Business News

Quebecor Inc. reports its consolidated results for second quarter 2010

Wednesday 11. August 2010 - Quebecor Inc. ("Quebecor" or the "Company") today reported its consolidated financial results for the second quarter of 2010. Quebecor consolidates the financial results of its Quebecor Media Inc. ("Quebecor Media") subsidiary, in which it holds a 54.7% interest.

Second quarter 2010 highlights

Quebecor records revenues of $994.0 million, up $47.6 million (5.0%) from the second quarter of 2009.
Operating income up $38.3 million (12.1%) to $354.2 million.
Net income: $65.5 million ($1.02 per basic share), compared with $76.8 million ($1.19 per basic share) in the same period of 2009.
Adjusted income from continuing operations: $68.5 million ($1.06 per basic share), compared with $56.3 million ($0.88 per basic share) in the same period of 2009, an increase of $12.2 million ($0.18 per basic share) or 21.7%.
Telecommunications segment: operating income up $31.3 million (13.5%). Net customer base change in three-month period ended June 30, 2010: +22,300 for cable telephone service, +10,100 for cable Internet access, -4,000 for cable television service, reflecting a busier moving season in Québec in 2010 (and counting 22,100-customer increase for Digital TV), +1,700 activated handsets on wireless telephone service.
News Media segment’s operating income up $4.0 million (7.2%), posting significant growth for third consecutive quarter. Segment operating income (expressed as a percentage of revenues) was 22.0% in second quarter 2010 and 20.4% in 12-month period ended June 30, 2010.
Estimated $24.0 million additional savings generated by restructuring initiatives in the News Media segment in the first half of 2010, compared with the same period of 2009, for total annualized savings of $90.0 million since the program began.
“Quebecor maintained its momentum in the second quarter of 2010, posting increases in revenue and operating income,” said Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor. “Adjusted income from continuing operations, which reflects the growth of the Company’s operating activities, not counting unusual or one-time items, was up 21.7%. The Telecommunications segment spearheaded our second quarter growth with significant year-over-year revenue and operating income increases, driven by customer increases for all its services. We are pressing ahead with the build-out of the Advanced Wireless Services (“AWS”) network in order to start it up this summer. As of June 30, 2010, all switching services and platforms were installed and operational. Siting and tower-sharing agreements had been signed for more than 95% of the antenna sites and the equipment was installed or being installed at all those sites. We remain focused on our promise to deliver a superior customer experience by rolling out a reliable, effective wireless network which, combined with our other products and exclusive content, will provide consumers with one-stop solutions to all their telecommunications needs.

“Building on the third consecutive quarter of strong operating income growth in the News Media segment, the Company is forging ahead with its various convergence initiatives, including the I.S.O. program, the operational integration of Canoe Inc. (“Canoe”), the startup of the Quebecor Media Network, the roll-out of the QMI Agency and the creation of the QMI National Sales Office.

Meanwhile, two new initiatives were introduced in the second quarter of 2010. The illicoweb.tv service, launched in June 2010, will offer Videotron Ltd. (“Videotron”) customers who subscribe to the Digital TV and Internet access services an exceptional range of content via the Web, at no additional cost. The service will gradually be expanded to include all the channels in the customer’s existing Digital TV package. And Sun TV News (The Sun TV News Channel), the new English-language news and opinion specialty channel we are planning to launch in the first quarter of 2011, will add a high-potential niche to Quebecor’s media portfolio.

“At the dawn of a new period of economic prosperity, Quebecor intends to seize every opportunity to develop its integrated business model in order to maximize its growth going forward.”







