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Nov 6, 2017 6:20 AM ET

TVA Group reports $12.2 million growth in adjusted operating income(1) in third quarter of 2017

Disclosure NewswireTM

iCrowdNewswire - Nov 6, 2017

MONTREAL, – TVA Group Inc. (“TVA Group” or the “Corporation”) announced today that it recorded a net loss attributable to shareholders in the amount of $15.3 million or $0.35 per share in the third quarter of 2017, compared with a net loss attributable to shareholders of $32.5 million or $0.75 per share in the same quarter of 2016.

 

Third quarter operating highlights:

  • Consolidated adjusted operating incomeof $32,935,000, a favourable variance of $12,242,000 (+59.2%) from the same quarter of 2016.
  • $19,902,000 adjusted operating incomein the Broadcasting & Production segment, a favourable variance of $8,653,000 mainly because of an increase in the “TVA Sports” channel’s adjusted operating income1 resulting from, among other things, subscription revenue growth, as well as an increase in TVA Network’s adjusted operating income1 resulting from higher operating revenues.
  • $3,189,000 adjusted operating incomein the Magazines segment, an unfavourable variance of $2,523,000 mainly because of a decrease in operating revenues, which was partially offset by the savings generated by the rationalization plans implemented in recent quarters.
  • $9,844,000 adjusted operating incomein the Film Production & Audiovisual Services segment (“MELS”), a favourable variance of $6,112,000 essentially because of increased adjusted operating income1 from soundstage and equipment rental due to higher volume of activities.
  • Non-cash impairment charge of $29,993,000 for goodwill and $12,412,000 for certain intangible assets in the Magazines segment, compared with a $40,100,000 non-cash goodwill impairment charge in the same quarter of 2016.

“We are satisfied with our third quarter of 2017 results, particularly in the Broadcasting & Production segment, which grew its advertising revenues for the fourth consecutive quarter, with more than 11% year-over-year increase for the segment as a whole, despite the fact that in the third quarter of 2016, TVA Sports broadcasted the games of the World Cup of Hockey tournament.

TVA Group’s total market share increased by 3.1 points to 37.1%2 in the third quarter of 2017 compared with 34.0% in the same period of 2016. “LCN” grew its market share by 1.1 points to 4.8% due to, among other things, its outstanding coverage of Hurricane Irma. TVA Network also increased its market share by 1.7 points to 24.0%. It carried 7 of the top 10 shows in Quebec, including La Voix Junior which attracted more than 1.8 million viewers,” commented France Lauzière, President and CEO of the Corporation.

“The decrease in the Magazines segment’s adjusted operating income1 and the continuing downward trend in the magazine industry’s operating revenues, particularly advertising revenues, led the Corporation to conclude that a $42.4 million non-cash charge for impairment of goodwill and of intangible assets had to be taken,” added Ms Lauzière.

“Lastly, the presence of many movie productions in Montreal and on our film soundstages combined with the demand for equipment rental services by these same productions contributed to the major growth in the Film Production & Audiovisual Services segment’s results for the last quarter compared to the same quarter last year. Moreover, we are very proud of the trust of many local and international producers who use our services, such as those related to the rental of soundstages and filming equipment, postproduction and visual effects activities, and other specific technical services to the industry,” concluded Ms. Lauzière. 

Definition

Adjusted operating income (loss) (“Adjusted operating results”)

In its analysis of operating results, the Corporation defines adjusted operating income (loss) as net income (loss) before depreciation of property, plant and equipment, amortization of intangible assets, financial expenses, impairment of goodwill and of intangible assets, operational restructuring costs and others, income taxes and share of loss (income) of associated corporations. Adjusted 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 should not be considered in isolation or as a substitute for other performance measures prepared in accordance with IFRS. This measure is used by management and the Board of Directors to evaluate the Corporation’s consolidated results and the results of its segments. This measure eliminates the significant level of impairment, depreciation and amortization of tangible and intangible assets and is unaffected by the capital structure or investment activities of the Corporation and its segments. Adjusted operating income (loss) is also relevant because it is a significant component of the Corporation’s annual incentive compensation programs. The Corporation’s definition of adjusted 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 and the risk of loss of key customers in the Film Production & Audiovisual Services segment), programming, content and production cost risks, credit risk, government regulation risks, government assistance risks, changes in economic conditions, fragmentation of the media landscape, risk related to the Corporation’s ability to adapt to fast-paced technological change and to new delivery and storage methods, 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, 2016 and the “Risk Factors” section in the Corporation’s 2016 annual information form.

