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

Quebecor Inc.

November 01, 2005 15:20 ET

Quebecor Inc. Reports Third Quarter 2005 Results

MONTREAL, QUEBEC--(CCNMatthews - Nov. 1, 2005) - Quebecor Inc. (TSX:QBR.MV.A)(TSX:QBR.SV.B)



HIGHLIGHTS

- Quebecor Media increases revenues by $61.0 million and operating
income by $5.7 million.
- Quebecor World's revenues up US$7.6 million and operating income
down US$19.3 million.
- Customer base for Videotron's digital cable television, Internet
access and Internet telephone services grows by 43,700, 39,700 and
54,200 respectively in third quarter 2005, the largest quarterly
increases since the services were launched.
- Investments totalling $220.0 million announced to relocate and
modernize printing plants in Quebec and Ontario. New facilities
should be fully operational by 2007.
- As part of US$300.0 million investment plan, installation of the
first group of presses is underway in six Quebecor World plants in
North America. The new presses are expected to be operational in
fourth quarter 2005.
- Quebecor Media and subsidiaries refinance debt at more advantageous
interest rates.


Quebecor Inc. recorded total revenues of $2.52 billion in the third quarter of 2005, a decrease of $108.6 million (-4.1%). A $61.0 million (10.3%) revenue increase at Quebecor Media Inc. did not entirely make up for a decrease at Quebecor World Inc., due mainly to the unfavourable impact of conversion of results into Canadian dollars. Quebecor's operating income decreased by $40.1 million (-9.5%) to $381.4 million in the third quarter. At Quebecor Media, operating income increased by $5.7 million (3.4%). At Quebecor World, operating income decreased by US$19.3 million, which because of the unfavourable impact of the devaluation of the U.S. dollar during the period translated into a $44.9 million decline when stated in Canadian dollars.

"Quebecor Media reported continuing improvement in operating results and, to support future growth, announced major investments in its Newspapers segment and strategic acquisitions in its Interactive Technologies & Communications and Leisure & Entertainment segments," said Pierre Karl Peladeau, President and Chief Executive Officer of Quebecor Inc. "However, Quebecor's revenues and operating income continued to be impacted by the effect of challenging conditions in global print media markets on Quebecor World's operating results and by the impact of the conversion of Quebecor World's results into Canadian dollars. In this environment, Quebecor World is pursuing its restructuring program and investing more than US$300.0 million in North America. In Europe, Quebecor World is working on a retooling plan to be announced in the first quarter of 2006. The subsidiary intends to rapidly implement the necessary programs to improve its competitive position in the region."

Quebecor generated net income of $22.6 million ($0.35 per basic share) in the third quarter of 2005, an $18.4 million decrease from $41.0 million ($0.63 per basic share) in the same period of 2004 due primarily to a $60.0 million loss on settlement of debt at Quebecor Media and the decrease in operating income, which were partially offset by an increase in the unrealized gain on re-measurement of exchangeable debentures and lower amortization charges.

In the third quarter of 2005, Quebecor recognized a $27.5 million unrealized gain on re-measurement of the floating rate debentures Series 2001, following the adoption on July 1, 2004 of the new consensus in Abstract EIC-56, which rescinds the ability to use hedge accounting for exchangeable debentures when the issuer's investment in the underlying shares is consolidated or accounted for by the equity method. Since every $1.00 decrease in Quebecor World's stock price results in a $12.5 million unrealized gain, the $2.20 per share decrease in the stock price between July 1, 2005 and September 30, 2005 generated an unrealized gain of $27.5 million on re-measurement of exchangeable debentures. The corresponding unrealized loss on the value of Quebecor World shares underlying the exchangeable debentures is not recorded in the books.

Excluding unusual items, which include the reserve for restructuring, impairment of assets and other special charges, the unrealized gain on re-measurement of exchangeable debentures, and the loss on debt refinancing, all net of income tax and non-controlling interest, net income was $29.8 million in the third quarter of 2005 ($0.46 per basic share), compared with $33.4 million ($0.51 per basic share) in the same period of 2004, a decrease of $3.6 million ($0.05 per basic share).

Quebecor Media recorded a $10.1 million net loss in the third quarter of 2005, compared with net income of $26.9 million in the same period of 2004. The $37.0 million negative difference was mainly due to a $60.0 million loss on settlement of debt. Quebecor World recorded quarterly net income of US$19.6 million (US$0.15 per basic share), compared with US$39.1 million (US$0.30 per basic share) in the same quarter of 2004.

In September 2005, Quebecor Media reached an agreement to acquire Sogides ltee, a major Quebec book publishing and distribution group. The closing of the transaction is subject to certain conditions, including regulatory approval.

Year to date

For the first nine months of 2005, Quebecor's revenues decreased by $186.9 million (-2.4%) to $7.53 billion, mainly as a result of the unfavourable impact of the conversion of Quebecor World's revenues into Canadian dollars. Operating income decreased by $93.5 million (-7.6%) to $1.13 billion. A $27.2 million (5.5%) increase in operating income at Quebecor Media did not entirely offset the US$50.2 million decrease at Quebecor World, which was accentuated by conversion into Canadian dollars. Quebecor generated net income in the amount of $55.2 million ($0.85 per basic share), compared with $52.8 million ($0.82 per basic share) in the same period of 2004, a $2.4 million increase.

Excluding unusual items, which include the reserve for restructuring, impairment of assets and other special charges, the unrealized gain on re-measurement of exchangeable debentures, and the loss on debt refinancing, all net of income tax and non-controlling interest, year-to-date net income from continuing operations amounted to $73.2 million ($1.13 per basic share), compared with $61.7 million ($0.95 per basic share) in the same period of 2004, an increase of $11.5 million ($0.18 per basic share).

