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

Quebecor Inc.

May 13, 2009 09:55 ET

Quebecor Inc. Reports Consolidated Results for First Quarter 2009

MONTREAL, QUEBEC--(Marketwire - May 13, 2009) - Quebecor Inc. ("Quebecor") (TSX:QBR.A)(TSX:QBR.B) today reported its consolidated financial results for the first quarter of 2009. Quebecor consolidates the financial results of its Quebecor Media Inc. subsidiary ("Quebecor Media"), in which it holds a 54.7% interest.

Highlights since end of 2008

- Quebecor records revenues of $896.2 million, up $19.1 million (2.2%) from first quarter 2008.

- Operating income(1): up $15.5 million (6.0%) to $272.2 million.

- Income from continuing operations: $57.7 million ($0.90 per basic share), up $12.6 million (27.9%) from $45.1 million ($0.70 per basic share) in same period of 2008.

- Adjusted income from continuing operating activities(2): $43.1 million in first quarter 2009 ($0.67 per basic share), up $8.5 million (24.6%) from $34.6 million ($0.54 per basic share) in same period of 2008.

- Cable segment: operating income up $27.0 million (13.7%). Customer growth in first quarter 2009: +38,900 for cable telephone service, +25,500 for cable Internet access, +13,600 for cable television service (including 35,900 customer increase for illico Digital TV), +4,600 activated phones for wireless telephone service.

- March 5, 2009: Videotron Ltd. ("Videotron") optimizes liquidity position in a difficult financial market by issuing US$260.0 million aggregate principal amount of Senior Notes at effective rate of 9.35%, for net proceeds of $332.4 million.

- March 30, 2009: Videotron reaches agreement to renew its collective agreements encompassing all of its 2,822 unionized employees, including Montreal, Sherbrooke and Quebec City until December 31, 2013, Saguenay-Lac-St-Jean until January 31, 2014, and Gatineau until August 31, 2015.

(1) See "Operating income" under "Definitions."

(2) See "Adjusted income from continuing operations" under "Definitions."

"Despite the challenging economic and financial environment in the first quarter of 2009, Quebecor managed to increase its financial manoeuvring room and to grow its revenues, operating income and net income from continuing operations," said Pierre Karl Peladeau. "The Cable segment, which continues to register customer growth for all of its services quarter after quarter, accounts for the bulk of the improvement in results. In addition, the renewal of Videotron's collective agreements with its 2,822 unionized employees will help it to carry out its business plan in the coming years, as it enters a new phase in its development with the roll-out of advanced wireless services.

"Meanwhile, the restructuring initiatives in the Newspapers segment, launched in late 2008, are progressing according to schedule and generated estimated savings of $7.0 million in the first quarter of 2009. These initiatives, combined with other factors, helped mitigate the impact of the economic crisis, which was particularly acute in the newspaper business. The positive financial effects of the restructuring initiatives are expected to grow going forward, as other measures designed to enhance operational efficiency, productivity and optimal use of resources are implemented. These measures include our ISO program, launched a few years ago, which has now been extended to the newspapers we acquired with the takeover of Osprey Media. At the same time, we will continue exploring other cost-reduction opportunities while we search for new revenue streams, including those related to the marketing of the content produced by our QMI press agency."



Table 1
Quebecor first quarter financial highlights, 2005-2009
(in millions of Canadian dollars, except per share data)
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2009 2008 2007 2006 2005
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Revenues $896.2 $877.1 $751.1 $695.9 $622.8

Operating income(a) 272.2 256.7 183.5 158.2 147.5
Income from continuing
operations 57.7 45.1 3.4 (59.6) (26.1)
Net income (loss) 57.7 428.4(c) (14.4) (60.8) (23.7)
Adjusted income from
continuing operating
activities(b) 43.1 34.6 16.8 10.5 3.1
Per share data:
Income from continuing
operations 0.90 0.70 0.05 (0.93) (0.40)
Net income (loss) 0.90 6.66 (0.22) (0.95) (0.37)
Adjusted income from
continuing operating
activities(b) 0.67 0.54 0.26 0.16 0.05
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(a) See "Operating income" under "Definitions."
(b) See "Adjusted income from continuing operating activities" under
"Definitions."
(c) Including $399.7 million gain resulting from deconsolidation of
Quebecor World Inc.



Analysis of first quarter 2009 results

- Quebecor's revenues increased $19.1 million (2.2%) to $896.2 million.