The forward-looking statements in this news release reflect the Corporation’s expectations as of November 3, 2017, 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 to do so by the applicable securities laws.

TVA GROUP

TVA Group Inc., a subsidiary of Quebecor Media Inc., is a communications company engaged in the broadcasting, film and audiovisual production, and magazine publishing industries. TVA Group Inc. is North America’s largest broadcaster of French-language entertainment, information and public affairs programming and one of the largest private production companies. It is also the largest publisher of French-language magazines and publishes some of the most popular English-language titles in Canada. The Corporation’s Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B. 

 

_________________________________

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

2 Source: Numeris, French Quebec, July 1 to September 30, 2017, Mon-Sun, 2:00 – 2:00, T2+.

 

TVA GROUP INC.

Interim consolidated statements of loss

 

(unaudited)

(in thousands of Canadian dollars, except per-share amounts)

    
  

Three-month periods 
ended September 30

Nine-month periods 
ended September 30

 

Note

 

2017

 

2016

 

2017

 

2016

          

Revenues

2

$

140,785

$

131,592

$

434,451

$

421,344

          

Purchases of goods and services

3

 

71,719

 

74,517

 

276,436

 

279,746

Employee costs

  

36,131

 

36,382

 

114,602

 

118,181

Depreciation of property, plant and equipment and amortization of intangible assets

  

8,767

 

8,968

 

26,509

 

26,322

Financial expenses

4

 

697

 

738

 

1,969

 

2,574

Impairment of goodwill and intangible assets

5

 

42,405

 

40,100

 

42,405

 

40,100

Operational restructuring costs and others

6

 

32

 

617

 

4,982

 

1,777

Loss before tax (recovery) expense and share of loss (income) of associated corporations

  

(18,966)

 

(29,730)

 

(32,452)

 

(47,356)

          

Tax (recovery) expense

  

(3,927)

 

2,821

 

(7,124)

 

(1,404)

          

Share of loss (income) of associated corporations

  

139

 

(275)

 

(328)

 

(603)

Net loss

 

$

(15,178)

$

(32,276)

$

(25,000)

$

(45,349)

          

Net (loss) income attributable to:

         
 

Shareholders

 

$

(15,259)

$

(32,507)

$

(25,161)

$

(45,572)

 

Non-controlling interest

  

81

 

231

 

161

 

223

          
          

Basic and diluted loss per share attributable to shareholders

7 c)

$

(0.35)

$

(0.75)

$

(0.58)

$

(1.05)

          

See accompanying notes to interim condensed consolidated financial statements.

                                                                                                                                                     

 

TVA GROUP INC.

Interim consolidated statements of comprehensive loss

 

(unaudited)

(in thousands of Canadian dollars)

    
  

Three-month periods 
ended September 30

Nine-month periods 
ended September 30

 

Note

 

2017

 

2016

 

2017

 

2016

          

Net loss

 

$

(15,178)

$

(32,276)

$

(25,000)

$

(45,349)

          

Other comprehensive items that may be reclassified to income:

         
 

Cash flow hedge:

         
  

Gain on valuation of derivative financial instruments

9

 

50

 

40

 

160

 

203

  

Deferred income taxes

9

 

(14)

 

(10)

 

(43)

 

(54)

Other comprehensive items that will not be reclassified to income:

         
 

Defined benefit plans:

         
  

Re-measurement gain (loss)

9

 

 

5,000

 

 

(20,000)

  

Deferred income taxes

9

 

 

(1,343)

 

 

5,342

   

36

 

3,687

 

117

 

(14,509)

Comprehensive loss

 

$

(15,142)

$

(28,589)

$

(24,883)

$

(59,858)

          

Comprehensive loss attributable to:

         
 

Shareholders

 

$

(15,223)

$

(28,820)

$

(25,044)

$

(60,081)

 

Non-controlling interest

  

81

 

231

 

161

 

223

          

See accompanying notes to interim condensed consolidated financial statements.

