TVA Group Reports $4.4 Million Net Loss Attributable to Shareholders in Fourth Quarter Ended December 31, 2014

MONTREAL, CANADA--(Marketwired - Feb. 27, 2015) - TVA Group Inc. (the "Corporation") (TSX:TVA.B) announces that it recorded a net loss attributable to shareholders in the amount of $4.4 million, or $0.19 per share, for the fourth quarter of 2014, compared with net income attributable to shareholders of $8.3 million, or $0.35 per share, in the same quarter of 2013.

Fourth quarter operating highlights:

• Consolidated adjusted operating income(1): $6,814,000, a decrease of $13,520,000 (-66.5%) compared with the same quarter of 2013.
  
  
• Broadcasting & Production segment's adjusted operating income: $5,073,000, an unfavourable variance of $13,314,000 (-72.4%) due primarily to the following factors:
  
  
  • 4.1% decrease in operating income at TVA Network, largely because of a 3.4% decrease in advertising revenues; and
    
    
  • increase in the operating loss of the TVA Sports service as a result of increased in programming investments and the launch of TVA Sports 2.
    
    
• Magazines segment's adjusted operating income: $1,741,000, an unfavourable variance of $206,000 (-10.6%) mainly because of an 8.3% decrease in advertising revenues and a 1.9% decrease in newsstand revenues.
  
  
• On December 30, 2014, the Corporation closed the acquisition of substantially all of the assets of Vision Globale A.R. ltée ("Vision Globale") for a total purchase price of $116,139,000 in cash. Vision Globale operates in the film and television industry, offering soundstage and equipment leasing, post-production and visual effects services.
  
  
• On November 17, 2014, the Corporation announced an agreement with Transcontinental Inc. to acquire 15 magazines for a cash consideration of $55.5 million. The transaction is however subject to Competition Bureau approval.
  
  

(1) See definition of adjusted operating income (loss) below.

"While the Broadcasting & Production segment's advertising revenues fell short of our expectations in the fourth quarter of 2014, we are very pleased with the audience response to our new sports offering, which yielded a market share of nearly 2.0% for TVA Sports and TVA Sports 2, compared with 0.4% in the same quarter of 2013," commented Julie Tremblay, President and CEO of the Corporation. "Naturally, the addition of extensive NHL coverage entailed significant investments in sports content, particularly in connection with the launch of TVA Sports 2, in September, 2014 and we are reaping the dividends at every level. For example, our advertisers have responded very positively and TVA Sports' advertising revenues were up by several million dollars in the last quarter of 2014 compared with the same quarter of 2013. New contracts for carriage of TVA Sports and TVA Sports 2 generated a 62% overall increase in subscription revenues for our specialty services compared with the same quarter of 2013," also commented Julie Tremblay.

"The Magazines segment put in a strong financial performance. Its operating margin was 11.4% of total revenues. A 3.3% reduction in the segment's operating expenses enabled it to largely absorb a 4.2% quarter-over-quarter drop in its operating revenues. We are also very pleased with the agreement with Transcontinental. The transaction will add 15 prestigious titles to our stable and will position the Corporation to offer its advertisers a portfolio of complementary and diverse magazines, expand its online assets and enable it to compete more effectively with major media groups and digital rivals. We are awaiting Competition Bureau approval of the deal," concluded Julie Tremblay.

Cash flows provided by operating activities totalled $9.5 million for the quarter, compared with $5.1 million in the same quarter of 2013. The $4.4 million increase was essentially due to the favourable variance in non-cash items, particularly accounts payable, rights and accrued liabilities, which was partially offset by the decrease in adjusted operating income.

2014 results

For the fiscal year ended December 31, 2014, the Corporation's consolidated adjusted operating income was $29.4 million, compared with $60.6 million in the previous year, a 51.4% decrease. Adjusted operating income decreased by 62.8% in the Broadcasting & Production segment and increased by 28.5% in the Magazines segment. The increase in the Magazines segment was due in part to the positive impact of the inclusion of the operating results of La Semaine magazine since July 18, 2013, the decrease in operating expenses at the other magazines, and the impact of savings generated by the expense reduction plan instituted in the second quarter of 2013. The decrease in the Broadcasting & Production segment's adjusted operating income was due to the decline at TVA Network caused by the combined effect of lower advertising revenues, the favourable impact on 2013 operating revenues of recognition of retroactive royalties for retransmission of distant signals, higher content costs, and the increased adjusted operating loss of TVA Sports resulting directly from programming expenditures.

