TVA Group reports 30.5% increase in adjusted operating income(1) in the fourth quarter of 2016

MONTREAL, March 3, 2017 /CNW Telbec/ - TVA Group Inc. ("TVA Group" or the "Corporation") today announced that it recorded a net income attributable to shareholders of $5.7 million, or $0.13 per share, in the fourth quarter of 2016, compared with a net loss attributable to shareholders of $1.5 million, or a loss of $0.03 per share, in the same quarter of 2015.

Fourth quarter operating highlights:

• Consolidated adjusted operating income¹ of $21,984,000, a favourable variance of $5,138,000 (30.5%) from the same quarter of 2015;
• $17,445,000 adjusted operating income¹ in the Broadcasting & Production segment, a favourable variance of $4,752,000 mainly because of a 21.1% increase in the adjusted operating income¹ of TVA Network and improved in the adjusted operating results¹ at the specialty services, particularly "TVA Sports";
• $2,139,000 adjusted operating income¹ in the Magazines segment, a negative variance of $934,000 (-30.4%) mainly because of lower operating revenues;
• $2,400,000 adjusted operating income¹ in the Film Production & Audiovisual Services segment ("MELS"), a favourable variance of $1,320,000 essentially because of increased in adjusted operating income¹ from soundstage and equipment rental and dubbing, and a decrease in the adjusted operating loss¹ of visual effects services due to higher volume of activities.

"We are satisfied with the results posted for the last quarter of our financial year, particularly the Broadcasting & Production segment, which registered significant advertising revenue growth, including year-over-year increases of 14.7% at "TVA Sports" and 10.5% at TVA Network. TVA Group's total market share increased by 3.0 points to 35.5%² in the fourth quarter of 2016, compared with 32.5% in the same period of 2015. TVA Group again demonstrated its news leadership on US election night, when its coverage was seen by 1,139,000 viewers, a 40.0% market share³. In addition, more than 900,000 people followed the election results on the tvanouvelles.ca site and its mobile app (Android and iOS). We are pleased to see that subscriptions to the "TVA Sports" channel have recovered with the current hockey season," commented Julie Tremblay, President and Chief Executive Officer of the Corporation.

"Our Magazines segment has been affected by the difficulties in that industry. But while the segment's operating revenues fell by a significant 18.9%, the cost-cutting programs we introduced offset 86.3% of the drop in operating revenues and enabled us to generate a 7.3% operating margin. During the last quarter, we announced the discontinuation of two magazines, CHEZ SOI and Tellement bon, in order to be able to focus on our flagship brands and increase their reach. Despite the closures, TVA Group will maintain a strong presence in the decorating and cooking categories with our brands Les idées de ma maison, Style at Home, Coup de pouce, Canadian Living and Recettes du Québec," added Ms. Tremblay.

"Finally, the Film Production & Audiovisual Services segment's results improved considerably in the fourth quarter of 2016 compared with the same quarter of the previous year, largely because of higher volume of activities at our visual effects services. We are also very proud to have contributed to the award for the best sound for the film Arrival, directed by Denis Villeneuve, at the British Academy of Film and Television Arts, "BAFTA" 2017 edition, and also of the eight Oscar nominations," concluded Ms. Tremblay. 

2016 financial year results

For the fiscal year ended December 31, 2016, the Corporation's consolidated adjusted operating income¹ was $45,401,000, compared with $47,390,000 in the previous year, a 4.2% decrease.  Adjusted operating income¹ decreased by 7.2% in the Broadcasting & Production segment and increased by 52.3% in the Magazines segment, mainly explained by the inclusion of the results of the acquired magazines for the full year in 2016 and the realization of synergies and operational cost savings. In the Film Production & Audiovisual Services segment, adjusted operating income¹ decreased by $5,003,000, mainly as a result of significantly lower volume of activities in soundstage and equipment rental, which was partially offset by the decrease in the adjusted operating loss¹ of visual effects activities. The $1,736,000 decrease in the Broadcasting & Production segment's adjusted operating income¹ was due primarily to a 7.8% increase in the adjusted operating loss¹ of "TVA Sports," caused in particular by the failure of the Montreal Canadiens to qualify for the Stanley Cup playoffs, and to a slight decrease in TVA Network's adjusted operating income¹. Those factors were partially offset by an increase in the adjusted operating income¹ of the specialty services other than "TVA Sports" and "LCN."

