Quebecor Media Inc.
TSX : QBR.A
TSX : QBR.B

Quebecor Media Inc.

February 26, 2008 06:00 ET

Quebecor Inc. Announces Record 2007 Results of Quebecor Media Inc., a 54.7% Held Subsidiary

MONTREAL, QUEBEC--(Marketwire - Feb. 26, 2008) - Quebecor Media Inc. (TSX:QBR.A)(TSX:QBR.B)

Financial year 2007 highlights

- Quebecor Media Inc. posts revenues of $3.37 billion, a $367.3 million (12.2%) increase from 2006.

- Operating income increases by $164.3 million (20.5%) to record $963.9 million.

- Net income totals record $327.1 million, compared with $169.7 million net loss in 2006, a $496.8 million improvement.

- Cable segment: operating income up $130.2 million (25.4%); customer base increases by 238,600 for cable telephone service, 141,000 for cable Internet access, 65,700 for all cable television services combined (including a 144,600 customer increase for illico Digital TV), 33,900 phones for wireless telephone service.

- Federal government establishes conducive conditions for competition in wireless telephone industry by setting aside segment of new 3G spectrum for market entrants.

- Nurun Inc. taken private: on February 19, 2008, Quebecor Media acquired 91.54% of the outstanding shares of Nurun it did not already hold for a total consideration of $69.5 million.

Quebecor Media's revenues increased by $367.3 million (12.2%) to $3.37 billion in 2007. All of Quebecor Media's business segments reported higher revenues. Operating income grew by $164.3 million (20.5%) to $963.9 million in 2007, mainly because of significantly improved results in the Cable segment, where operating income increased by $130.2 million (25.4%). Operating income also increased in Newspapers (by $18.3 million or 8.8%), primarily as a result of the acquisition of Osprey Media Income Fund ("Osprey Media"), and in Broadcasting ($17.3 million or 41.1%) and Leisure and Entertainment ($7.7 million or 39.9%). Excluding Osprey Media's operating income and the impact of the consolidated stock option plan, operating income increased by 20.0% in 2007, compared with 11.0% in 2006.

"In 2007, Quebecor Media posted the strongest increase in operating income since the acquisition of Groupe Videotron ltee," said Pierre Karl Peladeau, President and Chief Executive Officer of Quebecor Inc. "Our excellent results are mainly due to robust, sustained growth in the Cable segment, which continues to register substantial customer base increases for all services, year after year. The Newspapers segment was boosted by the favourable impact of the acquisition of Osprey Media, which closed in August 2007, as well as increased operating income from its regular operations, on a comparable basis. In addition, the Broadcasting and Leisure and Entertainment segments both reported significant improvements in operating income. The results testify to the success of the convergence strategy Quebecor Media has been pursuing for several years. Meanwhile, Quebecor Media welcomed the federal government's decision to create favourable conditions for new players to enter the Advanced Wireless Services (AWS) market and recommitted to making a major investment in this communications platform to support its future business growth."

Quebecor Media recorded net income of $327.1 million in 2007, compared with a $169.7 million net loss in 2006. The favourable variance of $496.8 million was due primarily to the favourable impact on the comparative numbers for 2007 of the recognition in 2006 of a $342.6 million loss on debt refinancing ($219.0 million net of income tax and non-controlling interest) and of a $180.0 million charge for impairment of goodwill and broadcasting licences in the Broadcasting segment ($156.6 million net of income tax and non-controlling interest). The $164.3 million increase in operating income in 2007 also contributed to the improvement. These favourable factors were partially offset by, among other things, a $29.7 million increase in the amortization charge and a $15.4 million increase in financial expenses.



Quebecor Media Inc.
Highlights, 2002 - 2007 (in millions of Canadian dollars)

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2007 2006 2005 2004 2003 2002
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Revenues $3,365.9 $2,998.6 $2,695.4 $2,456.9 $2,291.9 $2,253.0
Operating income $963.9 $799.6 $732.1 $697.2 $611.6 $572.4
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Financial ratios according to financial statements, 2002 - 2007

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2007 2006 2005 2004 2003 2002
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Debt (1) 3.7 3.9 4.3 4.4 5.1 5.9
Interest coverage(2) 4.1 3.6 2.7 2.5 2.1 1.9
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(1) Long-term debt (including the fair value of derivative financial
instruments) / operating income.
(2) Operating income / interest on long-term debt (including amortization
of discount and financing costs).


The debt ratio was reduced from 5.9 in 2002 to 3.7 in 2007. During the same period, the interest coverage ratio increased from 1.9 to 4.1. Despite substantial investments related to cable networks and newspaper printing facilities, as well as the business acquisitions made by Quebecor Media during the period, Quebecor Media's financial ratios improved significantly between 2002 and 2007. The excellent performance was mainly due to sustained growth in operating income during the period. Between 2002 and 2007, Videotron Ltd. made capital investments totalling $1.2 billion in order to maintain its technological leadership and deliver the best service and the best customer experience. The Newspapers segment also invested $344.7 million during the period in order to provide industry-leading print quality for its largest daily newspapers.