Consolidated operating revenues totalled $439.3 million in fiscal 2014, compared with $444.8 million in the previous year, a 1.2% decrease. During the same period, the Corporation recorded a net loss attributable to shareholders in the amount of $41.1 million, or $1.73 per share, compared with net income attributable to shareholders in the amount of $15.7 million, or $0.66 per share, in 2013.

In the third quarter of 2014, the Corporation reviewed its business plan and operating forecasts, particularly in the Broadcasting & Production segment. The Corporation concluded that the recoverable amounts were less than the carrying amounts of its broadcasting licence and goodwill. As a result, non-cash impairment charges of $32,462,000 and $8,538,000 respectively were recorded with respect to those assets.

Definition

Adjusted operating income (loss)

In its analysis of operating results, the Corporation defines adjusted operating income (loss) as net income (loss) before depreciation of property, plant and equipment, amortization of intangible assets, financial expenses, operational restructuring costs, impairment of assets and other costs, income taxes and share of loss (income) of associated corporations. Adjusted operating income (loss) as defined above is not a measure of results that is consistent with International Financial Reporting Standards ("IFRS"). 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 should not be considered in isolation or as a substitute for other performance measures prepared in accordance with IFRS.

This measure is used by management and the Board of Directors to evaluate the Corporation's consolidated results and the results of its business segments. This measure eliminates the significant level of impairment, depreciation and amortization of tangible and intangible assets and is unaffected by the capital structure or investment activities of the Corporation and its segments. Adjusted operating income (loss) is also relevant because it is a significant component of the Corporation's annual incentive compensation programs. The Corporation's definition of adjusted operating income (loss) may not be identical to similarly titled measures reported by other companies.

Forward-looking information disclaimer

The statements in this news release that are not historical facts may be forward-looking statements and are subject to important known and unknown risks, uncertainties and assumptions which could cause the Corporation's actual results for future periods to differ materially from those set forth in the forward-looking statements. Forward-looking statements generally can be identified by the use of the conditional, the use of forward-looking terminology such as "propose," "will," "expect," "may," "anticipate," "intend," "estimate," "plan," "foresee," "believe" or the negative of these terms or variations of them or similar terminology. Factors that may cause actual results to differ from current expectations include seasonality, operational risks (including pricing actions by competitors), programming, content and production cost risks, credit risk, government regulation risks, government assistance risks, changes in economic conditions, fragmentation of the media landscape, and labour relation risks. 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 Corporation's actual results to differ from current expectations please refer to the Corporation's public filings available at www.sedar.com and http://groupetva.ca including, in particular, the "Risks and Uncertainties" section of the Corporation's annual Management's Discussion and Analysis for the year ended December 31, 2014.

The forward-looking statements in this news release reflect the Corporation's expectations as of February 27, 2015, and are subject to change after this date. The Corporation 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.

TVA Group

TVA Group Inc., a subsidiary of Quebecor Media Inc., is an integrated communications company engaged in the broadcasting, film and television production, and magazine publishing industries. TVA Group Inc. is the largest broadcaster of French-language entertainment, information and public affairs programming in North America, the largest publisher of French-language magazines, and one of the largest private-sector producers of French-language content. The Corporation's Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B. 

The audited consolidated financial statements with notes and the annual Management's Discussion and Analysis can be consulted on the Corporation's website at http://groupetva.ca.

TVA GROUP INC.

Consolidated statements of (loss) income

(unaudited)

(in thousands of dollars, except per-share amounts)

	Three-month periods ended December 31					Years ended December 31
		2014			2013		2014			2013
Revenues	$	129,794		$	120,022	$	439,340		$	444,816
Purchases of goods and services		92,063			69,519		283,571			253,485
Employee costs		30,917			30,169		126,343			130,761
Depreciation of property, plant and equipment and amortization of intangible assets		5,533			5,474		22,104			21,430
Financial expenses		1,058			1,476		4,231			6,265
Operational restructuring costs, impairment of assets and other costs		3,485			991		3,594			4,865
Impairment of a licence and goodwill		−			−		41,000			−
(Loss) income before tax (recovery) expense and share of loss of associated corporations		(3,262	)		12,393		(41,503	)		28,010
Tax (recovery) expense		(2,058	)		2,564		(8,753	)		6,110
Share of loss of associated corporations		3,214			1,501		8,338			6,154
Net (loss) income attributable to shareholders	$	(4,418	)	$	8,328	$	(41,088	)	$	15,746
Basic and diluted earnings per share attributable to shareholders	$	(0.19	)	$	0.35	$	(1.73	)	$	0.66

TVA GROUP INC.

