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Press release from Marketwire

TVA Group Reports $2.1 Million Net Income Attributable to Shareholders in Quarter Ended September 30, 2012

Monday, November 05, 2012

TVA Group Reports $2.1 Million Net Income Attributable to Shareholders in Quarter Ended September 30, 201211:26 EST Monday, November 05, 2012MONTREAL, CANADA--(Marketwire - Nov. 5, 2012) - TVA Group Inc. (TSX:TVA.B) ("the Corporation") announces that it recorded net income attributable to shareholders in the amount of $2.1 million, or $0.09 per share, for the third quarter of 2012, compared with net income attributable to shareholders of $0.00 per share in the same quarter of 2011. Third quarter operating highlights :Operating income(1) in the Television segment up $8,685,000 to $8,374,000, mainly because of: $5,320,000 increase in operating income at TVA Network due to an 8.6% increase in advertising revenues; positive impact on operating income of the deconsolidation of the results of SUN News since July 1, 2012. Partially offset by:operating loss of the "TVA Sports" service, in operation since September 2011; loss of the contribution to operating income provided by our interest in "Mystery TV" and "The Cave," which was sold on May 31, 2012. Operating income in the Publishing segment down $944,000 to $2,310,000, mainly because of a decrease in operating revenues caused largely by lower newsstand sales and advertising revenues. "We are satisfied with the third quarter 2012 financial results, particularly the performance of TVA Network and LCN during the Québec election campaign," said Pierre Dion, President and CEO of the Corporation. "Our French-language specialty services are also continuing to register steady growth in both subscription revenues and advertising revenues. Finally, in an increasingly competitive marketplace, we continued investing in content for all of TVA Group's vehicles."In the Publishing segment, operating revenues declined 4.4% compared with the same quarter of the previous year, which largely accounts for the decrease in the segment's operating income. Several brand projects and strategies designed to generate new revenue streams and make up for the decline in 'traditional' revenues are currently under way in the segment." Cash flows provided by operating activities amounted to $18.3 million for the quarter, compared with $11.8 million in the same quarter of 2011. The $6.5 million increase was essentially due to the improved operating results. The unaudited consolidated financial statements for the three-month and nine-month periods ending September 30, 2012, with notes and the interim Management's Discussion and Analysis, can be consulted on the Corporation's website at http://groupetva.ca. Definition Operating income (loss)In its analysis of operating results, the Corporation defines operating income (loss) as net income (net loss) before amortization of property, plant and equipment and intangible assets, financial expenses, impairment of goodwill, gain on disposal of businesses, restructuring costs of operations, impairment of assets and other costs, income taxes (recovery), share of loss (income) of associated corporations and net loss attributable to non-controlling interest. Operating income (loss) as defined above is not a measure of results that is consistent with 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 consolidated results of the Corporation 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 costs risks, credit risk, government regulation risks, governmental assistance risks, changes in economic conditions, fragmentation of the media landscape and labour relations 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, 2011.The forward-looking statements in this news release reflect the Corporation's expectations as of November 5, 2012, 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. (1) Refer to definition of operating income (loss) below.TVA GROUP INC.Consolidated Statements of Income (Loss)(unaudited)(in thousand of dollars, except per share amounts) Three-month periods ended September 30Nine-month periods ended September 30Note2012201120122011Revenues2$97,171$89,214$330,362$313,859Operating, selling and administrative expenses386,48786,271305,771283,992Amortization of property, plant