 

TVA GROUP INC.

Interim consolidated statements of equity

 

(unaudited)

(in thousands of Canadian dollars)

    
 

Equity attributable to shareholders

Equity
attributable
to non-
controlling
interest

Total 
equity

 

Capital
stock 
(note 7)

Contributed
surplus

Retained
earnings

Accumula-
ted other
comprehen-
sive (loss)
income
(note 9)

             

Balance as at December 31, 2015

$

207,280

$

581

$

107,369

$

(6,474)

$

676

$

309,432

Net (loss) income

 

 

 

(45,572)

 

 

223

 

(45,349)

Other comprehensive loss

 

 

 

 

(14,509)

 

 

(14,509)

Balance as at September 30, 2016

 

207,280

 

581

 

61,797

 

(20,983)

 

899

 

249,574

Net income (loss)

 

 

 

5,717

 

 

(59)

 

5,658

Other comprehensive income

 

 

 

 

22,993

 

 

22,993

Balance as at December 31, 2016

 

207,280

 

581

 

67,514

 

2,010

 

840

 

278,225

Net (loss) income

 

 

 

(25,161)

 

 

161

 

(25,000)

Other comprehensive income

 

 

 

 

117

 

 

117

Balance as at September 30, 2017

$

207,280

$

581

$

42,353

$

2,127

$

1,001

$

253,342

             

See accompanying notes to interim condensed consolidated financial statements.

 

TVA GROUP INC.

Interim consolidated balance sheets

 

(unaudited)

(in thousands of Canadian dollars)

    
 

Note

September 30,
2017

December 31,
2016

      

Assets

     
      

Current assets

     
 

Cash

 

$

25,151

$

17,219

 

Accounts receivable

  

140,722

 

142,663

 

Income taxes

  

2,553

 

3,966

 

Programs, broadcast rights and inventories

  

71,240

 

77,628

 

Prepaid expenses

  

5,894

 

3,870

   

245,560

 

245,346

Non-current assets

     
 

Broadcast rights

  

43,586

 

44,684

 

Investments

  

12,734

 

12,756

 

Property, plant and equipment

  

201,320

 

205,843

 

Intangible assets

5

 

15,872

 

32,493

 

Goodwill

5

 

7,892

 

37,885

 

Defined benefit plan asset

  

1,686

 

4,250

 

Deferred income taxes

  

14,038

 

3,351

   

297,128

 

341,262

Total assets

 

$

542,688

$

586,608

      

Liabilities and equity

     
      

Current liabilities

     
 

Accounts payable and accrued liabilities

 

$

95,525

$

105,523

 

Income taxes

  

4,986

 

1,250

 

Broadcast rights payable

  

82,114

 

92,627

 

Provisions

  

7,995

 

6,638

 

Deferred revenues

  

21,060

 

19,847

 

Short-term debt

  

9,375

 

6,562

   

221,055

 

232,447

Non-current liabilities

     
 

Long-term debt

  

55,658

 

62,561

 

Other liabilities

  

11,924

 

11,579

 

Deferred income taxes

  

709

 

1,796

   

68,291

 

75,936

Equity

     
 

Capital stock

7

 

207,280

 

207,280

 

Contributed surplus

  

581

 

581

 

Retained earnings

  

42,353

 

67,514

 

Accumulated other comprehensive income

9

 

2,127

 

2,010

 

Equity attributable to shareholders

  

252,341

 

277,385

 

Non-controlling interest

  

1,001

 

840

   

253,342

 

278,225

      

Total liabilities and equity

 

$

542,688

$

586,608

      

See accompanying notes to interim condensed consolidated financial statements.

On November 3, 2017, the Board of Directors approved the interim condensed consolidated financial statements for the three-month and nine-month periods ended September 30, 2017 and 2016.

 

TVA GROUP INC.

