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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Jurisdiction of incorporation or organization)
612 Saint-Jacques Street
Montréal, Québec, Canada H3C 4M8
(Address of principal executive offices)
Title of each class | Name of each exchange on which registered | |
None | None |
(Title of Class)
(Title of Class)
110,000 Cumulative First Preferred Shares, Series C
2,555,000 Cumulative First Preferred Shares, Series G
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PART I | ||||||||
1 | ||||||||
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21 | ||||||||
74 | ||||||||
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120 | ||||||||
132 | ||||||||
136 | ||||||||
138 | ||||||||
139 | ||||||||
160 | ||||||||
161 | ||||||||
PART II | ||||||||
162 | ||||||||
162 | ||||||||
162 | ||||||||
163 | ||||||||
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164 | ||||||||
164 | ||||||||
PART III | ||||||||
164 | ||||||||
164 | ||||||||
164 | ||||||||
169 | ||||||||
170 | ||||||||
Certificate of Amendment | ||||||||
By-Law No 2007-2 | ||||||||
Fourth Amended and Restated Credit Agreement | ||||||||
Calculation of Ratio of Earnings to Fixed Charges | ||||||||
Subsidiaries of Quebecor Media Inc. | ||||||||
Certification of Pierre Karl Peladeau (S.302) | ||||||||
Certification of Louis Morin (S.302) | ||||||||
Certification of Pierre Karl Peladeau (S.906) | ||||||||
Certification of Louis Morin (S.906) |
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Year Ended: | Average(1) | High | Low | Period End | ||||||||||||
December 31, 2007 | 0.9309 | 1.0908 | 0.8437 | 1.0120 | ||||||||||||
December 31, 2006 | 0.8818 | 0.9100 | 0.8528 | 0.8582 | ||||||||||||
December 31, 2005 | 0.8254 | 0.8690 | 0.7872 | 0.8579 | ||||||||||||
December 31, 2004 | 0.7682 | 0.8493 | 0.7158 | 0.8309 | ||||||||||||
December 31, 2003 | 0.7139 | 0.7738 | 0.6349 | 0.7738 |
Month Ended: | Average(2) | High | Low | Period End | ||||||||||||
March 2008 (through March 14, 2008) | 1.0100 | 1.0162 | 1.0025 | 1.0135 | ||||||||||||
February 29, 2008 | 1.0014 | 1.0291 | 0.9815 | 1.0061 | ||||||||||||
January 31, 2008 | 0.9902 | 1.0096 | 0.9714 | 0.9982 | ||||||||||||
December 31, 2007 | 0.9979 | 1.0221 | 0.9789 | 1.0120 | ||||||||||||
November 30, 2007 | 1.0351 | 1.0908 | 0.9993 | 0.9993 | ||||||||||||
October 31, 2007 | 1.0255 | 1.0531 | 0.9998 | 1.0531 | ||||||||||||
September 30, 2007 | 0.9754 | 1.0041 | 0.9482 | 1.0041 |
(1) | The average of the exchange rates for all days during the applicable year. | |
(2) | The average of the exchange rates for all days during the applicable month. |
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• | general economic, financial or market conditions; | ||
• | the intensity of competitive activity in the industries in which we operate, including competition from alternative means of programs and content transmission; | ||
• | unanticipated higher capital spending required to address continued development of competitive alternative technologies or the inability to obtain additional capital to continue the development of our business; | ||
• | our ability to implement successfully our business and operating strategies and manage our growth and expansion; | ||
• | the outcome of Canada’s upcoming wireless spectrum auction and our ability to successfully pursue a strategy of becoming a facilities-based wireless provider; | ||
• | our ability to continue to distribute a wide range of television programming and to attract large audiences and readership; | ||
• | variations in the cost, quality and variety of our television programming; | ||
• | cyclical and seasonal variations in our advertising revenue; | ||
• | disruptions to the network through which we provide our digital television, Internet access and telephony services, and our ability to protect such services from piracy; | ||
