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Press release from Marketwire

TVA Group Reports $6.3 Million Net Income Attributable to Shareholders in Quarter Ended September 30, 2013

Tuesday, November 05, 2013

TVA Group Reports $6.3 Million Net Income Attributable to Shareholders in Quarter Ended September 30, 2013

09:41 EST Tuesday, November 05, 2013

MONTREAL, CANADA--(Marketwired - Nov. 5, 2013) - TVA Group Inc. (the "Corporation") (TSX:TVA.B) announces that it recorded net income attributable to shareholders in the amount of $6.3 million, or $0.27 per share, in the third quarter of 2013, compared with $1.5 million, or $0.06 per share, in the same quarter of 2012.

Third quarter operating highlights :

  • Consolidated operating income(1) increased $8,060,000 (+77.9%) to $18,401,000.
  • The Television segment generated $14,658,000 in operating income, a $6,607,000 (+82.1%) increase mainly due to:
    • recognition of $6,841,000 in retroactive royalties for distant signal retransmission for the years 2009 to 2012 and the first two quarters of 2013;
    • improved operating results at the specialty services, particularly "addikTV," "CASA" and "TVA Sports";
  • Partially offset by:
    • decrease in operating income from commercial production due to lower volume.
  • The Publishing segment generated $3,743,000 in operating income, a $1,453,000 increase mainly due to:
    • positive impact of the inclusion of the operating results of La Semaine magazine since July 18, 2013;
    • cost reductions yielded by the cost-containment plan introduced in the second quarter of 2013; and
    • contribution from increased volume at TVA Studio during the quarter.

"In addition to the retroactive royalties on distant signal retransmission, the results of the last quarter also showed an improvement in operating income," commented Pierre Dion, President and CEO of the Corporation. "This performance would not have been possible without the operational savings yielded by, among other things, the investments we have made in recent years in equipment and technological infrastructure. In the Television segment, TVA Network's advertising revenues decreased by 7.9% during the last quarter while the specialty services continued their strong performance with 6.6% growth in advertising revenues and 9.8% growth in subscription revenues.

"The Publishing segment registered remarkable operating income growth from the same quarter of 2012. The inclusion of the operating results of La Semaine magazine, acquired on July 18, 2013, contributed significantly to this growth as did the cost reductions TVA Publications has achieved since the second quarter of 2013. The integration of our new acquisition's operations into TVA Publications' existing business will continue during the fourth quarter. Excluding the acquisition, newsstand revenues decreased by 3.6% and advertising revenues by 5.6% in the third quarter. The decreases were less than those registered in the first two quarters of 2013. These results reflect our efforts since the beginning of the year to improve our products and marketing," said M. Pierre Dion.

(1) See definition of operating income (loss) below.

Cash flows provided by operating activities totalled $13.0 million in the third quarter of 2013, compared with $18.3 million in the same quarter of 2012. The $5.3 million decrease was essentially due to an unfavourable net change in non-cash items, including accounts receivable, programs, broadcast and distribution rights, and inventories, partially offset by an improvement in operating income.

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 business sectors. 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 November 5, 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)
(unaudited)
(in thousands of dollars, except per share amounts)
Three-month periods Nine-month periods
ended September 30 ended September 30
2013 2012 2013 2012
(restated, (restated,
Note note 2) note 2)
Revenues 3 $ 102,217 $ 97,171 $ 324,794 $ 326,143
Purchases of goods and services 4 52,051 52,188 183,966 191,505
Employee costs 31,765 34,642 100,592 112,781
Amortization of property, plant and equipment and intangible assets 5,494 4,913 15,956 15,372
Financial expenses 5 1,588 1,673 4,789 5,555
Operational restructuring costs, impairment of assets and other costs 6 875 - 3,874 117
Impairment of goodwill 7 - - - 32,200
Gain on disposal of investments 8 - - - (12,881 )
Income (loss) before tax expense and share of income of associated corporations and joint ventures 10,444 3,755 15,617 (18,506 )
Tax expense 2,444 356 3,546 1,392
Share of loss (income) of associated corporations and joint ventures 1,675 1,860 4,653 (182 )
Net income (loss) $ 6,325 $ 1,539 $ 7,418 $ (19,716 )
Net income (loss) attributable to:
Shareholders $ 6,325 $ 1,539 $ 7,418 $ (15,302 )
Non-controlling interest - - - (4,414 )
Basic and diluted earnings (loss) per share attributable to shareholders 10 c ) $ 0.27 $ 0.06 $ 0.31 $ (0.64 )

See accompanying notes to condensed consolidated financial statements.