- Revenues increased in the following segments: Cable (by $46.9 million
or 10.9% of segment revenues), mainly because of customer growth for
all services, Broadcasting ($3.3 million or 3.1%), Interactive
Technologies and Communications ($2.1 million or 10.2%), and Leisure
and Entertainment ($1.5 million or 2.4%).

- Revenues decreased in Newspapers (by $32.6 million or -11.7%), mainly
as a result of lower advertising revenues.

- Operating income increased $15.5 million (6.0%) to $272.2 million, due
primarily to an increase in the Cable segment ($27.0 million or 13.7% of
segment operating income) resulting mainly from customer growth.
Operating income decreased $16.3 million (-35.4%) in the Newspapers
segment.

- Quebecor's net income totalled $57.7 million ($0.90 per basic share) in
the first quarter of 2009, compared with $428.4 million ($6.66 per basic
share) in the same period of 2008.

- Favourable variances in the following items:

- $15.5 million increase in operating income;

- $15.0 million decrease in income tax expense;

- $13.0 million decrease in financial expenses;

were outweighed by:

- recognition in first quarter 2008 of income from discontinued
operations in the amount of $383.3 million;

- $22.0 million increase in non-controlling interest;

- $7.6 million increase in amortization charge.

- Adjusted income from continuing operating activities: $43.1 million in
the first quarter of 2009 ($0.67 per basic share), compared with $34.6
million ($0.54 per basic share) in the same period of 2008, an increase of
$8.5 million ($0.13 per basic share), or 24.6%.


Financing activities

On March 5, 2009, Videotron issued US$260.0 million aggregate principal amount of Senior Notes at an effective rate of 9.35%, for net proceeds of $332.4 million (including accrued interest and before financing expenses). Videotron used the proceeds to repay all drawings under its senior secured credit facility and the remainder for general purposes. In the context of the current instability of the financial markets, Videotron seized the opportunity to optimize its liquidity position through this offering.

Dividend

On May 13, 2009, 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 June 22, 2009 to shareholders of record at the close of business on May 29, 2009. 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.

Quebecor - Discontinued operations

On January 21, 2008, Quebecor World Inc. ("Quebecor World") and its U.S. subsidiaries were granted creditor protection under the Companies' Creditors Arrangement Act in Canada. On the same date, its U.S. subsidiaries also filed a petition for creditor protection under Chapter 11 of the United States Bankruptcy Code. Accordingly, Quebecor's investment in Quebecor World has no longer been consolidated since January 21, 2008, and Quebecor World's activities are considered "Discontinued Operations" for the purposes of Quebecor's consolidated financial statements.

The net assets deficiency and the accumulated comprehensive loss were reversed upon deconsolidation on January 21, 2008, generating a net gain of $399.7 million, net of the $35.1 million decrease in the income tax asset related to the investment in Quebecor World.

Detailed financial information

For a detailed analysis of Quebecor's results for the first quarter of 2009, please refer to the Management Discussion and Analysis and consolidated financial statements of Quebecor, available on the Company's website at http://www.quebecor.com/InvestorCenter/QIQuarterlyReports.aspx or from the SEDAR filing service at http://www.sedar.com.

Conference call for investors and webcast

Quebecor will hold a conference call to discuss the first quarter 2009 results of Quebecor and Quebecor Media on May 13, 2009, at 5:00 p.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 77467#. A tape recording of the call will be available from May 13 to June 12, 2009 by dialling 1 877 293-8133, access code 885154#. The conference call will also be broadcast live on Quebecor' 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's actual results for future periods to differ materially from those set forth in the forward-looking statements. Forward-looking statements may be identified by the use of the conditional or by forward-looking terminology such as the terms "plans," "expects," "may," "anticipates," "intends," "estimates," "projects," "seeks," "believes" or similar terms, variations of such terms or the negative of such terms. 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's products and pricing actions by competitors), insurance risk, risks associated with capital investment (including risks related to technological development and equipment availability and breakdown), environmental risks, risks associated with labour agreements, risks associated with commodities and energy prices (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, risks associated with government acts and regulations, risks related to changes in tax legislation, 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's actual results to differ from current expectations, please refer to Quebecor's public filings available at www.sedar.com and www.quebecor.com including, in particular, the "Risks and Uncertainties" section in Quebecor's Management Discussion and Analysis for the year ended December 31, 2008.