Discontinued operations

In May 2005, Quebecor World announced plans to dispose of its non-core North American Commercial group in order to focus on its core printing business. In the second quarter of 2005, Quebecor World completed the sale of its Los Angeles, California facility, a business unit in the non-core Commercial group. During the third quarter, it completed the sale of a unit in Westwood, Massachusetts and signed conditional agreements to sell the remaining units included in the non-core Commercial group. These units should be sold in the fourth quarter of 2005, provided the conditions stipulated in the agreements are satisfied by Quebecor World and the purchasers. Consequently, the results and operating cash flows of the divested plants and the others that are about to be sold have been presented separately in the Company's consolidated financial statements as discontinued operations and comparative figures have been restated to conform to the presentation adopted in the third quarter of 2005.

Events subsequent to balance-sheet date

On November 1, 2005, the Company's Board of Directors declared a quarterly dividend of $0.05 per share on Class A Multiple Voting Shares and Class B Subordinate Voting Shares, payable on December 13, 2005 to shareholders of record at the close of business on November 18, 2005.

Full financial information

For a detailed analysis of the results of Quebecor Inc. and its subsidiaries for the third quarter and first nine months of 2005, please refer to the Management's Discussion and Analysis and consolidated financial statements of Quebecor at www.quebecor.com/InvestorCenter/QIFinancialReports.aspx. A summary segmented analysis and definitions of operating income and of free cash flows from operations are provided below.

Conference call for investors and Webcast

Quebecor Inc. will hold a conference call to discuss its third quarter 2005 results on Tuesday, November 1, 2005, at 4:00 pm EST. There will be a question period reserved for financial analysts. To access the conference call, please dial 1 877 293-8052 or (403) 269-3852, access code 5151260. A tape recording of the call will be available from November 1 through December 3, 2005, by dialling 1 877 293-8133 or (403) 266-2079, access code 294645. The conference call will also be broadcast live on Quebecor's Web site 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

This press release contains forward-looking statements, which are subject to known and unknown risks and uncertainties that could cause the Company's actual results to differ materially from those set forth in the forward-looking statements. These risks include changes in customer demand for the Company's products, changes in raw material and equipment costs and availability, seasonal fluctuations in customer orders, pricing actions by competitors, and general changes in the economic environment.

The Company

Quebecor Inc. (TSX: QBR.MV.A, QBR.SV.B) is a communications company with operations in North America, Europe, Latin America and Asia. It has two operating subsidiaries, Quebecor World Inc. and Quebecor Media Inc. Quebecor World is one of the largest commercial print media services companies in the world. Quebecor Media owns operating companies in numerous media-related businesses: Videotron ltee, the largest cable operator in Quebec and a major Internet Service Provider and provider of telephone services; Videotron Telecom Ltd., a provider of business telecommunications services; Sun Media Corporation, Canada's largest national chain of tabloids and community newspapers; TVA Group Inc., operator of the largest French-language general-interest television network in Quebec, a number of specialty channels, and the English-language general-interest station SUN TV; Canoe Inc., operator of a network of English- and French-language Internet properties in Canada; Nurun Inc., an important interactive technologies and communications agency in Canada, the United States and Europe; 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 video-game rental and retail stores. Quebecor Inc. has operations in 17 countries.

SEGMENTED ANALYSIS AND DEFINITIONS

Quebecor World Inc.

Quebecor World's revenues were US$1.58 billion in the third quarter of 2005, a US$7.6 million (0.5%) increase. Excluding the favourable impact of the fluctuation of currencies other than the U.S. dollar (US$23.3 million), revenues decreased by 1.0% due primarily to continuing pricing pressure.

Operating income totalled US$171.6 million, compared with US$190.9 million in the third quarter of 2004. The US$19.3 million (-10.1%) decrease mainly reflects lower gross margins resulting from sustained pricing pressures and higher energy costs, which were not entirely offset by economies yielded by restructuring initiatives. The impact was particularly strong at the French and British operations in Europe, and at the Magazine group and certain non-core operations in North America.

Selling, general and administrative expenses and securitization fees totalled US$101.0 million in the third quarter of 2005, compared with US$110.5 million in the same quarter of 2004. The 8.6% decrease resulted primarily from cost-containment and work-force reduction initiatives, which more than offset the unfavourable impact of currency translation.

Quebecor World recorded reserves for restructuring, impairment of assets and other special charges of $20.3 million during the quarter, $1.5 million more than in the same period of 2004. These reserves included a charge for impairment of certain assets, mainly in the United Kingdom, and restructuring initiatives at the Helio Corbeil plant in France and at other Quebecor World facilities.

Quebecor World estimates it will incur additional restructuring charges of US$12.8 million in the last quarter of 2005 and the year 2006 in connection with initiatives announced and approved prior to September 30, 2005. A total of 1,086 jobs were eliminated in the first nine months of 2005 and a further 235 will be cut by year's end under initiatives approved in 2005 and prior years.

Quebecor World's free cash flows from operations was negative US$80.1 million in the third quarter, compared with positive US$0.1 million in the same period of 2004. The US$80.0 million increase in the use of cash was due to the decrease in operating income and an increase in additions to property, plant and equipment in North America as a result of equipment acquisition and relocation, primarily for the purpose of improving efficiency.

