TVA Group Inc.
TSX : TVA.B

TVA Group Inc.

November 01, 2006 13:26 ET

TVA Group Inc. Reports Net Loss of $0.8 Million for the Quarter Ended September 30, 2006

MONTREAL, CANADA--(CCNMatthews - Nov. 1, 2006) - TVA Group Inc. (TSX:TVA.B) announces that the Company reported a net loss of $0.8 million, or $0.03 per diluted share, for the third quarter of 2006, compared with a net income of $2.7 million, or $0.10 per diluted share, for the corresponding quarter of 2005. The decline in net income and in income per diluted share from the same period a year earlier is mainly due to the net impact of rationalization expenses and to the share in the depreciation of an intangible asset in the publishing business. TVA maintained its operating income(1) at $4.8 million for the third quarter, the same amount as for the corresponding period of 2005.

The Company's net income since the start of the year totalled $9.9 million ($0.36 per share) against $19.7 million ($0.67 per share) for the corresponding period last year.

"Conventional television continues to feel pressure from the market," said Pierre Dion, President and Chief Executive Officer of TVA Group. "TVA Network saw its profit decline significantly during the quarter compared to the same quarter a year earlier, even though it continues to post excellent audience ratings, with the BBM numbers showing that it posted a 27.8% market share and broadcast 23 of the 30 most-watched shows during this period. All of our specialty channels improved their operating income(1) over the same period of last year. We are very happy with the results of our new Prise 2 channel, which was launched in the first quarter of this year. The growth of subscription revenues for these specialty channels is the main reason for this better profitability. Sun TV reduced its operating loss1 by more than 27% from the third quarter of 2005. Our publishing business had a good quarter, posting considerably higher operating income(1) than for the corresponding period a year earlier, illustrating a clear improvement in our margins. Lastly, our distribution sector, which performed well during the third quarter of 2005 with the success of the films White Noise and C.R.A.Z.Y., saw its profitability drop during the same period this year because of the postponement of the release of several movies until 2007."

Cash flows from operating activities were $5.3 million for the third quarter, against $13.2 million for the corresponding year-ago period. This decrease in cash flows from operating activities is mainly the result of the lower income and the net change in non-cash working capital items.

TVA Group's Board of Directors announced today a dividend of $ 0.05 per share, payable on December 1st, 2006, to Class A and B shareholders of record as at November 16th, 2006.

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 risks, government regulation risks, government 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 31, 2005, 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 November 1, 2006, 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.

About TVA Group

TVA Group is an integrated communications company involved in television, production and distribution of audiovisual products, and in magazine publishing. TVA Group is North America's largest private producer and distributor of French-language entertainment, information and public affairs programming, and its largest publisher of French-language magazines. TVA Group 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.

(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 and impairment of intangible assets, gain on disposal of business, income taxes (recovery), 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 commonly used by senior management and the Board of Directors to analyze and compare the consolidated results of the Company with those of companies in the industries in which the Company is engaged. 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 For the nine-month
periods ended periods ended
--------------------------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
--------------------------------------------------------------------------
Operating revenues $79,014 $81,042 $273,375 $281,806
Operating, selling and
administrative
expenses 74,249 76,230 250,178 245,571
Amortization of fixed
assets and start-up costs 3,321 2,996 10,486 10,030
Financial expenses 1,371 909 3,949 1,582
Restructuring costs of
operations and
impairment of an
intangible asset
(Note 3) 1,898 - 1,898 -
Gain on disposal of
a business - - - (44)
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(Loss) Income before
(recorery) income
taxes, non controlling
interest and
equity in income of
companies subject to
significant influence (1,825) 907 6,864 24,667

(Recovery) Income taxes (21) (715) 201 7,030
Non-controlling interest (783) (848) (2,621) (1,426)
Equity in income of
companies subject to
significant influence (201) (201) (570) (604)
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NET (LOSS) INCOME $(820) $2,671 $9,854 $19,667
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(LOSS) EARNINGS PER SHARE
Basic and diluted
(note 4 c) $(0.03) $0.10 $0.36 $0.67
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See accompanying notes to consolidated financial statements