Analysis of second quarter 2010 results

Quebecor’s revenues increased $47.6 million (5.0%) to $994.0 million.
Revenues increased in Telecommunications (by $55.7 million or 11.4% of segment revenues) mainly due to customer growth for all services.
Revenues decreased in News Media (by $4.3 million or -1.6%), mainly because of lower advertising revenues at the community newspapers and lower circulation revenues, and in Leisure and Entertainment ($2.2 million or -3.2%).
Operating income rose $38.3 million (12.1%) to $354.2 million due to increases in Telecommunications ($31.3 million or 13.5% of segment operating income), News Media ($4.0 million or 7.2%) and Broadcasting ($1.1 million or 4.4%).
Quebecor’s net income totalled $65.5 million ($1.02 per basic share) in the second quarter of 2010, compared with $76.8 million ($1.19 per basic share) in the same period of 2009.
The $11.3 million ($0.17 per basic share) decrease was mainly due to:
$31.2 million increase in income tax expense, reflecting the unfavourable impact of unusual items, as well as higher pre-tax income;
$16.7 million unfavourable variance in gains and losses on valuation and translation of financial instruments;
$6.9 million increase in financial expenses, including the $6.3 million unfavourable impact on operating items of exchange rate variances;
$6.7 million increase in amortization charge.
Partially offset by:

$38.3 million increase in operating income;
favourable variance in 2010 related to recognition in second quarter 2009 of a $13.6 million non-cash charge for impairment of goodwill and intangible assets.
Adjusted income from continuing operations: $68.5 million in the second quarter of 2010 ($1.06 per basic share), compared with $56.3 million ($0.88 per basic share) in the same period of 2009, an increase of $12.2 million ($0.18 per basic share) or 21.7%.
2010/2009 year-to-date comparison

Revenues: $1.94 billion, an increase of $92.4 million (5.0%).
Revenues increased in Telecommunications (by $106.5 million or 11.0% of segment revenues) essentially due to customer growth for all services, and in Interactive Technologies and Communications ($1.4 million or 3.0%).
Revenues decreased in News Media (by $8.9 million or -1.7%), mainly because of lower advertising revenues at the community newspapers and lower circulation revenues, and in Leisure and Entertainment ($5.0 million or -3.8%).
Operating income: $642.7 million, an increase of $54.6 million (9.3%).
Operating income rose in Telecommunications ($59.4 million or 13.0% of segment operating income), News Media ($14.3 million or 16.8%) and Interactive Technologies and Communications ($0.6 million or 35.3%).
Revenues decreased in Broadcasting (by $4.5 million or -12.0%) and Leisure and Entertainment ($1.5 million or -26.8%).
Changes in the fair value of Quebecor Media and in Quebecor’s stock price resulted in an aggregate $19.2 million ($0.17 per basic share) unfavourable variance in the stock-based compensation charge in the first half of 2010 compared with the same period of 2009.
Net income: $103.8 million ($1.62 per basic share), compared with $134.5 million ($2.09 per basic share) in the first half of 2009.
The $30.7 million ($0.47 per basic share) decrease was mainly due to:
$35.5 million unfavourable variance in gains on valuation and translation of financial instruments;
$26.1 million increase in income tax expense, resulting mainly from unusual items;
$18.9 million increase in financial expenses, including the $14.1 million unfavourable impact on operating items of exchange rate variances;
recognition in first half of 2010 of losses on debt refinancing totalling $12.3 million;
$11.1 million increase in amortization charge.
Offset by:

$54.6 million increase in operating income;
favourable variance related to recognition in first half 2009 of a $13.6 million non-cash charge for impairment of goodwill and intangible assets.
Adjusted income from continuing operations: $115.3 million in the first half of 2010 ($1.79 per basic share), compared with $99.4 million ($1.55 per basic share) in the same period of 2009, an increase of $15.9 million ($0.24 per basic share) or 16.0%.
Financing activities

In May 2010, Osprey Media Publishing Inc. (“Osprey Media”) paid down the balance of its term credit facility and settled related hedge agreements for a total cash consideration of $116.3 million. This transaction led to the reclassification to income of a $1.9 million loss (excluding income tax and non-controlling interest) previously recorded under other comprehensive income. Osprey Media’s credit facilities were cancelled on June 30, 2010.
Dividends

On August 10, 2010, 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 21, 2010 to shareholders of record at the close of business on August 27, 2010. 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.