On a year-to-date basis, Quebecor World's revenues increased by US$102.5 million (2.3%) to US$4.62 billion, mainly because of the favourable impact of the conversion of currencies other than the U.S. dollar. Operating income was US$501.2 million, compared with US$551.4 million in 2004. The US$50.2 million (-9.1%) decrease was essentially due to lower gross profit margin resulting from sustained pricing pressures, lower volumes in some business groups, higher energy costs and the recognition of higher specific charges in 2005 than in 2004.

Stated in Canadian dollars, Quebecor World's revenues amounted to $1.89 billion in the third quarter of 2005, a decrease of $166.9 million (-8.1%) due essentially to the impact of conversion into Canadian currency. Operating income totalled $205.7 million, a $44.9 million (-17.9%) decrease. The decline in operating income was accentuated by currency translation. For the year to date, Quebecor World's revenues, still in Canadian dollars, decreased $352.5 million (-5.9%) to $5.65 billion and its operating income decreased $120.0 million (-16.4%) to $612.6 million. The decrease is essentially due to the factors noted above in the discussion of the third quarter results.

Quebecor Media Inc.

Quebecor Media generated revenues of $650.9 million in the third quarter of 2005, an increase of $61.0 million (10.3%) compared with the same period of 2004. All business segments without exception reported revenue increases. Operating income rose by $5.7 million (3.4%) to $175.4 million.

For the year-to-date, Quebecor Media's revenues increased by $179.9 million, or 10.2%, to $1.95 billion, and its operating income increased by $27.2 million (5.5%) to $520.2 million.

Cable segment

In the Cable segment, revenues increased by $29.5 million (13.3%) to $250.8 million and operating income by $5.3 million (5.9%) to $95.0 million in the third quarter of 2005, due primarily to customer growth and the improved profitability of Videotron's services as a result of increases in some rates.

Videotron's services all registered substantial customer growth during the quarter:



- illico Digital TV added 43,700 customers, the largest quarterly
increase since the service was launched in February 1999;
- The combined customer base for all cable television services grew
by 28,600, the largest quarterly net growth in five years;
- The cable Internet access service added 39,700 customers, the
largest quarterly increase since the service was launched in 1998;
- The residential IP telephone service has recruited 96,000 customers
since it was launched, including 54,200 in the third quarter of
2005.


Videotron's net monthly ARPU ("average revenue per user") was $52.55, an increase of $5.49 (11.7%) in comparison with the third quarter of 2004. Free cash flows from operations amounted to $35.0 million, compared with $57.5 million in 2004. The $22.5 million decrease was mainly due to an increase in additions to property, plant and equipment as a result of investments in the network.

On a year-to-date basis, the Cable segment's revenues increased by $83.6 million (13.1%) to $724.0 million. The segment's operating income increased by $28.6 million (11.3%) to $282.1 million.

Newspapers segment

The Newspapers segment's revenues grew by $13.2 million (6.4%) to $220.7 million in the third quarter of 2005. Advertising revenues rose 8.0%, mainly because of higher total volumes. Revenues from commercial printing and distribution also increased, while circulation revenues decreased by 0.6%.

Operating income decreased by $1.5 million (-2.9%) to $49.5 million in the third quarter of 2005. The revenue growth did not entirely offset increases in operating costs, mainly at the urban dailies. The operating losses of the free dailies increased from $2.3 million in the third quarter of 2004 to $4.3 million in the third quarter of 2005, primarily as a result of the launch of the Vancouver newspaper. Operating income decreased by $3.0 million (-7.0%) at the urban dailies (excluding the free dailies) and increased by $2.2 million (16.3%) at the community papers. However, between the second quarter and third quarter of 2005, the revenues of the free dailies increased by $1.2 million and their circulation by 27,000 copies.

Free cash flows from operations were $14.2 million in the third quarter of 2005, compared with $44.3 million in the same period of 2004. The $30.1 million decrease was due primarily to an increase in additions to property, plant and equipment as a result of progressive disbursements for the purchase of six new presses for the printing of Le Journal de Montreal, The Toronto Sun and The London Free Press.

For the first nine months of 2005, the Newspapers segment's revenues increased by $31.9 million (5.0%) to $672.8 million and its operating income decreased by $2.7 million (-1.7%) to $152.9 million.

Quebecor Media announced two major projects during the quarter: an investment of more than $110 million to modernize the Journal de Montreal's printing plant and relocate it to Saint-Janvier-de-Mirabel, north of Montreal, and another $110 million investment to build a new printing plant in the Toronto area, to be operated by a new entity co-owned by Quebecor Media and Quebecor World. The two new printing plants should be fully operational by 2007. Management has not yet completed its analysis of the impact of the two projects in terms of workforce reduction costs.

A NADbank® survey conducted in the spring of 2005 confirmed the gains made by Le Journal de Montreal in relation to the competition. The readership of Le Journal de Montreal increased by 5.2% on weekdays, 6.4% on Saturdays and 13.8% on Sundays between the year 2004 and the spring of 2005.

Broadcasting segment

The Broadcasting segment recorded revenues of $81.0 million in the third quarter of 2005, a $9.7 million (13.6%) increase. Revenues from broadcasting operations grew by $9.6 million (19.5%), largely because of higher advertising revenues, including revenues from the LCN, Mystere and ARGENT specialty channels and from the SUN TV television station, and higher revenues from commercial production. Distribution revenues rose by $1.0 million, primarily because of the success of the video release of White Noise and of the theatrical release of the Quebec feature C.R.A.Z.Y., which was partially offset by lower television distribution revenues. Revenues from publishing operations decreased by $0.7 million in the third quarter of 2005 due to lower newsstand sales, particularly of weekly magazines.