The forward-looking statements in this press release reflect Quebecor's expectations as of May 13, 2009, and are subject to change after that date. Quebecor 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.

The Company

Quebecor Inc. (TSX:QBR.A)(TSX:QBR.B) is a holding company with a 54.7% interest in Quebecor Media Inc, one of Canada's largest media groups. Quebecor Media owns operating companies in numerous media related businesses: Videotron Ltd., an integrated communications company engaged in cable television, interactive multimedia development, Internet access services, cable telephony and wireless telephone service; Sun Media Corporation, the largest publisher of newspapers in Canada; Canoe Inc., operator of a network of English- and French-language Internet properties 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; Nurun Inc., a major interactive technologies and communications agency with offices in Canada, the United States, Europe and Asia; magazine publisher TVA Publishing Inc.; book publishers and distributors Sogides Group Inc. and CEC Publishing Inc.; Archambault Group Inc. and TVA Films, companies engaged in the production, distribution and retailing of cultural products; Le SuperClub Videotron ltee, a DVD and console game rental and retail chain; and Quebecor MediaPages, publisher of print and online directories.

DEFINITIONS

Operating income

In its analysis of operating results, the Company defines operating income or loss, as reconciled to net income under Canadian generally accepted accounting principles ("Canadian GAAP"), as net income before amortization, financial expenses, gain on valuation and translation of financial instruments, charge for restructuring of operations and other special items, 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. The Company uses operating income in order to assess the performance of its investment in Quebecor Media. The Company's management and Board of Directors use this measure in evaluating its consolidated results as well as the results of the Company's operating segments. This measure eliminates the significant level of depreciation and amortization of tangible and intangible assets and is unaffected by the capital structure or investment activities of the Company and its segments. Operating income is also relevant because it is a significant component of the Company's annual incentive compensation programs. A limitation of this measure, however, is that it does not reflect the periodic costs of tangible and intangible assets used in generating revenues in the Company's segments The Company 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 the Company is engaged. The Company's definition of operating income may not be the same as similarly titled measures reported by other companies.

Table 2 below reconciles Quebecor's operating income with the closest Canadian GAAP measure.



Table 2
Reconciliation of the operating income measure used in this report to the
net income measure used in the consolidated financial statements
(in millions of Canadian dollars)
Three months ended March 31
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2009 2008
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Operating income
Cable $223.6 $196.6
Newspapers 29.7 46.0
Broadcasting 12.4 11.0
Leisure and Entertainment 0.8 (1.6)
Interactive Technologies and Communications 0.4 (0.7)
Head Office 5.3 5.4
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272.2 256.7
Amortization (85.3) (77.7)
Financial expenses (59.9) (72.9)
Gain on valuation and translation of financial
instruments 14.1 13.6
Restructuring of operations and other special items (3.4) (1.6)
Income tax (29.4) (44.4)
Non-controlling interest (50.6) (28.6)
Income from discontinued operations - 383.3
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Net income $57.7 $428.4
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Adjusted income from continuing operating activities

The Company defines adjusted income from continuing operating activities, as reconciled to net income under Canadian GAAP, as net income before gain on valuation and translation of financial instruments, charge for restructuring of operations and other special items and the results of discontinued operations, net of income tax and non-controlling interest. Adjusted income from continuing operating activities as defined above is not a measure of results that is consistent with Canadian GAAP. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP. Management believes that adjusted income from continuing operating activities is a meaningful measure that provides an indication of the long-term profitability of the Company's operating activities by eliminating the impact of unusual or one-time items. The Company's definition of adjusted income from continuing operating activities may not be identical to similarly titled measures reported by other companies.

Table 3 provides a reconciliation of adjusted income from continuing operating activities to the net income measure used in the consolidated financial statements of Quebecor.



Table 3
Reconciliation of the adjusted income from continuing operating activities
measure used in this report to the net income measure used in the
consolidated financial statements
(in millions of Canadian dollars)
Three months ended March 31
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2009 2008
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Adjusted income from continuing operating
activities $43.1 $34.6
Gain on valuation and translation of financial
instruments 14.1 13.6
Restructuring of operations and other special items (3.4) (1.6)
Income tax related to adjustments1 7.5 (6.4)
Non-controlling interest related to adjustments (3.6) 4.9
Income from discontinued operations - 383.3
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Net income $57.7 $428.4
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(1) Includes the impact of fluctuations in tax rates applicable to adjusted
items, for statutory reasons or in connection with tax planning
arrangements.