Fourth quarter 2007

Quebecor Media's revenues increased $120.7 million (14.3%) to $964.9 million in the fourth quarter of 2007, mainly as a result of higher revenues in Cable ($64.4 million or 17.7%) and Newspapers ($59.8 million or 24.2%). Quebecor Media's operating income rose by $48.9 million (20.5%) to $287.2 million in the fourth quarter of 2007, primarily as a result of increases in the Cable segment ($35.9 million or 25.7%) and the Newspapers segment ($13.1 million or 20.6%). The increases in the Newspapers segment's revenues and operating income in the fourth quarter of 2007 were mainly due to the acquisition of Osprey Media.

Quebecor Media recorded net income of $112.4 million in the fourth quarter of 2007, compared with a $97.1 million net loss in the same period of 2006. The $209.5 million improvement was due primarily to the favourable impact on the comparative numbers for 2007 of the recognition in 2006 of a $180.0 million non-cash charge for impairment of goodwill and of broadcasting licences in the Broadcasting segment ($156.6 million net of income tax and non-controlling interest). The $48.9 million increase in operating income in the fourth quarter of 2007 and the approximately $22.2 million favourable impact of the decrease in federal tax rates also contributed to the improvement.

Impact on Quebecor Media Inc. and Quebecor Inc. of Quebecor World Inc.'s decision to place itself under the protection of the Companies' Creditors Arrangement Act in Canada

On January 21, 2008, Quebecor World Inc. placed itself under the protection of the Companies' Creditors Arrangement Act. Quebecor World and some of its U.S. subsidiaries also placed themselves under the protection of Chapter 11 of the Bankruptcy Code in the United States.

These procedures will have no material impact on the operations of Quebecor Media.

In light of the rejection by Quebecor World's bank creditors of the rescue plan announced on January 11, 2008, Quebecor did not consider it to be in the interests of its shareholders to enhance its offer and increase the risk associated with its investment in Quebecor World. In light of Quebecor World's decision to place itself under the protection of the Companies' Creditors Arrangement Act, Quebecor will have to exclude Quebecor World from the scope of its consolidation as of January 21, 2008.

Since the events involving Quebecor World occurred after December 31, 2007, Quebecor will have to consolidate financial data for Quebecor World as of December 31, 2007 and for the financial year ended on that date.

The carrying value of Quebecor's investment in Quebecor World as of September 30, 2007, for consolidation purposes, was $429.0 million, and net losses on foreign exchange in the amount of approximately $350.0 million related to this investment had been accumulated as of that date in other comprehensive income. The total net loss before taxes that will ultimately be recognized in Quebecor's results in connection with the events involving Quebecor World should not exceed the total of these amounts. This net loss will have no impact on Quebecor's cash and cash equivalents.

The release of Quebecor's consolidated financial results for 2007 will be dependent on the production by Quebecor World of its financial results for the year ended December 31, 2007. In view of the recent events involving Quebecor World, Quebecor anticipates that the publication of its annual financial documents, including its audited consolidated financial results, its Management Discussion and Analysis and its press release, will be delayed. Quebecor cannot guarantee that, for the 2007 financial year, it will be able to meet its reporting obligations by the prescribed deadline since it has no control over Quebecor World's ability to report its own financial results.

Dividends declared and paid by Quebecor Media Inc. in 2007

The Board of Directors of Quebecor Media declared and paid dividends totalling $110.0 million in 2007.

Conference call for investors and webcast

Quebecor Inc. will hold a conference call to discuss Quebecor Media's results for the fourth quarter and financial year 2007 on February 26, 2008, at 8:30 a.m. EST. There will be a question period reserved for financial analysts. To access the conference call, please dial 1 877 293-8052, access code 70041#. A tape recording of the call will be available from February 26 through March 28, 2008, by dialling 1 877 293-8133, access code 610525#. The conference call will also be broadcast live on the Quebecor Inc. website at www.quebecor.com/InvestorCenter/QIConferenceCall.aspx. It is advisable to ensure the appropriate software is installed before accessing the call. Instructions and links to free player downloads are available at the Internet address shown above.

Forward-looking statements

The statements in this press release that are not historical facts are forward-looking statements and are subject to significant known and unknown risks, uncertainties and assumptions which could cause Quebecor Inc.'s actual results for future periods to differ materially from those set forth in the forward-looking statements. Certain factors that may cause actual results to differ from current expectations include seasonality (including seasonal fluctuations in customer orders), operating risk (including fluctuations in demand for Quebecor Inc.'s products and pricing actions by competitors), risks associated with capital investment (including risks related to technological development and equipment availability and breakdown), environmental risks, risks associated with labour agreements, commodity risks (including fluctuations in the cost and availability of raw materials), credit risk, financial risks, debt risks, risks related to interest rate fluctuations, foreign exchange risks, government regulation risks, risks related to tax changes and changes in the general political and economic environment. 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 Quebecor Inc.'s actual results to differ from current expectations, please refer to Quebecor Inc.'s public filings available at www.sedar.com and www.quebecor.com including, in particular, the "Risks and Uncertainties" section in Quebecor Inc.'s Management Discussion and Analysis for the year ended December 31, 2006 and the "Risk Factors" section of Quebecor Inc.'s 2006 Annual Information Form.

The forward-looking statements in this press release reflect Quebecor Inc.'s expectations as of February 26, 2008, and are subject to change after that date. Quebecor Inc. 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, except as required by applicable securities laws.

Quebecor Inc.

