Business News

Quebecor Inc. Reports Consolidated Results for Second Quarter 2012 and Renews Normal Course Issuer Bid

Friday 10. August 2012 - Quebecor Inc. ("Quebecor" or the "Corporation") (TSX:QBR.A)(TSX:QBR.B) today reported its consolidated financial results for the second quarter of 2012. Quebecor consolidates the financial results of its Quebecor Media Inc. ("Quebecor Media") subsidiary, in which it holds a 54.7% interest.

Second quarter 2012 highlights
Revenues: $1.09 billion, up $33.0 million (3.1%) from the second quarter of 2011.
Operating income:(1) down $0.7 million (-0.2%) to $357.8 million.
Net income attributable to shareholders: $67.0 million ($1.05 per basic share), up $11.8 million ($0.19 per basic share) from $55.2 million ($0.86 per basic share) in the second quarter of 2011.
Adjusted income from continuing operations:(2) $48.7 million ($0.77 per basic share), down $11.3 million ($0.16 per basic share) from $60.0 million ($0.93 per basic share) in the second quarter of 2011.
Revenue increases for all the core services of Videotron Ltd. (“Videotron”): Internet access ($20.4 million or 11.9%), cable television ($15.4 million or 6.1%), mobile telephony service ($14.8 million or 56.9%), and cable telephony service ($4.9 million or 4.5%).
Telecommunications segment’s operating income: up $27.5 million (10.0%).
“Quebecor’s revenues rose by 3.1% in the second quarter of 2012, mainly because of sustained growth in Videotron’s sales,” said Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor. “Our second quarter results were marked by the Telecommunications segment’s excellent results while our News Media segment’s results declined from the same period of 2011, mainly because of significant investments in, among other things, the distribution network and the publishing of community newspapers. However, the newspaper publishing and printing operations posted the highest operating margins, expressed as a percentage of revenues, of all the major industry players in the second quarter of 2012. We also made major investments in expanding the specialty services of TVA Group Inc. (“TVA Group”), so that their financial performance will no longer be entirely dependent on the conventional television network’s results.
“Videotron continued to grow despite the fiercely competitive environment. The mobile telephony service attracted new customers and generated additional revenue streams. We continued our business strategy, which is based on bundling services into attractive packages, coupled with superior product quality and outstanding customer service. Revenues from Videotron’s core services were all up significantly, boosting the Telecommunications segment’s operating income by $27.5 million, a 10.0% increase from the same quarter of 2011. Videotron also posted a net increase of 31,100 revenue generating units(3) during the second quarter of 2012. The illico TV new generation service was rolled out across all of Videotron’s service area during the quarter and more than six million Quebecers now have access to the new cable television service, which is distinguished by its user-friendliness and superior interfaces. Videotron also launched Ultimate Speed Internet 200, an Internet access service that sets a new standard for speed.
(1) See “Operating income” under “Definitions.”
(2) See “Adjusted income from continuing operations” under “Definitions.”
(3) Revenue generating units are the sum of cable television, cable and wireless Internet access, and cable telephony service subscriptions, plus subscriber connections to the mobile telephony service.
“The News Media segment was busy during the second quarter of 2012, acquiring Pub Extra magazine and the weekly L’Impact de Drummondville, and launching L’Écho de Victoriaville. Quebecor Media’s Québec community newspapers network now has a combined weekly circulation of over 2.5 million copies.
“To offer its customers expanded media exposure and broaden its convergence strategy, Quebecor Media has entered an entirely new media platform. Quebecor Media was chosen through a call for tenders to install, maintain and advertise on Société de transport de Montréal (STM) bus shelters for the next 20 years. For us, this is a promising move into a line of business that is experiencing significant technological change.
“In the field of electronic media, Quebecor Media announced a partnership with ReadBooks SAS, a Franco-Québec company specializing in ebooks. The partnership will support the development of new software for Archambault Group Inc. (“Archambault Group”) and Librairie Paragraphe Bookstore that will allow them to increase their offerings and enhance their customers’ reading experience.
“Finally, on another front, Quebecor Media welcomed with great satisfaction the Québec Superior Court judgements of July 23, 2012 ordering Bell TV (formerly Bell ExpressVu) to compensate Videotron and TVA Group. The court found that Bell TV committed serious misconduct by not taking the appropriate measures at the opportune time to prevent the illegal decoding of its satellite television signals, even though it knew the extent of the piracy of its system and had the required technology at its disposal to end it. We were glad to see Superior Court rule against Bell for resorting to illegal means that weaken its competitors and for having failed to meet its obligations to protect rather than undermine the integrity of the Québec and Canadian broadcasting industry.
“In the first half of 2012, Quebecor actively pursued its customer, product and business development strategies, combined with vigorous operating cost-control initiatives, in order to achieve its long-term growth and profitability targets.”
Table 1
Quebecor second quarter financial highlights, 2008 to 2012
(in millions of Canadian dollars, except per share data)
2012(1) 2011(1) 2010(1) 2009(2) 2008(2)
Revenues $ 1,086.4 $ 1,053.4 $ 994.0 $ 946.4 $ 949.9
Operating income(3) 357.8 358.5 351.9 315.9 276.9
Net income attributable to shareholders 67.0 55.2 60.8 76.8 57.5
Adjusted income from continuing operations(4) 48.7 60.0 62.9 56.3 41.5
Per basic share:
Net income attributable to shareholders 1.05 0.86 0.95 1.19 0.90
Adjusted income from continuing operations(4) 0.77 0.93 0.98 0.88 0.61
(1) Financial figures for the second quarters of years 2010 to 2012 are presented in accordance with International Financial Reporting Standards (“IFRS”).

