TVA Group Reports $13.8 Million Net Income Attributable to Shareholders for the Second Quarter Ended June 30, 2011
(firmenpresse) - MONTREAL, CANADA -- (Marketwire) -- 08/08/11 -- TVA Group Inc. (TSX: TVA.B)("the Corporation") announces that it recorded net income attributable to shareholders in the amount of $13.8 million, or $0.58 per share, for the second quarter of 2011, compared with $11.7 million, or $0.49 per share, in the same quarter of 2010.
The Corporation adopted International Financial Reporting Standards ("IFRS") on January 1, 2011. The Corporation's consolidated financial statements for the three-month and six-month periods ended June 30, 2011 have therefore been prepared in accordance with IFRS and comparative data for 2010 has been restated. For more information, see "Transition to IFRS" below.
Second quarter operating highlights:
(1) See "Additional IFRS Measures" below.
"The launch of our two new specialty services, SUN News and "Mlle," largely accounts for the decline in our operating income in the second quarter of 2011," said Pierre Dion, President and CEO of the Corporation. "This was however part of our strategy of investing in content and launching new specialty services to take advantage of opportunities in the fast-changing industry environment. During the last quarter, we also announced the creation of our new sports specialty service, "TVA Sports," which will launch in September 2011. The new channels will help boost TVA Group's overall television market share in the years to come. During the last quarter, advertising revenues were up 9.6% at TVA Network and 27.7% at our specialty services. Subscription revenues grew 13.4%. The revenue increases enable us to push ahead with our investment strategy while reducing the short-term impact on our results."
"Our Publishing sector registered a 5% increase in advertising revenues during the last quarter. However, an overlap in government assistance programs in 2010, which did not recur in 2011, and lower newsstand revenues caused a decrease in operating income in the second quarter of 2011," noted Mr. Dion.
Cash flows provided by operating activities were nil for the quarter, compared with $14.7 million in the same quarter of 2010. The $14.7 million decrease was due to an unfavourable variance in accounts receivable as a direct result of the dispute at Canada Post during the last month of the 2011 quarter.
Transition to IFRS
On January 1, 2011, Canadian generally accepted accounting principles ("GAAP"), as used by publicly accountable enterprises, were fully converged to IFRS. Prior to the adoption of IFRS, for all periods up to and including the year ended December 31, 2010, the Corporation's consolidated financial statements were prepared in accordance with Canadian GAAP. IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences related to recognition, measurement and disclosures.
The date of the opening balance sheet under IFRS and date of transition to IFRS is January 1, 2010. The financial data for 2010 has therefore been restated. The Corporation is also required to apply IFRS accounting policies retrospectively to determine its opening balance sheet, subject to certain exemptions. However, the Corporation is not required to restate figures for periods prior to January 1, 2010 that were previously prepared in accordance with Canadian GAAP.
Significant accounting policies under IFRS are disclosed in note 1 to the consolidated financial statements for the three-month period ended March 31, 2011. Note 11 to the condensed consolidated financial statements for the most recent quarter describes adjustments made by the Corporation in restating its previously published Canadian GAAP consolidated financial statements for the three-month and six-month periods ended June 30, 2010. The changes in critical accounting policies under IFRS and their impact on estimates are explained under "Changes in Critical Accounting Policies and Estimates" in the Corporation's interim Management's Discussion and Analysis.
Additional IFRS Measures
In its analysis of operating results, the Corporation uses operating income, as presented in its consolidated statement of income, to assess its financial performance. This measure is used by management and the Board of Directors to evaluate the Corporation's consolidated results and the results of its business sectors. This measure is unaffected by the capital structure or investment activities of the Corporation and its sectors. Operating income is also relevant because it is a significant component of the Corporation's annual incentive compensation programs. Operating income is defined as an additional IFRS measure.
Previously, under Canadian GAAP, operating income was classified as a non-GAAP measure. The Corporation defined operating income as net income under Canadian GAAP before amortization of property, plant and equipment and intangible assets, financial expenses, restructuring costs of operations, impairment of assets and other, income taxes, share of income of associated corporation and net loss attributable to non-controlling interest.
The Corporation's definition of operating income may not be the same as similarly titled measures reported by other companies.
Suspension of dividends
Given the significant investments of the Corporation in its capital projects and the launches of several specialty services, the Board of Directors of TVA Group decided to suspend the payment of dividends by the Corporation and does not expect to redeem its shares in the coming months according to the normal course issuer bid.