Operating income decreased by $8.1 million (-62.8%) to $4.8 million mainly as a result of the operating losses of the television station SUN TV and of the newly launched specialty channels Mystere and ARGENT, as well as higher investment in content, advertising and marketing at the weekly magazines. Distribution operations generated $0.7 million in operating income, a $1.0 million improvement in comparison with 2004.

On a year-to-date basis, the Broadcasting segment's revenues increased by $30.2 million (12.0%) to $281.8 million and its operating income decreased by $18.8 million (-34.2%) to $36.2 million.

During the third quarter, TVA Group changed the name of its general-interest television station in Toronto, acquired in December 2004, from Toronto 1 to SUN TV.

Other segments of Quebecor Media Inc.

The results of the Leisure and Entertainment, Business Telecommunications, Interactive Technologies and Communications, and Internet/Portals segments are reported in the attached summary quarterly financial statements. Highlights of the third quarter of 2005 include:



- Leisure and Entertainment: Revenues up $4.2 million (6.8%) to
$65.9 million and operating income flat at $10.5 million.
Archambault Group's revenues grew by $3.7 million, mainly because
of higher retail sales. The Books division's revenues increased by
$0.8 million.

- Business Telecommunications: Revenues up $3.5 million (16.3%) to
$25.0 million; operating income up $2.8 million (66.7%) to $7.0
million. The increases were due primarily to the positive impact of
the roll-out of the residential telephone service, in conjunction
with Videotron.

- Interactive Technologies and Communications: Revenues up $3.4
million (27.9%) due to business development in the government
market, as well as in North America and Europe. Operating income
more than doubled to $0.9 million, an increase of $0.5 million
(125.0%). In September, Nurun signed a letter of intent to acquire
China Interactive Limited, a Chinese interactive marketing firm.

- Internet/Portals: Revenues up $4.1 million (51.3%). Operating
income increased by a substantial $1.1 million (91.7%) to $2.3
million due to the performance of the general- and special-interest
portals and the Progisia Informatique consulting division.


Definitions

Operating income

In its analysis of operating results, the Company defines operating income (or loss) as earnings (or loss) before amortization, financial expenses, reserve for restructuring of operations, impairment of assets and other special charges, gains (losses) on re-measurement of exchangeable debentures, net gain (loss) on debt refinancing, gains (losses) on sales of businesses, shares of a subsidiary and other assets, and income taxes. Dividends on Preferred Shares of subsidiaries, non-controlling interest and the results of discontinued operations are not considered in the computation of operating income.

Operating income (or loss) as defined above is not a measure of results that is consistent with generally accepted accounting principles. 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 is not intended to represent funds available for debt service, dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Operating income (or loss) is used by the Company because management believes it is a meaningful measure of performance. Operating income (or loss) is 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 (or loss) may not be identical to similarly titled measures reported by other companies. When operating income (or loss) is reported, a table reconciling it with the closest GAAP measure is provided in the Management's Discussion and Analysis.

Free cash flows from operations

The Company uses free cash flows from operations as a measure of liquidity. Free cash flows from operations represents funds available for business acquisitions, the payment of dividends on equity shares, and the repayment of long-term debt. Free cash flows from operations are not a measure of liquidity that is consistent with generally accepted accounting principles. 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. The Company's definition of free cash flows from operations may not be identical to similarly titled measures reported by other companies. When free cash flows from operations are reported, a table reconciling it with the closest GAAP measure is provided in the Management's Discussion and Analysis.



QUEBECOR INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions of Canadian dollars, except for earnings per share data)
(unaudited)
Three months ended Nine months ended
September 30 September 30
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2005 2004 2005 2004
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REVENUES

Printing $1,893.1 $2,060.0 $5,648.6 $6,001.1
Cable 250.8 221.3 724.0 640.4
Newspapers 220.7 207.5 672.8 640.9
Broadcasting 81.0 71.3 281.8 251.6
Leisure and
Entertainment 65.9 61.7 167.7 160.7
Business
Telecommunications 25.0 21.5 72.7 56.1
Interactive
Technologies and
Communications 15.6 12.2 48.9 37.2
Internet/Portals 12.1 8.0 35.6 24.1
Head office and
inter-segment (43.9) (34.6) (123.8) (96.9)
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2,520.3 2,628.9 7,528.3 7,715.2

Cost of sales and
selling and
administrative
expenses (2,138.9) (2,207.4) (6,395.5) (6,488.9)
Amortization (146.5) (156.9) (450.6) (484.4)
Financial expenses (114.7) (114.0) (352.8) (386.2)
Reserve for
restructuring of
operations,
impairment of assets
and other special
charges (20.3) (18.8) (100.0) (92.6)
Gain on re-measurement
of exchangeable
debentures 27.5 15.0 50.0 15.0
Loss on debt
refinancing (60.0) - (60.0) (2.6)
Other - - 0.1 1.3
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INCOME BEFORE INCOME
TAXES 67.4 146.8 219.5 276.8

Income taxes:
Current 7.8 11.5 42.8 52.5
Future 12.0 33.3 33.0 33.6
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19.8 44.8 75.8 86.1
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47.6 102.0 143.7 190.7
Dividends on preferred
shares of
subsidiaries, net of
income taxes (12.2) (12.0) (36.5) (35.8)
Non-controlling interest (12.2) (50.0) (48.4) (104.1)
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INCOME FROM CONTINUING
OPERATIONS 23.2 40.0 58.8 50.8
(Loss) income from
discontinued operations (0.6) 1.0 (3.6) 2.0
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NET INCOME $22.6 $41.0 $55.2 $52.8
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EARNINGS PER SHARE
Basic and diluted
From continuing
operations $0.36 $0.61 $0.91 $0.79
From discontinued
operations (0.01) 0.02 (0.06) 0.03
Net income 0.35 0.63 0.85 0.82