and equipment and intangible assets4,913 4,28015,372 12,528Financial expenses41,2111,4694,1614,377Impairment of goodwill5−−32,200−Gain on disposal of businesses13−−(12,881)−Restructuring costs of operations, impairmentof assets and other costs6− 312117 633Income (loss) before income taxes and share of income of associated corporations4,560 (3,118)(14,378) 12,329Income taxes (recovery)7 and 13573(448)2,0425,349After-tax share of loss (income) of associated corporations1,860 1861,532 (285)Net income (loss)$2,127$(2,856)$(17,952)$7,265Net income (loss) attributable to:Shareholders$2,127$8$(13,538)$14,135Non-controlling interest11−(2,864)(4,414)(6,870)Basic and diluted earnings per share attributable to shareholders9 c)$0.09 $−$(0.57) $ 0.59See accompanying notes to condensed consolidated financial statements.TVA GROUP INC.Consolidated Statements of Comprehensive Income (Loss)(unaudited)(in thousands of dollars)Three-month periods ended September 30Nine-month periods ended September 30Note2012201120122011Net income (loss)$2,127$(2,856)$(17,952)$7,265Other comprehensive loss:Defined benefit plans:Net change in asset limit or in minimum funding liability− (141)− (423)Deferred income taxes−38−114−(103)−(309)Comprehensive income (loss)$2,127$(2,959)$(17,952)$6,956Comprehensive income (loss) attributable to:Shareholders$2,127$(95)$(13,538)$13,826Non-controlling interest11−(2,864)(4,414)(6,870)See accompanying notes to condensed consolidated financial statements.TVA GROUP INC.Consolidated Statements of Equity (unaudited)(in thousands of dollars)Equity attributable to shareholdersCapital stock (note 9)Contributed surplusRetained earningsEquity attributable to non-controlling interestTotal equityBalance as of December 31, 2010$ 98,647$ −$ 170,784$ 4,511$ 273,942Net income (loss)−−14,135(6,870)7,265Other comprehensive loss−−(309)−(309)Dividends−−(2,377)−(2,377)Contributions related to non-controlling interest (note 11)−−−7,8407,840Balance as of September 30, 201198,647−182,2335,481286,361Net income (net loss)−−11,468(2,297)9,171Other comprehensive loss−−(16,708)−(16,708)Contributions related to non-controlling interest (note 11)−−−2,2052,205Balance as of December 31, 201198,647−176,9935,389281,029Net loss−−(13,538)(4,414)(17,952)Contributions related to non-controlling interest (note 11)−−−3,5283,528Disposal of interest in SUN News (note 11)−581−(4,503)(3,922)Balance as of September 30, 2012$ 98,647$ 581$ 163,455$ −$ 262,683See accompanying notes to condensed consolidated financial statements.TVA GROUP INC.Consolidated Balance Sheets(unaudited)(in thousands of dollars)NoteSeptember 30, 2012December 31, 2011AssetsCurrent assetsCash$5,729$1,756Accounts receivable114,714117,644Current income tax assets4,6944,014Programs, broadcast and distribution rights and inventories73,57261,954Prepaid expenses3,2382,690Assets held for sale13−8,370201,947196,428Non-current assetsBroadcast and distribution rights33,39035,488Investments1117,32912,865Property, plant and equipment96,923102,007Licences and other intangible assets112,181114,539Goodwill539,78171,981Deferred income taxes783545300,387337,425Total assets$502,334$533,853Liabilities and equityCurrent liabilitiesBank overdraft$−$3,980Accounts payable and accrued liabilities91,86282,086Current income tax liabilities204503Broadcast and distribution rights payable18,58015,778Provisions9481,533Deferred revenues8,6676,535Current portion of long-term debt8−17,756Liabilities held for sale13−1,538120,261129,709Non-current liabilitiesLong-term debt874,62674,635Other liabilities34,69639,696Deferred income taxes710,0688,784119,390123,115EquityCapital stock998,64798,647Contributed surplus11581−Retained earnings163,455176,993Equity attributable to shareholders262,683275,640Non-controlling interest11−5,389262,683281,029Total liabilities and equity$502,334$533,853See accompanying notes to condensed consolidated financial statements.On November 5, 2012, the Board of Directors approved the condensed consolidated financial statements for the three-month and nine-month periods ended September 30, 2012 and 2011.TVA GROUP INC.Consolidated Statements of Cash Flows (unaudited)(in thousands of dollars)Three-month periods ended September 30Nine-month periods ended September 30Note2012201120122011Cash flows related to operating activitiesNet income (loss)$2,127$(2,856)$(17,952)$7,265Non-cash items:Amortization5,0204,37015,68712,797Impairment of goodwill5−−32,200−Gain on disposals of businesses13−−(12,881)−Restructuring costs of operations, impairment of assets and other costs6− 253− 583After-tax share of loss (income) of associated corporations1,860 1861,532 (285)Deferred income taxes72248461,0302,651Cash flows provided by current operations9,2312,79919,61623,011Net change in non-cash items9,0819,0173,130(917)Cash flows provided by operating activities18,31211,81622,74622,094Cash flows related to investing activitiesAdditions to property, plant and equipment(5,566)(7,034)(17,668)(22,024)Additions to intangible assets(892)(1,490)(2,195)(3,438)Disposal of businesses, net of cash11 and 13765−18,663−Cash of SUN News at the date of deconsolidation11− −(430) −Net change in investments11(1,493)226(1,493)236 Cash flows used in investing activities(7,186)(8,298)(3,123)(25,226)Cash flows related to financing activitiesNet change in bank overdraft(4,943)2,178(3,980)(22)Net change in revolving term loan(454)(7,394)(17,736)(3,300)Financing costs8−−(344)−Non-controlling interest11−4,9003,5287,840Dividends paid−−−(2,377)Cash flows (used in) provided by financing activities(5,397) (316)(18,532) 2,141Net change in cash5,7293,2021,091(991)Cash at beginning of period−1,4124,6385,605Cash at end of period$5,729$4,614$5,729$4,614Interest and income taxes reflected as operating activitiesInterest paid$48$312$2,788$2,982Net income taxes (received) paid(1,501)171,971656See accompanying notes to condensed consolidated financial statements.TVA GROUP INC.Notes to Condensed Consolidated Financial StatementsThree-month and nine-month periods ended September 30, 2012 and 2011 (unaudited)(Tabular amounts are expressed in thousands of dollars, except per share and per option amounts)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 Blvd. East, Montreal, Quebec, Canada. The Corporation's businesses experience significant seasonality due, among other factors, to cyclical 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 presentationThese consolidated financial statements were prepared in accordance with the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. In particular, these consolidated financial statements were prepared in accordance with IAS 34, Interim Financial Reporting, and accordingly, they are condensed consolidated financial statements because they do not include all disclosures required under IFRS for annual consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the Corporation's 2011 annual consolidated financial statements and the notes thereto. The same accounting policies described in the annual consolidated financial statements have been used herein.Comparative figures for the three-month and nine-month periods ended September 30, 2011, have been reclassified to conform to the presentation adopted for the nine-month period ended September 30, 2012.2. RevenuesThe breakdown of revenues between services rendered and product sales is as follows:Three-month periods ended September 30Nine-month periods ended September 302012201120122011Services rendered$72,458$64,331$253,564$237,548Product sales24,71324,88376,79876,311$97,171$89,214$330,362$313,8593. Operating, selling and administrative expensesThe main components are as follows: Three-month periods ended September 30Nine-month periods ended September 302012201120122011Employee and sales commission costs$36,617$36,511$120,500$110,155Royalties, rights and production costs30,56327,017115,445103,472Printing and distribution4,8564,71817,29815,360Marketing, advertising and promotion2,0982,61711,47410,640Transmission and microwave expenses1,2061,7594,7714,330Other11,14713,64936,28340,035$86,487$86,271$305,771$283,9924. Financial expensesThree-month periods ended September 30Nine-month periods ended September 302012201120122011Interest on long-term debt$1,148$1,356$3,846$4,072Amortization of financing costs10790315269Other(44)23−36$1,211$1,469$4,161$4,3775. Impairment of goodwillAs a result of new fees adopted in 2012 for 2010, 2011 and 2012 with respect to business contributions for costs related to waste recovery services provided by Quebec municipalities, the operating costs of the Corporation's Publishing segment are adversely affected. Accordingly, the Corporation reviewed