Quebecor Inc. Reports Consolidated Results for Second Quarter 2009
Montréal, Québec - Quebecor Inc. (“Quebecor”) today reported its consolidated financial results for the second quarter of 2009. Quebecor consolidates the financial results of its Quebecor Media Inc. subsidiary (“Quebecor Media”), in which it holds a 54.7% interest.
Quebecor Media has renamed two of its business segments to better reflect its comprehensive product line: the Cable segment has become the Telecommunications segment and the Newspapers segment has become the News Media segment.
Highlights since end of first quarter 2009
- Quebecor records revenues of $939.4 million, down $2.9 million (-0.3%) from second quarter 2008.
- Operating income : up $39.0 million (14.1%) to $315.9 million.
- Net income: $76.8 million ($1.19 per basic share), up $19.3 million (33.6%) from $57.5 million ($0.90 per basic share) in the same period of 2008.
- Adjusted income from continuing operating activities : $56.3 million in second quarter 2009 ($0.88 per basic share), up $14.8 million ($0.23 per basic share), or 35.7%, from $41.5 million ($0.65 per basic share) in the same period of 2008.
- Telecommunications segment: operating income up $50.5 million (27.7%). Customer growth in second quarter 2009: +43,900 for cable telephone service, +20,600 for cable Internet access, +3,400 for cable television service (including 27,100 customer increase for illico Digital TV), +5,500 activated phones for wireless telephone service.
- Roaming agreements with wireless providers Rogers Communications Inc. (“Rogers”) and T Mobile USA, Inc.: Videotron Ltd. (“Videotron”) will be able to serve future customers for its Advanced Wireless Services (“AWS”) in Canada and in the United States.
- Tower-sharing agreements with Rogers and Bell Mobility in Québec and in the Ottawa area: Videotron will be able to build network at anticipated cost.
“In what continues to be a constantly challenging economic and financial environment, Quebecor’s net income grew 33.6% in the second quarter of 2009 to $76.8 million, or $1.19 per basic share,” said Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor. “Once again, the improved results are being driven by the Telecommunications segment, which significantly increased its operating income Videotron registered customer growth for all its services for the 16th consecutive quarter. At the same time, Videotron is pushing ahead with its AWS project: it has reached roaming and tower sharing agreements, which will enable it to build out its network within budget, offer customers service of the highest quality across Canada and the United States, and limit the proliferation of towers in Québec. Meanwhile, in our News Media segment, the restructuring programs and other cost reduction initiatives launched in late 2008 have already generated estimated savings of $25.0 million in the first half of 2009. They are expected to yield still greater savings in the second half of the year.”
Analysis of second quarter 2009 results
- Quebecor’s revenues decreased $2.9 million (-0.3%) to $939.4 million.
- Revenues increased in the following segments: Telecommunications (by $39.9 million or 8.9% of segment revenues) mainly because of customer growth for all services Leisure and Entertainment ($4.5 million or 7.1%) and Broadcasting ($0.5 million or 0.5%).
- Revenues decreased in News Media (by $49.5 million or -15.6%) almost entirely as a result of lower advertising revenues.
- Operating income increased $39.0 million (14.1%) to $315.9 million, due primarily to an increase in the Telecommunications segment ($50.5 million or 27.7% of segment operating income) resulting mainly from customer growth. Operating income more than doubled in the Leisure and Entertainment segment, rising $2.7 million. Operating income decreased $18.1 million (-24.6%) in News Media.
- The increase in operating income includes a $21.6 million favourable variance (including $16.7 million in the Telecommunications segment and $4.9 million in the Broadcasting segment) related to retroactive recognition in the second quarter of 2008 of a provision for Canadian Radio-television and Telecommunications Commission (“CRTC”) Part II licence fees.
- Quebecor’s net income totalled $76.8 million ($1.19 per basic share), compared with $57.5 million ($0.90 per basic share) in the same period of 2008, an increase of $19.3 million (33.6%).
- The increase was mainly due to:
- $39.0 million increase in operating income
- $17.1 million decrease in financial expenses.
Offset by :
- recognition in the second quarter of 2009 of a $13.6 million non-cash charge for impairment of goodwill and intangible assets
- $13.5 million unfavourable variance in the gain on valuation and translation of financial instruments
- $7.5 million increase in non-controlling interest
- $5.5 million increase in amortization charge.