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Weighted average
number of shares
outstanding (in
millions) 64.6 64.6 64.6 64.6
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QUEBECOR INC. AND ITS SUBSIDIARIES
SEGMENTED INFORMATION
(in millions of Canadian dollars)
(unaudited)

Three months ended Nine months ended
September 30 September 30
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2005 2004 2005 2004
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Income before
amortization, financial
expenses, reserve for
restructuring of
operations, impairment
of assets and other
special charges, gain
on re-measurement of
exchangeable
debentures, loss on
debt refinancing and
other
Printing $205.7 $250.6 $612.6 $732.6
Cable 95.0 89.7 282.1 253.5
Newspapers 49.5 51.0 152.9 155.6
Broadcasting 4.8 12.9 36.2 55.0
Leisure and
Entertainment 10.5 10.5 15.4 14.6
Business
Telecommunications 7.0 4.2 20.7 11.3
Interactive
Technologies and
Communications 0.9 0.4 3.1 1.5
Internet/Portals 2.3 1.2 6.7 3.3
General corporate
revenues (expenses) 5.7 1.0 3.1 (1.1)
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$381.4 $421.5 $1 132.8 $1 226.3
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Amortization
Printing $89.4 $103.1 $282.8 $321.4
Cable 35.6 34.8 104.8 104.7
Newspapers 7.5 6.2 20.3 19.0
Broadcasting 3.0 2.7 10.0 8.8
Leisure and
Entertainment 1.2 0.9 3.2 2.8
Business
Telecommunications 8.5 8.4 25.9 25.2
Interactive
Technologies and
Communications 0.5 0.5 1.3 1.2
Internet/Portals 0.2 0.1 0.6 0.5
Head Office 0.6 0.2 1.7 0.8
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$146.5 $156.9 $450.6 $484.4
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Additions to property,
plant and equipment
Printing $107.5 $50.3 $265.7 $137.2
Cable 59.4 33.2 134.5 93.7
Newspapers 29.3 3.9 36.2 12.4
Broadcasting 2.9 4.0 9.8 7.6
Leisure and
Entertainment 2.0 0.6 4.8 2.0
Business
Telecommunications 6.3 7.5 12.6 16.1
Interactive
Technologies and
Communications 0.2 0.3 1.1 0.9
Internet/Portals 0.4 0.1 0.6 0.4
Head office 2.0 1.5 5.7 2.0
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$210.0 $101.4 $471.0 $272.3
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(in millions of Canadian dollars)
(unaudited)

Three months ended Nine months ended
September 30 September 30
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2005 2004 2005 2004
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Balance at beginning
of period $1,258.4 $1,140.1 $1,235.3 $1,128.3

Net income 22.6 41.0 55.2 52.8
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1,281.0 1,181.1 1,290.5 1,181.1

Dividends (3.2) (2.6) (9.0) (2.6)
Excess of purchase
price over carrying
value of Class B
Subordinate Shares
acquired (2.5) - (6.2) -

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Balance at end of
period $1,275.3 $1,178.5 $1,275.3 $1,178.5
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QUEBECOR INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of Canadian dollars)
(unaudited)
Three months ended Nine months ended
September 30 September 30
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2005 2004 2005 2004
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Cash flows related to
operations:
Income from
continuing
operations $23.2 $40.0 $58.8 $50.8
Adjustments for:
Amortization of
property, plant
and equipment 144.9 154.7 445.3 479.6
Amortization of
deferred charges
and other assets 1.6 2.2 5.3 4.8
Amortization of
deferred financing
costs and long-term
debt discount 16.7 15.8 49.2 46.9
Amortization of
deferred client
incentives 8.5 8.4 24.0 25.0
Impairment of
assets and non
cash portion of
restructuring 9.1 5.2 59.2 60.8
Loss (gain) on
ineffective
derivative
instruments and
on foreign
currency
translation on
unhedged long-term
debt 3.1 (8.2) 5.3 2.0
Loss on revaluation
of the additional
amount payable 0.9 4.9 6.2 14.7
Loss (gain) on
disposal of
businesses,
property,
plant and
equipment and
other assets 2.9 1.2 (2.4) 11.8
Gain on
re-measurement
of exchangeable
debentures (27.5) (15.0) (50.0) (15.0)
Loss on debt
refinancing 60.0 - 60.0 2.6
Future income
taxes 12.0 33.3 33.0 33.6
Non-controlling
interest 12.2 50.0 48.4 104.1
Other (1.6) 2.4 4.2 4.1
---------------------------------------------------------------------
266.0 294.9 746.5 825.8
Net change in
non-cash balances
related to
operations (net of
the effect of
business
acquisitions and
disposals) (156.4) (161.4) (322.6) (489.1)
---------------------------------------------------------------------
Cash flows provided
by continuing
operations 109.6 133.5 423.9 336.7
Cash flows (used in)
provided by
discontinued
operations (3.0) 21.7 0.1 9.0
---------------------------------------------------------------------
Cash flows provided
by operations 106.6 155.2 424.0 345.7
---------------------------------------------------------------------
Cash flows related to
financing activities:
Net (decrease)
increase in bank
indebtedness (5.7) (2.9) 8.1 (2.7)
Net borrowings under
revolving bank
facilities and
commercial paper 197.5 263.4 154.4 325.0
Repayments of
long-term debt
including unwinding
of hedging contracts (318.9) (219.9) (328.4) (329.4)
Issuance of long-term
debt 205.1 - 205.1 -
Net (increase)
reduction in
prepayments under
cross-currency swap
agreements (34.0) (2.9) (34.1) 0.6
Repayments under an
interest rate swap (1.3) - (3.6) -
Issuance of capital
stock by subsidiaries 2.8 3.4 17.2 15.0
Repurchase of Class B
Subordinate Shares (3.5) - (8.5) -
Dividends (3.2) (2.6) (9.0) (2.6)
Dividends paid to
non-controlling
shareholders (19.7) (25.1) (56.8) (58.5)
Other (3.8) - (4.2) 0.4
---------------------------------------------------------------------
Cash flows provided
by (used in)
financing activities 15.3 13.4 (59.8) (52.2)
---------------------------------------------------------------------
Cash flows related to
investing activities:
Business acquisitions,
net of cash and cash
equivalents acquired (79.3) (44.1) (152.5) (72.9)
Proceeds from disposal
of businesses, net of
cash and cash
equivalents disposed 4.2 1.1 9.5 (7.8)
Additions to property,
plant and equipment (210.0) (101.4) (471.0) (272.3)
Net proceeds from
disposal of
derivatives
instruments - - 85.7 -
Net (increase)
decrease in
temporary
investments - (63.5) 99.6 130.6
Increase in
cash and cash
equivalents and
temporary
investments held
in trust (0.4) (0.9) (0.1) (0.9)
Proceeds from
disposal of assets 3.0 0.6 12.3 6.4
Other 1.2 (2.9) - (2.0)
---------------------------------------------------------------------
Cash flows used in
investing activities (281.3) (211.1) (416.5) (218.9)
---------------------------------------------------------------------