its business plan for these activities and performed an impairment test on the Publishing segment's 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 during the first quarter of 2012. The Corporation used a pre-tax discount rate of 16.26% (15.89% as of April 1, 2011) and a perpetual growth rate of 1.00% (1.00% as of April 1, 2011) to calculate the recoverable amount.6. Restructuring costs of operations, impairment of assets and other costsIn the nine-month period ended September 30, 2012, the Corporation recorded $117,000 in restructuring costs of operations following the elimination of a number of positions in the Publishing segment. During the three-month period ended September 30, 2011, the Corporation had recorded an impairment expense on its broadcast rights inventories in the amount of $253,000 ($583,000 for the nine-month period ended September 30, 2011) and a $59,000 ($50,000 for the nine-month period ended September 30, 2011) provision for restructuring costs following the discontinuation of the operations of the over-the-air station "SUN TV".7. Income taxesIn light of the evolution of the tax auditing, jurisprudence and tax legislation, the Corporation reduced its deferred tax liabilities by $195,000 in the third quarter of 2012 ($372,000 in the third quarter of 2011).8. Long-term debtOn February 24, 2012, the Corporation completed the renewal of its revolving term loan of $100,000,000 for a five-year term with similar conditions, except for the borrowing cost, which is more favourable for the Corporation. The loan matures on February 23, 2017 and is repayable in full on that date. Given the maturity of the revolving term loan as of December 31, 2011, the Corporation had presented the loan as a current liability.The costs associated with the renewal of the revolving term loan in the first quarter of 2012 totalled $344,000 and were recorded as financing costs in reduction of long-term debt.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 stockSeptember 30, 2012December 31, 20114,320,000 class A common shares$72$7219,450,906 class B shares98,57598,575$98,647$98,647(c) Earnings per share attributable to shareholdersThe following table sets forth the computation of basic and diluted earnings per share attributable to shareholders:Three-month periods ended September 30Nine-month periods ended September 302012201120122011Net income (loss) attributable to shareholders$2,127 $ 8$ (13,538) $ 14,135Weighted average number of basic and diluted shares outstanding23,770,906 23,770,90623,770,906 23,770,906Basic and diluted earnings per share attributable to shareholders (in dollars)$0.09 $ −$(0.57) $ 0.59The diluted earnings per share calculation does not take into consideration the potential dilutive effect of stock options of the Corporation since their impact is anti-dilutive. During the three-month and nine-month periods ended September 30, 2012, 819,421 stock options of the Corporation's plan (833,610 in 2011) were excluded from the diluted earnings per share calculation.10. Stock-based compensation and other stock-based paymentsNine-month period ended September 30, 2012Class BQuebecor Mediastock optionsstock optionsWeighted averageWeighted averageNumberexercise priceNumberexercise priceBalance as of December 31, 2011833,610$ 16.35393,252$ 46.66Exercised−−(113,728)46.27Cancelled(14,189)16.84−−Options related to SUN News' corporate executive (note 11)−-(11,000)50.10Balance as of September 30, 2012819,421$ 16.34268,524$ 46.68Of the number of options outstanding as at September 30, 2012, 712,079 Class B stock options at an average exercise price of $16.58 and 62,459 Quebecor Media stock options at an average price of $46.16 could be exercised.During the three-month and nine-month periods ended September 30, 2012, 113,728 Quebecor Media stock options were exercised for a cash consideration of $629,000 (during the three-month period ended September 30, 2011, no stock options were exercised; during the nine-month period ended September 30, 2011, 15,230 stock options were exercised for $108,000). During the three-month and nine-month periods ended September 30, 2012, the Corporation recorded compensation expense reversals of $19,000 and $264,000 respectively (compared with reversals of $573,000 and $1,314,000 respectively in the same periods of 2011) in relation to the Corporation's Class B stock options as well as a compensation expense reversal of $64,000 and a compensation charge of $482,000 respectively (compared with compensation charges of $500,000 and $239,000 respectively for the same periods of 2011) in relation to Quebecor Media stock options. 