share, for the corresponding
quarter of 2008.
The decrease in net income is mainly explained by significant income tax
benefits which had been realized during the third quarter of 2008. However, the
Company's consolidated operating income(1) was $10.3 million, compared with
$10.8 million during the same quarter of 2008.
Operating highlights for the third quarter:
- Decrease of $1,418,000 or 16.0% in the Television sector's operating income
compared with the corresponding quarter last year. This decrease is essentially
explained by the following factors:
- Higher operating loss(1) for SUN TV in 2009;
- Decrease of 12.5% in operating income of specialty services following
decisions to increase investments in programming for certain channels; and
- Decrease of 5.0% in operating income for the TVA Network following a decrease
of 7.0% in its advertising revenues.
- Increase of $1,234,000, or 50.5%, in the Publishing sector's operating income
to $3,678,000, compared with $2,444,000 for the corresponding quarter of 2008,
despite a 6.4% decrease in advertising revenues.
- The Distribution sector recorded an operating loss of $749,000 compared with
an operating loss of $517,000 for the corresponding quarter of 2008.
"Although we have been withstanding the current economic crisis and market
trends relatively well up until now, our results for the last quarter are
testimony to the pressure in the advertising market. In Television, we are
continuing our investments in Quebec content that have allowed TVA Network to
maintain its 25.3% market shares in addition to having 23 of its shows among the
30 most-watched shows in Quebec (source: BBM, all two years and over, from July
1st to September 27th, 2009). TVA Network News is still number one and LCN
recorded an average of 3.8 market shares, representing a growth of 15% compared
with the same quarter last year. We are also pursuing our strategy to invest
more in programming and promotion of our French-language specialty channels.
Also, the channels "Mystere," "Prise 2," and "Argent" have seen combined growth
of 34.8% in their subscription revenues" said Pierre Dion, President and Chief
Executive Officer of TVA Group Inc.
(1) See definition of operating income and loss below.
"In the Publishing sector, the decline in advertising revenues was less
significant than in previous quarters, and our continued careful management of
costs resulted in a growth of 50.5% for this sector's operating income over the
corresponding quarter of 2008. The profit margin for the quarter was 19.2%
compared with 12.7% for the corresponding quarter of 2008. Finally, the
Distribution sector maintained its operating loss at the same level as that for
the same quarter last year, despite a few movie releases in theatres during this
quarter," concluded Mr. Dion.
Cash flows generated by operating activities for the quarter were $1,558,000
compared with $11,926,000 for the corresponding quarter of last year. This
decrease is essentially the result of the net variance in non-cash working
capital items from both accounts receivable and accounts payable.
Dividend
TVA Group Inc.'s Board of Directors today declared a dividend of $0.05 per
share, payable on December 1st, 2009 to Class A and B shareholders of record as
at November 16, 2009. This dividend is designated to be an eligible dividend, as
provided under subsection 89(14) of the Income Tax Act of Canada and its
provincial counterpart.
The Company
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 Inc. 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 Group Inc. 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 interim
Management's Discussion and Analysis can be consulted on TVA's Web site at:
www.tva.canoe.ca.
Definition of operating income or operating loss
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, income taxes (recovery), 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 senior 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, 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, 2008.
The forward-looking statements in this news release reflect the Company's
expectations as of October 30th, 2009, 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
(unaudited)
(in thousands of dollars, except per share amounts)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three-month periods Nine-month periods
ended September 30 ended September 30
-------------------------------------------------------------------------
2009 2008 2009 2008
Restated Restated
(note 2) (note 2)
-------------------------------------------------------------------------
Operating revenues $89,185 $92,249 $310,515 $309,763
Operating, selling and
administrative expenses 78,844 81,400 262,709 266,224
Amortization of property,
plant and equipment and
intangible assets 3,514 3,374 10,363 9,888
Financial expenses (note 3) 589 1,035 1,943 2,013
Restructuring costs of
operations (note 4) 157 - (794) 184
-------------------------------------------------------------------------
Income before income
taxes, non-controlling
interest and equity in
income of companies
subject to significant
influence $6,081 $6,440 $36,294 $31,454
Income taxes (recovery)
(note 5) 172 (5,180) 10,085 2,848
Non-controlling interest (558) (374) (1,652) (1,369)
Equity in loss (income)
of companies subject to
significant influence 77 40 (197) (393)
-------------------------------------------------------------------------
NET INCOME $6,390 $11,954 $28,058 $30,368
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BASIC AND DILUTED
EARNINGS PER SHARE
(note 8 c) $0.27 $0.50 $1.17 $1.18
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
Consolidated statements of Comprehensive Income
(unaudited)
(in thousands of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three-month periods Nine-month periods
ended September 30 ended September 30
-------------------------------------------------------------------------
2009 2008 2009 2008
Restated Restated
(note 2) (note 2)
-------------------------------------------------------------------------
Net income $6,390 $11,954 $28,058 $30,368
Other comprehensive income
Unrealized profit on a
derivative financial
instrument, net of
income taxes 119 - 106 -
-------------------------------------------------------------------------
COMPREHENSIVE INCOME $6,509 $11,954 $28,164 $30,368
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
TVA GROUP INC.