Consolidated operating revenues amounted to $590,866,000 in fiscal 2016, compared with $589,890,000 in the previous year, a slight 0.2% increase. The Corporation's net loss attributable to shareholders for the year totalled $39,855,000 or a loss of $0.92 per share, compared with a net loss attributable to shareholders of $55,226,000 or a loss of $1.42 per share in 2015.

In the third quarter of 2016, the Corporation recognized a $40,100,000 non-cash goodwill impairment charge, without any tax consequences, in the Magazines segment. In 2015, a $60,107,000 non-cash impairment charge was recorded with respect to the broadcasting licence, including $30,054,000 without any tax consequences.

Definition

¹ Adjusted operating income (loss) ("Adjusted operating results")

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 others, income taxes and share of (income) loss 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 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. Certain factors that may cause actual results to differ from current expectations include seasonality, operational risks (including pricing actions by competitors and risk related to the loss of key customers in the Film Production & Audiovisual Services segment), programming, content and production cost risks, credit risk, government regulation risks, government assistance risks, changes in economic conditions, fragmentation of the media landscape, risks related to the Corporation's ability to adapt to fast‑paced technological change and to new delivery and storage methods, 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, 2016 and the "Risk Factors" section in the Corporation's 2016 annual information form.

The forward-looking statements in this news release reflect the Corporation's expectations as of March 3, 2017, 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 to do so by the applicable securities laws.

TVA Group

TVA Group Inc., a subsidiary of Quebecor Media Inc., is a communications company engaged in the broadcasting, film and audiovisual production, and magazine publishing industries. TVA Group Inc. is the largest broadcaster of French‑language entertainment, information and public affairs programming in North America and one of the largest private production companies. TVA Group is also a leading publisher of French-language magazines and publishes some of Canada's most popular English-language titles. The Corporation's Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B. 

_____________________________________
¹ See definition of adjusted operating income (loss) below.
² Source: Numeris, French Quebec, October 1 to December 31, 2016, Mon-Sun, 2 a.m. - 2 a.m., T2+
³ Source: Numeris, French Quebec, 6:30 pm-2 am, November 8, 2016, T2+.

TVA GROUP INC.
Consolidated statements of income (loss)
(unaudited)
(in thousands of Canadian dollars, except per-share amounts)
	Three-month periods ended December 31					Years ended December 31
			2016		2015			2016		2015
Revenues	$		169,522	$	165,429	$		590,866	$	589,890
Purchases of goods and services			104,603		109,898			384,349		383,898
Employee costs			42,935		38,685			161,116		158,602
Depreciation of property, plant and equipment and amortization of intangible assets			9,639		12,757			35,961		33,515
Financial expenses			804		290			3,378		4,104
Impairment of a licence and of goodwill			−		−			40,100		60,107
Operational restructuring costs, impairment of assets and others			4,163		3,436			5,940		6,315
Income (loss) before tax expense (recovery) and share of (income) loss of associated corporations			7,378		363			(39,978)		(56,651)
Tax expense (recovery)			1,946		265			542		(7,818)
Share of (income) loss of associated corporations			(226)		1,575			(829)		6,134
Net income (loss)	$		5,658	$	(1,477)	$		(39,691)	$	(54,967)
Net income (loss) attributable to:
Shareholders	$		5,717	$	(1,472)	$		(39,855)	$	(55,226)
Non-controlling interest			(59)		(5)			164		259
Basic and diluted income (loss) per share attributable to shareholders	$		0.13	$	(0.03)	$		(0.92)	$	(1.42)

TVA GROUP INC.
Consolidated statements of comprehensive income (loss)
(unaudited)
(in thousands of Canadian dollars)
			Three-month periods ended December 31				Years ended December 31
				2016		2015		2016		2015
Net income (loss)			$	5,658	$	(1,477)	$	(39,691)	$	(54,967)
Other comprehensive items that may be reclassified to income:
	Cash flow hedge:
		Gain (loss) on valuation of derivative financial instruments		91		57		294		(462)
		Deferred income taxes		(25)		(16)		(79)		124
Other comprehensive items that will not be reclassified to income:
	Defined benefit plans:
		Re-measurement gain (loss)		31,296		(3,446)		11,296		(3,446)
		Deferred income taxes		(8,369)		928		(3,027)		928
				22,993		(2,477)		8,484		(2,856)
Comprehensive income (loss)			$	28,651	$	(3,954)	$	(31,207)	$	(57,823)
Comprehensive income (loss) attributable to:
Shareholders			$	28,710	$	(3,949)	$	(31,371)	$	(58,082)
Non-controlling interest				(59)		(5)		164		259