Average Monthly Revenue per User

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



QUEBECOR INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(in millions of Canadian dollars, except for earnings per share data)

(unaudited) Three months ended March 31
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2009 2008
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(restated)
Revenues

Cable $477.5 $430.6
Newspapers 245.5 278.1
Broadcasting 109.8 106.5
Leisure and Entertainment 64.1 62.6
Interactive Technologies and Communications 22.7 20.6
Head Office and inter-segment (23.4) (21.3)
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896.2 877.1

Cost of sales and selling and
administrative expenses 624.0 620.4
Amortization 85.3 77.7
Financial expenses 59.9 72.9
Gain on valuation and translation
of financial instruments (14.1) (13.6)
Restructuring of operations and
other special items 3.4 1.6
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Income before income taxes and
non-controlling interest 137.7 118.1

Income taxes:
Current (0.8) (1.1)
Future 30.2 45.5
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29.4 44.4
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108.3 73.7
Non-controlling interest (50.6) (28.6)
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Income from continuing operations 57.7 45.1
Income from discontinued operations - 383.3
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Net income $57.7 $428.4
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Earnings per share
Basic and diluted
From continuing operations $0.90 $0.70
From discontinued operations - 5.96
Net income 0.90 6.66
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Weighted average number of shares
outstanding and diluted (in millions) 64.3 64.3
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QUEBECOR INC. AND ITS SUBSIDIARIES
SEGMENTED INFORMATION

(in millions of Canadian dollars)
(unaudited) Three months ended March 31
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2009 2008
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(restated)

Income from continuing operations before
amortization, financial expenses, gain on
valuation and translation of financial
instruments, restructuring of operations
and other special items, income taxes and
non-controlling interest

Cable $223.6 $196.6
Newspapers 29.7 46.0
Broadcasting 12.4 11.0
Leisure and Entertainment 0.8 (1.6)
Interactive Technologies and Communications 0.4 (0.7)
Head Office 5.3 5.4
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$272.2 $256.7
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Amortization
Cable $62.0 $56.0
Newspapers 14.7 15.4
Broadcasting 3.6 3.3
Leisure and Entertainment 2.4 1.8
Interactive Technologies and Communications 1.1 0.9
Head Office 1.5 0.3
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$85.3 $77.7
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Additions to property, plant and equipment
Cable $101.8 $86.5
Newspapers 10.5 34.3
Broadcasting 5.0 1.8
Leisure and Entertainment 0.7 1.4
Interactive Technologies and Communications 0.8 0.5
Head Office 0.6 4.6
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$119.4 $129.1
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QUEBECOR INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions of Canadian dollars)
(unaudited) Three months ended March 31
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2009 2008
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(restated)

Net income $57.7 $428.4

Other comprehensive (loss) income, net of
income taxes and non-controlling interest:
Unrealized gain on translation of net
investments in foreign operations - 1.3
(Loss) gain on valuation of derivative
financial instruments (1.4) 9.8
Reclassification to income of other
comprehensive loss related to
discontinued operations - 326.5
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(1.4) 337.6
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Comprehensive income $56.3 $766.0
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QUEBECOR INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in millions of Canadian dollars)
(unaudited)
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Accumulated
other Total
Capital Retained comprehensive shareholders'
stock earnings loss equity
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Balance as of December
31, 2007, as previously
reported $346.6 $391.5 $(321.8) $416.3
Cumulative effect of
changes in accounting
policies - (1.3) - (1.3)
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Balance as of December
31, 2007, as restated 346.6 390.2 (321.8) 415.0
Net income - 428.4 - 428.4
Dividends - (3.2) - (3.2)
Other comprehensive income - - 337.6 337.6
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Balance as of March 31,
2008, as restated 346.6 815.4 15.8 1,177.8
Net loss - (240.4) - (240.4)
Dividends - (9.7) - (9.7)
Other comprehensive loss - - (43.3) (43.3)
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Balance as of December
31, 2008, as restated 346.6 565.3 (27.5) 884.4
Net income - 57.7 - 57.7
Dividends - (3.2) - (3.2)
Other comprehensive loss - - (1.4) (1.4)
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Balance as of March 31,
2009 $346.6 $619.8 $(28.9) $ 937.5
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QUEBECOR INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions of Canadian dollars)
(unaudited) Three months ended March 31
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2009 2008
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(restated)