Consolidated statements of comprehensive (loss) income

(unaudited)

(in thousands of dollars)

			Three-month periods ended December 31						Years ended December 31
				2014			2013			2014			2013
Net (loss) income			$	(4,418	)	$	8,328		$	(41,088	)	$	15,746
Other comprehensive items that will not be reclassified to income:
	Defined benefit plans:
		Re-measurement (loss) gain		(11,993	)		11,304			(11,993	)		35,304
		Deferred income taxes		3,227			(3,036	)		3,227			(9,536	)
				(8,766	)		8,268			(8,766	)		25,768
Comprehensive (loss) income attributable to shareholders			$	(13,184	)	$	16,596		$	(49,854	)	$	41,514

TVA GROUP INC.

Consolidated statements of equity

(unaudited)

(in thousands of dollars)

	Equity attributable to shareholders
	Capital stock		Contributed surplus		Retained earnings			Accumulated other comprehensive (loss) income - Defined benefit plans			Total equity
Balance as at December 31, 2012	$	98,647	$	581	$	187,937		$	(20,620	)	$	266,545
Net income		-		-		15,746			-			15,746
Other comprehensive income		-		-		-			25,768			25,768
Balance as at December 31, 2013		98,647		581		203,683			5,148			308,059
Net loss		-		-		(41,088	)		-			(41,088	)
Other comprehensive loss		-		-		-			(8,766	)		(8,766	)
Balance as at December 31, 2014	$	98,647	$	581	$	162,595		$	(3,618	)	$	258,205

TVA GROUP INC.

Consolidated balance sheets

(unaudited)

(in thousands of dollars)

		December 31, 2014		December 31, 2013
Assets
Current assets
	Cash	$	−	$	7,717
	Accounts receivable		136,811		136,408
	Income taxes		5,256		124
	Programs, broadcast and distribution rights and inventories		74,765		61,428
	Prepaid expenses		3,734		2,380
			220,566		208,057
Non-current assets
	Broadcast and distribution rights		31,989		31,985
	Investments		12,111		14,822
	Property, plant and equipment		201,429		100,962
	Licences and other intangible assets		83,647		112,566
	Goodwill		48,266		44,536
	Defined benefit plan asset		2,964		8,238
	Deferred income taxes		1,060		885
			381,466		313,994
Total assets		$	602,032	$	522,051

Liabilities and equity
Current liabilities
	Bank overdraft	$	4,486		$	−
	Accounts payable and accrued liabilities		92,756			85,960
	Income taxes		777			1,828
	Broadcast and distribution rights payable		45,660			17,304
	Provisions		321			645
	Deferred revenues		8,690			9,302
	Credit facility from parent corporation		100,000			−
	Short-term debt		938			74,640
			253,628			189,679
Non-current liabilities
	Long-term debt		72,757			−
	Other liabilities		9,967			3,974
	Deferred income taxes		7,475			20,339
			90,199			24,313
Equity
	Capital stock		98,647			98,647
	Contributed surplus		581			581
	Retained earnings		162,595			203,683
	Accumulated other comprehensive income (loss)		(3,618	)		5,148
	Equity attributable to shareholders		258,205			308,059
Total liabilities and equity		$	602,032		$	522,051

TVA GROUP INC.

Consolidated statements of cash flows

(unaudited)

(in thousands of dollars)