Net (decrease) increase
in cash and cash
equivalents (159.4) (42.5) (52.3) 74.6
Effect of exchange
rate changes on cash
and cash equivalents
denominated in foreign
currencies (14.8) (46.3) 16.5 (45.3)
Cash and cash
equivalents at
beginning of period 292.6 211.2 154.2 93.1
---------------------------------------------------------------------
Cash and cash
equivalents at end of
period $118.4 $122.4 $118.4 $122.4
---------------------------------------------------------------------
---------------------------------------------------------------------

Cash and cash
equivalents consist
of:
Cash $16.0 $23.4 $16.0 $23.4
Cash equivalents 102.4 99.0 102.4 99.0
---------------------------------------------------------------------
$118.4 $122.4 $118.4 $122.4
---------------------------------------------------------------------
---------------------------------------------------------------------

Cash interest
payments $155.9 $168.9 $360.7 $389.0
Cash payments (net of
refunds) for income
taxes (3.6) (0.2) 71.1 84.7
---------------------------------------------------------------------
---------------------------------------------------------------------



QUEBECOR INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions of Canadian dollars)
September 30 December 31
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 2004
---------------------------------------------------------------------
(unaudited) (audited)

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $118.4 $154.2
Cash and cash equivalents and temporary
investments held in trust (market value
of $10.9 million ($10.8 million in 2004)) 10.9 10.8
Temporary investments (market value of
$0.1 million ($99.7 million in 2004)) 0.1 99.7
Accounts receivable 880.0 824.8
Income taxes 79.9 63.9
Inventories and investments in televisual
products and movies 700.1 638.9
Prepaid expenses 48.0 51.9
Future income taxes 123.6 122.6
---------------------------------------------------------------------
1,961.0 1,966.8

LONG-TERM INVESTMENTS (market value of
$224.0 million ($386.7 million in 2004)) 332.6 352.6
PROPERTY, PLANT AND EQUIPMENT 4,194.6 4,388.4
FUTURE INCOME TAXES 79.2 81.0
OTHER ASSETS 444.5 527.3
GOODWILL 6,940.3 7,088.4
---------------------------------------------------------------------
$13,952.2 $14,404.5
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Bank indebtedness $8.9 $0.8
Accounts payable, accrued charges and
deferred revenue 1,671.2 1,870.0
Income taxes 68.4 68.0
Future income taxes 5.2 5.3
Additional amount payable 107.6 101.4
Current portion of long-term debt 15.9 16.7
---------------------------------------------------------------------
1,877.2 2,062.2

LONG-TERM DEBT 4,867.9 4,888.2
EXCHANGEABLE DEBENTURES 481.8 692.7
CONVERTIBLE NOTES 132.8 135.4
OTHER LIABILITIES 1,056.2 843.8
FUTURE INCOME TAXES 761.1 785.4
NON-CONTROLLING INTEREST 3,330.0 3,553.2

SHAREHOLDERS' EQUITY:
Capital stock 346.9 349.2
Retained earnings 1,275.3 1,235.3
Translation adjustment (177.0) (140.9)
---------------------------------------------------------------------
1,445.2 1,443.6
0.6
0.0
---------------------------------------------------------------------
$13,952.2 $14,404.5
---------------------------------------------------------------------
---------------------------------------------------------------------



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions of Canadian dollars)
(unaudited)
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------

REVENUES

Cable $250.8 $221.3 $724.0 $640.4
Newspapers 220.7 207.5 672.8 640.9
Broadcasting 81.0 71.3 281.8 251.6
Leisure and
Entertainment 65.9 61.7 167.7 160.7
Business
Telecommunications 25.0 21.5 72.7 56.1
Interactive
Technologies and
Communications 15.6 12.2 48.9 37.2
Internet/Portals 12.1 8.0 35.6 24.1
Head Office and
inter-segment (20.2) (13.6) (56.8) (44.2)
---------------------------------------------------------------------
650.9 589.9 1,946.7 1,766.8

