TVA Group reports $5.7 million net loss attributable to shareholders in the second quarter of 2016

MONTREAL, Aug. 1, 2016 /CNW Telbec/ - TVA Group Inc. (the "Corporation") today announced that it recorded a net loss attributable to shareholders of $5.7 million, or a loss of $0.13 per share, in the second quarter of 2016, compared with a loss of $2.6 million, or a loss of $0.06 per share, in the same quarter of 2015.

Second quarter operating highlights:

  • Consolidated adjusted operating income1 of $2,427,000, an unfavourable variance of $4,944,000 (-67%) from the same quarter of 2015;
  • $2,431,000 adjusted operating loss1 in the Broadcasting & Production segment, a $3,298,000 negative variance due primarily to a 20% increase in the adjusted operating loss1 of "TVA Sports" because of lower advertising sales resulting from the failure of the Montreal Canadiens and other Canadian teams in the National Hockey League ("NHL") for the Stanley Cup playoffs;
  • $3,920,000 adjusted operating income1 in the Magazines segment, up $2,701,000 (222%) mainly because of the addition for part of the quarter of the adjusted operating results generated by the magazines acquired from Transcontinental, the operational synergies realized since the integration of the acquired magazines, and other cost-cutting initiatives;
  • $938,000 adjusted operating income1 in the Film Production & Audiovisual Services segment ("MELS"), a negative variance of $4,347,000 (-82%) due to lower volume of activities in soundstage and equipment rental and in visual effects. In the same quarter of 2015, our soundstages and production equipment were heavily used for the major US production X‑Men Apocalypse.

"Our quarterly results were impacted by the decline in the TVA Sports channel's advertising sales, due in large part to the fact that the Montreal Canadiens didn't make the NHL playoffs. Apart from that unusual circumstance, we are satisfied with the performance of the other units of our Broadcasting & Production segment, particularly TVA Network, which grew its adjusted operating income by 2.2% and increased its market share to 23.4%,2 up 1.4 percentage points from the same period of 2015. TVA Network carried 4 of the top 5 most-watched programs in Quebec, including La Voix, which was the Number one show again with more than 2.7 million viewers", commented Julie Tremblay, President and Chief Executive Officer of the Corporation.

"The increase in the Magazines segment's operating results was the result of a concerted effort to successfully integrate the magazines acquired from Transcontinental on April 12, 2015. Our editorial and content management teams are constantly improving the content of our brands and magazines in order to address our readers' ever-changing needs. The latest Vividata3 surveys show that we have grown our print readership by 2% and maintained our leading position in Canada's magazine publishing industry with nearly 9 million readers across all platforms", said Ms Tremblay.

"Finally, the Film Production & Audiovisual Services segment suffered from the absence of any major Hollywood production in the second quarter of 2016, whereas the movie X-Men Apocalypse was filming on our soundstages in the same period of 2015. However, we are pleased with the bookings we have for next months," concluded Julie Tremblay. 

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 others, 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 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 and risks 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, 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, 2015 and the "Risk Factors" section in the Corporation's 2015 annual information form.

The forward-looking statements in this news release reflect the Corporation's expectations as of August 1st, 2016 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 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, April 1 to June 30, 2016, Mon-Sun, 2:00 – 2:00, All 2+

3

Source : Vividata, Q1 2016, Total Canada, 12+

 

TVA GROUP INC.

Interim consolidated statements of loss


(unaudited)

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







Three-month periods
ended June 30

Six-month periods
ended June 30


Note


2016


2015


2016


2015











Revenues

2

$

144,229

$

159,424

$

289,752

$

285,938











Purchases of goods and services

3


101,227


109,869


204,760


203,280

Employee costs



40,575


42,184


82,268


82,978

Depreciation of property, plant and equipment and amortization of intangible assets



8,920


7,079


17,354


13,887

Financial expenses

4


866


870


1,836


2,805

Operational restructuring costs, impairment of assets and others

5


708


2,304


1,160


2,711

Loss before tax recovery and share of (income) loss of associated corporations



(8,067)


(2,882)


(17,626)


(19,723)











Tax recovery



(2,126)


(412)


(4,225)


(6,394)











Share of (income) loss of associated corporations



(222)


258


(328)


4,110

Net loss


$

(5,719)

$

(2,728)

$

(13,073)

$

(17,439)











Net loss attributable to:











Shareholders


$

(5,676)

$

(2,588)

$

(13,065)

$

(17,299)


Non-controlling interest



(43)


(140)


(8)


(140)





















Basic and diluted loss per share attributable to shareholders

7 c)

$

(0.13)

$

(0.06)

$

(0.30)

$

(0.50)











See accompanying notes to interim condensed consolidated financial statements.