(2) Financial figures for the second quarters of years 2008 and 2009 are presented in accordance with Canadian Generally Accepted Accounting Principles (“GAAP”).

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

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

2012/2011 second quarter comparison
Revenues: $1.09 billion, an increase of $33.0 million (3.1%).
Revenues increased in Telecommunications ($50.7 million or 8.4% of segment revenues) and Interactive Technologies and Communications ($11.2 million or 39.7%).
Revenues decreased in News Media ($12.7 million or -4.7%), Leisure and Entertainment ($8.6 million or -12.0%) and Broadcasting ($2.1 million or -1.8%).
Operating income: $357.8 million, a decrease of $0.7 million (-0.2%).
Operating income decreased in News Media ($9.3 million or -20.4% of segment operating income), Leisure and Entertainment ($7.4 million), Broadcasting ($2.6 million or -11.7%), and Head Office ($10.6 million). The decrease at Head Office was caused mainly by the unfavourable variation in the fair value of stock options, as well as higher operating expenses, including the donations and sponsorships expense.
Operating income increased in Telecommunications ($27.5 million or 10.0%) and Interactive Technologies and Communications ($1.7 million or 130.8%).
The change in the fair value of Quebecor Media stock options resulted in a $5.0 million unfavourable variance in the stock-based compensation charge in the second quarter of 2012 compared with the same period of 2011. The change in the fair value of Quebecor stock options resulted in a $7.8 million unfavourable variance in the Corporation’s stock-based compensation charge in the second quarter of 2012.
Net income attributable to shareholders: $67.0 million ($1.05 per basic share) compared with $55.2 million ($0.86 per basic share) in the second quarter of 2011, an increase of $11.8 million ($0.19 per basic share).
The increase was due mainly to:
$45.9 million favourable variance in gain on valuation and translation of financial instruments;
$18.6 million favourable variance in charge for restructuring of operations, impairment of assets and other special items.
Offset by:
$22.7 million increase in amortization charge.
Adjusted income from continuing operations: $48.7 million in the second quarter of 2012 ($0.77 per basic share) compared with $60.0 million ($0.93 per basic share) in the same period of 2011, a decrease of $11.3 million ($0.16 per basic share).
2012/2011 year-to-date comparison
Revenues: $2.15 billion, an increase of $106.5 million (5.2%).
Revenues increased in Telecommunications ($113.3 million or 9.6% of segment revenues), Interactive Technologies and Communications ($21.0 million or 38.2%) and Broadcasting ($8.6 million or 3.8%).
Revenues decreased in News Media ($19.7 million or -3.9%) and Leisure and Entertainment ($2.9 million or -2.2%).
Operating income: $680.0 million, an increase of $27.2 million (4.2%).
Operating income increased in Telecommunications ($76.0 million or 14.4% of segment operating income) and Interactive Technologies and Communications ($3.8 million or 172.7%).
Operating income decreased in News Media ($21.0 million or -28.4%), Broadcasting ($13.0 million or -48.3%), Leisure and Entertainment ($8.3 million), and Head Office ($10.3 million). The decrease at Head Office was caused mainly by the unfavourable variance in the fair value of stock options.