Quebecor Inc. (TSX: QBR.A, QBR.B) is a holding company with interests in two companies, Quebecor Media Inc. and Quebecor World Inc. Quebecor holds a 54.7% interest in Quebecor Media, which owns operating companies in numerous media-related businesses: Videotron Ltd., the largest cable operator in Quebec and a major Internet Service Provider and provider of telephone and business telecommunications services; Quebecor Media's Newspapers segment, the largest publisher of newspapers in Canada; TVA Group Inc., operator of the largest French-language over-the-air television network in Quebec, a number of specialty channels, and the English-language over-the-air station SUN TV; Canoe Inc., operator of a network of English- and French-language Internet properties in Canada; Nurun Inc., a major interactive technologies and communications agency with offices in Canada, the United States, Europe and Asia; companies engaged in book publishing and magazine publishing; and companies engaged in the production, distribution and retailing of cultural products, namely Archambault Group Inc., the largest chain of music stores in eastern Canada, TVA Films, and Le SuperClub Videotron ltee, a chain of video and console-game rental and retail stores. Quebecor World is a commercial print media services company with operations in North America, Europe, Latin America and Asia.

SEGMENTED ANALYSIS

Cable segment

The Cable segment's revenues increased by $243.1 million (18.6%) to $1.55 billion in 2007, mainly because of customer growth.

Operating income increased by $130.2 million (25.4%) from $512.5 million in 2006 (a margin of 39.1% as a proportion of revenues) to $642.7 million (or 41.4% of revenues) in 2007, mainly because of the growth in the customer base for all services, increases in some rates, and a $12.6 million favourable variance related to non-recognition in 2007 of current Canadian Radio-television and Telecommunications Commission ("CRTC") Part II licence fee accruals following the notice issued on October 1, 2007. These positive factors more than offset the $20.9 million unfavourable impact of expenses related to Quebecor Media's stock option plan. Excluding the stock option expense, the Cable segment's operating income increased by 28.6% in 2007, compared with 26.9% in 2006.

In 2007, the Cable segment added:

- 238,600 customers to its cable telephone service (234,800 in 2006);
- 141,000 customers to its cable Internet access service (154,000 in 2006);
- 65,700 customers for all cable television services combined (66,300 in 2006), i.e., net increase for analog service and illico Digital TV, including 144,600 more customers for illico Digital TV (149,000 in 2006);
- 33,900 phones to its wireless telephone service (11,800 in 2006).

Cable segment customer numbers, 2002 - 2007
(in thousands of customers)



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2007 2006 2005 2004 2003 2002
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Cable television
Analog 869.9 948.8 1,031.5 1,118.9 1,183.3 1,259.4
Digital 768.2 623.6 474.6 333.7 240.9 171.6
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Total cable
television 1,638.1 1,572.4 1,506.1 1,452.6 1,424.2 1,431.0
Cable Internet 933.0 792.0 638.0 502.6 406.3 305.1
Cable telephone 636.4 397.8 163.0 - - -
Wireless telephone 45.7 11.8 - - - -
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Over the past five years, the Cable segment's total subscriptions to all its services have nearly doubled, from 1.7 million in 2002 to 3.3 million in 2007.

The Cable segment's average monthly revenue per user ("ARPU") increased by $10.09 (16.4%) from $61.43 in 2006 to $71.52 in 2007.

In the fourth quarter of 2007, the Cable segment increased its revenues by $64.4 million (17.7%) to $427.3 million and its operating income by $35.9 million (25.7%) to $175.7 million.

On November 28, 2007 and December 14, 2007, Industry Canada released a policy framework and a licensing framework, respectively, for the auction of spectrum licences for Advanced Wireless Services in the 2 GHz range. Several of the framework elements are expressly intended to encourage new entrants into the Canadian mobile wireless industry, most notably the setting aside of 40 MHz (out of a total of 105 MHz) of spectrum nationally for new entrants, and a decision to mandate digital roaming and antenna tower and site sharing by way of new licence conditions applicable to all existing and new mobile wireless licensees. These licence conditions are to be finalized prior to the March 10, 2008 deadline for applications to participate in the spectrum auction. The auction is scheduled to commence on May 27, 2008. Implementation of the technology will enable Canada to catch up with other major industrialized nations in terms of the quality of advanced wireless services and competitive pricing.

Quebecor Media has announced that it will participate, through Videotron, in the spectrum auction. If Quebecor Media is awarded spectrum, it anticipates investing, through Videotron, approximately $500.0 million (including licenses and initial operating losses) to build a third-generation (3G) network in Quebec with the latest technologies, thereby becoming a facilities-based wireless provider offering its Quebec customers integrated mobile multimedia services. Quebecor Media currently anticipates that this new network would be fully operational within 18 months following the end of the auction.

Newspapers segment

The Newspapers segment's revenues rose by $99.9 million (10.8%) to $1.03 billion in 2007, mainly as a result of the acquisition of Osprey Media. Excluding the impact of the acquisition, revenues increased by $4.4 million in 2007. Commercial printing and other revenues combined increased by 12.9%. Advertising revenues grew by 1.2% while circulation revenues decreased by 5.8%. The revenues of the urban dailies declined by 1.5% in 2007. Excluding the acquisition of Osprey Media, the revenues of the community newspapers increased by 1.1% in 2007. Within the urban dailies group, revenues of the free dailies increased by 62.7% in 2007 due to excellent results posted by the Montreal, Toronto and Vancouver dailies, and the launch of free dailies in Ottawa and Ottawa-Gatineau in November 2006, and in Calgary and Edmonton in February 2007.