TVA GROUP INC.
Consolidated Statements of Comprehensive Income (Loss)
(unaudited) (in thousands of dollars)
Three-month periods Nine-month periods
ended September 30 ended September 30
2013 2012 2013 2012
(restated, (restated,
note 2) note 2)
Net income (loss) $ 6,325 $ 1,539 $ 7,418 $ (19,716 )
Other comprehensive items that will not be reclassified to income:
Defined benefit plans:
Actuarial gain 24,000 - 24,000 -
Deferred income taxes (6,500 ) - (6,500 ) -
17,500 - 17,500 -
Comprehensive income (loss) $ 23,825 $ 1,539 $ 24,918 $ (19,716 )
Comprehensive income (loss) attributable to:
Shareholders $ 23,825 $ 1,539 $ 24,918 $ (15,302 )
Non-controlling interest - - - (4,414 )

See accompanying notes to condensed consolidated financial statements.

TVA GROUP INC.
Consolidated Statements of Equity
(unaudited)
(in thousands of dollars)
Equity attributable to shareholders
Capital stock (note 10) Contributed surplus Retained earnings Accumula-
ted other
comprehen-sive
loss -Defined benefit plans
Equity attributable to non-controlling interest Total 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 - - (15,302 ) - (4,414 ) (19,716 )
Contributions related to non-controlling interest (note 12) - - - - 3,528 3,528
Disposal of interest in SUN News (note 12) - 581 - - (4,503 ) (3,922 )
Balance as at September 30, 2012 98,647 581 179,099 (18,323 ) - 260,004
Net income - - 8,838 - - 8,838
Other comprehensive loss - - - (2,297 ) - (2,297 )
Balance as at December 31, 2012 98,647 581 187,937 (20,620 ) - 266,545
Net income - - 7,418 - - 7,418
Other comprehensive income - - - 17,500 - 17,500
Balance as at September 30, 2013 $ 98,647 $ 581 $ 195,355 $ (3,120 ) $ - $ 291,463

See accompanying notes to condensed consolidated financial statements.

TVA GROUP INC.
Consolidated Balance Sheets
(unaudited)
(in thousands of dollars)
September 30, 2013 December 31, 2012
Note (restated, note 2)
Assets
Current assets
Cash $ 7,163 $ 10,619
Accounts receivable 116,194 115,925
Income taxes 1,438 3,152
Programs, broadcast and distribution rights and inventories 6 73,418 67,579
Prepaid expenses 2,093 2,426
200,306 199,701
Non-current assets
Broadcast and distribution rights 6 31,792 33,563
Investments 15,146 17,651
Property, plant and equipment 99,192 98,494
Licences and other intangible assets 112,634 112,056
Goodwill 7 44,504 39,781
Deferred income taxes 1,515 725
304,783 302,270
Total assets $ 505,089 $ 501,971
Liabilities and equity
Current liabilities
Accounts payable and accrued liabilities $ 82,578 $ 89,092
Income taxes 767 816
Broadcast and distribution rights payable 18,544 16,966
Provisions 626 862
Deferred revenues 8,816 6,136
111,331 113,872
Non-current liabilities
Long-term debt 74,589 74,438
Other liabilities 9,752 38,499
Deferred income taxes 17,954 8,617
102,295 121,554
Equity
Capital stock 10 98,647 98,647
Contributed surplus 12 581 581
Retained earnings 195,355 187,937
Accumulated other comprehensive loss (3,120 ) (20,620 )
Equity attributable to shareholders 291,463 266,545
Total liabilities and equity $ 505,089 $ 501,971

See accompanying notes to condensed consolidated financial statements.

On November 5, 2013, the Board of Directors approved the condensed consolidated financial statements for the three-month and nine-month periods ended September 30, 2013 and 2012.

