TVA Group Inc.
TSX : TVA.B

TVA Group Inc.

May 04, 2007 09:32 ET

TVA Group Inc. Records Net Income of $0.9 Million for the Quarter Ended March 31st 2007

MONTREAL, CANADA--(CCNMatthews - May 4, 2007) - TVA Group Inc. (TSX:TVA.B) announces a net income of $0.9 million or $0,03 per share, for the first quarter 2007 compared with net loss of $2.7 million or $0.10 per share, for the corresponding quarter of 2006.

Operating highlights for the first quarter:

- Growth of operating income(1) in the Television sector of $2.6 million, compared with the same quarter of last year, mainly due to:

- Growth of 52.6% in the operating income(1) for specialty services.

- Growth of more than 21% in TVA Network's operating income(1), while for the same quarter last year, there was a substantial drop of 59%.

- Decrease of 31% in the operating loss(1) of SUN TV, resulting from a combination of growth in its operating revenues of 16.1% and a decrease in its operating expenses of 7.2%.

- Significant improvement in the profitability of the Publishing sector, which recorded operating income(1) of $1.1 million, compared with an operating loss(1) of $1.5 million for the same quarter last year.

- The Distribution sector saw its operating loss(1) grow by $2.1 million against the corresponding quarter of 2006.

As a result, the Company's consolidated operating income(1) was $2.7 million, against an operating loss of $0.4 million for the same quarter of 2006.

"Given the challenges we are facing, we are generally satisfied with the Company's financial results for the first quarter of 2007. Our strategic plan of reducing operating expenses is well under way. Our teams of professionals are stepping up their efforts to counter the fragmentation of the conventional television market, and our ratings in recent weeks confirm our position as the leader in the francophone television market in Quebec. Our specialty channels are developing well, and we are pursuing growth in this sector. As well, SUN TV is on the right path, although much remains to be done," said Pierre Dion, President and Chief Executive Officer of TVA Group.

"In spite of the intense competition in the Publishing sector, our revenues in this sector grew 1.7% and our operating expenses dropped by more than 12%. Large amounts were still being invested in the weekly magazine market share war during the corresponding quarter last year. Finally, movie releases that are generally accompanied by major marketing expenses were more numerous than in the first quarter of 2006, accounting for the increase of $2.1 million in the operating loss(1) for this sector of activity," said Mr. Dion.

Cash flows provided by operations amounted to $13.8 million for the quarter, compared with $12.1 million for the corresponding quarter last year. This increase is largely due to the rise in operating income.

TVA Group's Board of Directors today announced a dividend of $0.05 per share, payable on June 5th, 2007 to Class A and B shareholders of record as at May 21st, 2007. 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.

TVA Group is an integrated communications company involved in television, production and distribution of audio-visual products, and in magazine publishing. TVA is one of the largest private-sector producer and the largest private-sector broadcaster of French-language entertainment, information and public affairs programming, and magazine publishing in North America. TVA also operates SUN TV, a general-interest station in Toronto. The Company's Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B.

The unaudited consolidated financial statements with notes and the management's discussion and analysis can be consulted on TVA's Web site at: www.tva.canoe.com

Forward-looking information disclaimer

The statements in this news release that are not historical facts are forward-looking statements and are subject to important known and unknown risks, uncertainties and assumptions which could cause the Company'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, operational risks (including pricing actions by competitors), capital investment risks, environmental risks, credit risk, government regulation risks, governmental assistance risks and general changes in the 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 the Company's actual results to differ from current expectations, please refer to the Company's public filings available at www.sedar.com and www.tva.canoe.com including, in particular, the "Risks and Uncertainties" section of the Company's annual management's discussion and analysis for the year ended December 31st, 2006, and the updated information in the Company's quarterly management's discussion and analysis.

The forward-looking statements in this news release reflect the Company's expectations as of May 4th, 2007, and are subject to change after this date. The Company expressly disclaims any obligation or intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by the applicable securities laws.

(1) Operating income or operating loss: In its analysis of operating results, the Company defines operating income or operating loss as earnings (loss) before amortization, financial expenses, restructuring costs of operations, impairment of intangible assets, gain on acquisition and disposal of business, (recovery) income taxes, non-controlling interest and equity in income of companies subject to significant influence. Operating income or operating loss, as defined above, is not a measure of results that is consistent with Canadian Generally Accepted Accounting Principles ("GAAP"). Neither is it intended to be regarded as an alternative to other financial performance measures or to the statement of cash flows as a measure of liquidity. This measure is not intended to represent funds available for debt service, dividend payment, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for other performance measures prepared in accordance with Canadian GAAP. Operating income is used by the Company because management believes it is a meaningful measurement of performance. This measure is used by senior management and the Board of Directors to evaluate the consolidated results of the Company and its sectors results. Measurements such as operating income are also commonly used by the investment community to analyze and compare the performance of companies in the industries in which we are engaged. The Company's definition of operating income may not be identical to similarly titled measures reported by other companies.



