Business News

Quebecor Inc. reports consolidated results for third quarter 2010

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

Third quarter 2010 highlights
Quebecor third quarter revenues: $969.9 million in 2010, up $45.4 million (4.9%) from the third quarter of 2009.
Operating income: $329.9 million, up $28.9 million (9.6%) from the third quarter of 2009.
Net income: $82.8 million ($1.28 per basic share) compared with $69.4 million ($1.08 per basic share) in the same period of 2009, an increase of $13.4 million ($0.20 per basic share) or 19.3%.
Adjusted income from continuing operations: $59.7 million ($0.93 per basic share), compared with $52.9 million ($0.82 per basic share) in the same period of 2009, an increase of $6.8 million ($0.11 per basic share) or 12.9%.
Telecommunications segment: operating income up $24.9 million (10.6%). Net customer base change in quarter ended September 30, 2010: +32,800 for cable telephone service, +32,100 for cable Internet access, +20,500 for cable television (counting 40,300-customer increase for Digital TV), +8,400 subscriber connections on mobile telephone service.
Videotron Ltd. (“Videotron”) successfully launches advanced mobile services network (“3G+ network”) on September 9, 2010. As of September 30, 2010, three weeks after the launch, there are 21,900 subscriber connections on the new network, including 11,000 migrations from the mobile virtual network operator (“MVNO”) service.
Restructuring measures in the News Media segment generate additional savings estimated at $29.0 million during the first nine months of 2010 compared with the same period of the previous year, for total annualized savings of $95.0 million since the program began.
“Despite costs incurred in the third quarter of 2010 to launch new products and new initiatives, Quebecor logged an excellent performance and posted increases in revenues, operating income and net income,” said Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor. “In the Telecommunications segment, revenues and operating income were both up significantly. Videotron recorded considerable customer additions for all its services, despite aggressive competition in the marketplace.
“A landmark event in the history of Quebecor Media occurred during the third quarter: on September 9, 2010, Videotron launched its new 3G+ network, a major development that will shape the future of the Company and its subsidiaries. Four years after our first notice of intent, and after spending more than $1.0 billion and creating nearly 1,000 jobs, Quebecor Media has kept its promise and built a reliable, effective 3G+ network. This network will provide consumers and businesses with solutions to their telecom needs under one roof. After only three weeks, we had 21,900 subscriber activations on the network, an indication of consumer receptiveness to our offering and of the demand for more competition in the mobile market.
“In conjunction with the 3G+ network launch, Videotron also introduced illico mobile, a service that lets customers use their mobile telephones to access television programs and series from 28 channels, music from 45 Galaxie channels, and the illico mobile store, which carries a varied catalogue of nearly 30,000 digital titles. Quebecor Media intends to use its 3G+ network as the cornerstone of a corporate business strategy geared toward harnessing all of the Company’s creative resources and providing consumers with access to the technology, services and information they want, anytime, anywhere.
“In the News Media segment, the urban dailies increased their advertising revenues by 2.4% to post advertising growth for the second straight quarter. The Company pushed ahead with its capital expenditures plan in the News Media segment in order to increase its revenue streams. Among other things, the QMI Agency continued its development by setting up two newsrooms in Montréal and Toronto, creating multiplatform teams for event coverage, and centralizing photo coverage across Canada. Since July 1, 2010, the QMI Agency has been the only supplier of general Canadian news content to our media properties, following the termination of Quebecor Media’s relationship with The Canadian Press. Meanwhile, two new community newspapers were launched during the third quarter, L’Écho de Saint-Eustache and Le Point du Lac-Saint-Jean. The QMI National Sales Office also reached national multiplatform advertising agreements with new clients and the Quebecor Media Network continued development of its own distribution network, expanding its territory to four new regions of Québec.