• | labour disputes or strikes; | ||
• | changes in our ability to obtain services and equipment critical to our operations; | ||
• | changes in laws and regulations, or in their interpretations, which could result in, among other things, the loss (or reduction in value) of our licenses or markets or in an increase in competition, compliance costs or capital expenditures; | ||
• | our substantial indebtedness and the restrictions on our business imposed by the terms of our debt; and | ||
• | interest rate fluctuations that affect a portion of our interest payment requirements on long-term debt. |
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Year Ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(in millions, except ratio) | ||||||||||||||||||||
STATEMENT OF INCOME DATA: | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Cable | $ | 1,552.6 | $ | 1,309.5 | $ | 1,080.3 | $ | 937.6 | $ | 862.8 | ||||||||||
Newspapers | 1,028.1 | 928.2 | 915.6 | 888.1 | 845.9 | |||||||||||||||
Broadcasting | 415.5 | 393.3 | 401.4 | 358.0 | 340.9 | |||||||||||||||
Leisure and Entertainment | 329.8 | 315.8 | 255.4 | 241.7 | 205.0 | |||||||||||||||
Interactive Technologies and Communications | 82.0 | 73.9 | 65.1 | 51.9 | 44.8 | |||||||||||||||
Internet/Portals | 48.3 | 41.6 | 35.2 | 26.5 | 21.6 | |||||||||||||||
Head office and inter-segment | (90.4 | ) | (63.7 | ) | (57.6 | ) | (46.9 | ) | (29.1 | ) | ||||||||||
3,365.9 | 2,998.6 | 2,695.4 | 2,456.9 | 2,291.9 | ||||||||||||||||
Cost of sales, selling and administrative expenses | (2,402.0 | ) | (2,199.0 | ) | (1,963.3 | ) | (1,759.7 | ) | (1,680.3 | ) | ||||||||||
Amortization | (290.4 | ) | (260.7 | ) | (231.9 | ) | (225.9 | ) | (226.6 | ) | ||||||||||
Financial expenses | (240.0 | ) | (224.6 | ) | (285.3 | ) | (314.6 | ) | (300.1 | ) | ||||||||||
Reserve for restructuring of operations, impairment of assets and other special charges | (11.6 | ) | (18.9 | ) | 0.2 | (2.8 | ) | (1.8 | ) | |||||||||||
(Loss) gain on debt refinancing and on repurchase of redeemable preferred shares of a subsidiary | (1.0 | ) | (342.6 | ) | (60.0 | ) | (4.8 | ) | 144.1 | |||||||||||
Gain (loss) on sale of businesses and other assets | 0.4 | 2.2 | 0.1 | 9.3 | (1.1 | ) | ||||||||||||||
Impairment of goodwill and intangible assets | (5.4 | ) | (180.0 | ) | — | — | (0.5 | ) | ||||||||||||
Income taxes | (74.8 | ) | 53.7 | (43.5 | ) | (37.4 | ) | 12.5 | ||||||||||||
Non-controlling interest | (19.2 | ) | (0.4 | ) | (16.2 | ) | (31.7 | ) | (34.5 | ) | ||||||||||
Income (loss) from discontinued operations | 5.2 | 2.0 | 1.0 | (1.1 | ) | 0.3 | ||||||||||||||
Net income (loss) | $ | 327.1 | $ | (169.7 | ) | $ | 96.5 | $ | 88.2 | $ | 203.9 | |||||||||
OTHER FINANCIAL DATA AND RATIO: | ||||||||||||||||||||
Operating income(1) | $ | 963.9 | $ | 799.6 | $ | 732.1 | $ | 697.2 | $ | 611.6 | ||||||||||
Additions to property, plant and equipment | 468.7 | 435.5 | 319.8 | 181.1 | 131.2 | |||||||||||||||
Comprehensive income (loss)(2) | 373.1 | (168.5 | ) | 95.2 | 88.7 | 205.2 | ||||||||||||||
Ratio of earnings to fixed charges or coverage deficiency (3)(4) (unaudited) | 2.7x | $ | 231.1 | 1.5x | 1.5x | 1.7x |
At December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
BALANCE SHEET DATA: | ||||||||||||||||||||
Cash and cash equivalents | $ | 26.1 | $ | 34.1 | $ | 97.4 | $ | 108.8 | $ | 103.6 | ||||||||||
Total assets | 7,560.9 | 6,583.9 | 6,675.5 | 6,509.2 | 6,610.6 | |||||||||||||||
Total debt (current and long-term portions) | 3,027.5 | 2,796.1 | 2,533.2 | 2,548.8 | 2,756.8 | |||||||||||||||
Capital stock | 1,752.4 | 1,752.4 | 1,773.7 | 1,773.7 | 1,773.7 | |||||||||||||||
Shareholders’ equity | 2,450.3 | 2,237.0 | 2,450.1 | 2,459.9 | 2,395.0 | |||||||||||||||
Cash dividends declared | 110.0 | 23.7 | 105.0 | 20.0 | — | |||||||||||||||
Number of common shares outstanding | 123.6 | 123.6 | 123.6 | 123.6 | 123.6 |