Cost of sales and
selling and
administrative
expenses (475.5) (420.2) (1,426.5) (1,273.8)
Amortization (56.9) (53.8) (167.2) (163.0)
Financial expenses (71.4) (64.7) (217.0) (228.0)
Loss on debt refinancing (60.0) - (60.0) -
Reserve for
restructuring of
operations and other
special charges - - - -
Other - (2.2) 0.1 (0.9)
---------------------------------------------------------------------
(LOSS) INCOME BEFORE
INCOME TAXES (12.9) 49.0 76.1 101.1
Income taxes:
Current 0.6 3.2 12.8 9.4
Future (4.4) 13.8 14.4 28.9
---------------------------------------------------------------------
(3.8) 17.0 27.2 38.3
---------------------------------------------------------------------
(9.1) 32.0 48.9 62.8
Non-controlling interest (1.0) (5.1) (10.8) (22.6)
---------------------------------------------------------------------
(LOSS) INCOME FROM
CONTINUING OPERATIONS (10.1) 26.9 38.1 40.2
Loss from discontinued
operations - - - (1.1)
---------------------------------------------------------------------
NET (LOSS) INCOME $(10.1) $26.9 $38.1 $39.1
---------------------------------------------------------------------
---------------------------------------------------------------------



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
SEGMENTED INFORMATION
(in millions of Canadian dollars)
(unaudited)
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------

Income before
amortization,
financial expenses,
loss on debt
refinancing and
other
Cable $95.0 $89.7 $282.1 $253.5
Newspapers 49.5 51.0 152.9 155.6
Broadcasting 4.8 12.9 36.2 55.0
Leisure and
Entertainment 10.5 10.5 15.4 14.6
Business
Telecommunications 7.0 4.2 20.7 11.3
Interactive
Technologies and
Communications 0.9 0.4 3.1 1.5
Internet/Portals 2.3 1.2 6.7 3.3
General corporate
revenue (expenses) 5.4 (0.2) 3.1 (1.8)
---------------------------------------------------------------------
$175.4 $169.7 $520.2 $493.0
---------------------------------------------------------------------
---------------------------------------------------------------------
Amortization
Cable $35.6 $34.8 $104.8 $104.7
Newspapers 7.5 6.2 20.3 19.0
Broadcasting 3.0 2.7 10.0 8.8
Leisure and
Entertainment 1.2 0.9 3.2 2.8
Business
Telecommunications 8.5 8.4 25.9 25.2
Interactive
Technologies and
Communications 0.5 0.5 1.3 1.2
Internet/Portals 0.2 0.1 0.6 0.5
Head Office 0.4 0.2 1.1 0.8
---------------------------------------------------------------------
$56.9 $53.8 $167.2 $163.0
---------------------------------------------------------------------
---------------------------------------------------------------------
Additions to property,
plant and equipment
Cable $59.5 $33.2 $134.5 $93.7
Newspapers 29.3 3.9 36.2 12.4
Broadcasting 2.9 4.0 9.8 7.6
Leisure and
Entertainment 2.0 0.6 4.8 2.0
Business
Telecommunications 6.3 7.5 12.6 16.1
Interactive
Technologies and
Communications 0.2 0.3 1.1 0.9
Internet/Portals 0.4 0.1 0.6 0.4
Head Office 1.1 1.9 2.9 2.0
---------------------------------------------------------------------
$101.7 $51.5 $202.5 $135.1
---------------------------------------------------------------------
---------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF DEFICIT
(in millions of Canadian dollars)
(unaudited)
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------

Deficit at beginning of
period $2,491.4 $2,585.6 $2,529.6 $2,597.8

Net loss (income) 10.1 (26.9) (38.1) (39.1)
---------------------------------------------------------------------
2,501.5 2,558.7 2,491.5 2,558.7

Dividends 10.0 20.0 20.0 20.0
---------------------------------------------------------------------
Deficit at end of
period $2,511.5 $2,578.7 $2,511.5 $2,578.7
---------------------------------------------------------------------
---------------------------------------------------------------------



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of Canadian dollars)
(unaudited)
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------