TVA GROUP INC.
Consolidated statements of equity
(unaudited)
(in thousands of Canadian dollars)
	Equity attributable to shareholders								Equity attributable to non- controlling interest		Total equity
	Capital stock		Contributed surplus		Retained earnings		Accumula- ted other comprehen- sive (loss) income
Balance as at December 31, 2014	$	98,647	$	581	$	162,595	$	(3,618)	$	–	$	258,205
Business acquisitions		–		–		–		–		417		417
Net (loss) income		–		–		(55,226)		–		259		(54,967)
Issuance of share capital, net of transaction costs		108,633		–		–		–		–		108,633
Other comprehensive loss		–		–		–		(2,856)		–		(2,856)
Balance as at December 31, 2015		207,280		581		107,369		(6,474)		676		309,432
Net (loss) income		–		–		(39,855)		–		164		(39,691)
Other comprehensive income		–		–		–		8,484		–		8,484
Balance as at December 31, 2016	$	207,280	$	581	$	67,514	$	2,010	$	840	$	278,225

TVA GROUP INC.
Consolidated balance sheets
(unaudited)
(in thousands of Canadian dollars)
			December 31, 2016		December 31, 2015
Assets
Current assets
	Cash	$	17,219	$	11,996
	Accounts receivable		142,663		150,930
	Income taxes		3,966		6,787
	Programs, broadcast rights and inventories		77,628		79,495
	Prepaid expenses		3,870		4,064
			245,346		253,272
Non-current assets
	Broadcast rights		44,684		36,321
	Investments		12,756		12,594
	Property, plant and equipment		205,843		208,103
	Intangible assets		32,493		39,770
	Goodwill		37,885		77,985
	Defined benefit plan asset		4,250		–
	Deferred income taxes		3,351		7,069
			341,262		381,842
Total assets		$	586,608	$	635,114

TVA GROUP INC.
Consolidated balance sheets (continued)
(unaudited)
(in thousands of Canadian dollars)
			December 31, 2016		December 31, 2015
Liabilities and equity
Current liabilities
	Accounts payable and accrued liabilities	$	105,523	$	112,914
	Income taxes		1,250		1,769
	Broadcast rights payable		92,627		88,867
	Provisions		6,638		7,107
	Deferred revenues		19,847		28,148
	Short-term debt		6,562		4,219
			232,447		243,024
Non-current liabilities
	Long-term debt		62,561		68,812
	Defined benefit plan liability		1,904		2,322
	Other liabilities		9,675		8,652
	Deferred income taxes		1,796		2,872
			75,936		82,658
Equity
	Capital stock		207,280		207,280
	Contributed surplus		581		581
	Retained earnings		67,514		107,369
	Accumulated other comprehensive income (loss)		2,010		(6,474)
	Equity attributable to shareholders		277,385		308,756
	Non-controlling interest		840		676
			278,225		309,432
Total liabilities and equity		$	586,608	$	635,114