			Three-month periods ended December 31						Years ended December 31
				2014			2013			2014			2013
Cash flows related to operating activities
	Net (loss) income		$	(4,418	)	$	8,328		$	(41,088	)	$	15,746
	Adjustments for:
		Depreciation and amortization		5,604			5,525			22,326			21,632
		Impairment of assets		832			483			832			2,093
		Impairment of a licence and goodwill		−			−			41,000			−
		Share of loss of associated corporations		3,214			1,501			8,338			6,154
		Deferred income taxes		(5,670	)		(86	)		(9,838	)		1,162
	Cash flows from current operations			(438	)		15,751			21,570			46,787
	Net change in non-cash balances related to operating activities			9,916			(10,657	)		15,116			(20,509	)
Cash flows provided by operating activities				9,478			5,094			36,686			26,278
Cash flows related to investing activities
	Additions to property, plant and equipment			(4,244	)		(2,055	)		(22,158	)		(16,245	)
	Additions to intangible assets			(806	)		(1,308	)		(2,489	)		(3,003	)
	Business acquisition, net of cash			(116,115	)		−			(116,616	)		(6,607	)
	Net change in investments			(1,911	)		(1,177	)		(6,459	)		(3,325	)
Cash flows used in investing activities				(123,076	)		(4,540	)		(147,722	)		(29,180	)
Cash flows related to financing activities
	Bank overdraft			4,486			−			4,486			−
	Increase in credit facility from parent corporation			100,000			−			100,000			−
	Repayment of long-term debt			(75,000	)		−			(75,000	)		−
	Increase in long-term debt			74,737			−			74,737			−
	Financing costs			(904	)		−			(904	)		−
Cash flows provided by financing activities				103,319			−			103,319			−
Net change in cash				(10,279	)		554			(7,717	)		(2,902	)
Cash at beginning of period				10,279			7,163			7,717			10,619
Cash at end of period			$	−		$	7,717		$	−		$	7,717
Interests and taxes reflected as operating activities
	Net interests paid		$	2,117		$	2,188		$	4,169		$	4,514
	Income taxes paid, net of refunds			1,486			191			7,266			1,005

TVA GROUP INC.

Segmented information

(unaudited)

(in thousands of dollars)

In 2014, management changed the names of the Corporation's business segments to better reflect operational realities. The Television segment is now called Broadcasting & Production and the Publishing segment is now called Magazines.

Management also made changes to the Corporation's management structure at the beginning of 2014. As a result of those changes, the custom publishing, commercial print production and premedia services previously provided by the TVA Studio division in the Magazines segment became part of the operations of TVA Accès Inc. in the Broadcasting & Production segment. Prior period disclosures have been restated to reflect this new presentation.

The Corporation's operations consist of the following segments:

• The Broadcasting & Production segment, which includes the operations of TVA Network (including the subsidiaries and divisions TVA Productions Inc., TVA Sales and Marketing Inc., TVA Nouvelles, TVA Interactif), specialty services, the marketing of digital products associated with the various televisual brands, the commercial production and dubbing operations of TVA Accès Inc., the distribution of audiovisual products by the TVA Films division, the home and online shopping services of the TVA Boutiques division up to the second quarter of 2013, and the soundstage and equipment leasing and post-production services provided by Montréal Studios et Équipements s.e.n.c. since December 30, 2014.
  
  
• The Magazines segment, which includes the operations of TVA Publications Inc. and Les Publications Charron & Cie Inc., which publish French-language magazines in various fields such as the arts, entertainment, television, fashion and decoration, and market digital products associated with the various magazine brands.
  

		Three-month periods ended December 31						Years ended December 31
			2014			2013			2014			2013
Revenues
	Broadcasting and Production	$	116,173		$	104,772		$	380,178		$	386,009
	Magazines		15,275			15,947			62,614			61,964
	Intersegment items		(1,654	)		(697	)		(3,452	)		(3,157	)
			129,794			120,022			439,340			444,816
Adjusted operating income(1)
	Broadcasting and Production		5,073			18,387			19,728			53,023
	Magazines		1,741			1,947			9,698			7,547
			6,814			20,334			29,426			60,570
Depreciation of property, plant and equipment and amortization of intangible assets			5,533			5,474			22,104			21,430
Financial expenses			1,058			1,476			4,231			6,265
Operational restructuring costs, impairment of assets and other costs			3,485			991			3,594			4,865
Impairment of a licence and goodwill			−			−			41,000			−
(Loss) income before tax (recovery) expense and share of loss of associated corporations		$	(3,262	)	$	12,393		$	(41,503	)	$	28,010

The above-noted intersegment items represent the elimination of normal course business transactions between the Corporation's business segments regarding revenues.

(1)

The Chief Executive Officer uses adjusted operating income (loss) as a measure of financial performance for assessing the performance of each of the Corporation's segments. Adjusted operating income (loss) is defined as net income (loss) before depreciation of property, plant and equipment and amortization of intangible assets, financial expenses, operational restructuring costs, impairment of assets and other costs, income taxes and share of loss (income) of associated corporations. Adjusted operating income (loss) as defined above is not a measure of results that is consistent with IFRS.