Interim consolidated statements of cash flows

 

(unaudited)

(in thousands of Canadian dollars)

    
  

Three-month periods
 ended September 30

Nine-month periods
 ended September 30

 

Note

 

2017

 

2016

 

2017

 

2016

          

Cash flows related to operating activities

         
 

Net loss

 

$

(15,178)

$

(32,276)

$

(25,000)

$

(45,349)

 

Adjustments for:

         
  

Depreciation and amortization

  

8,816

 

9,036

 

26,657

 

26,528

  

Impairment of goodwill and intangible assets

5

 

42,405

 

40,100

 

42,405

 

40,100

  

Share of loss (income) of associated corporations

  

139

 

(275)

 

(328)

 

(603)

  

Deferred income taxes

  

(9,065)

 

1,580

 

(11,818)

 

(2,220)

  

Others

  

1

 

101

 

2

 

302

   

27,118

 

18,266

 

31,918

 

18,758

 

Net change in non-cash balances related to operating activities

  

18,715

 

15,354

 

(1,002)

 

17,626

Cash flows provided by operating activities

  

45,833

 

33,620

 

30,916

 

36,384

          

Cash flows related to investing activities

         
 

Additions to property, plant and equipment

  

(6,654)

 

(7,821)

 

(17,540)

 

(24,018)

 

Additions to intangible assets

  

(399)

 

(444)

 

(1,437)

 

(1,489)

 

Change in investments

  

293

 

(1,188)

 

350

 

(895)

 

Business disposal

  

 

 

 

222

Cash flows used in investing activities

  

(6,760)

 

(9,453)

 

(18,627)

 

(26,180)

          

Cash flows related to financing activities

         
 

Decrease in bank overdraft

  

(6,631)

 

(6,244)

 

 

 

Net change in long-term debt

  

(8,270)

 

(3,926)

 

(4,238)

 

(2,795)

 

Repayment of derivative financial instruments

  

(39)

 

(47)

 

(119)

 

(143)

Cash flows used in financing activities

  

(14,940)

 

(10,217)

 

(4,357)

 

(2,938)

Net change in cash

  

24,133

 

13,950

 

7,932

 

7,266

Cash at beginning of period

  

1,018

 

5,312

 

17,219

 

11,996

Cash at end of period

 

$

25,151

$

19,262

$

25,151

$

19,262

Interest and taxes reflected as operating activities

         
 

Net interest paid

 

$

597

$

533

$

1,822

$

1,804

 

Net income taxes paid (received)

  

375

 

(3,594)

 

(455)

 

(1,548)

           

See accompanying notes to interim condensed consolidated financial statements.

TVA GROUP INC.
Notes to interim condensed consolidated financial statements

Three-month and nine-month periods ended September 30, 2017 and 2016 (unaudited)
(Tabular amounts are expressed in thousands of Canadian 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 a communications company engaged in the Broadcasting & Production, Film Production & Audiovisual Services, and Magazines industries (note 12). The Corporation is a subsidiary of Quebecor Media Inc. (“Quebecor Media” or the “parent corporation”) and its ultimate parent corporation is Quebecor Inc. (“Quebecor”). The Corporation’s head office is located at 1600 de Maisonneuve Boulevard East, Montreal, Quebec, Canada.

The Corporation’s businesses experience significant seasonality due to, among other factors, seasonal advertising patterns, consumers’ viewing, reading and listening habits, and demand for production services from international and local producers. Because the Corporation depends on the sale of advertising for a significant portion of its revenues, 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. These condensed consolidated financial statements should be read in conjunction with the Corporation’s 2016 annual consolidated financial statements, which describe the accounting policies used to prepare these financial statements.

Certain comparative figures for the three-month and nine-month periods ended September 30, 2016 have been restated to conform to the presentation adopted for the three-month and nine-month periods ended September 30, 2017.