 

TVA GROUP INC.

Interim consolidated statements of comprehensive loss


(unaudited)

(in thousands of Canadian dollars)




Three-month periods
ended June 30

Six-month periods
ended June 30


Note


2016


2015


2016


2015











Net loss


$

(5,719)

$

(2,728)

$

(13,073)

$

(17,439)











Other comprehensive items that may be reclassified to income:











Cash flow hedge:












Gain (loss) on valuation of derivative financial instruments

9


71


182


163


(365)



Deferred income taxes

9


(19)


(49)


(44)


98

Other comprehensive items that will not be reclassified to income:











Defined benefit plans:












Re-measurement loss

9


(10,000)



(25,000)




Deferred income taxes

9


2,685



6,685





(7,263)


133


(18,196)


(267)

Comprehensive loss


$

(12,982)

$

(2,595)

$

(31,269)

$

(17,706)











Comprehensive loss attributable to:











Shareholders


$

(12,939)

$

(2,455)

$

(31,261)

$

(17,566)


Non-controlling interest



(43)


(140)


(8)


(140)












See accompanying notes to interim condensed consolidated financial statements.

 

TVA GROUP INC.

Interim consolidated statements of equity


(unaudited)

(in thousands of Canadian dollars)



Equity attributable to shareholders

Equity
attributable
to non-
controlling
interest

Total
equity


Capital
stock
(note 7)

Contributed
surplus

Retained
earnings

Accumula-
ted other
comprehen-
sive loss
(note 9)














Balance as at December 31, 2014

$

98,647

$

581

$

162,595

$

(3,618)

$

$

258,205

Business acquisitions (note 6)






565


565

Net loss




(17,299)



(140)


(17,439)

Issuance of share capital, net of transaction costs


108,725






108,725

Other comprehensive loss





(267)



(267)

Balance as at June 30, 2015


207,372


581


145,296


(3,885)


425


349,789

Business acquisitions (note 6)






(148)


(148)

Net (loss) income




(37,927)



399


(37,528)

Transaction costs related to issuance of share capital


(92)






(92)

Other comprehensive loss





(2,589)



(2,589)

Balance as at December 31, 2015


207,280


581


107,369


(6,474)


676


309,432

Net loss




(13,065)



(8)


(13,073)

Other comprehensive loss





(18,196)



(18,196)

Balance as at June 30, 2016

$

207,280

$

581

$

94,304

$

(24,670)

$

668

$

278,163














See accompanying notes to interim condensed consolidated financial statements.

 


TVA GROUP INC.

Interim consolidated balance sheets


(unaudited)

(in thousands of Canadian dollars)




June 30,
2016

December 31,
2015







Assets












Current assets







Cash


$

5,312

$

11,996


Accounts receivable



138,299


150,930


Income taxes



7,830


6,787


Programs, broadcast rights and inventories



59,127


79,495


Prepaid expenses



6,987


4,064




217,555


253,272

Non-current assets







Broadcast rights



49,269


36,321


Investments



12,629


12,594


Property, plant and equipment



208,027


208,103


Intangible assets



35,999


39,770


Goodwill



77,985


77,985


Deferred income taxes



17,443


7,069




401,352


381,842

Total assets


$

618,907

$

635,114









Note

June 30,
2016

December 31,
2015







Liabilities and equity












Current liabilities







Bank overdraft


$

6,244

$


Accounts payable and accrued liabilities



103,099


112,914


Income taxes



341


1,769


Broadcast rights payable



91,301


88,867


Provisions



5,573


7,107


Deferred revenues



17,023


28,148


Short-term debt



5,156


4,219




228,737


243,024

Non-current liabilities







Long-term debt



69,144


68,812


Defined benefit plan liability



30,349


2,322


Other liabilities



9,707


8,652


Deferred income taxes



2,807


2,872




112,007


82,658

Equity







Capital stock

7


207,280


207,280


Contributed surplus



581


581


Retained earnings



94,304


107,369


Accumulated other comprehensive loss

9


(24,670)


(6,474)


Equity attributable to shareholders



277,495


308,756


Non-controlling interest



668


676




278,163


309,432

Total liabilities and equity


$

618,907

$

635,114







See accompanying notes to interim condensed consolidated financial statements.

