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TVA Group Reports $7.0 Million Net Income Attributable to Shareholders in Quarter Ended June 30, 2013


TVA Group Reports $7.0 Million Net Income Attributable to Shareholders in Quarter Ended June 30, 2013

MONTREAL, CANADA -- (Marketwired) -- 08/02/13 -- TVA Group Inc. ("the Corporation")(TSX:TVA.B) announces that it recorded net income attributable to shareholders in the amount of $7.0 million, or $0.29 per share, in the second quarter of 2013, compared with $10.2 million, or $0.43 per share, excluding a $12.9 million gain on disposal of investments,(1) in the same quarter of 2012.

Second quarter operating highlights:


 
--  Television segment generates operating income(2) in the amount of
    $18,932,000, a $3,013,000 increase mainly due to:
    
    --  positive impact on operating income of the deconsolidation of the
        results of SUN News since July 1, 2012; 
        
        partially offset by:
        
        
    --  lower operating income at TVA Network as a direct consequence of a
        1.5% decrease in operating revenues; and 
        
    --  lower operating results at the specialty services due to higher
        programming investments at all services. 
        
--  Publishing segment generates operating income in the amount of
    $2,008,000, a $595,000 decrease mainly due to an unfavourable variance
    in the charge related to business contributions toward the costs of
    waste recovery and recycling services provided by Quebec municipalities
    ("EEQ"), whereas a downward adjustment of the liability recorded in the
    first quarter of 2012 in respect of this charge was recognized in the
    second quarter of 2012.

"Results for the latest quarter, combined with those for the first quarter of 2013, point towards long-term trends in the global television market," said Pierre Dion, President and Chief Executive Officer of the Corporation. "This reality has prompted us to introduce a cost-reduction plan to enable us to achieve our financial targets for fiscal 2013 while continuing to invest in growth projects. At the same time, our revenue-diversification strategy aimed at increasing subscription revenues continued paying dividends, with 14.5% growth in the second quarter of 2013 compared with the same quarter of 2012".

"Our magazines' newsstand revenues and advertising revenues both declined in comparison with the same quarter of 2012. However, the cost-containment initiatives we have introduced since the beginning of the year have offset these decreases, aligning our cost structure with our current revenue levels. We are very pleased with our acquisition of Les Publications Charron and its weekly La Semaine, which allows us to grow that brand with the support of all of Quebecor Media's existing platforms and to offer it to our advertisers as a complement to our existing selection of magazines in Quebec."


 
(1) In the quarter ended June 30 2012, net income attributable to           
    shareholders was $23.1 million or $0.97 per share.                      
(2) See definition of operating income (loss) below.                        

Cash flows provided by operating activities totalled $10.7 million in the second quarter of 2013, compared with $2.0 million in the same quarter of 2012. The $8.7 million increase was essentially due to a favourable net change in non-cash items, resulting in part from positive variances in accounts receivable and in programs, broadcast and distribution rights, and inventories, partially offset by an unfavourable variance in rights payable.

Definition

Operating income (loss)

In its analysis of operating results, the Corporation defines operating income (loss) as net income (loss) before amortization of property, plant and equipment and intangible assets, financial expenses, operational restructuring costs, impairment of assets and other costs, impairment of goodwill, gain on disposal of investments, tax expense, share of loss (income) of associated corporations and joint ventures, and net loss attributable to non-controlling interest. Operating income (loss) as defined above is not a measure of results that is consistent with International Financial Reporting Standards ("IFRS"). 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 IFRS. Operating income (loss) is used by the Corporation because management believes it is a meaningful measure of performance.

This measure is used by management and the Board of Directors to evaluate the Corporation's consolidated results and the results of its segments. Measurements such as operating income (loss) are also commonly used by the investment community to analyze and compare the performance of companies in the industries in which the Corporation is active. The Corporation's definition of operating income (loss) 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 Corporation'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), programming, content and production cost risks, credit risk, government regulation risks, government assistance risks, changes in economic conditions, fragmentation of the media landscape, and labour relation risks. 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 Corporation's actual results to differ from current expectations please refer to the Corporation's public filings available at www.sedar.com and http://groupetva.ca including, in particular, the "Risks and Uncertainties" section of the Corporation's annual Management's Discussion and Analysis for the year ended December 31, 2012.