2.  Revenues

The breakdown of revenues between advertising services, royalties, rental and postproduction services and other services rendered, and product sales is as follows:

 

   
 

Three-month periods

ended September 30

Nine-month periods

ended September 30

  

2017

 

2016

 

2017

 

2016

         

Advertising services

$

57,418

$

55,649

$

211,890

$

203,164

Royalties

 

32,307

 

28,654

 

96,678

 

86,577

Rental and postproduction services and other services rendered

 

26,017

 

17,401

 

51,140

 

45,697

Product sales

 

25,043

 

29,888

 

74,743

 

85,906

 

$

140,785

$

131,592

$

434,451

$

421,344

3.  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

  

2017

 

2016

 

2017

 

2016

         

Rights and production costs

$

38,850

$

42,816

$

177,874

$

180,787

Printing and distribution

 

6,792

 

7,948

 

20,401

 

24,771

Services rendered by the parent corporation:

        
 

– Commissions on advertising sales

 

4,435

 

4,090

 

15,927

 

14,874

 

– Others

 

2,220

 

2,163

 

6,678

 

6,554

Building costs

 

5,436

 

5,336

 

16,001

 

16,113

Marketing, advertising and promotion

 

4,772

 

4,593

 

13,330

 

13,787

Others

 

9,214

 

7,571

 

26,225

 

22,860

 

$

71,719

$

74,517

$

276,436

$

279,746

4.  Financial expenses

 

   
 

Three-month periods

ended September 30

Nine-month periods

ended September 30

  

2017

 

2016

 

2017

 

2016

         

Interest on long-term debt

$

619

$

616

$

1,821

$

1,892

Amortization of financing costs

 

49

 

68

 

148

 

206

Interest expense on net defined benefit liability or asset

 

25

 

88

 

74

 

262

Foreign exchange loss (gain)

 

15

 

42

 

(93)

 

275

Others

 

(11)

 

(76)

 

19

 

(61)

 

$

697

$

738

$

1,969

$

2,574

5.  Impairment of goodwill and intangible assets

The continuing downward trend in operating revenues in the magazines industry led the Corporation to perform impairment tests on its Magazines cash-generating unit (“CGU”) in the third quarters of 2017 and 2016. The Corporation concluded that the recoverable amount of the Magazines CGU, based on value in use, was less than its carrying amount. Accordingly, a $29,993,000 goodwill impairment charge, including $1,489,000 without any tax consequences ($40,100,000 without tax consequences in 2016), and a $12,412,000 charge for impairment of certain intangible assets, including $3,103,000 without any tax consequences (nil in 2016), were recognized. 

6.  Operational restructuring costs and others

In the three-month and nine-month periods ended September 30, 2017 and 2016, the Corporation recorded the following operational restructuring costs in connection with elimination of positions:

 

   
 

Three-month periods 
ended September 30

Nine-month periods

ended September 30

 

2017

2016

2017

2016

         

Broadcasting & Production

$

19

$

341

$

710

$

745

Magazines

 

13

 

105

 

420

 

495

Film Production & Audiovisual Services

 

 

71

 

137

 

167

 

$

32

$

517

$

1,267

$

1,407

In the second quarter of 2017, the Corporation recorded a $3,663,000 charge for onerous leases extending up to June 2022 for premises that are unused following implementation of rationalization plans in the Magazines segment.

During the nine-month period ended September 30, 2016, the Corporation had recognized a $198,000 loss on the contingent consideration receivable from Sogides Group Inc. in connection with the sale of the book publishing operations acquired in the transaction with Transcontinental Inc.

7.  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,

 2017

December 31,

2016

     

4,320,000 Class A common shares

$

72

$

72

38,885,535 Class B shares

 

207,208

 

207,208

 

$

207,280

$

207,280

(c) Loss per share attributable to shareholders

The following table shows the computation of loss per basic and diluted share attributable to shareholders:

 

   
 

Three-month periods

ended September 30

Nine-month periods

ended September 30

  

2017

 

2016

 

2017

 

2016

         

Net loss attributable to shareholders

$

(15,259)

$

(32,507)

$

(25,161)

$

(45,572)

         

Weighted average number of basic and diluted shares outstanding

 

43,205,535

 

43,205,535

 

43,205,535

 

43,205,535

         

Basic and diluted loss per share attributable to shareholders

$

(0.35)

$

(0.75)

$

(0.58)

$

(1.05)

The loss per diluted share calculation does not take into consideration the potential dilutive effect of stock options of the Corporation, because their impact is non-dilutive.