 

On August 1, 2016, the Board of Directors approved the interim condensed consolidated financial statements for the three-month and six-month periods ended June 30, 2016 and 2015.

 

TVA GROUP INC.

Interim consolidated statements of cash flows


(unaudited)

(in thousands of Canadian dollars)




Three-month periods
 ended June 30

Six-month periods
 ended June 30


Note


2016


2015


2016


2015











Cash flows related to operating activities











Net loss


$

(5,719)

$

(2,728)

$

(13,073)

$

(17,439)


Adjustments for:












Depreciation and amortization



8,989


7,148


17,492


14,063



Share of (income) loss of associated corporations



(222)


258


(328)


4,110



Deferred income taxes



(2,032)


(334)


(3,800)


(6,027)



Loss on contingent consideration receivable

5


198



198




Loss on valuation of derivative financial instruments



1


2


3


17




1,215


4,346


492


(5,276)


Net change in non-cash balances related to operating activities



6,325


42,122


2,272


76,871

Cash flows provided by operating activities



7,540


46,468


2,764


71,595











Cash flows related to investing activities











Additions to property, plant and equipment



(3,306)


(6,034)


(16,197)


(12,094)


Additions to intangible assets



(546)


(391)


(1,045)


(899)


Net change in investments

10 a)


293


(539)


293


(2,620)


Net business acquisitions

6


222


(55,200)


222


(55,200)

Cash flows used in investing activities



(3,337)


(62,164)


(16,727)


(70,813)











Cash flows related to financing activities











Change in bank overdraft



(5,574)



6,244


(4,486)


Increase in long-term debt



2,058


2,909


1,131


3,098


Repayment of credit facility from parent corporation

10 b)





(100,000)


Issuance of share capital, net of transaction costs

7





108,725


Repayment of derivative financial instruments



(46)


(54)


(96)


(110)

Cash flows (used in) provided by financing activities



(3,562)


2,855


7,279


7,227

Net change in cash



641


(12,841)


(6,684)


8,009

Cash at beginning of period



4,671


20,850


11,996


Cash at end of period


$

5,312

$

8,009

$

5,312

$

8,009

Interest and taxes reflected as operating activities











Net interest paid


$

637

$

836

$

1,271

$

2,551


Income taxes paid (net of refunds)



936


44


2,046


1,460












See accompanying notes to interim condensed consolidated financial statements.

 

TVA GROUP INC.
Notes to interim condensed consolidated financial statements

Three-month and six-month periods ended June 30, 2016 and 2015 (unaudited)
(Tabular amounts are expressed in thousands of Canadian dollars, except per share and per option amounts)

TVA Group Inc. ("TVA Group" or the "Corporation") is governed by the Québec Business Corporations Act. TVA Group is an integrated communications company engaged in the broadcasting and production, film production and audiovisual services, and magazines publishing industries (note 12). The Corporation is a subsidiary of Quebecor Media Inc. ("Quebecor Media" or "the parent corporation") and its ultimate parent corporation is Quebecor Inc. ("Quebecor"). The Corporation's head office is located at 1600 de Maisonneuve Boulevard East, Montreal, Quebec, Canada.

The Corporation's businesses experience significant seasonality due to, among other factors, seasonal advertising patterns, consumers' viewing, reading and listening habits, and demand for production facilities from international and local producers. Because the Corporation depends on the sale of advertising for a significant portion of its revenues, 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.

1.   Basis of presentation

These consolidated financial statements were prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), except that they do not include all disclosures required under IFRS for annual consolidated financial statements. In particular, these consolidated financial statements were prepared in accordance with IAS 34, Interim Financial Reporting, and accordingly, they are condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the Corporation's 2015 annual consolidated financial statements, which describe the accounting policies used to prepare these financial statements.

Certain comparative figures for the three-month and six-month periods ended June 30, 2015 have been restated to conform to the presentation adopted for the three-month and six-month periods ended June 30, 2016.