TVA GROUP INC.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands of dollars)
Three-month periods
ended September 30
Nine-month periods
ended September 30
2013 2012 2013 2012

Note
(restated,
note 2)
(restated,
note 2)
Cash flows related to operating activities
Net income (loss) $ 6,325 $ 1,539 $ 7,418 $ (19,716 )
Non-cash items:
Amortization 5,544 5,020 16,107 15,687
Impairment of assets 6 611 - 1,610 -
Impairment of goodwill 7 - - - 32,200
Gain on disposal of investments 8 - - - (12,881 )
Share of loss (income) of associated corporations and joint ventures 1,675 1,860 4,653 (182 )
Deferred income taxes 339 7 1,248 380
14,494 8,426 31,036 15,488
Net change in non-cash items (1,497 ) 9,886 (9,852 ) 7,075
Cash flows provided by operating activities 12,997 18,312 21,184 22,563
Cash flows related to investing activities
Additions to property, plant and equipment (4,642 ) (5,566 ) (14,190 ) (17,668 )
Additions to intangible assets (773 ) (892 ) (1,695 ) (2,195 )
Business (acquisition) disposal 9,12 (6,607 ) 765 (6,607 ) 765
Net change in investments 8,12 (1,477 ) (1,493 ) (2,148 ) 19,470
Cash of SUN News at the date of deconsolidation 12 - - - (430 )
Cash flows used in investing activities (13,499 ) (7,186 ) (24,640 ) (58 )
Cash flows related to financing activities
Net change in bank overdraft - (4,943 ) - (3,980 )
Net change in revolving credit facility - (454 ) - (17,736 )
Financing costs - - - (344 )
Non-controlling interest 12 - - - 3,528
Cash flows used in financing activities - (5,397 ) - (18,532 )
Net change in cash (502 ) 5,729 (3,456 ) 3,973
Cash at beginning of period 7,665 - 10,619 1,756
Cash at end of period $ 7,163 $ 5,729 $ 7,163 $ 5,729
Interest and taxes reflected as operating activities
Interest paid $ 130 $ 48 $ 2,326 $ 2,795
Income taxes (received) paid (575 ) (1,501 ) 814 1,971

See accompanying notes to condensed consolidated financial statements.

TVA GROUP INC.
Notes to Condensed Consolidated Financial Statements
Three-month and nine-month periods ended September 30, 2013 and 2012 (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 13). The Corporation is a subsidiary of Quebecor Media Inc. ("Quebecor Media" or the "parent corporation") and the ultimate parent corporation is Quebecor Inc. ("Québecor"). 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 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.

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 nine-month periods ended September 30, 2012 have been restated to conform to the presentation adopted for the three-month and nine-month periods ended September 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 comparative figures for the nine-month period ended September 30, 2012 (no impact for the three-month period ended September 30, 2012 (note 8)):
Consolidated Statement of Income
Increase (decrease)
Revenues $ (4,219 )
Purchases of goods and services (2,512 )
Financial expenses 7
Loss before tax expense and share of income of associated corporations and joint ventures

1,714
Share of loss (income) of associatedcorporations and joint ventures
(1,714
)
Net 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

Increase (decrease)
Three-month period ended
September 30, 2012
Nine-month period ended
September 30, 2012
Employee costs $ 343 $ 1,027
Financial expenses 462 1,387
Deferred income tax expense (217 ) (650 )
Net income $ (588 ) $ (1,764 )
Consolidated balance sheets
Increase (decrease) December 31, 2012 December 31, 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
ended September 30

Nine-month periods
ended September 30
2013

2012
(restated,
note 2)
2013

2012
(restated,
note 2)
Services rendered(1) $ 77,711 $ 72,458 $ 250,555 $ 249,345
Product sales 24,506 24,713 74,239 76,798
$ 102,217 $ 97,171 $ 324,794 $ 326,143
(1) The Corporation collects royalties on the retransmission of its television signal in markets located outside the local service areas of its over-the-air stations. During the third quarter of 2013, the Copyright Board of Canada (the "Board") completed its consultations on the issues surrounding an agreement on a new division of royalties between copyright collective societies for the 2009-2013 period, whereby the Corporation's share of the royalties is significantly increased. The agreement was endorsed by the Board. Accordingly, based on the confirmed new information, the Corporation recorded in the third quarter of 2013 an amount to reflect the increase in its share of the royalties, of which $6,111,000 applied to the years 2009 to 2012 and $730,000 to the first two quarters of 2013.