The Corporation
TVA Group Inc., a subsidiary of Quebecor Media Inc., is an integrated communications company involved in the creation, production, broadcast and distribution of audiovisual products, and in magazine publishing. TVA Group Inc. is the largest broadcaster of French-language entertainment, information and public affairs programming and publisher of French-language magazines in North America, and one of the largest private-sector producers of French-language content in North America. The Corporation also operates SUN News, a Canada-wide English-language news and opinion specialty service. The Corporation's Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B.
The unaudited consolidated financial statements for the three-month and six-month periods ending June 30, 2011, with notes, and the interim Management's Discussion and Analysis, can be consulted on TVA Group Inc.'s website at .
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), programming content and production costs risks, credit risk, government regulation risks, governmental assistance risks, changes in economic conditions, fragmentation of the media landscape and labour relations 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 and including, in particular, the "Risks and Uncertainties" section of the Corporation's Management's Discussion and Analysis for the year ended December 31, 2010.
The forward-looking statements in this news release reflect the Corporation's expectations as of August 8, 2011, 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 by the applicable securities laws.
TVA Group Inc. ("TVA Group" or "the Corporation") was incorporated under Part 1A of the Companies Act (Quebec) by certificate and articles of continuance dated December 17, 1981. The Corporation has been governed by the Quebec Business Corporations Act since it came into effect on February 14, 2011. TVA Group is an integrated communications company with two operating segments: Television and Publishing (note 10). The Corporation is a subsidiary of Quebecor Media Inc. ("Quebecor Media" or "the parent corporation") and the ultimate parent corporation is Quebecor Inc. ("Quebecor"). The Corporation's head office is located at 1600 De Maisonneuve Blvd. East, Montreal, Quebec, Canada.
The Corporation's businesses experience significant seasonality due to, among other factors, seasonal advertising patterns and influences on people's viewing, reading and listening habits. Because the Corporation depends on the sale of advertising for a significant portion of its revenue, 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 the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board, which replaced Canadian Generally Accepted Accounting Principles ("GAAP") as of January 1, 2011. In particular, these consolidated financial statements were prepared in accordance with IAS 34, Interim Financial Reporting, and with IFRS 1, First-time Adoption of IFRS, and accordingly, they are condensed consolidated financial statements because they do not include all disclosures required under IFRS for annual consolidated financial statements. These consolidated financial statements should be read in conjunction with the Corporation's 2010 annual consolidated financial statements and the Corporation's consolidated financial statements for the three-month period ended March 31, 2011.
Significant accounting policies applied by the Corporation under IFRS are described in note 1 to the consolidated financial statements for the three-month period ended March 31, 2011. Additional information on the transition to IFRS is also provided in note 11 below.
Comparative figures for the three-month and six-month periods ended June 30, 2010, and the year ended December 31, 2010, have been restated to conform to the presentation adopted for the six-month period ended June 30, 2011.
2. New accounting pronouncements
The Corporation has not early adopted the following new standards and adoption impacts on the consolidated financial statements have not yet been determined:
3. Revenues
The breakdown of revenues between services rendered and product sales is as follows:
4. Operating, selling and administrative expenses
The main components are as follows:
5. Operating income
In its analysis of operating results, the Corporation uses operating income, as presented in its consolidated statement of income, to assess its financial performance. The Corporation's management and Board of Directors use this measure in evaluating the Corporation's consolidated results as well as the results of its business segments. As such, this measure is unaffected by the capital structure or investment activities of the Corporation and its segments. Operating income is also a significant component of the Corporation's annual incentive compensation programs. Operating income is referred to as an additional IFRS measure.
6. Financial expenses
7. Restructuring costs of operations, impairment of assets and other
During the second quarter of 2010, the Corporation and Sun Media Corporation, subsidiaries of Quebecor Media, announced the creation of a partnership (51% TVA Group and 49% Sun Media Corporation) for the purpose of setting up and launching a new news and opinion specialty service called "SUN News" in the English-Canadian market in the spring of 2011. The Corporation also announced its intention to cease operation of its existing conventional television station, "SUN TV," when the new specialty service began broadcasting. As a result of this repositioning, the Corporation recorded an impairment expense related to its broadcast rights inventories in the amount of $3,430,000 and an impairment expense for certain equipment in the amount of $2,235,000 in the second quarter of 2010. During the three-month period ended June 30, 2011, the Corporation recorded an additional impairment expense related to its broadcast rights inventories in the amount of $330,000.