2.   Revenues

The breakdown of revenues between advertising services, royalties, rental and postproduction services and other services rendered, and product sales is as follows:






Three-month periods

ended June 30

Six-month periods

ended June 30



2016


2015


2016


2015










Advertising services

$

70,252

$

76,311

$

134,702

$

134,943

Royalties, rental and postproduction services and other services rendered


48,307


55,117


102,327


101,875

Product sales


25,670


27,996


52,723


49,120


$

144,229

$

159,424

$

289,752

$

285,938

 

3.   Purchases of goods and services

The main components of purchases of goods and services are as follows:





Three-month periods

ended June 30

Six-month periods

ended June 30



2016


2015


2016


2015










Royalties, rights and production costs

$

67,514

$

75,209

$

137,971

$

144,353

Printing and distribution


8,635


8,778


16,823


12,778

Services rendered by parent corporation










- Commissions on advertising sales


5,447


5,595


10,315


8,746


- Others


2,189


2,237


4,391


4,689

Building costs


5,154


5,497


10,777


9,829

Marketing, advertising and promotion


5,597


4,543


9,194


9,110

Others


6,691


8,010


15,289


13,775


$

101,227

$

109,869

$

204,760

$

203,280

 

4.   Financial expenses






Three-month periods

ended June 30

Six-month periods

ended June 30



2016


2015


2016


2015










Interest on long-term debt

$

603

$

773

$

1,276

$

1,611

Interest on credit facility from parent corporation (note 10 b))





805

Foreign exchange loss


98


25


233


166

Amortization of financing costs


69


69


138


176

Interest expense on net defined benefit liability


87


13


174


26

Loss on valuation of derivative financial instruments


1


2


3


17

Others


8


(12)


12


4


$

866

$

870

$

1,836

$

2,805

 

5.   Operational restructuring costs, impairment of assets and others

In the three-month and six-month periods ended June 30, 2016 and 2015, the Corporation recorded the following operational restructuring costs, mainly in connection with elimination of positions:





Three-month periods
ended June 30

Six-month periods

ended June 30


2016

2015

2016

2015










Broadcasting & Production

$

404

$

465

$

404

$

465

Magazines


76


1,280


390


1,280

Film Production & Audiovisual Services


18


90


96


335


$

498

$

1,835

$

890

$

2,080

 

In the second quarter of 2016, the Corporation recognized a $198,000 loss on the contingent consideration receivable from Sogides Group Inc. in connection with the sale of the book publishing operations acquired in the transaction with Transcontinental Inc. (note 6).

Furthermore, during the three-month period ended June 30, 2016, the Corporation recorded professional fees in the amount of $12,000 in connection with business acquisitions made in 2014 and 2015 ($469,000 in the same period of 2015). During the six-month period ended June 30, 2016, the Corporation recorded professional fees in the amount of $72,000 in connection with those acquisitions ($631,000 in the same period of 2015).

6.   Business acquisitions and disposals

On April 12, 2015, the Corporation acquired 14 magazines from Transcontinental Inc, four of which are owned and operated in partnership, as well as three websites, custom publishing contracts and book publishing operations, for a purchase price of $56,286,000 in cash, including $786,000 paid in the fourth quarter of 2015 as a final adjustment contingent upon a predetermined working capital target agreed to by the parties. The process of allocating the purchase price was completed during the three-month period ended December 31, 2015.

The acquisition was in keeping with the Corporation's strategy of investing in the production and dissemination of diverse, rich, high-quality entertainment and information contents. The acquired intangible assets basically consist of customer lists and brands. The goodwill related to the acquisition arises mainly from the quality of the content and the expected synergies.

The final purchase price allocation between the fair value of identifiable assets and liabilities related to this acquisition breaks down as follows:










Assets acquired




Current assets

$

20,930


Investment


2,237


Property, plant and equipment


867


Intangible assets


19,250


Goodwill


34,162


Deferred income taxes


400



77,846

Liabilities assumed




Current liabilities


(21,143)



(21,143)

Net assets acquired at fair value


56,703

Non-controlling interest


(417)

Consideration in cash

$

56,286

 

As part of this transaction, the Corporation simultaneously transferred the acquired book publishing operations to Sogides Group Inc., a corporation under common control, for the agreed price of $720,000, including $300,000 in cash and a contingent consideration receivable valued at $420,000. The transferred net assets included $807,000 in current assets, a $127,000 publishing fund and $214,000 in current liabilities. During the three-month period ended June 30, 2016, the Corporation received a final contingent consideration of $222,000 and recorded a $198,000 loss under other items to reflect the change in value of that consideration (note 5).

Goodwill in the amount of $6,758,000 is deductible for income tax purposes.

Global Vision

As of June 30, 2015, the Corporation had recognized a $1,217,000 balance payable as a preliminary adjustment to the purchase price for the acquisition of substantially all of the assets of A.R. Global Vision Ltd. in 2014. As a result, the preliminary allocation of the fair value of assets and liabilities for this acquisition has been reviewed, leading to recognition of a deferred income tax asset of $373,000, additional goodwill of $821,000, and a downward adjustment to long-term liabilities in the amount of $23,000. The process of allocating the purchase price was completed during the three-month period ended December 31, 2015.