TVA GROUP INC.
Consolidated statements of income
(unaudited)
(in thousands of dollars, except per share amounts)

----------------------------------------------------------------------
For the three-month periods
ended March 31
----------------------------------------------------------------------
----------------------------------------------------------------------
2007 2006
----------------------------------------------------------------------
----------------------------------------------------------------------
Operating revenues $93,326 $90,924
Operating, selling and
administrative expenses 90,602 91,319
Amortization of fixed
assets and start-up costs 3,188 3,600
Financial expenses 1,037 1,184
Restructuring costs of
operations (note 3) 980 -
----------------------------------------------------------------------
----------------------------------------------------------------------
Loss before recovery of income
taxes, non-controlling interest
and equity in income of companies
subject to significant influence (2,481) (5,179)
Recovery of income taxes (note 4) (2,219) (1,294)
Non-controlling interest (778) (979)
Equity in income of companies
subject to significant influence (420) (167)
----------------------------------------------------------------------
----------------------------------------------------------------------
NET INCOME (NET LOSS) AND
COMPREHENSIVE INCOME $936 $(2,739)
----------------------------------------------------------------------
----------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE
Basic and diluted (note 6 b) $0.03 $(0.10)
----------------------------------------------------------------------
----------------------------------------------------------------------
See accompanying notes to consolidated financial statements



Consolidated statements of retained earnings
(unaudited)
(in thousands of dollars)

----------------------------------------------------------------------
For the three-month periods
ended March 31
----------------------------------------------------------------------
----------------------------------------------------------------------
2007 2006
----------------------------------------------------------------------
----------------------------------------------------------------------
Balance, at beginning of period $62,631 $71,280
Net income (net loss) 936 (2,739)
Dividends paid (1,351) (1,351)
Share redemption - excess of
purchase price over net carrying value - (104)
----------------------------------------------------------------------
Balance, at end of period $62,216 $67,086
----------------------------------------------------------------------
----------------------------------------------------------------------
See accompanying notes to consolidated financial statements



TVA GROUP INC.
Consolidated balance sheets
(in thousands of dollars)
-----------------------------------------------------------------------
March 31, 2007 Dec. 31, 2006
(unaudited) (audited)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
ASSETS
Current assets
Cash $1,926 $2,956
Accounts receivable 98,468 103,637
Current income tax assets 6,276 8,992
Investments in televisual
products and films 36,258 42,221
Inventories and prepaid expenses 6,181 6,259
Future income tax assets 3,900 4,267
-----------------------------------------------------------------------
-----------------------------------------------------------------------
153,009 168,332
Investments in televisual
products and films 31,550 27,186
Investments 55,250 54,830
Fixed assets 73,582 74,038
Future income tax assets 3,422 3,448
Other assets 8,717 8,213
Licences 69,589 69,589
Goodwill 71,868 71,868
-----------------------------------------------------------------------
$466,987 $477,504
-----------------------------------------------------------------------
-----------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdraft $5,930 $-
Accounts payable and
accrued liabilities 78,468 76,589
Current income tax liabilities 4,986 6,051
Broadcast and distribution
rights payable 23,105 22,867
Deferred revenue 6,343 7,022
Deferred credit 590 864
-----------------------------------------------------------------------
-----------------------------------------------------------------------
119,422 113,393

Broadcast rights payable 2,593 3,226
Long-term debt 83,237 96,515
Future income tax
liabilities (note 4) 42,889 44,331
Deferred credit 198 213
Non-controlling interest
and redeemable preferred shares 37,556 38,334
-----------------------------------------------------------------------
-----------------------------------------------------------------------
285,895 296,012
SHAREHOLDERS' EQUITY
Capital stock (note 6) 115,137 115,137
Contributed surplus 3,739 3,724
Retained earnings 62,216 62,631
-----------------------------------------------------------------------
-----------------------------------------------------------------------
181,092 181,492
-----------------------------------------------------------------------
$466,987 $477,504
-----------------------------------------------------------------------
-----------------------------------------------------------------------
See accompanying notes to consolidated financial statements



TVA GROUP INC.
Consolidated statements of cash flows
(unaudited)
(in thousands of dollars)
----------------------------------------------------------------------
For the three-month periods
ended March 31
----------------------------------------------------------------------
----------------------------------------------------------------------
2007 2006
----------------------------------------------------------------------
----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (net loss) $936 $(2,739)
Non-cash items
Amortization 3,209 3,622
Equity in income of companies
subject to significant influence (420) (167)
Non-controlling interest (778) (979)
Future income taxes (1,338) (499)
Others (644) 78
----------------------------------------------------------------------
Cash flows provided by current
operations 965 (684)