Consolidated statements of retained earnings
(unaudited)
(in thousands of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nine-month periods
ended September 30
-------------------------------------------------------------------------
2009 2008
Restated
(note 2)
-------------------------------------------------------------------------
Balance, at beginning of period,
before restating $99,101 $95,610
Cumulative effects of changes in accounting
policies (note 2) (590) (698)
-------------------------------------------------------------------------
Balance, at beginning of period, as restated 98,511 94,912
Net income 28,058 30,368
Adjustment for transactions with affiliated
companies (note 12) (7,780) -
Dividends paid (3,598) (3,904)
Share redemption - excess of purchase price
over net carrying value (note 8) (1,298) (36,208)
-------------------------------------------------------------------------
Balance, at end of period $113,893 $85,168
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
TVA GROUP INC.
Consolidated balance sheets
(unaudited)
(in thousands of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sept. 30, 2009 Dec. 31, 2008
Restated (note 2)
-------------------------------------------------------------------------
ASSETS
Current assets
Cash $684 $5,262
Accounts receivable 91,935 101,702
Current income tax assets 815 2,697
Programs, broadcast and distribution
rights and inventories (note 6) 59,405 52,996
Future income tax assets 5,223 2,363
Others current assets (note 12) 5,632 2,664
-------------------------------------------------------------------------
163,694 167,684
Programs, broadcast and distribution rights 45,534 35,952
Investments (note 12) 11,106 32,148
Property, plant and equipment 78,122 77,355
Licences and others intangible assets 84,487 80,950
Other assets 8,799 8,489
Future income tax assets 782 80
Goodwill 71,981 71,981
-------------------------------------------------------------------------
464,505 $474,639
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdraft $1,886 $147
Accounts payable and accrued liabilities 80,391 95,656
Current income tax liabilities 3,623 2,041
Broadcast and distribution rights payable 27,019 24,400
Deferred revenues 7,009 7,573
Long-term debt due within one year (note 7) 89,908 -
Other liabilities 568 366
-------------------------------------------------------------------------
210,404 130,183
Broadcast rights payable 6,114 5,021
Long-term debt (note 7) - 93,705
Future income tax liabilities 31,222 31,342
Others long term liabilities 94 550
Non-controlling interest and redeemable
preferred shares (note 12) 254 11,656
-------------------------------------------------------------------------
248,088 272,457
Shareholders' equity
Capital stock (note 8) 98,647 99,930
Contributed surplus 4,075 4,045
Retained earnings 113,893 98,511
Accumulated other comprehensive
loss (note 10) (198) (304)
-------------------------------------------------------------------------
216,417 202,182
Subsequent event (note 13)
-------------------------------------------------------------------------
$464,505 $474,639
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
TVA GROUP INC.