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Year Ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(in millions, except ratio) | ||||||||||||||||||||
STATEMENT OF INCOME DATA: | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Cable | $ | 1,552.0 | $ | 1,312.2 | $ | 1,086.5 | $ | 946.9 | $ | 862.8 | ||||||||||
Newspapers | 1,028.1 | 928.2 | 915.6 | 888.1 | 845.9 | |||||||||||||||
Broadcasting | 415.5 | 393.3 | 401.4 | 358.0 | 340.9 | |||||||||||||||
Leisure and Entertainment | 329.8 | 315.8 | 255.4 | 241.7 | 205.0 | |||||||||||||||
Interactive Technologies and Communications | 82.0 | 73.9 | 65.1 | 51.9 | 44.8 | |||||||||||||||
Internet/Portals | 48.3 | 41.6 | 35.2 | 26.5 | 21.6 | |||||||||||||||
Head office and inter-segment | (90.4 | ) | (63.7 | ) | (57.6 | ) | (46.9 | ) | (29.1 | ) | ||||||||||
3,365.3 | 3,001.3 | 2,701.6 | 2,466.2 | 2,291.9 | ||||||||||||||||
Cost of sales, selling and administrative expenses | (2,406.5 | ) | (2,207.8 | ) | (1,967.5 | ) | (1,758.8 | ) | (1,677.0 | ) | ||||||||||
Amortization | (287.7 | ) | (257.9 | ) | (229.6 | ) | (225.7 | ) | (226.6 | ) | ||||||||||
Financial expenses | (229.1 | ) | (220.0 | ) | (304.0 | ) | (322.2 | ) | (467.6 | ) | ||||||||||
Reserve for restructuring of operations, impairment of assets and other special charges | (11.6 | ) | (18.9 | ) | 0.2 | (2.8 | ) | (1.8 | ) | |||||||||||
Loss on debt refinancing | (1.0 | ) | (275.7 | ) | (48.5 | ) | (4.8 | ) | (9.6 | ) | ||||||||||
Gain (loss) on sales of businesses and other assets | 0.4 | 2.2 | 1.6 | 9.3 | (1.1 | ) | ||||||||||||||
Impairment of goodwill and intangible assets | (5.4 | ) | (180.0 | ) | — | — | (0.5 | ) | ||||||||||||
Income taxes | (99.7 | ) | 13.3 | (7.6 | ) | (43.4 | ) | 13.8 | ||||||||||||
Non-controlling interest | (17.0 | ) | (1.3 | ) | (18.4 | ) | (35.1 | ) | (34.5 | ) | ||||||||||
Other (expenses) revenues and (loss) income from discontinued operations | 5.2 | 2.0 | 1.0 | (0.8 | ) | 16.5 | ||||||||||||||
Net income (loss) | $ | 312.9 | $ | (142.8 | ) | $ | 128.8 | $ | 81.9 | $ | (96.5 | ) | ||||||||
OTHER FINANCIAL DATA AND RATIO: | ||||||||||||||||||||
Operating income(1) | $ | 958.8 | $ | 793.5 | $ | 734.1 | $ | 707.4 | $ | 614.9 | ||||||||||
Additions to property, plant and equipment | 468.7 | 435.5 | 319.8 | 181.1 | 131.2 | |||||||||||||||
Comprehensive (loss) income | 356.9 | (56.4 | ) | 160.0 | (25.5 | ) | (155.7 | ) | ||||||||||||
Ratio of earnings to fixed charges or coverage deficiency (3)(4) (unaudited) | 2.7x | $ | 162.9 | 1.5x | 1.5x | $ | 76.0 |
At December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
BALANCE SHEET DATA: | ||||||||||||||||||||
Cash and cash equivalents | $ | 26.1 | $ | 34.1 | $ | 97.4 | $ | 108.8 | $ | 103.6 | ||||||||||
Total assets | 7,523.4 | 6,533.4 | 6,664.1 | 6,480.1 | 6,602.2 | |||||||||||||||
Total debt (current and long-term portion) | 3,016.1 | 2,766.3 | 2,501.1 | 2,529.0 | 2,736.1 | |||||||||||||||
Capital stock | 1,752.4 | 1,752.4 | 1,773.7 | 1,773.7 | 1,773.7 | |||||||||||||||
Shareholders’ equity | 2,407.9 | 2,155.3 | 2,275.2 | 2,204.3 | 2,253.3 | |||||||||||||||
Cash dividends declared | 110.0 | 23.7 | 105.0 | 20.0 | — | |||||||||||||||
Number of common shares outstanding | 123.6 | 123.6 | 123.6 | 123.6 | 123.6 |
(1) | Quebecor Media defines operating income, reconciled to net income (loss) under Canadian GAAP, as net income (loss) before amortization, financial expenses, reserve for restructuring of operations, impairment of assets and other special charges, (loss) gain on debt refinancing and on repurchase of redeemable preferred shares of a subsidiary, gain (loss) on sales of businesses and other assets, impairment of goodwill and intangible assets, income taxes, non-controlling interest and income (loss) from discontinued operations. Quebecor Media defines operating income, reconciled to net income (loss) under U.S. GAAP, as net income (loss) before amortization, financial expenses, reserve for restructuring of operations, impairment of assets and other |