The forward-looking statements in this news release reflect the Corporation's expectations as of August 2, 2013, and are subject to change after this date. The Corporation 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

TVA Group Inc., a subsidiary of Quebecor Media Inc., is an integrated communications company involved in the creation, production, broadcast and distribution of audiovisual products, and in magazine publishing. TVA Group Inc. is the largest broadcaster of French-language entertainment, information and public affairs programming and publisher of French-language magazines in North America, and one of the largest private-sector producers of French-language content in North America. The Corporation's Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B.


 
TVA GROUP INC.                                                              
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)    
                                                                            
(unaudited)                                                                 
(in thousands of dollars, except per share amounts)                         
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                  Three-month periods     Six-month periods 
                                        ended June 30         ended June 30 
----------------------------------------------------------------------------
                                      2013       2012       2013       2012 
                                          (restated,            (restated,  
                           Note               note 2)               note 2) 
----------------------------------------------------------------------------
                                                                            
Revenues                      3  $ 111,507  $ 113,509  $ 222,577  $ 228,972 
                                                                            
Purchases of goods and                                                      
 services                     4     56,822     57,570    131,915    139,317 
Employee costs                      33,745     37,417     68,827     78,139 
Amortization of property,                                                   
 plant and equipment and                                                    
 intangible assets                   5,374      5,242     10,462     10,459 
Financial expenses            5      1,597      1,896      3,201      3,882 
Operational restructuring                                                   
 costs, impairment of                                                       
 assets and other costs       6      2,047          -      2,999        117 
Impairment of goodwill        7          -          -          -     32,200 
Gain on disposal of                                                         
 investments                  8          -    (12,881)         -    (12,881)
----------------------------------------------------------------------------
Income (loss) before tax                                                    
 expense and share of                                                       
 income of associated                                                       
 corporations and joint                                                     
 ventures                           11,922     24,265      5,173    (22,261)
----------------------------------------------------------------------------
                                                                            
Tax expense                          3,526      4,356      1,102      1,036 
                                                                            
Share of loss (income) of                                                   
 associated corporations                                                    
 and joint ventures                  1,415       (942)     2,978     (2,042)
----------------------------------------------------------------------------
Net income (loss) and                                                       
 comprehensive income                                                       
 (loss)                          $   6,981  $  20,851  $   1,093  $ (21,255)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income (loss) and                                                       
 comprehensive income                                                       
 (loss) attributable to:                                                    
  Shareholders                   $   6,981  $  23,088  $   1,093  $ (16,841)
  Non-controlling interest               -     (2,237)         -     (4,414)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Basic and diluted earnings                                                  
 (loss) per share                                                           
 attributable to                                                            
 shareholders              9 c)  $    0.29  $    0.97  $    0.05  $   (0.71)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.      
                                                                            
                                                                            
                                                                            
TVA GROUP INC.                                                              
Consolidated Statements of Equity                                           
                                                                            
(unaudited)                                                                 
(in thousands of dollars)                                                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                  Equity attributable to shareholders                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                              Accumu-                       
                                                lated                       
                                                other                       
                                              compre-      Equity           
                                              hensive    attribu-           
                                               loss -       table           
                Capital  Contri-              Defined     to non-           
                 stock     buted  Retained    benefit controlling     Total 
               (note 9)  surplus  earnings      plans    interest    equity 
----------------------------------------------------------------------------
                                                                            
Balance as at                                                               
 December 31,                                                               
 2011,as                                                                    
 previously                                                                 
 reported      $ 98,647 $      - $ 176,993 $        -    $  5,389 $ 281,029 
Changes in                                                                  
 accounting                                                                 
 policies(note                                                              
 2)                   -        -    17,408    (18,323)          -      (915)
----------------------------------------------------------------------------
Balance as at                                                               
 December 31,                                                               
 2011,as                                                                    
 restated        98,647        -   194,401    (18,323)      5,389   280,114 
Net loss              -        -   (16,841)         -      (4,414)  (21,255)
Contributions                                                               
 related to                                                                 
 non-                                                                       
 controlling                                                                
 interest (note                                                             
 11)                  -        -         -          -       3,528     3,528 
Disposal of                                                                 
 interest in                                                                
 SUN News (note                                                             
 11)                  -      581         -          -      (4,503)   (3,922)
----------------------------------------------------------------------------
Balance as at                                                               
 June 30, 2012   98,647      581   177,560    (18,323)          -   258,465 
Net income            -        -    10,377          -           -    10,377 
Other                                                                       
 comprehensive                                                              
 loss                 -        -         -     (2,297)          -    (2,297)
----------------------------------------------------------------------------
Balance as at                                                               
 December 31,                                                               
 2012            98,647      581   187,937    (20,620)          -   266,545 
Net income            -        -     1,093          -           -     1,093 
----------------------------------------------------------------------------
Balance as at                                                               
 June 30, 2013 $ 98,647 $    581 $ 189,030 $  (20,620)   $      - $ 267,638 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.      
                                                                            