7.   Capital stock

a) Authorized capital stock

An unlimited number of Class A common shares, participating, voting, without par value.

An unlimited number of Class B shares, participating, non-voting, without par value.

An unlimited number of preferred shares, non-participating, non-voting, with a par value of $10 each, issuable in series.

b) Issued and outstanding capital stock





June 30,

 2016

December 31,

2015






4,320,000 Class A common shares

$

72

$

72

38,885,535 Class B shares


207,208


207,208


$

207,280

$

207,280

 

On March 20, 2015, the Corporation completed a subscription rights offering to its shareholders, whereby it received net proceeds totalling $110,000,000 from the issuance of 19,434,629 Class B Non-Voting Shares. Transaction costs of $1,870,000, less $503,000 in income tax, were charged to share capital as a reduction of net proceeds from the issuance. The transaction costs included $1,100,000 in commitment fees paid to Quebecor Media.

c) Loss per share attributable to shareholders

The following table shows the computation of loss per basic and diluted share attributable to shareholders:





Three-month periods

ended June 30

Six-month periods

ended June 30



2016


2015


2016


2015










Net loss attributable to shareholders

$

(5,676)

$

(2,588)

$

(13,065)

$

(17,299)










Weighted average number of basic and diluted shares outstanding


43,205,535


43,205,535


43,205,535


34,449,274










Basic and diluted loss per share attributable to shareholders

$

(0.13)

$

(0.06)

$

(0.30)

$

(0.50)

 

The loss per diluted share calculation does not take into consideration the potential dilutive effect of stock options of the Corporation, because their impact is non-dilutive.

8.   Stock-based compensation and other stock-based payments




Six-month period ended June 30, 2016


Corporation's Class B

stock options

Quebecor Media

stock options


Number

Weighted
average
exercise price

Number

Weighted
average
exercise price








Balance as at December 31, 2015

463,371

$

13.30

226,200

$

61.70

Exercised


(3,800)


57.39

Expired

(49,250)


15.99


Balance as at June 30, 2016

414,121

$

12.98

222,400

$

61.78

 

Of the options outstanding as at June 30, 2016, 334,121 Corporation Class B stock options at an average exercise price of $14.30 and 25,750 Quebecor Media stock options at an average price of $65.38 could be exercised.

During the three-month period ended June 30, 2016, 3,800 Quebecor Media stock options were exercised for a cash consideration of $30,000 (35,147 stock options were exercised for a cash consideration of $447,000 in the same period of 2015). During the six-month period ended June 30, 2016, 3,800 Quebecor Media stock options were exercised for a cash consideration of $30,000 (46,772 stock options were exercised for a cash consideration of $739,000 in the same period of 2015).

During the three-month and six-month periods ended June 30, 2016, the Corporation did not record any compensation expense in relation to the Corporation's Class B stock options ($6,000 expense and $5,000 reversal respectively in the same periods of 2015) and recognized compensation expenses of $260,000 and $589,000 respectively in relation to Quebecor Media stock options ($103,000 reversal and $831,000 expense respectively in the same periods of 2015).

On July 10, 2016, TVA Group established a differed share unit ("DSU") plan and a performance share unit ("PSU") plan for its employees based on TVA Group Class B Non-voting Shares ("TVA Group Class B Shares"). The DSUs vest over six years and will be redeemed for cash only upon the participant's retirement or termination of employment, as the case may be. The PSUs vest over three years and will be redeemed for cash at the end of this period subject to the achievement of financial targets. DSUs and PSUs entitle the holders to receive additional units when dividends are paid on TVA Group Class B Shares. No treasury shares will be issued for the purposes of these plans. On July 10, 2016, TVA Group awarded 159,499 DSUs and 212,671 PSUs.

On July 13, 2016, Quebecor also established a DSU plan and a PSU plan for its employees and those of its subsidiaries based on Quebecor Class B Shares, among others. The DSUs vest over six years and will be redeemed for cash only upon the participant's retirement or termination of employment, as the case may be. The PSUs vest over three years and will be redeemed for cash at the end of this period subject to the achievement of financial targets. DSUs and PSUs entitle the holders to receive additional units when dividends are paid on Quebecor Class B Shares. No treasury shares will be issued for the purposes of these plans. On July 13, 2016, Quebecor awarded 11,857 DSUs and 13,176 PSUs based on Quebecor Class B Shares, to employees of TVA Group.