The Newspapers segment's operating income totalled $225.9 million in 2007, an $18.3 million (8.8%) increase. The favourable impact of the acquisition of Osprey Media ($25.3 million) was partially offset by investments and one-time charges, including investments related to the launch of four new free dailies in Ottawa, Ottawa-Gatineau, Calgary and Edmonton and the launch of Quebecor MediaPages, the impact of the labour disputes at Le Journal de Montreal and Le Journal de Quebec in 2006 and 2007 respectively, and variances in the charge for Quebecor Media's stock option plan. Excluding these items, operating income was $225.2 million in 2007, compared with $214.2 million in 2006. The $11.0 million (5.1%) increase mainly reflects lower newsprint costs, the impact of restructuring initiatives and the decrease in operating losses at the free dailies, on a comparable basis (i.e., at the Montreal, Toronto and Vancouver dailies), which were partially offset by costs related to the implementation of certain projects. Operating income from the dailies in the Western Group increased by 13.8%. Osprey Media's operating income increased by 12.6% in 2007, on a comparable basis, testifying to the strategic value of the acquisition for Quebecor Media's Newspapers segment. Excluding the launch of the four new free dailies and the impact on results of the labour disputes at Le Journal de Montreal and Le Journal de Quebec, operating income increased by 5.5% at the urban dailies. Excluding the impact of the acquisition of Osprey Media, operating income increased by 6.3% at the community newspapers.

In the fourth quarter of 2007, the Newspapers segment's revenues increased by $59.8 million (24.2%) to $306.5 million, mainly as a result of the impact of the acquisition of Osprey Media, which closed in August 2007. Excluding the impact of that acquisition, combined revenues from commercial printing and other sources increased by 29.5%, advertising revenues were flat, and circulation revenues decreased by 8.8%.

The Newspapers segment's operating income totalled $76.6 million in the fourth quarter of 2007, a $13.1 million (20.6%) increase attributable primarily to the impact of the acquisition of Osprey Media ($15.9 million). Excluding the acquisition of Osprey Media and investments and one-time charges, including investments related to the launch of four new free dailies (in Ottawa, Ottawa-Gatineau, Calgary and Edmonton) and of Quebecor MediaPages, charges related to Quebecor Media's stock option plan, and the impact of the labour disputes at Le Journal de Montreal and Le Journal de Quebec in 2006 and 2007 respectively, operating income was $70.1 million in the fourth quarter of 2007, compared with $66.7 million in the same quarter of 2006. The $3.4 million (5.1%) increase was essentially due to the decrease in newsprint costs. Despite the labour dispute at Le Journal de Quebec, operating income increased by 6.9% in the fourth quarter of 2007, compared with the same period of 2006.

Quebecor Media announced on October 11, 2007 the creation of a new subsidiary, Quebecor MediaPages, to consolidate all its print and online directory operations. Quebecor MediaPages plans to launch 30 new local directories under the MediaPages name in Quebec, Ontario and Alberta in 2007 and 2008.

Broadcasting segment

The Broadcasting segment recorded revenues of $415.5 million in 2007, an increase of $22.2 million (5.6%). Revenues from broadcasting operations rose $11.7 million, primarily as a result of higher advertising revenues at the TVA Network and SUN TV, higher subscription and advertising revenues at the specialty channels (Mystere, ARGENT, Prise 2, LCN, mentv and Mystery), and higher revenues from video on demand, from Shopping TVA and from commercial production. Revenues from distribution operations increased by $5.5 million due to a larger number of theatrical releases in 2007 than in 2006 and increased revenues from video releases. Revenues from publishing operations increased by $1.8 million in 2007. The favourable impact of the acquisition of the interest in TV Hebdo and TV 7 Jours not already held by TVA Group Inc. was partially offset by a decrease in revenues from newsstand sales.

The Broadcasting segment recorded operating income of $59.4 million in 2007, a $17.3 million (41.1%) increase. Operating income from broadcasting operations increased by $7.2 million, mainly because of the impact of the higher revenues from the specialty channels, SUN TV and video on demand, and the non-recognition in 2007 of current Canadian Radio-television and Telecommunications Commission ("CRTC") Part II licence fee accruals following the notice issued on October 1, 2007, for a favourable variance of $4.1 million. Operating income from distribution operations improved by $3.0 million, mainly because of higher revenues from video releases. Operating income from publishing operations increased by $6.5 million, essentially because of reductions in some operating expenses, including printing costs.

The Broadcasting segment's revenues increased $4.2 million (3.5%) to $124.1 million in the fourth quarter of 2007 and its operating income rose by $3.9 million (20.6%) to $22.8 million.

The business environment for conventional television continues to be cause for concern, as indicated by the 2.6% decline in advertising revenues from TVA Group's conventional television operations in the fourth quarter of 2007, despite the fact that the TVA Network has 25 of the 30 top-rated shows in Quebec and remains Quebec's leading general-interest television network, seven days a week.