Consolidated statements of cash flows
(unaudited)
(in thousands of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three-month periods Nine-month periods
ended September 30 ended September 30
-------------------------------------------------------------------------
2009 2008 2009 2008
Restated Restated
(note 2) (note 2)
-------------------------------------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $6,390 $11,954 $28,058 $30,368
Non-cash items
Amortization 3,536 3,396 10,429 9,954
Equity in loss (income)
of companies subject to
significant influence 77 40 (197) (393)
Non-controlling interest (558) (374) (1,652) (1,369)
Future income taxes (2,839) (6,366) (3,048) (4,895)
Others 172 (381) (310) (570)
-------------------------------------------------------------------------
Cash flows provided by
current operations 6,778 8,269 33,280 33,095
Net change in non-cash
items (5,220) 3,657 (14,877) (3,416)
-------------------------------------------------------------------------
Cash flows from operating
activities 1,558 11,926 18,403 29,679
-------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property,
plant and equipment (4,367) (7,234) (12,848) (12,819)
Additions to intangible
assets (1,123) (747) (4,057) (2,532)
Business acquisition - (105) - (105)
Changes in investments
(note 12) 227 - 11,977 (489)
-------------------------------------------------------------------------
Cash flows from investing
activities (5,263) (8,086) (4,928) (15,945)
-------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Bank overdraft (1,927) (2,335) 1,739 (2,223)
(Decrease) increase in
long-term debt 6,945 (922) (3,863) 42,167
Redeemable preferred
share redemption
(note 12) - - (9,750) -
Class B share redemption
(note 8 b) (2,036) (15) (2,581) (51,415)
Dividends paid (1,198) (1,202) (3,598) (3,904)
-------------------------------------------------------------------------
Cash flows from financing
activities 1,784 (4,474) (18,053) (15,375)
-------------------------------------------------------------------------
Net change in cash (1,921) (634) (4,578) (1,641)
Cash, at beginning of
period 2,605 2,218 5,262 3,225
-------------------------------------------------------------------------
Cash, at end of period $684 $1,584 $684 $1,584
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION
Net interests paid $356 $698 $1,704 $1,705
Income taxes paid 1,939 3,313 9,649 18,751
Additions to property,
plant and equipment and
intangible assets
financed by accounts
payable and accrued
liabilities at end of
period $1,295 $983
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
TVA GROUP INC.
Notes to consolidated financial statements
Three-month and nine-month periods ended September 30, 2009 and 2008
(unaudited)
(Amounts presented in the tables are expressed in thousands of dollars,
except per-share and per-option amounts)
1. FINANCIAL STATEMENTS PRESENTATION
These consolidated financial statements have been prepared in conformity with
Canadian Generally Accepted Accounting Principles ("GAAP"). With the exception
of the accounting policy 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 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
Effective January 1st, 2009, the Company adopted the Canadian Institute of
Chartered Accountants Handbook ("CICA Handbook") Section 3064, Goodwill and
Intangible Assets, which replaces Section 3062, Goodwill and Other Intangible
Assets, Section 3450, Research and Development Costs, and Emerging Issues
Committee (EIC) 27, Revenues and Expenditures During the Pre-operating Period,
and to modify Accounting Guideline (AcG) 11, Entreprises in the Development
Stage. The new section establishes standards for recognizing intangible assets
in the sense of the definition of assets based on principles for recognizing
costs as assets and for clarifying the application of the concept of matching
revenues and expenses for intangible assets acquired or developed internally.
This new section was applied retroactively with restatement of previous periods.
Subsequent to the adoption of this section, the Company reclassified the net
carrying value of its software and Web sites from property, plant and equipment
to intangible assets and wrote off the undepreciated balance of deferred
start-up costs for specialty channels included under Other assets as well as
related future tax liabilities. The writing off of these balances was recorded
as an adjustment of retained earnings at the beginning of the period. Net income
for three-month and nine-month periods ended September 30, 2008 was also
corrected in order to recognize start-up costs for the Les idees de ma maison
specialty channel, launched in February 2008, as operating, selling and
administrative expenses, to reverse the amortization expense for deferred
start-up costs for specialty channels and to reverse the future tax expense
related to these items. This resulted in the following adjustments being
recognized in the consolidated financial statements:
Consolidated Balance Sheets
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Increase (decrease) December 31st, 2008 January 1st, 2008
-------------------------------------------------------------------------
Property, plant and equipement $(11,235) $(8,187)
Intangible assets 11,235 8,187
Other assets (854) (1,020)
Future long-term income tax liabilities (264) (322)
Retained earnings (590) (698)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Income
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Increase (decrease) Three-month period Nine-month period
ended September ended September
30, 2008 30, 2008
-------------------------------------------------------------------------
Operating, selling and administrative
expenses $- $400
Amortization (138) (400)
Future income taxes expense 42 (5)
-------------------------------------------------------------------------
Net income $96 $(5)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted earnings per share $0.01 $-
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Future changes in accounting policies
In January 2009, the Canadian Institute of Chartered Accountants issued three
new accounting standards, Section 1582, Business Combinations, Section 1601,
Consolidated Financial Statements, and Section 1602, Non-controlling Interests,
with a view to moving toward international standards for business combinations
and the presentation of non-controlling interests in consolidated financial
statements.