                                                                            
                                                                            
TVA GROUP INC.                                                              
Consolidated Balance Sheets                                                 
                                                                            
(unaudited)                                                                 
(in thousands of dollars)                                                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                    June 30,   December 31, 
                                                        2013           2012 
                                                                  (restated 
                                                                          , 
                                          Note                      note 2) 
----------------------------------------------------------------------------
                                                                            
Assets                                                                      
                                                                            
Current assets                                                              
  Cash                                            $    7,665     $   10,619 
  Accounts receivable                                107,857        115,925 
  Income taxes                                         3,924          3,152 
  Programs, broadcast and distribution                                      
   rights and inventories                    6        61,416         67,579 
  Prepaid expenses                                     3,876          2,426 
----------------------------------------------------------------------------
                                                     184,738        199,701 
Non-current assets                                                          
  Broadcast and distribution rights          6        37,253         33,563 
  Investments                                         15,344         17,651 
  Property, plant and equipment                      100,623         98,494 
  Licences and other intangible assets               110,416        112,056 
  Goodwill                                   7        39,781         39,781 
  Deferred income taxes                                1,220            725 
----------------------------------------------------------------------------
                                                     304,637        302,270 
----------------------------------------------------------------------------
Total assets                                      $  489,375     $  501,971 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities and equity                                                      
                                                                            
Current liabilities                                                         
  Accounts payable and accrued liabilities        $   77,097     $   89,092 
  Income taxes                                           391            816 
  Broadcast and distribution rights                                         
   payable                                            16,991         16,966 
  Provisions                                           1,023            862 
  Deferred revenues                                    4,120          6,136 
----------------------------------------------------------------------------
                                                      99,622        113,872 
Non-current liabilities                                                     
  Long-term debt                                      74,539         74,438 
  Other liabilities                                   37,405         38,499 
  Deferred income taxes                               10,171          8,617 
----------------------------------------------------------------------------
                                                     122,115        121,554 
Equity                                                                      
  Capital stock                              9        98,647         98,647 
  Contributed surplus                       11           581            581 
  Retained earnings                                  189,030        187,937 
  Accumulated other comprehensive loss               (20,620)       (20,620)
----------------------------------------------------------------------------
  Equity attributable to shareholders                267,638        266,545 
Event after the reporting period            13                              
----------------------------------------------------------------------------
Total liabilities and equity                      $  489,375     $  501,971 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.      

On August 2, 2013, the Board of Directors approved the condensed consolidated financial statements for the three-month and six-month periods ended June 30, 2013 and 2012.


 
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 
----------------------------------------------------------------------------
                                     2013        2012      2013        2012 
                                          (restated,            (restated,  
                              Note            note 2)               note 2) 
----------------------------------------------------------------------------
                                                                            
Cash flows related to                                                       
 operating activities                                                       
  Net income (loss)               $ 6,981  $   20,851  $  1,093  $  (21,255)
  Non-cash items:                                                           
    Amortization                    5,424       5,349    10,563      10,667 
    Impairment of assets         6    612           -       999           - 
    Impairment of goodwill       7      -           -         -      32,200 
    Gain on disposal of                                                     
     investments                 8      -     (12,881)        -     (12,881)
    Share of loss (income) of                                               
     associated corporations                                                
     and joint ventures             1,415        (942)    2,978      (2,042)
    Deferred income taxes            (115)        355       909         373 
----------------------------------------------------------------------------
                                   14,317      12,732    16,542       7,062 
  Net change in non-cash items     (3,587)    (10,776)   (8,355)     (2,811)
----------------------------------------------------------------------------
Cash flows provided by                                                      
 operating activities              10,730       1,956     8,187       4,251 
----------------------------------------------------------------------------
                                                                            