9.   Accumulated other comprehensive loss






Cash flow

hedge

Defined

benefit plans

Total








Balance as at December 31, 2014

$

$

(3,618)

$

(3,618)

Other comprehensive loss


(267)



(267)

Balance as at June 30, 2015


(267)


(3,618)


(3,885)

Other comprehensive loss


(71)


(2,518)


(2,589)

Balance as at December 31, 2015


(338)


(6,136)


(6,474)

Other comprehensive income (loss)


119


(18,315)


(18,196)

Balance as at June 30, 2016

$

(219)

$

(24,451)

$

(24,670)

 

10. Related party transactions

a) ROC Television G.P. ("ROC Television," formerly SUN News General Partnership)

Since the announcement on February 13, 2015 of the discontinuation of the operations of ROC Television, in which TVA Group holds a 49% interest, the Corporation has continued making capital contributions to ROC Television to cover its operating losses up to the closure date as well as costs related to the discontinuation of operations. A $1,760,000 allowance was recorded under accounts payable and accrued liabilities at June 30, 2016 to cover those costs.

The partners made no capital contribution in the second quarter of 2016, compared with a $1,100,000 contribution in the second quarter of 2015, including $539,000 from TVA Group and $561,000 from the other partner.

The partners made no capital contribution in the first half of 2016, compared with a $5,900,000 contribution in the first half of 2015, including $2,891,000 from TVA Group and $3,009,000 from the other partner.

b) Credit facility from parent corporation 

In connection with the funding of the acquisition of substantially all of the assets of A.R. Global Vision Ltd., the Corporation obtained a $100,000,000 credit facility from Quebecor Media, which was paid down in full in the first quarter of 2015 with the proceeds from the subscription rights offering (note 7).  The Corporation recognized and paid interest in the amount of $805,000 on that credit facility in the first quarter of 2015.

11. Fair value of financial instruments

In accordance with IFRS 13, Fair Value Measurement, the Corporation has considered the following fair value hierarchy. This hierarchy reflects the significance of the inputs used in measuring the financial instruments accounted for at fair value on the consolidated balance sheets:

Level 1:

quoted prices (unadjusted) in active markets for identical assets or liabilities;



Level 2:

inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and



Level 3:

inputs that are not based on observable market data (unobservable inputs).

 

The fair values of long-term debt and of the derivative financial instrument are estimated based on a valuation model using Level 2 inputs. The fair values are based on discounted cash flows using period-end market yields or the market value of similar financial instruments with the same maturity.

The carrying amount and the fair value of the long-term debt and of the derivative financial instrument as at June 30, 2016 and December 31, 2015 were as follows:





June 30, 2016

December 31, 2015


Carrying
amount

Fair
value

Carrying
amount

Fair
value










Derivative financial instrument

$

558

$

558

$

814

$

814

Long-term debt1


74,928


74,928


73,797


73,797

1 The carrying amount of long-term debt excludes financing costs.

 

12. Segmented information

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, commercial printed 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, the commercial production services and distribution of audiovisual products by the TVA Films division.
  • 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, commercial print 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, postproduction and visual effects services.




Three-month periods

ended June 30

Six-month periods

ended June 30



2016


2015


2016


2015










Revenues










Broadcasting & Production

$

105,061

$

110,578

$

211,024

$

214,101


Magazines


29,197


31,347


56,684


46,225


Film Production & Audiovisual Services


12,650


19,855


28,162


30,104


Intersegment items


(2,679)


(2,356)


(6,118)


(4,492)



144,229


159,424


289,752


285,938

Adjusted operating income (loss) 1










Broadcasting & Production


(2,431)


867


(6,315)


(7,792)


Magazines


3,920


1,219


5,979


2,184


Film Production & Audiovisual Services


938


5,285


3,060


5,288



2,427


7,371


2,724


(320)

Depreciation of property, plant and equipment and amortization of intangible assets


8,920


7,079


17,354


13,887

Financial expenses


866


870


1,836


2,805

Operational restructuring costs, impairment of assets and others


708


2,304


1,160


2,711

Loss before tax recovery and share of (income) loss of associated corporations

$

(8,067)

$

(2,882)

$

(17,626)

$

(19,723)

 

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



(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 loss (income) of associated corporations. Adjusted operating income (loss) as defined above is not a measure of results that is consistent with IFRS.

 

SOURCE TVA Group

For further information: Denis Rozon, CPA, CA, Vice President and Chief Financial Officer, (514) 598-2808

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