Net change in non-cash items 12,827 12,741
----------------------------------------------------------------------
Cash flows from operating activities 13,792 12,057
----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (3,498) (1,663)
Business acquisition (note 5) (2,625) -
Proceeds from disposal of a business - 91
Deferred charges - (286)
Decrease in investments - 323
----------------------------------------------------------------------
Cash flows from investing activities (6,123) (1,535)
----------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft 5,930 (5,862)
Decrease in long-term debt (13,278) (2,647)
Class B share redemption - (154)
Dividends paid (1,351) (1,351)
----------------------------------------------------------------------
Cash flows from financing activities (8,699) (10,014)
----------------------------------------------------------------------
Net change in cash (1,030) 508

Cash, at beginning 2,956 1,757
----------------------------------------------------------------------
Cash, at end $1,926 $2,265
----------------------------------------------------------------------
----------------------------------------------------------------------

Supplemental information
Interest paid 670 1,143
Income taxes (received) paid (2,532) 1,824
Additions to fixed assets
financed by accounts payable and
accrued liabilities at end of period 1,068 739
----------------------------------------------------------------------
----------------------------------------------------------------------
See accompanying notes to consolidated financial statements


TVA GROUP INC.

Notes to consolidated financial statements

For the three-month periods ended March 31, 2007 and 2006 (unaudited)

(Amounts presented in the tables are expressed in thousands of dollars, except per-share and per-option amounts)

1. FINANCIAL STATEMENT PRESENTATION

These consolidated financial statements have been prepared in conformity with Canadian Generally Accepted Accounting Principles ("GAAP"). With the exception of the accounting policies presented in Note 2 for the current quarter, the same accounting policies described in the consolidated financial statements included in the latest annual report of TVA Group Inc. ("the Company") have been used. However, these consolidated financial statements do not include all disclosures required under Canadian GAAP for an annual report and accordingly should be read in conjunction with the Company's latest annual consolidated financial statements and the notes thereto.

Some of the Company's businesses experience significant seasonality effects due to, among other things, seasonal advertising patterns and their influence on people's viewing, reading and listening habits. Because the Company depends on the sale of advertising for a significant portion of its revenue, operating results are also sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising expenditures. Accordingly, the results of operations for interim periods should not necessarily be considered indicative of full-year results due to the seasonality of certain operations.

2. CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2007, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Section 1530, Comprehensive Income and Section 3855, Financial Instruments -- Recognition and Measurement. Changes in accounting policies in conformity with these new accounting standards are as follows:

(a) Comprehensive Income

Section 1530 introduces comprehensive income, which is calculated by adding other comprehensive income to net income. Other comprehensive income represents changes in shareholders' equity arising from transactions and other events with non-owner sources such as unrealized gains and losses on financial assets classified as available-for-sale.

(b) Financial Instruments

Section 3855 establishes standards for recognizing and measuring financial assets, financial liabilities and derivatives. Under this standard, financial instruments are now classified as held-for- trading, available-for-sale, held-to-maturity, receivables, or other financial liabilities and measurement in subsequent periods depends on their classification. Transaction costs are expensed as incurred for financial instruments classified as held-for-trading. For other financial instruments, transaction costs are capitalized on initial recognition and presented in reduction of the underlying financial instruments.

Financial assets and financial liabilities held-for-trading are measured at fair value with changes recognized in income. Available-for-sale financial assets are measured at fair value or at cost, in the case of financial assets that do not have a quoted market price in an active market and changes in fair value are recorded in comprehensive income. Financial assets held-to-maturity, receivables, and other financial liabilities are measured at amortized cost using the effective interest method of amortization. The Company has classified its cash and cash equivalent as held for trading. Trade receivables and receivables from related parties were classified as receivables. Portfolio investments include in the investments were classified as available for sales. All of the Company's financial liabilities were classified as other liabilities.

Derivative instruments are recorded as financial assets or liabilities at fair value, including those derivatives that are embedded in financial or non-financial contracts that are not closely related to the host contracts. Changes in the fair values of the derivatives are recognized in financial expenses with the exception of derivatives designated in a cash flow hedge for which hedge accounting is used. In accordance with the new standards, the Company selected January 1, 2003 as its transition date for embedded derivatives.

The adoption of these new sections did not have an significant effect on the consolidated financial statements.