Leisure and Entertainment segment

The revenues of the Leisure and Entertainment segment increased by $14.0 million (4.4%) to $329.8 million in 2007, mainly because of an 11.1% increase in the revenues of Quebecor Media Book Group. At Archambault Group Inc., revenues grew by 0.8%. The increase in the revenues of Quebecor Media Book Group in 2007 was mainly due to higher revenues in the academic segment and at Messageries A.D.P. inc., due in the latter case to the distribution of several successful releases, including the French translation of the international bestseller The Secret by Rhonda Byrne, which sold more than 343,000 copies in 2007.

The Leisure and Entertainment segment's operating income amounted to $27.0 million in 2007, compared with $19.3 million in the previous year. The $7.7 million (39.9%) increase was mainly due to the impact of the revenue increases, as well as decreases in some operating costs.

In the fourth quarter of 2007, the Leisure and Entertainment segment's revenues decreased by $1.7 million (-1.6%) to $103.4 million and its operating income increased by $0.3 million (3.0%) to $10.3 million.

In 2007, Pierre Marchand was appointed President, Music Division, of Archambault Group. In early 2008, Celine Massicotte was appointed President and Chief Operating Officer of Groupe Sogides inc.

Interactive Technologies and Communications segment

The Interactive Technologies and Communications segment recorded revenues of $82.0 million in 2007, an $8.1 million (11.0%) increase which reflects the recruitment of new customers and the positive impact of the acquisition of Crazy Labs Web Solutions S.L. in July 2006, partially offset by the impact of lower volume in the United States.

The segment's operating income totalled $2.8 million in 2007, a $4.7 million (-62.7%) decrease due to lower volume in the U.S., the impact of a change in the stock option plan, and one-time charges related to Quebecor Media's purchase of some of Nurun's shares, as well as an increase in the conditional compensation charge related to the acquisition of Ant Farm Interactive LLC in 2004. Recognition in 2006 of federal research and development tax credits from previous years was also a factor in the decrease in operating income in 2007. These unfavourable variances were partially offset by the impact of increased revenues from new customers.

In the fourth quarter of 2007, the Interactive Technologies and Communications segment recorded revenues of $20.1 million, essentially unchanged from the same quarter of 2006. Nurun's operating income decreased from $3.3 million in the fourth quarter of 2006 to nil in the fourth quarter of 2007.

On February 19, 2008, Quebecor Media acquired 91.54% of the outstanding shares of Nurun it did not already hold at a price of $4.75 per share, for a total cash consideration of $69.5 million.

Internet/Portals segment

The Internet/Portals segment recorded total revenues of $48.3 million in 2007, a $6.7 million (16.1%) increase. Revenues from the special-interest portals and the general-interest portals rose by 23.8% and 6.5% respectively from 2006. Among the special-interest portals, jobboom.com recorded significant increases in revenues from packages and other revenue streams.

Operating income decreased by $3.2 million (-31.7%) to $6.9 million in 2007. The revenue growth did not entirely offset the unfavourable impact of increases in some operating costs, including labour and advertising and promotion costs. These cost increases were caused in part by the introduction of a new business development strategy and investments in new products.

In the fourth quarter of 2007, the revenues of the Internet/Portals segment increased by $2.1 million (18.1%) to $13.7 million and its operating income by $1.3 million (86.7%) to $2.8 million.

On November 28, 2007, Quebecor Media officially launched canoe.tv, Canada's first webcaster. It will carry exclusive content as well as programming from conventional sources.

Financing activities

Quebecor Media completed, on October 5, 2007, a placement of US$700.0 million aggregate principal amount of Senior Notes. The Senior Notes were sold at a price equivalent to 93.75% of face value for net proceeds of $672.2 million (including accrued interest of $16.6 million and before financing expenses of $9.8 million). The Notes bear interest at 7 3/4% (an effective rate of 8.81%) and mature on March 15, 2016. Quebecor Media used the net proceeds from the placement, as well as its cash and cash equivalents, to repay in full advances drawn on the Senior Bridge Facility entered into by Quebecor Media to finance the acquisition of Osprey Media for a total consideration of $414.4 million, to repay, on October 31, 2007, US$179.7 million drawn on Sun Media Corporation's term loan "B", and to settle the $106.0 million liability related to derivative financial instruments connected to the term loan "B."

DEFINITIONS

Operating income

In its analysis of operating results, Quebecor Inc. defines operating income, as reconciled to (net loss) net income under Canadian generally accepted accounting principles ("GAAP"), as (net loss) net income before amortization, financial expenses, reserve for restructuring of operations, impairment of assets and other special charges, (loss) gain on re-measurement of exchangeable debentures and of a portfolio investment, loss on debt refinancing, (loss) gain on sales of businesses and other assets, impairment of goodwill and intangible assets, income taxes, dividends on Preferred Shares of a subsidiary, net of income tax, non-controlling interest and the results of discontinued operations. Operating income as defined above is not a measure of results that is consistent with Canadian GAAP. It is not intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP. Management believes that operating income is a meaningful measure of performance. Quebecor Inc. considers its business segments as a whole and uses operating income in order to assess the performance of its investment. Quebecor Inc. management and its Board of Directors use this measure in evaluating its consolidated results as well as results of Quebecor Inc.'s operating segments. This measure eliminates the significant level of non-cash depreciation of tangible assets and amortization of certain intangible assets, and is unaffected by the capital structure or investment activities of Quebecor Inc. and its segments. Operating income is also relevant because it is a significant component of Quebecor Inc.'s annual incentive compensation programs. A limitation of this measure, however, is that it does not reflect the periodic costs of capitalized tangible and intangible assets used in generating revenues in Quebecor Inc.'s segments. Quebecor Inc. also uses other measures that do reflect such costs, such as cash flows from segment operations and free cash flows from operations. In addition, measures like operating income are commonly used by the investment community to analyze and compare the performance of companies in the industries in which Quebecor Inc. is engaged. Quebecor Inc.'s definition of operating income may not be the same as similarly titled measures reported by other companies. The table below reconciles Quebecor Media's operating income with the closest Canadian GAAP measure.