4. Purchases of goods and services

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

Three-month periods ended September 30 Nine-month periods ended September 30
2013

2012
(restated,
note 2)
2013

2012
(restated,
note 2)
Royalties, rights and production costs $ 30,771 $ 30,359 $ 112,481 $ 113,075
Printing and distribution 5,024 4,856 14,342 17,298
Marketing, advertising and promotion 3,896 2,098 12,271 11,470
Buildings costs 2,134 2,270 6,526 7,355
Services rendered by parent corporation 4,570 3,602 16,542 12,817
Other 5,656 9,003 21,804 29,490
$ 52,051 $ 52,188 $ 183,966 $ 191,505

5. Financial expenses

Three-month periods
ended September 30
Nine-month periods
ended September 30
2013

2012
(restated,
note 2)
2013

2012
(restated,
note 2)
Interest on long-term debt $ 1,139 $ 1,148 $ 3,387 $ 3,846
Amortization of financing costs 50 107 151 315
Interest on net defined benefit liability 420 462 1,260 1,387
Other (21 ) (44 ) (9 ) 7
$ 1,588 $ 1,673 $ 4,789 $ 5,555

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

During the three-month period ended September 30, 2013, the Corporation recorded an additional $611,000 inventory impairment charge in connection with the discontinuation of its TVA Boutiques division's home shopping and online shopping operations. For the nine-month period ended September 30, 2013, the impairment charge related to the discontinuation of operations totalled $1,223,000 in addition to a $303,000 provision for operational restructuring costs.

In the three-month period ended September 30, 2013, the Corporation recorded $138,000 in operational restructuring costs in connection with staff reductions, mainly in the Publishing segment ($1,784,000 for the nine- month period ended September 30, 2013, including $879,000 in the Television segment and $905,000 in the Publishing segment). In the nine-month period ended September 30, 2012, the Corporation recorded $117,000 in operational restructuring costs in connection with staff reductions in the Publishing segment.

During the nine-month period ended September 30, 2013, the Corporation also recorded a $387,000 impairment charge related to its long-term distribution rights inventory following its decision in the first quarter of 2013 to discontinue theatrical distribution of new Quebec films.

7. Impairment of goodwill

During the first quarter of 2012, following the adoption of new rates for business contributions towards the cost 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 income 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 investments.

9. Business acquisition

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, for a total consideration of $7,638,000, of which $438,000 remains unpaid in respect of acquired working capital items. As part of this transaction, the Corporation also acquired all of the issued and outstanding shares of Charron Éditeur inc., a publishing house, and simultaneously transferred its operations to Sogides Group, a corporation under common control, for the equivalent of the price paid, namely an agreed price of $212,000, net of transferred working capital items. The results of the new subsidiary, Les Publications Charron & Cie inc., have been included in the Corporation's consolidated results since July 18, 2013. As the purchase price allocation process was not completed as of September 30, 2013, the amounts allocated to assets and liabilities may be changed subsequently.

The preliminary allocation of the acquisition price of Les Publications Charron & Cie inc. is as follows:

2013
Assets acquired
Cash $ 593
Current assets 1,138
Property, plant and equipment 94
Intangible assets 3,030
Goodwill 4,723
Deferred income taxes 28
9,606
Liabilities assumed
Current liabilities (1,293 )
Deferred income taxes (675 )
(1,968 )
Net assets acquired at fair value $ 7,638
Consideration
Cash 7,200
Liability related to the preliminary adjustment in working capital 438
$ 7,638

The Corporation's consolidated revenues and its consolidated pro forma net income would not have been materially different from the actual numbers if the business acquisition had occurred at the beginning of the nine- month period ended September 30, 2013.

No goodwill is deductible for income tax purposes.