TVA GROUP INC.
Consolidated statements of retained earnings
(unaudited)
(in thousands of dollars)
--------------------------------------------------------------------------
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For the nine-month periods ended
--------------------------------------------------------------------------
Sept. 30, 2006 Sept. 30, 2005
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Balance, at beginning $71,280 $111,680
Net income 9,854 19,667
Dividends paid (4,054) (4,412)
Share redemption - excess of purchase
price over net carrying value (note 4 b) (104) (62,554)
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Balance, at end $76,976 $64,381
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See accompanying notes to consolidated financial statements



TVA GROUP INC.
Consolidated balance sheets
(in thousands of dollars)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Sept. 30, 2006 December 31, 2005
(unaudited) (audited)
--------------------------------------------------------------------------
ASSETS
Current assets
Cash $5,755 $1,757
Accounts receivable 86,893 101,126
Current income tax assets 5,343 3,897
Investments in televisual products and films 58,821 45,145
Inventories and prepaid expenses 6,096 5,607
Future tax assets 8,121 9,156
--------------------------------------------------------------------------
171,029 166,688

Investments in televisual products and films 28,621 28,040
Investments 58,184 57,840
Fixed assets 73,093 77,173
Future tax assets 3,185 3,478
Other assets 7,806 6,870
Licences 92,708 93,452
Goodwill 79,833 79,833
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$514,459 $513,374
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $11,177 $12,284
Accounts payable and accrued
liabilities 71,349 69,933
Current income tax liabilities 4,295 4,695
Broadcast and distribution rights
payable 34,007 26,466
Deferred revenue 5,442 5,620
Deferred credit 1,246 1,394
--------------------------------------------------------------------------
127,516 120,392

Broadcast rights payable 5,535 2,532
Long-term debt 92,451 107,098
Future tax liabilities 51,555 54,638
Deferred credit 232 290
Non-controlling interest and
redeemable preferred shares (note 2) 41,626 38,526
--------------------------------------------------------------------------
318,915 323,476

SHAREHOLDERS' EQUITY
Capital stock (note 4) 115,137 115,187
Contributed surplus 3,431 3,431
Retained earnings 76,976 71,280
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195,544 189,898
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$514,459 $513,374
--------------------------------------------------------------------------
--------------------------------------------------------------------------

See accompanying notes to consolidated financial statements



TVA GROUP INC.
Consolidated statements of cash flows
(unaudited)
(in thousands of dollars)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three-month For the nine-month
periods ended periods ended
--------------------------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
--------------------------------------------------------------------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net (loss) income $(820) $2,671 $9,854 $19,667
Non-cash items
Amortization 3,342 3,018 10,551 10,148
Equity in income of
companies subject to
significant influence (201) (201) (570) (604)
Non-controlling interest (783) (848) (2,621) (1,426)
Future income taxes (724) 589 (1,961) (1,002)
Impairment of an
intangible asset 744 - 744 -
Other (145) 132 102 298
------------------------------------------------------------------------
Cash flows provided
by current operations 1,413 5,361 16,099 27,081

Net change in
non-cash items 3,862 7,802 8,050 (7,635)
------------------------------------------------------------------------
5,275 13,163 24,149 19,446

CASH FLOWS FROM
INVESTING ACTIVITIES
Additions to fixed assets (1,820) (2,934) (5,401) (9,789)
Proceeds from
disposal of a business - - 91 -
Deferred charges - - (286) (742)
Decrease (increase)
in investments 226 (37,300) 549 (34,961)
------------------------------------------------------------------------
(1,594) (40,234) (5,047) (45,492)

CASH FLOWS FROM
FINANCING ACTIVITIES
Bank indebtedness 2,965 (8,872) (1,107) 3,443
(Decrease) increase
in long-term debt (2,594) 77,347 (14,647) 72,562
Deferred financing charges - - - (441)
Issuance of redeemable
preferred shares - 37,300 - 37,300
Issuance of an advance
by the non-controlling
interest (note 2) 1,125 - 4,858 -
Class B share
redemption (note 4 b) - (76,077) (154) (81,280)
Dividends paid (1,352) (1,354) (4,054) (4,412)
------------------------------------------------------------------------
144 28,344 (15,104) 27,172
------------------------------------------------------------------------
Net change in cash 3,825 1,273 3,998 1,126
Cash, at beginning 1,930 1,839 1,757 1,986
------------------------------------------------------------------------
Cash, at end $5,755 $3,112 $5,755 $3,112
------------------------------------------------------------------------
------------------------------------------------------------------------