Cash flows related to operations
Income from continuing operations $57.7 $45.1
Adjustments for:
Amortization of property, plant
and equipment 73.5 68.5
Amortization of intangible assets 11.8 9.2
Gain on valuation and translation
of financial instruments (14.1) (13.6)
Amortization of financing costs
and long-term debt discount 2.1 2.0
Future income taxes 30.2 45.5
Non-controlling interest 50.6 28.6
Other 1.9 0.4
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213.7 185.7
Net change in non-cash balances
related to operations (88.4) (147.3)
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Cash flows provided by continuing
operations 125.3 38.4
Cash flows provided by discontinued
operations - 20.5
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Cash flows provided by operations 125.3 58.9
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Cash flows related to investing activities
Business acquisitions, net of cash
and cash equivalents (1.0) (86.3)
Business disposals, net of cash
and cash equivalents 6.4 1.2
Additions to property, plant and equipment (119.4) (129.1)
Additions to intangible assets (23.9) (14.0)
Other 0.7 (1.7)
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Cash flows used in continuing
investing activities (137.2) (229.9)
Cash flows used in discontinued
investing activities and cash and
cash equivalents of Quebecor World Inc.
at the date of deconsolidation - (117.7)
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Cash flows used in investing activities (137.2) (347.6)
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Cash flows related to financing activities
Net increase in bank indebtedness 19.5 37.5
Issuance of long-term debt,
net of financing fees 325.5 0.5
Net (repayments) borrowings under
revolving bank facilities (205.6) 153.3
Repayments of long-term debt (14.0) (8.4)
Dividends paid to non-controlling
shareholders (9.1) (0.7)
Other - 2.6
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Cash flows provided by continuing
financing activities 116.3 184.8
Cash flows provided by discontinued
financing activities - 37.3
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Cash flows provided by financing activities 116.3 222.1
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Net increase (decrease) in cash and
cash equivalents 104.4 (66.6)

Effect of exchange rate changes on cash
and cash equivalents denominated in
foreign currencies (0.1) 0.4
Cash and cash equivalents at beginning
of period 10.0 66.5
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Cash and cash equivalents at end of period $114.3 $0.3
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Cash and cash equivalents consist of
Cash $8.2 $0.1
Cash equivalents 106.1 0.2
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$114.3 $0.3
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Continuing operations
Cash interest payments $58.5 $60.1
Cash income tax payments (net of refunds) 5.1 12.1
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QUEBECOR INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(in millions of Canadian dollars)
(unaudited) March 31 December 31
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2009 2008
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(restated)

Assets

Current assets
Cash and cash equivalents $114.3 $10.0
Cash and cash equivalents in trust 5.3 5.3
Accounts receivable 427.1 484.6
Income taxes 9.3 9.4
Inventories and programs, broadcast
and distribution rights 170.7 189.3
Prepaid expenses 47.2 31.5
Future income taxes 81.4 115.2
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855.3 845.3

Property, plant and equipment 2,308.9 2,272.9
Intangible assets 996.9 985.9
Derivative financial instruments 412.8 317.9
Other assets 110.0 105.9
Future income taxes 14.7 12.3
Goodwill 3,515.3 3,516.7
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$8,213.9 $8,056.9
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Liabilities and shareholders' equity

Current liabilities
Bank indebtedness $31.8 $12.3
Accounts payable and accrued charges 638.5 788.6
Deferred revenue 228.0 224.0
Dividends payable 3.2 -
Income taxes 2.6 9.8
Current portion of long-term debt 45.0 42.3
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949.1 1,077.0

Long-term debt 4,603.5 4,407.1
Derivative financial instruments 100.8 117.3
Exchangeable debentures and
other liabilities 120.6 117.0
Future income taxes 476.8 469.1
Non-controlling interest 1,025.6 985.0

Shareholders' equity
Capital stock 346.6 346.6
Retained earnings 619.8 565.3
Accumulated other comprehensive loss (28.9) (27.5)
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937.5 884.4
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$8,213.9 $8,056.9
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Contact Information

  • Quebecor
    Jean-Francois Pruneau
    Vice President, Finance
    514-380-4144
    or
    Quebecor
    Isabelle Dessureault
    Vice President, Public Affairs
    514-380-7501