Section 1582, Business Combinations, replaces Section 1581, Business
Combinations, and sets out the main principles governing the recognition of the
purchase consideration as well as the recognition and measurement of
identifiable assets acquired and liabilities assumed in a business combination
achieved at the fair value of the business acquired on the acquisition date,
even if the business combination is achieved in stages. Subsequent changes to
the fair value of the contingent consideration classified as a liability would
be recognized as retained earnings and not as an adjustment of the consideration
exchanged for the business acquired. Restructuring costs and other costs related
directly to the business combination are no longer considered costs included in
the recognized price of acquisition and would instead be recognized as expenses
in the periods during which they are incurred, unless they are considered costs
for the issuing of new debt or equity. In addition, for each business
combination, the purchaser must recognize the non-controlling interest in the
business acquired either at its fair value or the participating percentage in
the net identifiable assets of the business acquired. This section should be
applied prospectively to business combinations for which the acquisition date
falls within a fiscal year beginning on January 1st, 2011 or a later date. The
Company has not adopted this new section as early as permitted. The new section
will only affect future business acquisitions that are carried out during
periods that follow the adoption date.
Section 1601, Consolidated Financial Statements, and Section 1602,
Non-controlling Interests, which together replace Section 1600, Consolidated
Financial Statements, apply to the recognition of non-controlling interests in
consolidated financial statements and to transactions with holders of
non-controlling interests. The new sections require that non-controlling
interests be included as a separate item in shareholders' equity. These sections
apply to consolidated interim and annual financial statements for fiscal years
beginning on January 1st, 2011 and will be adopted at the same time as Section
1582.
3. FINANCIAL EXPENSES
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three-month periods Nine-month periods
ended September 30 ended September 30
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Interests on long-term
debt $465 $959 $1,816 $2,477
Dividends on redeemable
preferred shares - 267 513 797
Interest revenues on
convertible bonds issued
by an affiliated company - (258) (496) (771)
Interest incomes (16) (25) (92) (649)
Amortization of deferred
financing costs 22 22 66 66
Foreign exchange loss 116 70 107 93
Others 2 - 29 -
-------------------------------------------------------------------------
$589 $1,035 $1,943 $2,013
-------------------------------------------------------------------------
-------------------------------------------------------------------------
4. RESTRUCTURING COSTS OF OPERATIONS
In the third quarter of 2009, based on the new information available, the
Company has revised its provision for restructuring costs resulting in a
$157,000 provision increase (decrease of $794,000 for the nine-month period
ended September 30, 2009). During the first nine-month period of 2008, the
Company recorded a provision for restructuring costs of $184,000 following the
elimination of a position in the Television sector. The balance of the
restructuring provision was $1,039,000 as at September 30, 2009 ($2,796,000 as
at December 31, 2008).
5. INCOME TAXES (RECOVERY)
In light of the evolution of tax auditing, jurisprudence and tax legislation,
the Company reduced its future tax liabilities during the third quarter of 2009
by $1,888,000 ($6,977,000 during the third quarter of 2008).
6. PROGRAMS, BROADCAST AND DISTRIBUTION RIGHTS AND INVENTORIES
-------------------------------------------------------------------------
-------------------------------------------------------------------------
September 30, 2009 December 31, 2008
-------------------------------------------------------------------------
Programs, broadcast and
distribution rights $55,780 $49,445
Inventories 3,625 3,551
-------------------------------------------------------------------------
$59,405 $52,996
-------------------------------------------------------------------------
-------------------------------------------------------------------------
7. LONG-TERM DEBT
The Company has actually a revolving-term bank loan for a maximum amount of
$160,000,000, bearing interest at floating rates, of which $69,484,000 was
unused and available as at September 30, 2009. Under this credit agreement, the
Company is subject to certain covenants including maintenance of certain
financial ratios. As at September 30, 2009, the Company was in compliance with
these covenants. The Company has included its long-term debt as current
liabilities considering its credit agreement matures within a year, on June 15,
2010 and it has not yet finalized its renewal.