Supplemental information
Interest paid 1,283 706 3,787 1,218
Income taxes paid 703 (7,436) 4,322 9,845
Additions to fixed
assets financed by
accounts payable and
accrued liabilities
at end of period 1,438 841
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to consolidated financial statements


TVA GROUP INC.

Notes to consolidated financial statements

For the three and nine-month periods ended September 30, 2006 and 2005 (unaudited)

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

1. FINANCIAL STATEMENT PRESENTATION

These consolidated financial statements have been prepared in conformity with Canadian Generally Accepted Accounting Principles ("GAAP"). 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.

Certain comparative figures for the previous period have been reclassified to conform to the presentation adopted for the current period. Regarding Sun TV's purchase price allocation, certain acquired assets were accounted for at their fair value, including non-controlling interest. In order to reflect only the Company's share of the acquired assets at fair value, the licence was reduced by $7,707,000, goodwill by $2,655,000, future tax liability by $2,784,000 and non-controlling interest by $7,578,000. This reclassification had no impact on net income, cash flows and shareholders' equity for all the reported periods.

2. NON-CONTROLLING INTEREST

On May 12, 2006, a subsidiary of the Company, Sun TV Company (previously 3095531 Nova Scotia Company), owned at 75% and operating the television channel Sun TV, obtained from its non-controlling interest, Sun Media Corporation, a company under common control of its ultimate parent, Quebecor Inc., an advance amounting to $3,733,000 and on July 21, 2006 an additional advance of $1,125,000. To date, advances totalling $22,884,000, of which $17,163,000 was granted by the Company and the remaining $5,721,000 by Sun Media Corporation, were converted in common shares of the subsidiary, thus maintaining the interest in Sun TV Company at 75% and 25%, respectively.

3. RESTRUCTURING COSTS OF OPERATIONS AND IMPAIRMENT OF AN INTANGIBLE ASSET

During the quarter, the Company has recorded a restructuring reserve of $1,154,000 following the announcement of the elimination of some 20 positions in its television sector.

The Company has also recorded its share in the impairment in an intangible asset, consisting in a magazine operating licence owned in a joint venture amounting to $744,000.



4. CAPITAL STOCK

a) Outstanding shares
----------------------------------------------------------
----------------------------------------------------------
September 30, 2006 December 31, 2005
----------------------------------------------------------
Class A common shares 4,320,000 4,320,000
Class B shares 22,704,848 22,714,648
----------------------------------------------------------
27,024,848 27,034,648
----------------------------------------------------------
----------------------------------------------------------


b) Share redemption

Normal course issuer bid

During the nine-month period ended September 30, 2006, pursuant to its normal course issuer bid programs, the Company redeemed for cancellation a total of 9,800 non-voting Class B shares (250,600 shares as at September 30, 2005) for a net cash consideration of $154,000 ($5,203,000 as at September 30, 2005). As at September 30, 2006, all the shares redeemed were cancelled.

During the quarter, the Company filed a notice of intent to repurchase for cancellation between August 4, 2006 and August 3, 2007, in the normal course of its activities, a maximum of 1,135,242 outstanding Class B shares. The Company repurchase its shares at the market price plus brokerage fees. No shares have been repurchase under this new offer during the period.

Substantial issuer bid

During the nine-month period ended September 30, 2005, the Company had filed an Issuer Bid to redeem for cancellation up to 3,500,000 of its participating Class B non-voting shares at a price of not less than $19.50 per Class B share nor more than $22.00 per Class B share.