TVA GROUP INC.
Consolidated statements of cash flows
(unaudited)
(in thousands of Canadian dollars)
			Three-month periods ended December 31				Years ended December 31
				2016		2015		2016		2015
Cash flows related to operating activities
	Net income (loss)		$	5,658	$	(1,477)	$	(39,691)	$	(54,967)
	Adjustments for:
		Depreciation and amortization		9,715		12,826		36,243		33,829
		Impairment of a licence and of goodwill		−		−		40,100		60,107
		Share of (income) loss of associated corporations		(226)		1,575		(829)		6,134
		Deferred income taxes		1,726		(18)		(494)		(8,663)
		Others		1		2		303		24
Cash flows provided by current operations				16,874		12,908		35,632		36,464
Net change in non-cash balances related to operating activities				(11,603)		(4,449)		6,023		58,830
Cash flows provided by operating activities				5,271		8,459		41,655		95,294
Cash flows related to investing activities
	Additions to property, plant and equipment			(5,063)		(6,308)		(29,081)		(23,900)
	Additions to intangible assets			(796)		(1,061)		(2,285)		(2,642)
	Net business acquisitions			−		(786)		222		(57,147)
	Change in investments			−		−		(895)		(2,620)
Cash flows used in investing activities				(5,859)		(8,155)		(32,039)		(86,309)
Cash flows related to financing activities
	Decrease in bank overdraft			−		−		−		(4,486)
	Repayment of long-term debt			(1,395)		(1,152)		(4,190)		(940)
	Repayment of credit facility from parent corporation			−		−		−		(100,000)
	Issuance of share capital, net of transaction costs			−		−		−		108,633
	Repayment of derivative financial instruments			(60)		(51)		(203)		(196)
Cash flows (used in) provided by financing activities				(1,455)		(1,203)		(4,393)		3,011
Net change in cash				(2,043)		(899)		5,223		11,996
Cash at beginning of period				19,262		12,895		11,996		−
Cash at end of period			$	17,219	$	11,996	$	17,219	$	11,996
Interests and taxes reflected as operating activities
	Interests paid		$	766	$	800	$	2,570	$	3,975
	Income taxes paid (cashed) (net of refunds or of payments)			277		(731)		(1,271)		1,374

TVA GROUP INC.
Segmented information

(unaudited)
(in thousands of Canadian dollars)

Management made changes to the Corporation's management structure at the beginning of 2016. Some Broadcasting & Production segment operations formerly conducted by TVA Accès inc. (now Mels Dubbing Inc.) were transferred to other units of the Corporation. Commercial production remained in the Broadcasting & Production segment, while custom publishing, print advertising production and premedia services were integrated into the operations of the Magazines segment and dubbing became part of the Film Production & Audiovisual Services segment. Financial information for prior comparative periods has been restated to take into account the new presentation.

The Corporation's operations now consist of the following segments:

• The Broadcasting & Production segment, which includes the operations of TVA Network (including the subsidiary and divisions TVA Productions inc., TVA Nouvelles and TVA Interactif), specialty services, the marketing of digital products associated with the various televisual brands, commercial production services and distribution of audiovisual products.
• The Magazines segment, which through its subsidiaries, notably TVA Publications inc. and Les Publications Charron & Cie inc., publishes French- and English-language magazines in various fields such as the arts, entertainment, television, fashion, sports and decoration, and markets digital products associated with the various magazine brands; and provides custom publishing, print advertising production and premedia services.
• The Film Production & Audiovisual Services segment, which through its subsidiaries MELS Studios and Postproduction G.P. and Mels Dubbing Inc. provides soundstage and equipment rental, dubbing, postproduction and visual effects services.

TVA GROUP INC.
Segmented information (continued)
(unaudited)
(in thousands of Canadian dollars)
		Three-month periods ended December 31				Years ended December 31
			2016		2015		2016		2015
Revenues
	Broadcasting & Production	$	128,194	$	119,455	$	427,627	$	417,891
	Magazines		29,120		35,918		115,829		117,132
	Film Production & Audiovisual Services		15,189		12,930		59,320		64,570
	Intersegment items		(2,981)		(2,874)		(11,910)		(9,703)
			169,522		165,429		590,866		589,890
Adjusted operating income^(1)
	Broadcasting & Production		17,445		12,693		22,379		24,115
	Magazines		2,139		3,073		13,830		9,080
	Film Production & Audiovisual Services		2,400		1,080		9,192		14,195
			21,984		16,846		45,401		47,390
Depreciation of property, plant and equipment and amortization of intangible assets			9,639		12,757		35,961		33,515
Financial expenses			804		290		3,378		4,104
Impairment of a licence and of goodwill			−		−		40,100		60,107
Operational restructuring costs, impairment of assets and others			4,163		3,436		5,940		6,315
Income (loss) before tax expense (recovery) and share of (income) loss of associated corporations		$	7,378	$	363	$	(39,978)	$	(56,651)

⁽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, amortization of intangible assets, financial expenses, operational restructuring costs, impairment of assets and others, income taxes and share of (income) loss of associated corporations. Adjusted operating income (loss) as defined above is not a measure of results that is consistent with IFRS.

SOURCE TVA Group

Denis Rozon, CPA, CA, Vice President and Chief Financial Officer, [phone]

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