8. CAPITAL STOCK
a) Number of shares outstanding
-------------------------------------------------------------------------
-------------------------------------------------------------------------
September 30, 2009 December 31, 2008
-------------------------------------------------------------------------
Class A common shares 4,320,000 4,320,000
Class B shares 19,450,906 19,704,206
-------------------------------------------------------------------------
23,770,906 24,024,206
-------------------------------------------------------------------------
-------------------------------------------------------------------------
b) Share redemption
Issuer bid
On March 17, 2009, the Company has filed a new notice of intent to repurchase
for cancellation between March 19, 2009 and March 18, 2010, in the normal course
of its activities, a maximum of 985,210 Class B shares which represent
approximately 5% of the Company's outstanding Class B shares. The Company
repurchases its Class B shares at the market price, at the time of the purchase,
plus brokerage fees. During the third quarter of 2009, pursuant to its normal
course issuer bid programs, the Company redeemed for cancellation a total of
193,600 Class B shares for a net cash consideration of $ 2,036,000 (253,300
shares redeemed and cancelled for the nine-month period ended September 30, 2009
for a net cash consideration of $ 2,581,000).
Substantial issuer bid
On April 1st, 2008, the Company filed a substantial issuer bid to redeem for
cancellation up to 3,000,000 of its participating Class B non-voting shares for
a fixed price of $17.00 per share. 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 $ 404,000 in transaction fees. 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:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three-month periods Nine-month periods
ended September 30 ended September 30
-------------------------------------------------------------------------
2009 2008 2009 2008
Restated Restated
(note 2) (note 2)
-------------------------------------------------------------------------
Net income $6,390 $11,954 $28,058 $30,368
Weighted average number
of shares outstanding 23,894,299 24,024,206 23,965,625 25,716,876
Effect of dilutive stock
options - - - 3,467
-------------------------------------------------------------------------
Weighted average number
of diluted shares
outstanding 23,894,299 24,024,206 23,965,625 25,720,343
Basic and diluted
earnings per share $0.27 $0.50 $1.17 $1.18
-------------------------------------------------------------------------
-------------------------------------------------------------------------
9. STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Conventional Quebecor
Class B stock Media Inc.
options stock options
-------------------------------------------------------------------------
Balances as at December 31,
2008 and September 30, 2009 975,155 245,984
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Of the number of options outstanding as at September 30, 2009, 284,861
conventional Class B stock options at an average exercise price of $18.86 and
25,997 Quebecor Media Inc. stock options at an average exercise price of $26.85
can be exercised.
10. ACCUMULATED OTHER COMPREHENSIVE LOSS
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Interest rate SWAP
-------------------------------------------------------------------------
Balance as at December 31, 2008 $(304)
Other comprehensive Income 106
-------------------------------------------------------------------------
Balance as at September 30, 2009 $(198)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
11. 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:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three-month periods Nine-month periods
ended September 30 ended September 30
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Pension plans
Defined benefit plans $772 $672 $2,244 $2,072
Defined contribution
plans 740 627 2,232 1,874
Other retirement benefits $33 $47 $98 $141
-------------------------------------------------------------------------
-------------------------------------------------------------------------
12. RELATED-PARTY TRANSACTIONS
On June 27, 2009, a subsidiary of the Company, SUN TV Company, owned at 75% and
operating the television station SUN TV, entered into a fiscal consolidation
reduction transaction created July 12, 2005 with its non-controlling shareholder
Sun Media Corporation, a company under common control of its parent, Quebecor
Media Inc. To realize this transaction, SUN TV Company received a total
repayment of the Sun Media Corporation convertible bonds for $9,750,000. In
return, SUN TV Company repurchased from Sun Media Corporation all of the
preferred shares redeemable at the option of the holder, carrying a 10.85% fixed
cumulative dividend, for a total of $9,750,000. This transaction results for the
Company, on a consolidated level, in a reduced long-term investment in
convertible bonds of $9,750,000, and an equivalent reduction in redeemable
preferred shares disclosed under the heading "Non-controlling interest and
redeemable preferred shares."