On July 6, 2005, the Company took up 3,449,199 Class B shares of its capital stock relating to this Issuer Bid, for an aggregate consideration of $75,882,378 plus transaction fees, financed by the credit agreement, representing $22.00 per Class B share. The Class B shares redeemed for cancellation under this Issuer Bid represented 13.16% of the 26,203,647 Class B shares issued and outstanding.



c) (Loss) earnings per share

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

-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three-month For the nine-month
periods ended periods ended
-------------------------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
-------------------------------------------------------------------------
Net (loss) income $(820) $2,671 $9,854 $19,667
Weighted average number
of shares outstanding 27,024,848 27,415,578 27,025,960 29,526,499
Effect of dilutive
stock options - 9,876 190 8,965
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Weighted average number
of diluted
shares outstanding 27,024,848 27,425,454 27,026,150 29,535,464

Basic and diluted (loss)
earnings per share $(0.03) $0.10 $0.36 $0.67
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5. STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS

--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three-month For the nine-month
period ended period ended
September 30, 2006 September 30, 2006
--------------------------------------------------------------------------
Conventional Quebecor Conventional Quebecor
Class B Media Inc. Class B Media Inc.
Stock stock stock stock
options options options options
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Balance at beginning 673,067 131,992 310,177 100,242
Granted 90,712 8,694 467,477 40,444
Exercised (25,000) -- (27,500) --
Cancelled (230,628) (5,784) (242,003) (5,784)
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Balance as at
September 30, 2006 508,151 134,902 508,151 134,902
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Of the options outstanding as at September 30, 2006, 46,625 conventional Class B stock options at an average exercise price of $22.18 and 36,526 QMI stock options at an average exercise price of $16.17 can be exercised.

6. 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 $738,000. As at September 30, 2006, the Company did not record any liability related to these guarantees.

7. PENSION PLAN AND OTHER RETIREMENT BENEFITS

The Company maintains defined benefits and defined contribution pension plans for its employees. In addition, the Company maintains for certain retired employees with respect to an old plan, other retirement benefits, such as health, life and dental insurance plans.



Total costs for these benefits are as follows:

------------------------------------------------------------------------
------------------------------------------------------------------------
For the three-month For the nine-month
periods ended periods ended

------------------------------------------------------------------------
------------------------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
------------------------------------------------------------------------
Pension plans
Defined benefit plans $889 $571 $2,667 $1,774
Defined contribution plans 592 507 1,685 1,594
Other retirement benefits $74 $48 $221 $144
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8. SEGMENTED INFORMATION

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

For the three-month For the nine-month
periods ended periods ended
-------------------------------------------------------------------------
Sept. 30, Sept.30, Sept.30, Sept.30,
2006 2005 2006 2005
-------------------------------------------------------------------------
Operating revenues
Television $59,776 $58,944 $213,277 $211,934
Publishing 19,296 18,307 57,664 57,504
Distribution 2,583 4,627 8,894 15,630
Intersegment items (2,641) (836) (6,460) (3,262)
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79,014 81,042 273,375 281,806

Operating, selling and
administrative expenses
Television 55,981 55,105 189,354 181,390
Publishing 17,962 18,047 56,611 52,526
Distribution 2,373 3,914 10,099 14,917
Intersegment items (2,067) (836) (5,886) (3,262)
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74,249 76,230 250,178 245,571

Income (loss) before
amortization, financial
expenses, restructuring costs of
operations and impairment
of an intangible asset, gain on
disposal of a business,
income taxes,
non-controlling interest
and equity in
income of companies subject
to significant influence
Television 3,795 3,839 23,923 30,544
Publishing 1,334 260 1,053 4,978
Distribution 210 713 (1,205) 713
Intersegment items (574) - (574) -
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$4,765 $4,812 $23,197 $36,235
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Intersegment items mentionned above represent the elimination of normal
course business transactions made between each operation segment of the
Company regarding revenues, expenses and unrealized profit.


September 30, 2006 December 31, 2005
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Total assets
Television $403,104 $389,169
Publishing 85,694 89,769
Distribution 14,399 23,174
Unallocated items 11,262 11,262
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$514,459 $513,374
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Contact Information

  • TVA Group
    Denis Rozon
    Vice-President and Chief Financial Officer
    514-598-2808