As well, during the second quarter of 2010, the Corporation received $760,000 following the settlement of an insurance claim related to an item of property, plant and equipment. In the first quarter of 2010, the Corporation recorded a $505,000 gain in connection with that event, in addition to a $532,000 provision for restructuring costs of operations following the elimination of several positions in the Television sector.
8. 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
(c) Share redemption
Normal course issuer bid
On March 17, 2011, the Corporation filed a normal course issuer bid to redeem a maximum of 5% of the number of Class B shares of the Corporation at the offer date for cancellation between March 21, 2011 and March 20, 2012. The Corporation redeems its Class B shares at the market price at the time of redemption, plus brokerage fees. No Class B shares were repurchased in the first half of 2011.
(d) Earnings per share attributable to shareholders
The following table sets forth the computation of basic and diluted earnings per share attributable to shareholders:
The diluted earnings per share calculation does not take into consideration the potential dilutive effect of the Corporation's stock option plan since their impact is anti-dilutive. During the three-month and six-month periods ended June 30, 2011, 833,610 stock options of the Corporation's plan (869,769 in 2010) were excluded from the diluted earnings per share calculation.
9. Stock-based compensation and other stock-based payments
Of the number of options outstanding as of June 30, 2011, 583,743 Class B stock options at an average exercise price of $17.01 and 80,600 Quebecor Media stock options at an average price of $45.70 could be exercised.
During the three-month period ended June 30, 2011, none of Quebecor Media stock options were exercised (none in 2010). During the six-month period ended June 30, 2011, 15,230 Quebecor Media stock options were exercised for a cash consideration of $108,000 (5,046 stock options for $66,000 in 2010).
During the three-month and six-month periods ended June 30, 2011, the Corporation recorded compensation expense reversals of $826,000 and $741,000 respectively (compared with reversals of $1,203,000 and $543,000 respectively in the same periods of 2010) in relation to the Corporation's Class B stock options, as well as compensation expense reversals of $636,000 and $261,000 respectively (compared with compensation expenses of $281,000 and $429,000 respectively for the same periods of 2010) in relation to the Quebecor Media stock options.
10. Segmented information
The Corporation's operations consist of the following segments:
The intersegment items represent the elimination of normal course business transactions between the Corporation's business segments regarding revenues and expenses.
11. Transition to IFRS
These consolidated financial statements are prepared in accordance with IFRS (note 1). The date of the opening balance sheet under IFRS and the Corporation's date of transition to IFRS is January 1, 2010.
The Corporation is required to establish IFRS accounting policies as of the transition date and, in general, to apply these retrospectively to determine the IFRS opening balance sheet at January 1, 2010. Descriptions of applicable exemptions and exceptions under IFRS to this general principle of retrospective application, and the choices made by the Corporation, are provided in note 9 to the Corporation's consolidated financial statements for the three-month period ended March 31, 2011. This note also presents a reconciliation of the 2010 financial figures prepared under Canadian GAAP to the 2010 financial figures prepared under IFRS, including a reconciliation of the consolidated statements of income, comprehensive income and cash flows for the year ended December 31, 2010, as well as a reconciliation of the consolidated balance sheets and shareholders' equity as of January 1, 2010 and as of December 31, 2010. Additional annual disclosures under IFRS that are deemed material are also described in this note.
The following tables set forth the impact of the adjustments from Canadian GAAP to IFRS on the Corporation's consolidated statements of income, comprehensive income, and cash flows for the three-month and six-month periods ended June 30, 2010, as well as on equity as of June 30, 2010:
(a) Reconciliation of the consolidated statements of income and comprehensive income for the three-month period ended June 30, 2010
(b) Reconciliation of the consolidated statements of income and comprehensive income for the six-month period ended June 30, 2010
(c) Reconciliation of the consolidated statements of cash flows for the three-month and six-month periods ended June 30, 2010
The adjustments made by the Corporation in restating its consolidated financial statements for the three-month and six-month periods ended June 30, 2010, previously published in accordance with Canadian GAAP, had no impact on the totals for the various cash flow categories.
(d) Reconciliation of equity as of June 30, 2010
(e) Reconciliation of comprehensive income for the three-month and six-month periods ended June 30, 2010
The significant differences between the 2010 financial figures prepared under Canadian GAAP and under IFRS are explained as follows:
(i) Defined benefit plans
As stated in the "IFRS 1: exemptions and exceptions" section of note 9 to the Corporation's consolidated financial statements for the three-month period ended March 31, 2011, the Corporation elected to recognize all cumulative actuarial gains and losses under Canadian GAAP that existed as of January 1, 2010 in the opening retained earnings under IFRS for all of its defined benefit plans.