Cash flows related to                                                       
 investing activities                                                       
  Additions to property, plant                                              
   and equipment                   (4,236)     (6,828)   (9,548)    (12,102)
  Additions to intangible                                                   
   assets                            (338)       (737)     (922)     (1,303)
  Net change in investments   8,11 (1,470)     20,963      (671)     20,963 
  Cash of SUN News at the date                                              
   of deconsolidation           11      -        (430)        -        (430)
----------------------------------------------------------------------------
Cash flows (used in) provided                                               
 by investing activities           (6,044)     12,968   (11,141)      7,128 
----------------------------------------------------------------------------
                                                                            
Cash flows related to                                                       
 financing activities                                                       
  Net change in bank overdraft          -       4,661         -         963 
  Net change in revolving                                                   
   credit facility                   (254)    (22,285)        -     (17,282)
  Financing costs                       -           -         -        (344)
  Non-controlling interest      11      -       1,764         -       3,528 
----------------------------------------------------------------------------
Cash flows used in financing                                                
 activities                          (254)    (15,860)        -     (13,135)
----------------------------------------------------------------------------
                                                                            
Net change in cash                  4,432        (936)   (2,954)     (1,756)
Cash at beginning of period         3,233         936    10,619       1,756 
----------------------------------------------------------------------------
Cash at end of period             $ 7,665  $        -  $  7,665  $        - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Interest and taxes reflected                                                
 as operating activities                                                    
  Interest paid                   $ 2,115  $    2,361  $  2,196  $    2,747 
  Income taxes (received) paid       (579)      1,185     1,389       3,472 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.      
                                                                            
                                                                            
                                                                            
TVA GROUP INC.                                                              
Notes to Condensed Consolidated Financial Statements                        
                                                                            
Three-month and six-month periods ended June 30, 2013 and 2012 (unaudited)  
(Tabular amounts are expressed in thousands of dollars, except per share and
per option amounts)                                                         
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----------------------------------------------------------------------------

TVA Group Inc. ("TVA Group" or "the Corporation") is governed by the Quebec Business Corporations Act. TVA Group is an integrated communications company with two operating segments: Television and Publishing (note 12). The Corporation is a subsidiary of Quebecor Media Inc. ("Quebecor Media" or "the parent corporation") and the ultimate parent corporation is Quebecor Inc. ("Quebecor"). The Corporation's head office is located at 1600 de Maisonneuve Boulevard East, Montreal, Quebec, Canada.

The Corporation's businesses experience significant seasonality due, among other factors, to seasonal advertising patterns and influences on people's viewing, reading and listening habits. Because the Corporation depends on the sale of advertising for a significant portion of its revenues, 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. Furthermore, the Corporation is investing in the launch of new specialty services in the Television segment. During the period immediately following the launch of a new specialty service, subscription revenues are always relatively modest, while initial operating expenses may prove more substantial. Accordingly, the results of operations for interim periods should not necessarily be considered indicative of full-year results.

1. Basis of presentation

These consolidated financial statements were prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), except that they do not include all disclosures required under IFRS for annual consolidated financial statements. In particular, these consolidated financial statements were prepared in accordance with IAS 34, Interim Financial Reporting, and accordingly, they are condensed consolidated financial statements. They are presented in Canadian dollars, which is the currency of the primary economic environment in which the Corporation and its subsidiaries operate ("functional currency"). These condensed consolidated financial statements should be read in conjunction with the Corporation's 2012 annual consolidated financial statements, which describe the accounting policies used to prepare these financial statements.

Comparative figures for the three-month and six-month periods ended June 30, 2012 have been restated to conform to the presentation adopted for the three-month and six-month periods ended June 30, 2013.