The change in the fair value of Quebecor Media stock options resulted in a $9.7 million unfavourable variance in the stock-based compensation charge in the first half of 2012 compared with the same period of 2011. The change in the fair value of Quebecor stock options resulted in a $14.3 million unfavourable variance in the Corporation’s stock-based compensation charge in the first half of 2012.
Net income attributable to shareholders: $139.9 million ($2.20 per basic share) compared with $89.5 million ($1.39 per basic share) in the first half of 2011, an increase of $50.4 million ($0.81 per basic share).
The increase was due mainly to:
$117.3 million favourable variance in gain on valuation and translation of financial instruments;
$27.2 million increase in operating income;
$27.0 million favourable variance in charge for restructuring of operations, impairment of assets and other special items.
Partially offset by:
$43.2 million increase in amortization charge;
$14.5 million goodwill impairment charge recognized in the first half of 2012.
Adjusted income from continuing operations: $88.0 million in the first half of 2012 ($1.39 per basic share) compared with $95.9 million ($1.49 per basic share) in the same period of 2011, a decrease of $7.9 million ($0.10 per basic share).
Dividends
On August 8, 2012, the Board of Directors of Quebecor declared a quarterly dividend of $0.05 per share on Class A Multiple Voting Shares (“Class A shares”) and Class B Subordinate Voting Shares (“Class B shares”) payable on September 18, 2012 to shareholders of record at the close of business on August 24, 2012. 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.
Normal course issuer bid
The Board of Directors of Quebecor has authorized a normal course issuer bid for a maximum of 980,357 Class A shares, representing approximately 5% of the issued and outstanding Class A shares, and for a maximum of 4,351,276 Class B shares, representing approximately 10% of the public float for the Class B shares as of July 31, 2012.
The purchases will be made from August 13, 2012 to August 12, 2013, at prevailing market prices, on the open market through the facilities of the Toronto Stock Exchange and will be made in accordance with the requirements of said Exchange. All shares purchased will be cancelled. As of July 31, 2012, 19,607,151 Class A Shares and 43,725,831 Class Bshares were issued and outstanding.
The average daily trading volume of the Class A shares and the Class B shares of the Corporation from February 1, 2012 to July 31, 2012 has been 979 Class A shares and 110,324 Class B shares. Consequently, the Corporation will be authorized to purchase a maximum of 1,000 Class A shares and of 27,581 Class B shares during the same trading day pursuant to its normal course issued bid.
The Corporation believes that the repurchase of these shares, pursuant to this normal course issuer bid, is in the best interest of the Corporation and its shareholders.
Within the past twelve months, the Corporation has not repurchased any outstanding Class A shares and has repurchased 1,121,500 Class B Shares at a volume weighted average price of $33.2596 per share.
Shareholders may obtain a copy of the Notice filed with the Toronto Stock Exchange, without charge, by contacting the Secretary’s office of the Corporation at (514) 380-1994.