Actuarial gains and losses
Under IFRS, the Corporation elected to immediately recognize all actuarial gains and losses arising after January 1, 2010 as a component of other comprehensive income without recycling those gains or losses to the consolidated statement of income in subsequent periods. As a result, actuarial gains and losses are not amortized to the statement of income but rather are recorded directly to other comprehensive income at the end of each reporting period. Under Canadian GAAP, the Corporation was recording in the consolidated statements of income any cumulative unrecognized net actuarial gains and losses in excess of 10% of the greater of the defined benefit obligation, or the fair value of plan assets, over the expected average remaining service period of the active employee group covered by the plans.
Past service costs
Under IFRS, past service costs are recognized on a straight-line basis over the vesting period. Under Canadian GAAP, past service costs were amortized over the expected average remaining service period of the active employee group covered by the plans (with the exception of certain pension plans for which past service costs were recognized in income as incurred).
Benefit asset limit and minimum funding liability
Under IFRS, recognition of the net benefit asset under certain circumstances is limited to the amount recoverable, which is primarily based on the extent to which the Corporation can unilaterally reduce future contributions to the plan. In addition, an adjustment to the net benefit asset or the net benefit obligation can be recorded to reflect a minimum funding liability. Since the Corporation has elected to recognize actuarial gains or losses in other comprehensive income, changes in the net benefit asset limit or in the minimum funding liability adjustment since January 1, 2010 are also recognized in other comprehensive income. Under Canadian GAAP, a concept similar to the asset limit existed, although the calculation of the recoverable amount was different and changes in the valuation allowance were recognized in the consolidated statement of income. The concept of minimum funding liability did not exist under Canadian GAAP.
(ii) Stock-based compensation
Under IFRS, the liability related to stock-based awards that call for settlement in cash or other assets must be measured at its fair value and is to be re-measured at its fair value at the end of each reporting period. Under Canadian GAAP, the liability was measured and re-measured at each reporting date at the intrinsic values of the stock-based awards instead of at their fair value.
Under IFRS, when a stock-based payment vests in instalments over a vesting period ("graded vesting"), each instalment is accounted for as a separate arrangement, as compared to Canadian GAAP, which gave the choice of treating the instruments as a pool and under which the measurement was based on the average life of the stock-based awards.
(iii) Provisions
Provisions must be presented separately in the balance sheet under IFRS.
(iv) Intangible assets with indefinite useful lives
Under IFRS, indefinite lived assets are not amortized, while under Canadian GAAP, they were amortized until January 1, 2002. Accordingly, the Corporation has reversed amortization previously recognized on its broadcasting licences in opening retained earnings at the transition date.
(v) Related party transactions
Under IFRS, no particular recognition or measurement requirements for related party transactions exist; accordingly, the recognition and measurement of related party transactions must follow existing IFRS standards that apply to the transaction. Under Canadian GAAP, related party transactions could be recognized at the carrying amount of the assets being transferred or at the exchange amount, depending on certain criteria. As stated in the "IFRS 1: exemptions and exceptions" section of note 9 to the Corporation's consolidated financial statements for the three-month period ended March 31, 2011, the Corporation elected not to restate any business combinations arising before January 1, 2010, including those entered into between companies under common control. In addition, transfers of assets that had been recognized at the carrying amount under Canadian GAAP were restated to their exchange amounts, as allowed under IFRS.
(vi) Income taxes
The expected manner of recovery of intangible assets with indefinite useful lives for purposes of calculating deferred income taxes is different under IFRS than under Canadian GAAP. This difference resulted in a reduction of the deferred income tax liability related to these assets at transition.
Other adjustments to income taxes represent the tax impacts of other IFRS adjustments.
In addition, deferred income tax assets and liabilities are presented as non-current items under IFRS, even if it is anticipated that they will be realized in the short term.
(vii) Non-controlling interest
Under IFRS, non-controlling interest is presented as a separate component of equity in the balance sheet, while under Canadian GAAP it was presented as a separate component between liabilities and equity. In the consolidated statements of income and comprehensive income under IFRS, net income and comprehensive income are calculated before non-controlling interest and then attributed to shareholders and non-controlling interest. Under Canadian GAAP, non-controlling interest was presented as a component of net income and of comprehensive income.
Contacts:
Denis Rozon, CA
Vice-President and Chief Financial Officer
(514) 598-2808
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Datum: 08.08.2011 - 09:34 Uhr
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