2. Changes in accounting policies

On January 1, 2013, the Corporation adopted retrospectively the following standards. Unless otherwise indicated, the adoption of these new standards did not have a material impact on prior period comparative figures.


 
i.  IFRS 10 Consolidated Financial Statements replaces SIC 12 Consolidation
    - Special Purpose Entities and parts of IAS 27 Consolidated and Separate
    Financial Statements and provides additional guidance regarding the
    concept of control as the determining factor in whether an entity should
    be included in the consolidated financial statements of the parent
    corporation.
 
ii. IFRS 11 Joint Arrangements replaces IAS 31 Interests in Joint Ventures
    with guidance that focuses on the rights and obligations of the
    arrangement, rather than its legal form. It also withdraws the option to
    proportionately consolidate an entity's interest in joint ventures. The
    new standard requires that such interests be recognized using the equity
    method. 

The adoption of the standard had the following impacts on prior period comparative figures:

Consolidated statements of income and comprehensive income


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                 Three-month      Six-month 
                                                period ended   period ended 
Increase (decrease)                            June 30, 2012  June 30, 2012 
----------------------------------------------------------------------------
                                                                            
Revenues                                            $ (1,870)      $ (4,219)
Purchases of goods and services                       (1,073)        (2,512)
Financial expenses                                         3              7 
----------------------------------------------------------------------------
Loss before tax expense and share of income of                              
 associated corporations and joint ventures              800          1,714 
Share of loss (income) of associated                                        
 corporations and joint ventures                        (800)        (1,714)
----------------------------------------------------------------------------
Net income and comprehensive income                 $      -       $      - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
iii.IFRS 12 Disclosure of Interests in Other Entities is a new and
    comprehensive standard on disclosure requirements for all forms of
    interests in other entities, including joint arrangements, associates,
    special purpose entities and other off-balance sheet vehicles. 
    
iv. IFRS 13 Fair Value Measurement is a new and comprehensive standard that
    sets out a framework for measuring at fair value and that provides
    guidance on required disclosures about fair value measurements. 
    
v.  IAS 1 Presentation of Financial Statements was amended and the principal
    change resulting from amendments to this standard is the requirement to
    present separately other comprehensive items that may be reclassified to
    income and other comprehensive items that will not be reclassified to
    income. 
    
 
vi. IAS 19 Employee Benefits (Amended) involves, among other changes, the
    immediate recognition of the re-measurement component in other
    comprehensive income, thereby removing the accounting option previously
    available in IAS 19 to recognize or to defer recognition of changes in
    defined benefit obligations and in the fair value of plan assets
    directly in the consolidated statement of income. IAS 19 also introduces
    a net interest approach that replaces the expected return on assets and
    interest costs on the defined benefit obligation with a single net
    interest component determined by multiplying the net defined benefit
    liability or asset by the discount rate used to determine the defined
    benefit obligation. In addition, all past service costs are required to
    be recognized in profit or loss when the employee benefit plan is
    amended and no longer spread over any future service period. IAS 19 also
    allows amounts recorded in other comprehensive income to be recognized
    either immediately in retained earnings or as a separate category within
    equity. The Corporation has elected to immediately recognize in
    accumulated other comprehensive income the amounts recorded in other
    comprehensive income. 

The adoption of the amended standard had the following impacts on prior period comparative figures:

Consolidated statements of income and comprehensive income


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                 Three-month      Six-month 
                                                period ended  period  ended 
Increase (decrease)                            June 30, 2012  June 30, 2012 
----------------------------------------------------------------------------
                                                                            
Employee costs                                      $    342       $    684 
Financial expenses                                       462            925 
Deferred income tax expense                             (216)          (433)
----------------------------------------------------------------------------
Net income and comprehensive income                 $   (588)      $ (1,176)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Consolidated balance sheets


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                December 31,   December 31, 
Increase (decrease)                                     2012           2011 
----------------------------------------------------------------------------
                                                                            
Other liabilities                                   $      -       $  1,251 
Deferred income tax liability                              -           (336)
Retained earnings                                     20,620         17,408 
Accumulated other comprehensive income               (20,620)       (18,323)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

3. Revenues

The breakdown of revenues between services rendered and product sales is as follows:


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                 Three-month periods       Six-month periods
                                       ended June 30           ended June 30
----------------------------------------------------------------------------
                                   2013         2012       2013         2012
                                          (restated,              (restated,
                                             note 2)                 note 2)
----------------------------------------------------------------------------
                                                                            
Services rendered             $  86,867  $    87,665  $ 172,844  $   176,887
Product sales                    24,640       25,844     49,733       52,085
----------------------------------------------------------------------------
                              $ 111,507  $   113,509  $ 222,577  $   228,972
----------------------------------------------------------------------------
----------------------------------------------------------------------------