Cash flows related to
operations:
(Loss) income from
continuing
operations $(10.1) $26.9 $38.1 $40.2
Adjustments for:
Amortization of
property, plant
and equipment 55.4 52.6 162.2 159.0
Amortization of
deferred charges
and other assets 1.5 1.2 5.0 4.0
Amortization of
deferred financing
costs and
long-term debt
discount 16.0 14.9 46.7 43.0
Loss (gain) on
ineffective
derivative
instruments and
on foreign
currency
translation on
unhedged long-term
debt 4.9 (9.1) 6.4 0.9
Loss on revaluation
of the additional
amount payable 0.9 4.9 6.2 14.7
(Gain) loss on
disposal of
businesses, plant,
property and
equipment
and other assets (0.5) 0.6 (0.4) 11.5
Loss on debt
refinancing 60.0 - 60.0 -
Non-controlling
interest 1.0 5.1 10.8 22.6
Future income taxes (4.4) 13.8 14.4 28.9
Other (0.8) (0.9) (1.1) 0.6
---------------------------------------------------------------------
123.9 110.0 348.3 325.4
Net change in
non-cash balances
related to
operations (net of
effect of business
acquisitions and
disposals) (11.3) 7.9 (98.4) (62.5)
---------------------------------------------------------------------
Cash flows provided
by continuing
operations 112.6 117.9 249.9 262.9
Cash flows provided
by discontinued
operations - - - 0.6
---------------------------------------------------------------------
Cash flows provided
by operations 112.6 117.9 249.9 263.5
---------------------------------------------------------------------
Cash flows related to
financing activities:
Net (decrease)
increase in bank
indebtedness (4.8) (3.5) 8.9 (2.9)
Issuance of long-term
debt 205.1 - 205.1 -
Net borrowing
(repayments) under
revolving bank
facilities 79.4 (6.9) 74.6 (121.4)
Repayments of
long-term debt
including unwinding
of hedging contracts (316.3) (21.0) (318.0) (66.0)
Net (increase)
reduction in
prepayments under
cross-currency swap
agreements (34.0) (2.9) (34.1) 0.6
Repayments under an
interest rate swap (1.3) - (3.6) -
Issuance of capital
stock by
subsidiaries - - - 2.6
Dividends (10.0) (20.0) (20.0) (20.0)
Dividends paid to
non-controlling
shareholders (1.3) (1.5) (3.9) (3.9)
Other (3.6) - (4.1) -
---------------------------------------------------------------------
Cash flows used in
financing activities (86.8) (55.8) (95.1) (211.0)
---------------------------------------------------------------------
Cash flows related to
investing activities:
Businesses
acquisitions, net of
cash and cash
equivalents acquired (76.2) (41.0) (85.8) (66.7)
Proceeds from disposal
of businesses, net
of cash and cash
equivalents disposed - 1.1 4.3 (7.8)
Additions to
property, plant and
equipment (101.7) (51.5) (202.5) (135.1)
Additions to other
assets (1.4) - (2.8) (1.7)
Net (increase)
decrease in
temporary
investments - (63.5) 99.6 130.6
Proceeds from
disposal of assets 0.3 0.8 3.1 4.7
Other 0.1 (2.6) 0.2 (0.8)
---------------------------------------------------------------------
Cash flows used in
investing activities (178.9) (156.7) (183.9) (76.8)
---------------------------------------------------------------------

Net decrease in cash
and cash equivalents (153.1) (94.6) (29.1) (24.3)
Effect of exchange rate
changes on cash and
cash equivalents
denominated in foreign
currencies (0.4) (0.3) (0.5) 0.2
Cash and cash
equivalents at
beginning of period 232.7 174.4 108.8 103.6
---------------------------------------------------------------------
Cash and cash
equivalents at end
of period $79.2 $79.5 $79.2 $79.5
---------------------------------------------------------------------
---------------------------------------------------------------------

Cash and cash
equivalents consist
of:
Cash $3.4 $14.7 $3.4 $14.7
Cash equivalents 75.8 64.8 75.8 64.8
---------------------------------------------------------------------
$79.2 $79.5 $79.2 $79.5
---------------------------------------------------------------------
---------------------------------------------------------------------

Cash interest payments $106.9 $97.7 $224.6 $210.7
Cash payments (net of
refunds) for income
taxes (11.7) (9.1) 11.0 8.4
---------------------------------------------------------------------
---------------------------------------------------------------------



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

September 30 December 31
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 2004
---------------------------------------------------------------------
(unaudited) (audited)

ASSETS

CURRENT ASSETS
Cash and cash equivalents $79.2 $108.8
Temporary investments (market value of
$0.1 million ($99.7 million in 2004)) 0.1 99.7
Accounts receivable 342.9 342.9
Income taxes 7.5 24.2
Inventories and investments in televisual
products and movies 161.7 134.7
Prepaid expenses 28.0 21.4
Future income taxes 73.4 70.6
---------------------------------------------------------------------
692.8 802.3

LONG-TERM INVESTMENTS (market value of
$11.1 million ($13.0 million in 2004)) 11.1 13.0
PROPERTY, PLANT AND EQUIPMENT 1,557.2 1,522.1
FUTURE INCOME TAXES 79.0 80.8
OTHER ASSETS 243.6 240.0
GOODWILL 3,864.4 3,851.0
---------------------------------------------------------------------
$6,448.1 $6,509.2
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Bank indebtedness $8.9 $-
Accounts payable and accrued charges 469.3 546.2
Deferred revenue 149.1 143.7
Income taxes 9.9 13.4
Advances payable to parent company and
companies under common control 7.5 16.7
Additionnal amount payable 107.6 101.4
Current portion of long-term debt 4.7 2.8
---------------------------------------------------------------------
757.0 824.2

LONG-TERM DEBT 2,520.2 2,546.0
OTHER LIABILITIES 360.0 297.0
FUTURE INCOME TAXES 194.6 189.4
NON-CONTROLLING INTEREST 139.6 192.7

SHAREHOLDERS' EQUITY
Capital stock 1 773.7 1 773.7
Contributed surplus 3 216.8 3 216.8
Deficit (2,511.5) (2,529.6)
Translation adjustment (2.3) (1.0)
---------------------------------------------------------------------
2,476.7 2,459.9

---------------------------------------------------------------------
$6,448.1 $6,509.2
---------------------------------------------------------------------
---------------------------------------------------------------------


Contact Information

  • Quebecor Inc.
    Jacques Mallette
    Executive Vice President and Chief Financial Officer
    (514) 380-1948
    or
    Quebecor Inc.
    Luc Lavoie
    Executive Vice President, Corporate Affairs
    (514) 380-1974 / (514) 886-7665 (cell)
    lavoie.luc@quebecor.com