10. 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

September 30, 2013 December 31, 2012
4,320,000 Class A Common Shares $ 72 $ 72
19,450,906 Class B shares 98,575 98,575
$ 98,647 $ 98,647

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:

Three-month periods
ended September 30
Nine-month periods
ended September 30
2013

2012 (restated, note 2) 2013

2012 (restated, note 2)
Net income (loss) attributable to shareholders $ 6,325 $ 1,539 $ 7,418 $ (15,302 )
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)
$

0.27

$

0.06

$

0.31

$

(0.64
)

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.

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

Nine-month period ended September 30, 2013
Corporation's Class B stock options Quebecor Media stock options
Number Weighted average exercise price Number Weighted average exercise price
Balance as at December 31, 2012 819,421 $ 16.34 213,416 $ 46.55
Granted - - 207,000 57.64
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
Balance as at September 30, 2013 691,076 $ 16.54 331,407 $ 53.35

Of the options outstanding as at September 30, 2013, 691,076 Corporation 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 September 30, 2013, no Quebecor Media stock options were exercised. During the nine-month period ended September 30, 2013, 41,884 Quebecor Media stock options were exercised for a cash consideration of $471,000 (113,728 stock options were exercised for a cash consideration of $629,000 during the three-month and nine-month periods ended September 30, 2012).

During the three-month and nine-month periods ended September 30, 2013, the Corporation recorded compensation expense reversals of $99,000 and $130,000 respectively (compensation expense reversals of $19,000 and $264,000 respectively in the same periods of 2012) in relation to the Corporation's Class B stock options, and it recorded compensation expenses of $387,000 and $317,000 respectively (compensation expense reversal of $64,000 and compensation expense of $482,000 respectively in the same periods of 2012) in relation to Quebecor Media stock options.

12. Related party transactions

Capital contributions to SUN News

During the three-month period ended September 30, 2013, the partners in SUN News made a capital contribution of $4,500,000 ($3,600,000 in 2012), including $2,205,000 from the Corporation ($1,764,000 in 2012) and $2,295,000 from Sun Media Corporation, a company under common control ($1,836,000 in 2012).

During the nine-month period ended September 30, 2013, the partners in SUN News made a capital contribution of $7,500,000 ($10,800,000 in 2012), including $3,675,000 from the Corporation ($5,436,000 in 2012) and $3,825,000 from Sun Media Corporation ($5,364,000 in 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.

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

13. Segmented information

The Corporation's business segments are:

  • The Television segment, which includes the operations of TVA Network (including the subsidiaries and divisions TVA Productions Inc., TVA Sales and Marketing Inc., TVA Accès, 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 up to the second quarter of 2013, and the distribution of audiovisual products by the TVA Films division.
  • The Publishing segment, which includes the operations of TVA Publications Inc. and Les Publications Charron & Cie inc. - which publish French-language magazines in various fields such as the arts, entertainment, television, fashion and decoration, and market digital products associated with the different magazine brands - and the operations of the TVA Studio division, which specializes in custom publishing, commercial print production and premedia services.
Three-month periods
ended September 30
Nine-month periods
ended September 30
2013

2012
(restated,
note 2)
2013

2012
(restated,
note 2)
Revenues
Television $ 83,734 $ 81,646 $ 277,268 $ 279,379
Publishing 19,211 16,854 49,986 49,973
Intersegment items (728 ) (1,329 ) (2,460 ) (3,209 )
$ 102,217 $ 97,171 $ 324,794 $ 326,143
Operating income (1)
Television 14,658 8,051 34,253 19,011
Publishing 3,743 2,290 5,983 2,846
18,401 10,341 40,236 21,857
Amortization of property, plant and equipment and intangible assets
5,494

4,913

15,956

15,372
Financial expenses 1,588 1,673 4,789 5,555
Operational restructuring costs, impairment of assets and other costs
875

-

3,874

117
Impairment of goodwill - - - 32,200
Gain on disposal of investments - - - (12,881 )
Income (loss) before tax expense and share of income of associated corporations and joint ventures

$


10,444


$


3,755


$


15,617


$


(18,506
)

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.

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
Denis Rozon, CPA, CA
Vice President and Chief Financial Officer
(514) 598-2808

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