8.  Stock-based compensation

 

  
 

Nine-month period ended September 30, 2017

 

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, 2016

357,632

$

12.71

173,250

$

62.44

Exercised

 

(25,750)

 

63.95

Cancelled

(104,915)

 

14.00

(7,400)

 

64.78

Balance as at September 30, 2017

252,717

$

12.18

140,100

$

62.04

Of the options outstanding as at September 30, 2017, 204,717 Corporation Class B stock options at an average exercise price of $13.31 and 51,600 Quebecor Media stock options at an average price of $60.41 could be exercised.

During the three-month period ended September 30, 2017, 4,400 Quebecor Media stock options were exercised for a cash consideration of $122,000 (37,400 stock options were exercised for a cash consideration of $382,000 in the same period of 2016). During the nine-month period ended September 30, 2017, 25,750 Quebecor Media stock options were exercised for a cash consideration of $500,000 (41,200 stock options were exercised for a cash consideration of $412,000 in the same period of 2016).

Deferred stock unit (“DSU”) and performance stock unit (“PSU”) plans

TVA Group has a DSU plan and a PSU plan for some management employees based on TVA Group Class B Non-Voting Shares (“TVA Group Class B Shares”). Quebecor also has DSU and PSU plans for its employees and those of its subsidiaries, based on, among other things, Quebecor Class B Shares. Under these plans, the DSUs vest over six years and will be redeemed for cash only upon the participant’s retirement or cessation of employment, as the case may be. The PSUs vest over three years and will be redeemed for cash at the end of that period, subject to achievement of financial targets. Under the TVA Group plan, holders of DSUs and PSUs are entitled to receive dividends on TVA Group Class B Shares in the form of additional units. Under the Quebecor plan, holders of DSUs and PSUs are entitled to receive dividends on Quebecor Class B Shares in the form of additional units.

The following table shows changes in outstanding DSUs and PSUs during the nine-month period ended September 30, 2017:

 

  
 

Outstanding units

 

Corporation’s

stock units

Quebecor

stock units

 

DSU

PSU

DSU

PSU

     

Balance as at December 31, 2016

159,499

212,671

11,482

12,762

Granted

26

32

Exercised

(1,114)

(119)

Cancelled

(4,232)

(7,128)

(451)

(634)

Balance as at September 30, 2017

154,153

205,543

10,938

12,160

Deferred stock unit (“DSU”) plan for directors

As of September 30, 2017, the total number of DSUs outstanding under this plan was 70,588 (43,932 as of December 31, 2016).

Stock-based compensation expense

During the three-month and nine-month periods ended September 30, 2017, compensation expenses in the amount of $941,000 and $2,185,000 respectively were recorded in respect of all stock-based compensation plans ($351,000 and $1,003,000 in the same periods of 2016).

9.  Accumulated other comprehensive (loss) income

 

    
 

Cash flow

hedge

Defined

benefit plans

Total

       

Balance as at December 31, 2015

$

(338)

$

(6,136)

$

(6,474)

Other comprehensive income (loss)

 

149

 

(14,658)

 

(14,509)

Balance as at September 30, 2016

 

(189)

 

(20,794)

 

(20,983)

Other comprehensive income

 

66

 

22,927

 

22,993

Balance as at December 31, 2016

 

(123)

 

2,133

 

2,010

Other comprehensive income

 

117

 

 

117

Balance as at September 30, 2017

$

(6)

$

2,133

$

2,127

10.  Related party transactions

ROC Television G.P. (“ROC Television” formerly SUN News General Partnership)

Since the announcement on February 13, 2015 of the discontinuation of the operations of ROC Television, in which TVA Group holds a 49% interest, the Corporation has made capital contributions to ROC Television to cover its operating losses up to the closure date as well as costs related to the discontinuation of operations. A $198,000 allowance was recorded under accounts payable and accrued liabilities at September 30, 2017 to cover those costs.

The partners made a capital contribution of $2,600,000 in the three-month and nine-month periods ended September 30, 2016, including $1,274,000 from TVA Group for costs for which an allowance had already been made at the end of fiscal 2015.