4. Purchases of goods and services

The main components of purchases of goods and services are as follows:


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                 Three-month periods       Six-month periods
                                       ended June 30           ended June 30
----------------------------------------------------------------------------
                                   2013         2012       2013         2012
                                          (restated,              (restated,
                                             note 2)                 note 2)
----------------------------------------------------------------------------
                                                                            
Royalties, rights and                                                       
 production costs             $  32,722  $    32,555  $  81,710  $    82,716
Printing and distribution         4,720        4,523      9,318       12,442
Marketing, advertising and                                                  
 promotion                        3,308        4,059      8,375        9,372
Buildings costs                   2,209        2,445      4,392        5,085
Services rendered by parent                                                 
 corporation                      6,037        4,951     11,972        9,215
Other                             7,826        9,037     16,148       20,487
----------------------------------------------------------------------------
                              $  56,822  $    57,570  $ 131,915  $   139,317
----------------------------------------------------------------------------
----------------------------------------------------------------------------

5. Financial expenses


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                 Three-month periods       Six-month periods
                                       ended June 30           ended June 30
----------------------------------------------------------------------------
                                   2013         2012       2013         2012
                                          (restated,              (restated,
                                             note 2)                 note 2)
----------------------------------------------------------------------------
                                                                            
Interest on long-term debt    $   1,126  $     1,282  $   2,248  $     2,698
Amortization of financing                                                   
 costs                               50          107        101          208
Interest on net defined                                                     
 benefit liability                  420          462        840          925
Other                                 1           45         12           51
----------------------------------------------------------------------------
                              $   1,597  $     1,896  $   3,201  $     3,882
----------------------------------------------------------------------------
----------------------------------------------------------------------------

6. Operational restructuring costs, impairment of assets and other costs

In the three-month and six-month periods ended June 30, 2013, the Corporation recorded $1,646,000 in operational restructuring costs in connection with the elimination of a number of positions, including $897,000 in the Television segment and $749,000 in the Publishing segment. In the six-month period ended June 30, 2012, the Corporation recorded $117,000 in operational restructuring costs in connection with the elimination of a number of positions in the Publishing segment.

During the first quarter of 2013, the Corporation decided to discontinue theatrical distribution of new Quebec films, whereas in the second quarter of 2013, the Corporation announced that its TVA Boutiques division's home shopping and online shopping operations would be discontinued by August 31, 2013. As a result of these repositionings, the Corporation recorded a $612,000 inventory impairment charge and a $303,000 provision for operational restructuring costs for the three-month period ended June 30, 2013 and a $999,000 impairment charge and a $303,000 provision for operational restructuring costs for the six-month period ended June 30, 2013.

During the three-month period ended June 30, 2013, the Corporation also reversed a $514,000 provision for restructuring costs following a favourable judgment in a legal dispute related to a former subsidiary's production activities. During the six-month period ended June 30, 2013, the Corporation recorded a net charge of $51,000 in connection with this dispute.

7. Impairment of goodwill

During the first quarter of 2012, following the adoption of new rates for business contributions toward the costs of waste recovery and recycling services provided by Quebec municipalities, the Corporation had to review its business plan for the related activities and perform an impairment test on the Publishing cash-generating unit ("CGU"). The Corporation concluded that the recoverable amount based on value in use was less than the carrying amount of the Publishing CGU and a goodwill impairment charge of $32,200,000 was recorded.

8. Gain on disposal of investments

On May 31, 2012, following Canadian Radio-television and Telecommunications Commission approval, the Corporation completed the sale of its 51% interest in "The Cave" and its 50% interest in "Mystery TV" to its partner in the joint ventures, Shaw Media Global Inc., for a total cash consideration of $20,963,000. A $12,881,000 gain on disposal of investments, before taxes, was recorded. The transaction did not give rise to any tax expense because the Corporation used unrecorded capital losses to eliminate the capital gains tax on disposal of investments.

9. Capital stock

(a) Authorized capital stock

An unlimited number of Class A common shares, participating, voting, without par value.

An unlimited number of Class B shares, participating, non-voting, without par value.

An unlimited number of preferred shares, non-participating, non-voting, with a par value of $10 each, issuable in series.