- Adjusted income from continuing operating activities: $56.3 million in the second quarter of 2009 ($0.88 per basic share), compared with $41.5 million ($0.65 per basic share) in the same period of 2008, an increase of $14.8 million ($0.23 per basic share), or 35.7%.
Analysis of year-to-date results
- Quebecor’s revenues increased $16.2 million (0.9%) to $1.84 billion.
- Revenues increased in the following segments: Telecommunications (by $86.8 million or 9.9% of segment revenues), Leisure and Entertainment ($6.0 million or 4.8%), Broadcasting ($3.8 million or 1.7%) and Interactive Technologies and Communications ($2.3 million or 5.2%).
- Revenues decreased in News Media (by $82.1 million or -13.8%).
- Operating income increased $54.5 million (10.2%) to $588.1 million, due primarily to an increase in the Telecommunications segment ($77.5 million or 20.5% of segment operating income). Operating income decreased in News Media (by $34.4 million or -28.7%).
- Quebecor’s year-to-date net income totalled $134.5 million ($2.09 per basic share) compared with $485.9 million ($7.56 per basic share) in the same period of 2008.
- Favourable variances in the following items:
- $54.5 million increase in operating income
- $30.1 million decrease in financial expenses
- $18.4 million decrease in income tax expense.
- recognition in the first quarter of 2008 of income from discontinued operations in the amount of $383.3 million
- $29.5 million increase in non-controlling interest
- recognition in the first half of 2009 of $13.6 million non-cash charge for impairment of goodwill and intangible assets
- $13.1 million increase in amortization charge
- $13.0 million unfavourable variance in the gain on valuation and translation of financial instruments.
- Adjusted income from continuing operating activities: $99.4 million in the first half of 2009 ($1.55 per basic share), compared with $76.1 million ($1.19 per basic share) in the same period of 2008, an increase of $23.3 million ($0.36 per basic share) or 30.6%.
On August 5, 2009, the Board of Directors of Quebecor declared a quarterly dividend of $0.05 per share on Class A Multiple Voting Shares and Class B Subordinate Voting Shares, payable on September 15, 2009 to shareholders of record at the close of business on August 21, 2009. This dividend is designated to be an eligible dividend, as provided under subsection 89(14) of the Canadian Income Tax Act and its provincial counterpart.
Detailed financial information
For a detailed analysis of Quebecor’s results for the second quarter of 2009, please refer to the Management Discussion and Analysis and consolidated financial statements of Quebecor, available on the Company’s website at <http://www.quebecor.com/InvestorCenter/QIQuarterlyReports.aspx> or from the SEDAR filing service at <http://www.sedar.com>.
Conference call for investors and webcast
Quebecor will hold a conference call to discuss the second quarter 2009 results of Quebecor and Quebecor Media on August 6, 2009, at 10:30 a.m. EDT. There will be a question period reserved for financial analysts. To access the conference call, please dial 1 877 293-8052, access code 77467#. A tape recording of the call will be available from August 6 to September 12, 2009 by dialling 1 877 293-8133, access code 895426#. The conference call will also be broadcast live on Quebecor’s website at <www.quebecor.com/InvestorCenter/QIConferenceCall.aspx>. It is advisable to ensure the appropriate software is installed before accessing the call. Instructions and links to free player downloads are available at the Internet address shown above.
The statements in this press release that are not historical facts are forward-looking statements and are subject to significant known and unknown risks, uncertainties and assumptions which could cause Quebecor’s actual results for future periods to differ materially from those set forth in the forward-looking statements. Forward-looking statements may be identified by the use of the conditional or by forward-looking terminology such as the terms “plans,” “expects,” “may,” “anticipates,” “intends,” “estimates,” “projects,” “seeks,” “believes” or similar terms, variations of such terms, or the negative of such terms. Certain factors that may cause actual results to differ from current expectations include seasonality (including seasonal fluctuations in customer orders), operating risk (including fluctuations in demand for Quebecor’s products and pricing actions by competitors), insurance risk, risks associated with capital investment (including risks related to technological development and equipment availability and breakdown), environmental risks, risks associated with labour agreements, risks associated with commodities and energy prices (including fluctuations in the cost and availability of raw materials), credit risk, financial risks, debt risks, risks related to interest rate fluctuations, foreign exchange risks, risks associated with government acts and regulations, risks related to changes in tax legislation, and changes in the general political and economic environment. Investors and others are cautioned that the foregoing list of factors that may affect future results is not exhaustive and that undue reliance should not be placed on any forward-looking statements. For more information on the risks, uncertainties and assumptions that could cause Quebecor’s actual results to differ from current expectations, please refer to Quebecor’s public filings available at <www.sedar.com> and <www.quebecor.com> including, in particular, the “Risks and Uncertainties” section in Quebecor’s Management Discussion and Analysis for the year ended December 31, 2008.