3. RESTRUCTURING COSTS OF OPERATIONS

During the quarter, the Company recorded a restructuring reserve of $980,000. A reserve of $219,000 was recorded following the elimination of positions in the Publishing sector and a reserve of $761,000 was recorded for new litigation relating to the production activities of its former subsidiary, TVA Acquisition.

4. INCOME TAXES

In light of the evolution of tax auditing, jurisprudence and tax legislation, the Company reduced its future income tax liabilities during the quarter by $1,488,000.

5. ACQUISITION OF BUSINESS

On January 8, 2007, the Company made the final payment of the purchase price for the conventional television station in Toronto, SUN TV, including a working capital adjustment of $2,625,000.



6. CAPITAL STOCK

a) Number of shares outstanding

-----------------------------------------------------------------
-----------------------------------------------------------------
March 31, 2007 December 31, 2006
-----------------------------------------------------------------
Class A common shares 4,320,000 4,320,000
Class B shares 22,704,848 22,704,848
-----------------------------------------------------------------
27,024,848 27,024,848
-----------------------------------------------------------------
-----------------------------------------------------------------

b) Earnings (loss) per share

The following table provides the calculation of basic and diluted earnings
(loss) per share:

-------------------------------------------------------------------------
Three-month period ended March 31

-------------------------------------------------------------------------
2007 2006
-------------------------------------------------------------------------
Net income (Net loss) $936 $(2,739)
Weighted average number
of shares outstanding 27,024,848 27,028,178
Effect of dilutive stock
options 1,219 2,961
-------------------------------------------------------------------------
Weighted average of
diluted shares outstanding 27,026,067 27,031,139
Basic and diluted earnings
(loss) per share $0.03 $(0.10)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


7. STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
--------------------------------------------------------------------------
Three-month period ended March 31, 2007
--------------------------------------------------------------------------
Conventional Quebecor Media Inc.
Class B stock options stock options
--------------------------------------------------------------------------
Balance at beginning 489,695 129,118
Granted - -
Exercised - -
Cancelled (33,654) -
--------------------------------------------------------------------------
Balance as at March 31, 2007 456,041 129,118
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--------------------------------------------------------------------------


Of the options outstanding as at March 31, 2007, 52,457 conventional Class B stock options at an average exercise price of $20.50 and 48,701 Quebecor Media Inc. stock options at an average exercise price of $16.17 can be exercised.

8. GUARANTEES

The maximum exposure in respect of the guaranteed portion of the residual values of certain assets under operating leases to the benefit of the lessor is $643,000. As at March 31, 2007, the Company did not record any liability related to these guarantees.

9. PENSION PLANS AND OTHER RETIREMENT BENEFITS

The Company maintains defined benefit and defined contribution pension plans for its employees. In addition, under an old plan, the Company maintains for certain retired employees other retirement benefits, such as health, life and dental insurance plans. Total costs for these benefits are as follows:



-------------------------------------------------------------
Three-month period ended March 31
-------------------------------------------------------------
2007 2006
-------------------------------------------------------------
Pension plans
Defined benefit plans $991 $889
Defined contribution plans 611 587

Other retirement benefits $46 $73
-------------------------------------------------------------
-------------------------------------------------------------


10. SEGMENTED INFORMATION

The following table includes information on operating income,
as well as information on assets:

-----------------------------------------------------------------------
Three-month period ended March 31
-----------------------------------------------------------------------
2007 2006
-----------------------------------------------------------------------
Operating revenues
Television $73,268 $71,709
Publishing 17,836 17,545
Distribution 3,805 3,581
Intersegment items (1,583) (1,911)
-----------------------------------------------------------------------
93,326 90,924

Operating, selling and
administrative expenses
Television 69,438 70,467
Publishing 16,726 19,032
Distribution 6,012 3,731
Intersegment items (1,574) (1,911)
-----------------------------------------------------------------------
90,602 91,319

Income (loss) before amortization,
financial expenses, restructuring
costs of operations, recovery of
income taxes, non-controlling interest
and equity in income of companies
subject to significant influence
Television 3,830 1,242
Publishing 1,110 (1,487)
Distribution (2,207) (150)
Intersegment items (9) -
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$2,724 $(395)
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-----------------------------------------------------------------------


The intersegment items mentioned above represent the elimination of normal
course business transactions made between the Company's business segments
regarding revenues, expenses and unrealized profit.

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March 31, 2007 December 31, 2006
-----------------------------------------------------------------------
Total assets
Television $350,371 $362,200
Publishing 85,932 85,071
Distribution 19,422 18,971
Unallocated items 11,262 11,262
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$466,987 $477,504
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Contact Information

  • TVA Group Inc.
    Denis Rozon, CA
    Vice-President and Chief Financial Officer
    514-598-2808