Quebecor Media Inc.
Reconciliation of operating income with net income (net loss) as disclosed
in the consolidated financial statements
(in millions of Canadian dollars)

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2007 2006 2005 2004 2003 2002
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Operating Income
Cable $642.7 $512.5 $413.3 $363.8 $289.7 262.8
Newspapers 225.9 207.6 222.2 227.8 224.8 219.4
Broadcasting 59.4 42.1 53.0 80.5 81.5 78.9
Leisure and
Entertainment 27.0 19.3 27.0 22.7 14.7 14.5
Interactive
Technologies
and Communications 2.8 7.5 3.9 2.3 1.1 1.5
Internet / Portals 6.9 10.1 9.0 4.5 2.9 (2.6)
Head Office (0.8) 0.5 3.7 (4.4) (3.1) (2.1)
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963.9 799.6 732.1 697.2 611.6 572.4
Amortization (290.4) (260.7) (231.9) (225.9) (226.6) (224.6)
Financial expenses (240.0) (224.6) (285.3) (314.6) (300.1) (323.4)
Reserve for
restructuring of
operations,
impairment of
assets and other
special charges (11.6) (18.9) 0.2 (2.8) (1.8) (36.9)
(Loss) gain on debt
refinancing and on
repurchase of
redeemable
preferred shares
of a subsidiary (1.0) (342.6) (60.0) (4.8) 144.1 -
Gain (loss) on sale
of businesses and
other assets 0.4 2.2 0.1 9.3 (1.1) 3.6
Impairment of
goodwill and
intangible assets (5.4) (180.0) - - (0.5) (178.1)
Income taxes (74.8) 53.7 (43.5) (37.4) 12.5 (4.4)
Non-controlling
interest (19.2) (0.4) (16.2) (31.7) (34.6) (30.5)
Income (loss) from
discontinued
operations 5.2 2.0 1.0 (1.1) 0.4 (7.9)
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Net income (loss) $327.1 $(169.7) $96.5 $88.2 $203.9 (229.8)
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Average monthly revenue per user

ARPU is an industry metric that Quebecor Inc. uses to measure its average cable, Internet and telephony revenues per month per basic cable customer. ARPU is not a measurement that is consistent with Canadian GAAP, and Quebecor Inc.'s definition and calculation of ARPU may not be the same as identically titled measurements reported by other companies. Quebecor Inc. calculates ARPU by dividing its combined cable television, Internet access and telephony revenues by the average number of its basic cable customers during the applicable period, and then dividing the resulting amount by the number of months in the applicable period.



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions of Canadian dollars)

Three months ended Twelve months ended
December 31 December 31
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2007 2006 2007 2006
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(unaudited) (unaudited) (audited) (audited)


REVENUES

Cable $427.3 $362.9 $1,552.6 $1,309.5
Newspapers 306.5 246.7 1,028.1 928.2
Broadcasting 124.1 119.9 415.5 393.3
Leisure and
Entertainment 103.4 105.1 329.8 315.8
Interactive
Technologies and
Communications 20.1 20.0 82.0 73.9
Internet/Portals 13.7 11.6 48.3 41.6
Head office and
inter-segment (30.2) (22.0) (90.4) (63.7)
-------------------------------------------------------------------------
964.9 844.2 3,365.9 2,998.6

Cost of sales and
selling and
administrative
expenses 677.7 605.9 2,402.0 2,199.0
Amortization 75.9 68.3 290.4 260.7
Financial expenses 72.2 57.6 240.0 224.6
Reserve for
restructuring of
operations and
other special charges (3.5) 9.5 11.6 18.9
Loss on debt
refinancing 1.0 0.5 1.0 342.6
Gain on sale of
businesses and
other assets - (1.2) (0.4) (2.2)
Impairment of
goodwill and
other intangible
assets 5.4 180.0 5.4 180.0
-------------------------------------------------------------------------

INCOME (LOSS) BEFORE
INCOME TAXES AND
NON-CONTROLLING
INTEREST 136.2 (76.4) 415.9 (225.0)
Income taxes:
Current 14.0 1.3 11.3 5.4
Future 1.6 27.3 63.5 (59.1)
-------------------------------------------------------------------------
15.6 28.6 74.8 (53.7)
-------------------------------------------------------------------------
120.6 (105.0) 341.1 (171.3)
Non-controlling
interest (8.2) 6.8 (19.2) (0.4)
-------------------------------------------------------------------------
INCOME (LOSS) FROM
CONTINUING
OPERATIONS 112.4 (98.2) 321.9 (171.7)
Income from
discontinued
operations - 1.1 5.2 2.0
-------------------------------------------------------------------------
NET INCOME (LOSS) $112.4 $(97.1) $327.1 $(169.7)
-------------------------------------------------------------------------
-------------------------------------------------------------------------