During the second quarter of 2009, our parent company, Quebecor Media Inc.,
proceeded to the liquidation of Canoe Inc., which was 86.2% owned by Quebecor
Media Inc. and 13.8% by TVA Group Inc., and its assets were distributed
proportionally to shareholders. All the transactions resulting from this
liquidation were recorded at carrying amount of assets transferred between the
related companies, and an adjustment of $7,780,000 was recorded directly to the
Company's retained earnings. This adjustment represents the difference between
the carrying amount of $11,262,000 of the Group TVA Inc. investment in Canoe and
the net carrying amount of $3,482,000 of assets received upon liquidation,
including $2,000,000 in cash, three portals including the site "Argent/Money"
and their related income tax benefits. Moreover, the Company has undertaken to
become the sole owner of the television station SUN TV, for which the Company
paid $2,000,000 to Sun Media Corporation on June 29, 2009, that is subject to
the approval of the Canadian Radio-television and Telecommunications Commission
("CRTC").
13. SUBSEQUENT EVENT
In 2003 and 2004, a number of companies, including TVA Group Inc., brought suit
against the Crown before the Federal Court alleging that the Part II licence
fees ("Part II fees") having to be paid annually to the CRTC by broadcasters and
broadcasting distribution undertakings constituted, in fact and in law, unlawful
taxes under the Broadcasting Act (Canada). Following a Federal Court of Appeal
judgement in 2008 overturning a Federal Court ruling in favour of the
plaintiffs, leave to appeal to the Supreme Court of Canada was granted in 2008.
On October 7, 2009, the parties in this case, including TVA Group Inc., signed
an out-of-court settlement whereby the plaintiff companies withdrew their legal
challenge and monetary claims, and the government agreed not to claim the unpaid
Part II fees for the period of September 1st, 2006 through August 31st, 2009. In
view of this settlement, the Company will reverse in the fourth quarter of 2009
a $9,012,000 provision for unpaid Part II fees as of August 31st, 2009. Under
the out-of-court settlement, the government also undertook to recommend that the
CRTC amend its regulations to limit the amount of the Part II fees for the
period subsequent to August 31st, 2009. To date, however, the current regulatory
rate remains applicable to the Company and will continue to apply until such
time as it is amended by the CRTC.
14. SEGMENTED INFORMATION
The following table includes information on operating income, as well as
information on assets:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three-month periods Nine-month periods
ended September 30 ended September 30
-------------------------------------------------------------------------
2009 2008 2009 2008
Restated Restated
(note 2) (note 2)
-------------------------------------------------------------------------
Operating revenues
Television $67,985 $70,791 $249,897 $240,735
Publishing 19,107 19,197 55,853 59,098
Distribution 3,486 2,937 7,991 12,345
Intersegment items (1,393) (676) (3,226) (2,415)
-------------------------------------------------------------------------
89,185 92,249 310,515 309,763
Operating, selling and
administrative expenses
Television 60,544 61,932 208,542 204,976
Publishing 15,429 16,753 46,552 51,679
Distribution 4,235 3,454 10,765 12,240
Intersegment items (1,364) (739) (3,150) (2,671)
-------------------------------------------------------------------------
78,844 81,400 262,709 266,224
Income (loss) before
amortization, financial
expenses, restructuring
costs of operations,
income taxes, non-
controlling interest and
equity in income of
companies subject to
significant influence
Television 7,441 8,859 41,355 35,759
Publishing 3,678 2,444 9,301 7,419
Distribution (749) (517) (2,774) 105
Intersegment items (29) 63 (76) 256
-------------------------------------------------------------------------
$10,341 $10,849 $47,806 $43,539
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The intersegment items mentioned above represent the elimination of normal
course business transactions made between the Company's business segments
regarding revenues and expenses.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
September 30, 2009 December 31, 2008
Restated (note 2)
-------------------------------------------------------------------------
Total assets
Television $361,509 $362,213
Publishing 84,542 80,158
Distribution 18,454 21,006
Unallocated items (note 12) - 11,262
-------------------------------------------------------------------------
$464,505 $474,639
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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