Business News

Quebecor Inc. Reports Consolidated Results for 2008

Thursday 26. February 2009 - Quebecor Inc. (TSX:QBR.A) (TSX:QBR.B) today reported its consolidated financial results for the 2008 financial year and the fourth quarter of 2008. Quebecor consolidates the financial results of its Quebecor Media Inc. subsidiary, in which it holds a 54.7% interest.

2008 Highlights

– Quebecor reports revenues of $3.73 billion, an increase of $364.2 million (10.8%) from 2007.

– Operating income(1): up $171.7 million (18.1%) to $1.12 billion.

– Net income: $187.3 million ($2.91 per basic share) in 2008, compared with a net loss of $969.2 million ($15.07 per basic share) in 2007.

– Adjusted income from continuing operating activities(2): up $45.1 million (33.7%) to $178.8 million ($2.78 per basic share) in 2008.

– Cable segment: operating income up $154.5 million (24.0%). Customer growth in 2008: +215,600 for cable telephone service, +130,800 for cable Internet access, +77,500 for cable television service (including 159,100 customer increase for illico Digital TV), +18,300 activated phones for wireless telephone service.

– Quebecor Media confirmed in 2008 its intention to invest between $800.0 million and $1 billion in its new Advanced Wireless Services (AWS) network over the next four years, including $554.6 million already disbursed in 2008 for the purpose of acquiring 17 operating licences.

– $671.2 million non-cash charge of impairment of goodwill and mastheads, primarily in the Newspapers segment, due to industry challenges and the difficult economic environment. Restructuring initiatives totalling $54.6 million announced in order to adapt to market conditions and reduce staff.

“Quebecor succeeded in growing its revenues and operating income in 2008,” noted Pierre Karl Peladeau, President and Chief Executive Officer of Quebecor. “The progress was spearheaded by the strong results of its Cable segment, which continued logging solid subscriber growth for all its services. Indeed, in the fourth quarter of 2008, the segment registered the largest quarterly customer increase for illico Digital TV since the service was introduced in 1999. At the same time, the Newspapers segment is being impacted by the dramatic industry-wide changes of the past several years and the troubled financial and economic environment, which together are negatively affecting its advertising revenues. As a result, a 10% staff reduction was announced in the Newspapers segment in December 2008. As well, a significant non-cash charge for impairment of goodwill and intangible assets was recorded in income.

(1) See “Operating income” under “Definitions”.

(2) See “Adjusted income from continuing operations” under “Definitions”.

“Quebecor remains a highly diversified communications and media company that is responsive to customer needs and committed to its business development and growth strategy. We remain confident that Quebecor Media’s decision in 2008 to invest in an Advanced Wireless Services network will pay off in the medium term and the long term. This strategy will enable the company to deliver its exclusive original content on new platforms and will position Quebecor Media as a still more integrated business equipped to offer consumers a full line of high-calibre services at competitive prices, and to offer its business partners new possibilities.

“As a highly integrated media group, we see not only major challenges in the digital era but also, and most importantly, exciting business opportunities. Our strategy is not to simply adapt to the new economy but to proactively and creatively exploit its full potential. I believe the future belongs to consumer-driven businesses that give consumers exactly what they want in terms of information and entertainment, when they want and on the platform they want. This is precisely the vision we are embracing in all our lines of business, for this is the road to profitability in the future.”



Table 1
Quebecor Inc. financial highlights – 2004-2008
(in millions of Canadian dollars, except per share data)
————————————————————————-
————————————————————————-
2008 2007 2006 2005 2004
————————————————————————-
Revenues $3,730.1 $3,365.9 $2,998.6 $2,695.4 $2,456.8
Operating income(a) 1,121.0 949.3 788.5 732.9 697.7
Net income (loss) 187.3 (969.2) (93.9) 69.7 112.2
Adjusted income from
continuing
operations(b)(c) 178.8 133.7 97.7 55.3 44.7
Per basic share:
Net income (loss) 2.91 (15.07) (1.46) 1.08 1.74
Adjusted income from
continuing
operations(b)(c) 2.78 2.08 1.52 0.86 0.69
————————————————————————-
————————————————————————-


(a) See “Operating income” under “Definitions”.
(b) See “Quebecor Inc. – Discontinued operations”.
(c) See “Adjusted income from continuing operations” under “Definitions”.


Analysis of 2008 results


– Quebecor’s consolidated revenues from continuing operations increased
$364.2 million (10.8%) to $3.73 billion. Revenues rose mainly in the
following segments:
– Cable (by $251.6 million or 16.2% of segment revenues), reflecting
customer growth for all services;
– Newspapers ($107.5 million or 10.0%), due primarily to the impact of
the acquisition of Osprey Media Income Fund (Osprey Media) in August
2007;
– Broadcasting ($21.2 million or 5.1%).


– Quebecor’s operating income from continuing operations grew $171.7
million (18.1%) to $1.12 billion, mainly because of an increase in the
Cable segment ($154.5 million or 24.0% of segment operating income)
resulting primarily from customer growth.