“In short, Quebecor continued developing growth niches in all its lines of business during the third quarter and will continue doing so in the future in order to set itself apart from the competition and increase the Company’s value.”
Analysis of third quarter 2010 results
Revenues: $969.9 million, an increase of $45.4 million (4.9%).
Revenues increased in Telecommunications (by $48.3 million or 9.6% of segment revenues) mainly because of customer growth for all services, in Broadcasting ($5.1 million or 5.7%), and in Interactive Technologies and Communications ($1.2 million or 5.7%).
Revenues decreased in News Media (by $4.5 million or -1.8%) mainly because of lower circulation revenues, and in Leisure and Entertainment ($2.4 million or -3.0%).
Operating income: $329.9 million, an increase of $28.9 million (9.6%).
Operating income increased in Telecommunications (by $24.9 million or 10.6% of segment operating income), Broadcasting ($3.0 million or 29.1%), Leisure and Entertainment ($0.3 million or 2.5%), and in Interactive Technologies and Communications ($0.2 million or 20.0%).
Operating income decreased in News Media (by $4.3 million or -9.6%).
Net income: $82.8 million ($1.28 per basic share) in the third quarter of 2010, compared with $69.4 million ($1.08 per basic share) in the same period of 2009, an increase of $13.4 million ($0.20 per basic share) or 19.3%.
The increase was mainly due to:
$47.9 million favourable variance in gain on valuation and translation of financial instruments;
$28.9 million increase in operating income.
Partially offset by:
$20.7 million increase in income tax expense;
$18.7 million increase in charge for restructuring of operations, impairment of assets and other special items;
$11.7 million increase in amortization charge.
Adjusted income from continuing operations: $59.7 million in the third quarter of 2010 ($0.93 per basic share), compared with $52.9 million ($0.82 per basic share) in the same period of 2009, an increase of $6.8 million ($0.11 per basic share) or 12.9%.
2010/2009 year-to-date comparison
Revenues: $2.91 billion, an increase of $137.8 million (5.0%).
Revenues increased in Telecommunications (by $154.8 million or 10.5% of segment revenues) mainly because of customer growth for all services, in Broadcasting ($4.3 million or 1.4%), and in Interactive Technologies and Communications ($2.6 million or 3.9%).
Revenues decreased in News Media (by $13.4 million or -1.7%), mainly because of lower advertising revenues at the community newspapers and directories, as well as lower circulation revenues, and in Leisure and Entertainment ($7.4 million or -3.5%).
Operating income: $972.6 million, an increase of $83.5 million (9.4%).
Operating income increased in Telecommunications (by $84.3 million or 12.2% of segment operating income), News Media ($10.0 million or 7.7%), and Interactive Technologies and Communications ($0.8 million or 29.6%).
Operating income decreased in Broadcasting (by $1.5 million or -3.1%) and in Leisure and Entertainment ($1.2 million or -6.9%).
The change in the fair value of Quebecor Media and in Quebecor’s stock price resulted in a total $16.4 million ($0.13 per basic share) unfavourable variance in the stock-based compensation charge in the first nine months of 2010 compared with the same period of 2009.
Net income: $186.6 million ($2.90 per basic share), compared with $203.9 million ($3.17 per basic share) in the first nine months of 2009, a variance of $17.3 million ($0.27 per basic share) or -8.5%.
The decrease was mainly due to:
$46.8 million increase in income tax expense;
$22.8 million increase in amortization charge;
$20.6 million increase in financial expenses;
$17.9 million increase in charge for restructuring of operations, impairment of assets and other special items;
recognition in the first nine months of 2010 of losses on debt refinancing totalling $12.3 million.
Partially offset by:
$83.5 million increase in operating income;
favourable variance related to the recognition in the first nine months of 2009 of a $13.6 million non-cash charge for impairment of goodwill and intangible assets;
$12.4 million favourable variance in gains on valuation and translation of financial instruments.
Adjusted income from continuing operations: $175.0 million in the first nine months of 2010 ($2.72 per basic share), compared with $152.3 million ($2.37 per basic share) in the same period of 2009, an increase of $22.7 million ($0.35 per basic share) or 14.9%.
Dividends
On November 9, 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 December 21, 2010 to shareholders of record at the close of business on November 26, 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.