(b) Issued and outstanding capital stock


 
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                                                      June 30,  December 31,
                                                          2013          2012
----------------------------------------------------------------------------
                                                                            
4,320,000 Class A Common Shares                      $      72     $      72
19,450,906 Class B shares                               98,575        98,575
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                                                     $  98,647     $  98,647
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(c) Earnings (loss) per share attributable to shareholders

The following table sets forth the computation of basic and diluted earnings (loss) per share attributable to shareholders:


 
----------------------------------------------------------------------------
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                             Three-month periods         Six-month periods  
                                    ended June 30             ended June 30 
----------------------------------------------------------------------------
                                2013         2012         2013         2012 
                                       (restated,                (restated, 
                                          note 2)                   note 2) 
----------------------------------------------------------------------------
                                                                            
Net income (loss)                                                           
 attributable to                                                            
 shareholders            $     6,981  $    23,088  $     1,093  $   (16,841)
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----------------------------------------------------------------------------
                                                                            
Weighted average number                                                     
 of basic and diluted                                                       
 shares outstanding       23,770,906   23,770,906   23,770,906   23,770,906 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Basic and diluted                                                           
 earnings (loss) per                                                        
 share attributable to                                                      
 shareholders (in                                                           
 dollars)                $      0.29  $      0.97  $      0.05  $     (0.71)
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The diluted earnings (loss) per share calculation does not take into consideration the potential dilutive effect of stock options of the Corporation since their impact is anti-dilutive.

10. Stock-based compensation and other stock-based payments


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                        Six-month period ended June 30, 2013
----------------------------------------------------------------------------
                                Corporation's Class B         Quebecor Media
                                        stock options          stock options
----------------------------------------------------------------------------
                                             Weighted               Weighted
                                              average                average
                                             exercise               exercise
                                   Number       price     Number       price
----------------------------------------------------------------------------
                                                                            
Balance as at December 31,                                                  
 2012                             819,421   $   16.34    213,416   $   46.55
Exercised                               -           -    (41,884)      46.70
Cancelled                        (128,345)      15.29    (32,500)      47.68
Options related to executives                                               
 transferred to Quebecor Media          -           -    (14,625)      46.48
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Balance as at June 30, 2013       691,076   $   16.54    124,407   $   46.21
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----------------------------------------------------------------------------

Of the number of options outstanding as at June 30, 2013, 691,076 Corporation's Class B stock options at an average exercise price of $16.54 and 46,407 Quebecor Media stock options at an average price of $45.76 could be exercised.

During the three-month period ended June 30, 2013, 21,927 Quebecor Media stock options were exercised for a cash consideration of $243,000 (no stock options were exercised in the same period of 2012). During the six-month period ended June 30, 2013, 41,884 Quebecor Media stock options were exercised for a cash consideration of $471,000 (no stock options were exercised in the same period of 2012).

During the three-month and six-month periods ended June 30, 2013, the Corporation recorded compensation expense reversals of $83,000 and $31,000 respectively (compensation expense reversals of $250,000 and $245,000 respectively in the same periods of 2012) in relation to the Corporation's Class B stock options and compensation expense reversals of $41,000 and $70,000 respectively (compensation expense reversal of $50,000 and compensation expense of $546,000 respectively in the same periods of 2012) in relation to Quebecor Media stock options.

11. Related party transactions

Capital contributions to SUN News

During the three-month and six-month periods ended June 30, 2013, the partners in SUN News made a capital contribution of $3,000,000 ($3,600,000 and $7,200,000 respectively during the same periods of 2012), including $1,470,000 from the Corporation ($1,836,000 and $3,672,000 respectively during the same periods of 2012) and $1,530,000 from Sun Media Corporation, a company under common control ($1,764,000 and $3,528,000 respectively during the same periods of 2012).

Disposal of interest in SUN News

On June 30, 2012, the Corporation sold a 2% interest in SUN News to Sun Media Corporation for a cash consideration of $765,000.The Corporation now holds a 49% interest in SUN News and Sun Media Corporation owns 51%. The difference between the amount paid and the book value of the interest yielded a $581,000 gain, which was accounted for in contributed surplus. Following the loss of control, SUN News' results are no longer consolidated as of July 1, 2012, and the investment in SUN News is now accounted for using the equity method.