11. Related party transactions Capital contributions to SUN News During the three-month period ended September 30, 2012, the partners in SUN News made a capital contribution of $3,600,000 ($10,000,000 in 2011), including $1,764,000 ($5,100,000 in 2011) from the Corporation and $1,836,000 ($4,900,000 in 2011) from Sun Media Corporation, a company under common control. During the nine-month period ended September 30, 2012, the partners in SUN News made a capital contribution of $10,800,000 ($16,000,000 in 2011), including $5,436,000 ($8,160,000 in 2011) from the Corporation and $5,364,000 ($7,840,000 in 2011) from Sun Media Corporation. 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 $765,000 consideration. 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:Current assetsCash$430Accounts receivable and other current assets2,7923,222Non-current assetsProperty, plant and equipment8,873Intangible assets65012,745Current liabilitiesAccounts payable and accrued liabilities3,555Net assets9,190Corporation Sun Media interest(4,687)Investment using equity method$4,50312. Segmented informationThe Corporation's operations consist of the following segments: The Television segment includes the activities of TVA Network (including the subsidiaries and divisions TVA Productions Inc., TVA Ventes et Marketing Inc., TVA Accès, TVA Création, TVA Nouvelles, TVA Interactif), specialty services, the marketing of the digital products of the different televisual brands, the TVA Boutiques division's home and online shopping services and the TVA Films division's audiovisual products distribution operations.The Publishing segment includes the operations of TVA Publications Inc., a content producer specializing in the publication of French-language magazines in various fields, including arts, entertainment, television, fashion and decoration; marketing of the digital products of the different brands related to the magazines and the operations of the TVA Studio division, which specializes in customized publishing, commercial print productions and premedia services.The intersegment items represent the elimination of normal course business transactions between the Corporation's business segments regarding revenues and expenses. Three-month periods ended September 30Nine-month periods ended September 302012201120122011RevenuesTelevision$81,646$72,400$283,598$264,407Publishing16,85417,63849,97352,336Intersegment items(1,329)(824)(3,209)(2,884)97,17189,214330,362313,859Operating, selling and administrative expensesTelevision73,27272,711261,911242,560Publishing14,54414,38447,06944,316Intersegment items(1,329)(824)(3,209)(2,884)86,48786,271305,771283,992Income before amortization, financial expenses, impairment of goodwill, gain on disposal of businesses, restructuring costs of operations, impairment of assets and other costs, income taxes (recovery), and share of loss (income) of associated corporationsTelevision8,374(311)21,68721,847Publishing2,3103,2542,9048,020$10,684$2,943$24,591$29,867September 30, 2012December 31, 2011Total assetsTelevision$446,482$ 449,943Publishing55,85283,910$502,334$ 533,853GoodwillTelevision$2,539$ 2,539Publishing37,24269,442$39,781$ 71,98113. Disposal of businessesIn May 31, 2012, following the Canadian Radio-television and Telecommunications Commission ("CRTC") approval, the Corporation sold its 51% interest in "The Cave" and its 50% interest in "Mystery TV" to its partner in the joint ventures, Shaw Media Global Inc., and a gain on disposal of businesses in the amount of $12,881,000 before taxes was recorded. The transaction did not give rise to any income tax charge because the Corporation used unrecorded capital losses to eliminate the capital gains tax on disposal of businesses. The sale generated net cash flows in the amount of $17,898,000; proceeds from disposal of $20,963,000 less $3,065,000 in cash at the time of the sale.FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: Denis Rozon, CPA, CAVice-President and Chief Financial Officer(514) 598-2808