– Quebecor’s net income was $187.3 million ($2.91 per basic share) in 2008,
compared with a net loss of $969.2 million ($15.07 per basic share) in
2007. The favourable variance of $1.16 billion ($17.98 per basic share)
was mainly due to:
– $1.63 billion favourable variance in operating results of discontinued
operations(3);
– $171.7 million increase in operating income.
Partially offset by:
– recognition in the fourth quarter of 2008 of a non-cash impairment
charge totalling $671.2 million, including $631.0 million without any
tax consequences, for goodwill and intangible assets, primarily in the
Newspapers segment ($361.1 million net of income tax and non-
controlling interest);
– $119.2 million decrease in the gain on valuation and translation of
financial instruments;
– $48.4 million increase in income tax expense;
– $45.8 million increase in financial expenses due to higher average
indebtedness;
– $43.4 million increase in the charge for restructuring of operating
activities, impairment of assets and other special items, primarily in
the Newspapers segment.


– Adjusted income from continuing operating activities: $178.8 million in
2008 ($2.78 per basic share), compared with $133.7 million ($2.08 per
basic share) in 2007, an increase of $45.1 million ($0.70 per basic
share), or 33.7%.


(3) See “Quebecor Inc. – Discontinued operations.”


Analysis of fourth quarter 2008 operating results


– Quebecor’s consolidated revenues from continuing operations rose $37.7
million (3.9%) to $1.00 billion. Revenues increased mainly in the Cable
segment (by $46.2 million or 10.8% of segment revenues), reflecting
customer growth for all services.


– Quebecor’s operating income from continuing operations grew $32.0 million
(11.5%) to $310.1 million. The largest increase was in the Cable segment
($42.4 million or 24.1% of segment operating income) resulting primarily
from customer growth.


– Net loss of $343.7 million ($5.34 per basic share) in the fourth quarter
of 2008, compared with a net loss of $962.6 million ($14.96 per basic
share) in the fourth quarter of 2007. The favourable variance of $618.9
million ($9.62 per basic share) was due primarily to:
– favourable impact on the comparative numbers for 2008 of the $1.10
billion loss related to discontinued operations recognized in the
fourth quarter of 2007;
– $32.0 million increase in operating income.
Partially offset by:
– recognition of a non-cash impairment charge totalling $671.2 million,
including $631.0 million without any tax consequences, for goodwill and
intangible assets ($361.1 million net of income tax and non-controlling
interest);
– $122.2 million unfavourable variance in gain on valuation and
translation of financial instruments;
– $53.8 million unfavourable variance in the charge for restructuring of
operations, impairment of assets and other special items.


– Adjusted income from continuing operations: $60.7 million in the fourth
quarter of 2008 ($0.95 per basic share), compared with $37.5 million
($0.58 per basic share) in the fourth quarter of 2007, an increase of
$23.2 million ($0.37 per basic share) or 61.9%.





Dividend

On February 24, 2009, the Board of Directors of Quebecor Inc. declared a quarterly dividend of $0.05 per share on Class A Multiple Voting Shares and Class B Subordinate Voting Shares, payable on April 7, 2009 to shareholders of record at the close of business on March 13, 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.

Quebecor Inc. – Discontinued operations

On January 21, 2008, Quebecor World Inc. and its U.S. subsidiaries were granted creditor protection under the Companies’ Creditors Arrangement Act in Canada. On the same date, its U.S. subsidiaries also filed a petition under Chapter 11 of the United States Bankruptcy Code. Since that date, in accordance with generally accepted accounting principles, Quebecor’s investment in Quebecor World has no longer been consolidated, Quebecor’s investment in Quebecor World has been valued at zero, and Quebecor World’s activities are considered discontinued operations for the purposes of Quebecor’s consolidated financial statements.

Quebecor World’s operating results have been restated and are reported in the financial statements under the item “Income (loss) from discontinued operations,” and the cash flows provided by these operations have been restated and are reported in the financial statements under the item “Cash flows (used in) provided by discontinued operations.”

The results of discontinued operations include the $17.7 million net loss (net of non-controlling interest) recognized by Quebecor World for the period of January 1 to 21, 2008, compared with a net loss of $1.24 billion (net of non-controlling interest) reported in 2007.

At January 21, 2008, the Company’s consolidated balance sheet included a net assets deficiency of $761.3 million, representing the excess of liabilities and non-controlling interest related to Quebecor World over Quebecor World’s assets. At January 21, 2008, the Company also had net losses accumulated in other comprehensive income in the amount of $326.5 million, net of income tax, consisting primarily of accumulated currency translation losses in connection with the net investment in Quebecor World. The results of discontinued operations for the first quarter of 2008 also include a net gain of $399.7 million in respect of the difference between the reversal of the net assets deficiency and the reclassification in the results of the net losses accumulated in other comprehensive income as of the deconsolidation date, January 21, 2008, net of the $35.1 million decrease in future income tax assets related to the investment in Quebecor World.

These procedures will have no material impact on the operations of Quebecor Media.