The following table shows details of the net assets of SUN News, which were reclassified as an investment using the equity method at the date of deconsolidation:


 
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Current assets                                                              
  Cash                                                              $   430 
  Accounts receivable and other current assets                        2,792 
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                                                                      3,222 
Non-current assets                                                          
  Property, plant and equipment                                       8,873 
  Intangible assets                                                     650 
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                                                                     12,745 
Current liabilities                                                         
  Accounts payable and accrued liabilities                            3,555 
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Net assets                                                            9,190 
                                                                            
Sun Media Corporation interest                                       (4,687)
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Investment using equity method                                      $ 4,503 
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12. Segmented information

The Corporation's operations consist of the following segments:


 
- The Television segment includes the operations of TVA Network, (including 
  the subsidiaries and divisions TVA Productions Inc., TVA Sales and        
  Marketing Inc., TVA Acces, TVA Nouvelles, TVA Interactif), specialty      
  services, the marketing of digital products associated with the different 
  televisual brands, the home and online shopping services of the TVA       
  Boutiques division, and the distribution of audiovisual products by the   
  TVA Films division.                                                       
                                                                            
- The Publishing segment includes the operations of TVA Publications Inc., a
  content producer that specializes in the publication of French-language   
  magazines in various fields such as the arts, entertainment, television,  
  fashion and decoration; the marketing of digital products associated with 
  the different magazine brands; and the operations of the TVA Studio       
  division, specializing in custom publishing, commercial print production  
  and premedia services.                                                    
                                                                            
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----------------------------------------------------------------------------
                                Three-month periods       Six-month periods 
                                      ended June 30           ended June 30 
----------------------------------------------------------------------------
                                  2013         2012       2013         2012 
                                         (restated,              (restated, 
                                            note 2)                 note 2) 
----------------------------------------------------------------------------
                                                                            
Revenues                                                                    
  Television                 $  96,470  $    97,262  $ 193,534  $   197,733 
  Publishing                    15,806       17,213     30,775       33,119 
  Intersegment items              (769)        (966)    (1,732)      (1,880)
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                             $ 111,507  $   113,509  $ 222,577  $   228,972 
Operating income(1)                                                         
  Television                    18,932       15,919     19,595       10,960 
  Publishing                     2,008        2,603      2,240          556 
----------------------------------------------------------------------------
                                20,940       18,522     21,835       11,516 
Amortization of property,                                                   
 plant and equipment and                                                    
 intangible assets               5,374        5,242     10,462       10,459 
Financial expenses               1,597        1,896      3,201        3,882 
Operational restructuring                                                   
 costs, impairment of assets                                                
 and other costs                 2,047            -      2,999          117 
Impairment of goodwill               -            -          -       32,200 
Gain on disposal of                                                         
 investments                         -      (12,881)         -      (12,881)
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Income (loss) before tax                                                    
 expense and share of income                                                
 of associated corporations                                                 
 and joint ventures          $  11,922  $    24,265  $   5,173  $   (22,261)
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The above-noted intersegment items represent the elimination of normal course business transactions between the Corporation's business segments regarding revenues.


 
(1) The Chief Executive Officer uses operating income as a measure of       
    financial performance for assessing the performance of each of the      
    Corporation's segments. Operating income is defined as net income (loss)
    before amortization of property, plant and equipment and intangible     
    assets, financial expenses, operational restructuring costs, impairment 
    of assets and other costs, impairment of goodwill, gain on disposal of  
    investments, tax expense, share of loss (income) of associated          
    corporations and joint ventures, and net loss attributable to non-      
    controlling interest. Operating income as defined above is not a measure
    of results that is consistent with IFRS.                                

13. Event after the reporting period

On July 18, 2013, the Corporation acquired all of the issued and outstanding shares of Les Publications Charron & Cie inc., publisher of La Semaine magazine, and of Charron Editeur inc., a book publisher, for a total cash consideration of $7,500,000. Les Publications Charron & Cie inc. was acquired as part of TVA Group's strategy to remain the Quebec market leader in magazine publishing. The operations of Charron Editeur inc. will be transferred to Sogides Group, a corporation under common control, for a $300,000 consideration. Contacts: Denis Rozon, CPA, CA Vice President and Chief Financial Officer (514) 598-2808

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