11.  Fair value of financial instruments

In accordance with IFRS 13, Fair Value Measurement, the Corporation has considered the following fair value hierarchy. This hierarchy reflects the significance of the inputs used in measuring the financial instruments accounted for at fair value on the consolidated balance sheets:

 

Level 1: 

Quoted prices (unadjusted) in active markets for identical assets or liabilities;

  

Level 2:

Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

  

Level 3:

Inputs that are not based on observable market data (unobservable inputs).

The fair value of long-term debt and of the derivative financial instrument are estimated based on a valuation model using Level 2 inputs. Fair value is based on discounted cash flows using period-end market yields or the market value of similar financial instruments with the same maturity.

The book value and fair value of long-term debt and the derivative financial instrument as at September 30, 2017 and December 31, 2016 are as follows:

 

   
 

September 30, 2017

December 31, 2016

 

Carrying
amount

Fair
value

Carrying
amount

Fair
value

         

Derivative financial instrument

$

45

$

45

$

322

$

322

Long-term debt1

 

65,369

 

65,369

 

69,607

 

69,607

1 The book value of long-term debt excludes deferred financing costs.

12.  Segmented information

The Corporation’s operations consist of the following segments:

  • The Broadcasting & Production segment, which includes the operations of TVA Network (including the subsidiary and divisions TVA Productions inc., TVA Nouvelles and TVA Interactif), specialty services, the marketing of digital products associated with the various televisual brands, commercial production services and distribution of audiovisual products;
  • The Magazines segment, which through its subsidiaries, notably TVA Publications inc. and Les Publications Charron & Cie inc., publishes magazines in various fields including the arts, entertainment, television, fashion, sports and decoration, markets digital products associated with the various magazine brands and provides custom publishing, commercial print production and premedia services;
  • The Film Production & Audiovisual Services segment, which through its subsidiaries Mels Studios and Postproduction G.P. and Mels Dubbing Inc. provides soundstage and equipment rental, dubbing, postproduction and visual effects services.

 

   
 

Three-month periods

ended September 30

Nine-month periods

ended September 30

  

2017

 

2016

 

2017

 

2016

         

Revenues

        
 

Broadcasting & Production

$

94,110

$

88,409

$

322,133

$

299,433

 

Magazines

 

25,218

 

30,025

 

70,376

 

86,709

 

Film Production & Audiovisual Services

 

24,594

 

15,969

 

50,372

 

44,131

 

Intersegment items

 

(3,137)

 

(2,811)

 

(8,430)

 

(8,929)

  

140,785

 

131,592

 

434,451

 

421,344

Adjusted operating income(1)

        
 

Broadcasting & Production

 

19,902

 

11,249

 

25,635

 

4,934

 

Magazines

 

3,189

 

5,712

 

7,538

 

11,691

 

Film Production & Audiovisual Services

 

9,844

 

3,732

 

10,240

 

6,792

  

32,935

 

20,693

 

43,413

 

23,417

Depreciation of property, plant and equipment and amortization of intangible assets

 

8,767

 

8,968

 

26,509

 

26,322

Financial expenses

 

697

 

738

 

1,969

 

2,574

Impairment of goodwill and intangible assets

 

42,405

 

40,100

 

42,405

 

40,100

Operational restructuring costs and others

 

32

 

617

 

4,982

 

1,777

Loss before tax (recovery) expense and share of loss (income) of associated corporations

$

(18,966)

$

(29,730)

$

(32,452)

$

(47,356)

The above-noted intersegment items represent the elimination of normal course business transactions between the Corporation’s business segments.

 

(1)

The Chief Executive Officer uses adjusted operating income (loss) as a measure of financial performance for assessing the performance of each of the Corporation’s segments. Adjusted operating income (loss) is defined as net income (loss) before depreciation of property, plant and equipment, amortization of intangible assets, financial expenses, impairment of goodwill and of intangible assets, operational restructuring costs and others, income taxes and share of loss (income) of associated corporations. Adjusted operating income (loss) as defined above is not a measure of results that is consistent with IFRS.

SOURCE TVA Group

For further information: Denis Rozon, CPA, CA, Vice President and Chief Financial Officer, (514) 598-2808

Contact Information:

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

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