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
SEGMENTED INFORMATION
(in millions of Canadian dollars)

Three months ended Twelve months ended
December 31 December 31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2007 2006 2007 2006
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Income before
amortization,
financial expenses,
reserve for
restructuring of
operations and
other special
charges, loss
on debt
refinancing,
gain on sale
of businesses
and other assets,
and impairment
of goodwill and
other intangible
assets
Cable $175.7 $139.8 $642.7 $512.5
Newspapers 76.6 63.5 225.9 207.6
Broadcasting 22.8 18.9 59.4 42.1
Leisure and
Entertainment 10.3 10.0 27.0 19.3
Interactive
Technologies and
Communications - 3.3 2.8 7.5
Internet/Portals 2.8 1.5 6.9 10.1
General corporate
(expenses) revenue (1.0) 1.3 (0.8) 0.5
-------------------------------------------------------------------------
$287.2 $238.3 $963.9 $799.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Amortization
Cable $55.6 $52.1 $219.4 $198.4
Newspapers 13.6 9.2 44.7 36.5
Broadcasting 3.4 3.8 13.2 14.3
Leisure and
Entertainment 1.9 1.7 7.9 7.2
Interactive
Technologies and
Communications 0.8 1.1 3.0 2.3
Internet/Portals 0.5 0.5 1.6 1.1
Head Office 0.1 (0.1) 0.6 0.9
-------------------------------------------------------------------------
$75.9 $68.3 $290.4 $260.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Additions to property,
plant and equipment
Cable $94.3 $85.8 $330.1 $302.6
Newspapers 63.7 15.9 111.4 116.3
Broadcasting 6.5 3.6 16.2 9.0
Leisure and
Entertainment 1.5 1.1 2.9 3.4
Interactive
Technologies and
Communications 0.7 0.9 3.3 1.8
Internet/Portals 1.5 0.7 4.6 1.9
Head Office 0.1 0.2 0.2 0.5
-------------------------------------------------------------------------
$168.3 $108.2 $468.7 $435.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions of Canadian dollars)

Three months ended Twelve months ended
December 31 December 31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2007 2006 2007 2006
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Net income (loss) $112.4 $(97.1) $327.1 $(169.7)

Other comprehensive
income, net of
income taxes
Unrealized (loss)
gain on translation
of net investments
in foreign
operations - 1.0 (2.0) 1.2
Unrealized gain on
derivative
instruments, net of
income tax of
$6.7 million in the
three-month period
ended December 31,
2007 and including
income tax recovery
of $11.5 million
in the twelve-month
period ended
December 31, 2007 30.3 - 48.0 -
-------------------------------------------------------------------------
30.3 1.0 46.0 1.2

-------------------------------------------------------------------------
COMPREHENSIVE INCOME
(LOSS) $142.7 $(96.1) $373.1 $(168.5)
-------------------------------------------------------------------------
-------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF DEFICIT
(in millions of Canadian dollars)

Three months ended Twelve months ended
December 31 December 31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2007 2006 2007 2006
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Deficit at
beginning of
period, as
previously
reported $2,576.1 $2,620.7 $2,731.5 $2,538.1
Cumulative effect
of changes in
accounting
policies - - 14.3 -
-------------------------------------------------------------------------
Deficit at beginning
of period, as
restated 2,576.1 2,620.7 2,745.8 2,538.1

Net (income) loss (112.4) 97.1 (327.1) 169.7
-------------------------------------------------------------------------
2,463.7 2,717.8 2,418.7 2,707.8

Dividends 65.0 13.7 110.0 23.7
-------------------------------------------------------------------------
Deficit at end
of period $2,528.7 $2,731.5 $2,528.7 $2,731.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of Canadian dollars)