The forward-looking statements in this press release reflect Quebecor’s expectations as of August 6, 2009, and are subject to change after that date. Quebecor 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, except as required by applicable securities laws.
Quebecor Inc. (TSX: QBR.A, QBR.B) is a holding company with a 54.7% interest in Quebecor Media Inc, one of Canada’s largest media groups. Quebecor Media owns operating companies in numerous media related businesses: Videotron Ltd., an integrated communications company engaged in cable television, interactive multimedia development, Internet access services, cable telephony and wireless telephone service Sun Media Corporation, the largest publisher of newspapers in Canada Canoe Inc., operator of a network of English- and French-language Internet properties in Canada TVA Group Inc., operator of the largest French-language over-the-air television network in Québec, a number of specialty channels, and the English-language over-the-air station Sun TV Nurun Inc., a major interactive technologies and communications agency with offices in Canada, the United States, Europe and Asia magazine publisher TVA Publishing Inc. book publishers and distributors Sogides Group Inc. and CEC Publishing Inc. Archambault Group Inc. and TVA Films, companies engaged in the production, distribution and retailing of cultural products Le SuperClub Vidéotron ltée, a DVD and console game rental and retail chain and Quebecor MediaPages, publisher of print and online directories.
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Vice President, Finance
Vice President, Public Affairs
In its analysis of operating results, the Company defines operating income or loss, as reconciled to net income under Canadian generally accepted accounting principles (“Canadian GAAP”), as net income before amortization, financial expenses, gain on valuation and translation of financial instruments, charge for restructuring of operations and other special items, impairment of goodwill and intangible assets, income tax, non-controlling interest and the results of discontinued operations. Operating income as defined above is not a measure of results that is consistent with Canadian GAAP. It is not intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP. Management believes that operating income is a meaningful measure of performance. The Company uses operating income in order to assess the performance of its investment in Quebecor Media. The Company’s management and Board of Directors use this measure in evaluating its consolidated results as well as the results of the Company’s operating segments. This measure eliminates the significant level of depreciation and amortization of tangible and intangible assets and is unaffected by the capital structure or investment activities of the Company and its segments. Operating income is also relevant because it is a significant component of the Company’s annual incentive compensation programs. A limitation of this measure, however, is that it does not reflect the periodic costs of tangible and intangible assets used in generating revenues in the Company’s segments. The Company also uses other measures that do reflect such costs, such as cash flows from segment operations and free cash flows from operations. In addition, measures such as operating income are commonly used by the investment community to analyze and compare the performance of companies in the industries in which the Company is engaged. The Company’s definition of operating income may not be identical to similarly titled measures reported by other companies.
Table 2 below reconciles Quebecor’s operating income with the closest Canadian GAAP measure.
Adjusted income from continuing operating activities
The Company defines adjusted income from continuing operating activities, as reconciled to net income under Canadian GAAP, as net income before gain on valuation and translation of financial instruments, charge for restructuring of operations and other special items, impairment of goodwill and intangible assets, and the results of discontinued operations, net of income tax and non-controlling interest. Adjusted income from continuing operating activities as defined above is not a measure of results that is consistent with Canadian GAAP. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP. Management believes that adjusted income from continuing operating activities is a meaningful measure that provides an indication of the long-term profitability of the Company’s operating activities by eliminating the impact of unusual or one-time items. The Company’s definition of adjusted income from continuing operating activities may not be identical to similarly titled measures reported by other companies.
Table 3 provides a reconciliation of adjusted income from continuing operating activities to the net income measure used in the consolidated financial statements of Quebecor.
Average Monthly Revenue per User
ARPU is an industry metric that the Company uses to measure its average cable, Internet, cable telephone and wireless telephone revenues per month per customer. ARPU is not a measurement that is consistent with Canadian GAAP and the Company’s definition and calculation of ARPU may not be the same as identically titled measurements reported by other companies. The Company calculates ARPU by dividing its combined cable television, Internet access, cable telephone and wireless telephone revenues by the average number of customers during the applicable period, and then dividing the resulting amount by the number of months in the applicable period.