Three months ended Twelve months ended
December 31 December 31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2007 2006 2007 2006
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Cash flows related
to operations
Net income (loss)
from continuing
operations $112.4 $(98.2) $321.9 $(171.7)
Adjustments for:
Amortization of
property, plant
and equipment 69.6 65.2 275.4 251.2
Amortization of
deferred charges
and of other
assets 6.3 3.1 15.0 9.5
Impairement of
goodwill and
intangible assets 5.4 180.0 5.4 180.0
Net loss (gain)
on derivative
instruments and
on foreign
currency
translation of
financial
instruments 2.1 (3.0) 4.7 1.2
Loss on revaluation
of the Additional
Amount payable - 8.1 5.2 10.5
Loss (gain) on sale
of businesses,
property, plant
and equipment,
and other assets 4.7 (0.4) 4.7 (0.4)
Loss on debt
refinancing 1.0 0.5 1.0 342.6
Repayment of
accrued interest
on Senior Discount
Notes - - - (197.3)
Amortization of
financing costs
and long-term
debt discount 1.8 1.0 4.8 7.3
Future income taxes 1.6 27.3 63.5 (59.1)
Non-controlling
interest 8.2 (6.8) 19.2 0.4
Other (0.7) (1.2) (1.4) 0.3
-------------------------------------------------------------------------
212.4 175.6 719.4 374.5
Net change in
non-cash balances
related to
operations 74.2 47.9 32.7 (22.2)
-------------------------------------------------------------------------
Cash flows provided
by continuing
operations 286.6 223.5 752.1 352.3
Cash flows provided
by discontinued
operations - 1.2 1.4 2.1
-------------------------------------------------------------------------
Cash flows provided
by operations 286.6 224.7 753.5 354.4
-------------------------------------------------------------------------
Cash flows related
to investing
activities
Additions to
property, plant and
equipment (168.3) (108.2) (468.7) (435.5)
Business
acquisitions, net
of cash and
cash equivalents (2.1) (1.2) (438.6) (10.5)
Proceeds from
disposal of a
business 0.8 0.5 8.5 0.5
Net decrease
(increase) in
temporary
investments - (1.3) 1.2 39.2
Proceeds from
disposal of assets 2.5 0.9 6.1 9.4
Acquisition of tax
deductions from
parent company (14.9) - (14.9) (16.1)
Decrease in advance
receivable from
parent company - - - 15.9
Other (0.3) (0.8) (1.5) (3.4)
-------------------------------------------------------------------------
Cash flows used in
investing activities (182.3) (110.1) (907.9) (400.5)
-------------------------------------------------------------------------
Cash flows related
to financing
activities
Net increase
(decrease) in bank
indebtedness 9.2 (2.6) (6.6) 7.9
Net (repayments)
borrowings under
revolving and
bridge bank
facilities (556.9) (85.0) (56.7) 38.4
Issuance of
long-term debt,
net of financing
fees 745.3 0.1 756.1 1,225.8
Repayment of
long-term debt
and unwinding of
hedging contracts (281.9) (28.3) (301.3) (1,201.2)
Repayment of the
Additional Amount
payable - - (127.2) -
Net decrease in
prepayments under
cross-currency
swap agreements - - - 21.6
Dividends and
reduction of
Common Shares
paid-up capital (65.0) (13.7) (110.0) (105.0)
Dividends paid to
non-controlling
shareholders (1.1) (1.2) (4.0) (4.5)
Other - 0.2 (3.1) (0.6)
-------------------------------------------------------------------------
Cash flows (used in)
provided by financing
activities (150.4) (130.5) 147.2 (17.6)
-------------------------------------------------------------------------

Net decrease in cash
and cash equivalents (46.1) (15.9) (7.2) (63.7)
Effect of exchange
rate changes on cash
and cash equivalents
denominated in
foreign currencies - 0.5 (0.8) 0.4
Cash and cash
equivalents at
beginning of period 72.2 49.5 34.1 97.4
-------------------------------------------------------------------------
Cash and cash
equivalents at end
of period $26.1 $34.1 $26.1 $34.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cash and cash
equivalents consist of
Cash $6.8 $13.9 $6.8 $13.9
Cash equivalents 19.3 20.2 19.3 20.2
-------------------------------------------------------------------------
$26.1 $34.1 $26.1 $34.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cash interest
payments $99.1 $47.6 $243.3 $446.3
Cash income tax
payments (net of
refunds) 2.0 (1.6) (0.5) 7.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars)

December 31 December 31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2007 2006
-------------------------------------------------------------------------
(audited) (audited)

ASSETS
CURRENT ASSETS
Cash and cash equivalents $26.1 $34.1
Temporary investments 0.2 1.4
Accounts receivable 496.0 426.2
Income taxes 10.5 17.3
Amounts receivable from parent company and
companies under common control 1.9 -
Inventories and investments in televisual products
and movies 169.0 158.7
Prepaid expenses 32.7 24.4
Future income taxes 153.6 65.9
-------------------------------------------------------------------------
890.0 728.0

PROPERTY, PLANT AND EQUIPMENT 2,110.2 1,830.1
FUTURE INCOME TAXES 57.4 61.1
OTHER ASSETS 422.0 243.6
GOODWILL 4,081.3 3,721.1
-------------------------------------------------------------------------
$7,560.9 $6,583.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Bank indebtedness $16.3 $20.6
Accounts payable and accrued charges 756.0 592.4
Deferred revenue 202.7 177.6
Income taxes 19.2 8.8
Amounts payable to parent company and companies
under common control - 11.9
Additional Amount payable - 122.0
Current portion of long-term debt 24.7 23.1
-------------------------------------------------------------------------
1,018.9 956.4

LONG-TERM DEBT 3,002.8 2,773.0
DERIVATIVE FINANCIAL INSTRUMENTS 538.7 231.3
OTHER LIABILITIES 103.5 125.2
FUTURE INCOME TAXES 292.5 118.9
NON-CONTROLLING INTEREST 154.2 142.1

SHAREHOLDERS' EQUITY
Capital stock 1,752.4 1,752.4
Contributed surplus 3,217.2 3,217.2
Deficit (2,528.7) (2,731.5)
Accumulated other comprehensive loss 9.4 (1.1)
-------------------------------------------------------------------------
2,450.3 2,237.0

-------------------------------------------------------------------------
$7,560.9 $6,583.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Contact Information

  • Quebecor Media Inc.
    Louis Morin
    Executive Vice President and Chief Financial Officer
    514-380-1912
    or
    Quebecor Media Inc.
    Luc Lavoie
    Executive Vice President, Corporate Affairs
    514-380-1974
    514-947 6672 (mobile)
    lavoie.luc@quebecor.com