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special charges, loss on debt refinancing, gain (loss) on sale of businesses and other assets, impairment of goodwill and intangible assets, income taxes, non-controlling interest, and other (expenses) revenues and (loss) income from discontinued operations. Operating income as defined above is not a measure of results that is consistent with Canadian GAAP or U.S. GAAP. It is not intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP or U.S. GAAP. Our parent company, Quebecor, considers the media segment as a whole and uses operating income in order to assess the performance of its investment in Quebecor Media. Our management and Board of Directors use this measure in evaluating Quebecor Media’s consolidated results as well as results of Quebecor Media’s operating segments. As such, this measure eliminates the significant level of non-cash depreciation of tangible assets and amortization of certain intangible assets, and it is unaffected by the capital structure or investment activities of Quebecor Media and of its segments. Operating income is also relevant because it is a significant component of Quebecor Media’s annual incentive compensation programs. A limitation of this measure, however, is that it does not reflect the periodic costs of capitalized tangible and intangible assets used in generating revenues in Quebecor Media’s segments. Quebecor Media uses other measures that do reflect such costs, such as cash flows from segment operations and free cash flows from continuing operations. In addition, measures like operating income are commonly used by the investment community to analyze and compare the performance of companies in the industries in which we are engaged. Our definition of operating income may not be the same as similarly titled measures reported by other companies. The following table provides a reconciliation under Canadian GAAP of operating income to net income (loss) as presented in our consolidated financial statements: |
Year Ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Reconciliation of operating income to net income (loss) (Canadian GAAP) (in millions of Canadian dollars) | ||||||||||||||||||||
Operating income | ||||||||||||||||||||
Cable | $ | 642.7 | $ | 512.5 | $ | 413.3 | $ | 363.8 | $ | 289.7 | ||||||||||
Newspapers | 225.9 | 207.6 | 222.2 | 227.8 | 224.8 | |||||||||||||||
Broadcasting | 59.4 | 42.1 | 53.0 | 80.5 | 81.5 | |||||||||||||||
Leisure and Entertainment | 27.0 | 19.3 | 27.0 | 22.7 | 14.7 | |||||||||||||||
Interactive Technologies and Communications | 2.8 | 7.5 | 3.9 | 2.3 | 1.1 | |||||||||||||||
Internet/Portals | 6.9 | 10.1 | 9.0 | 4.5 | 2.9 | |||||||||||||||
Head office | (0.8 | ) | 0.5 | 3.7 | (4.4 | ) | (3.1 | ) | ||||||||||||
963.9 | 799.6 | 732.1 | 697.2 | 611.6 | ||||||||||||||||
Amortization | (290.4 | ) | (260.7 | ) | (231.9 | ) | (225.9 | ) | (226.6 | ) | ||||||||||
Financial expenses | (240.0 | ) | (224.6 | ) | (285.3 | ) | (314.6 | ) | (300.1 | ) | ||||||||||
Reserve for restructuring of operations, impairment of assets and other special charges | (11.6 | ) | (18.9 | ) | 0.2 | (2.8 | ) | (1.8 | ) | |||||||||||
(Loss) gain on debt refinancing and on repurchase of redeemable preferred shares of a subsidiary | (1.0 | ) | (342.6 | ) | (60.0 | ) | (4.8 | ) | 144.1 | |||||||||||
Gain (loss) on sale of businesses and other assets | 0.4 | 2.2 | 0.1 | 9.3 | (1.1 | ) | ||||||||||||||
Impairment of goodwill and intangible assets | (5.4 | ) | (180.0 | ) | — | — | (0.5 | ) | ||||||||||||
Income taxes | (74.8 | ) | 53.7 | (43.5 | ) | (37.4 | ) | 12.5 | ||||||||||||
Non-controlling interest | (19.2 | ) | (0.4 | ) | (16.2 | ) | (31.7 | ) | (34.5 | ) | ||||||||||
Income (loss) from discontinued operations | 5.2 | 2.0 | 1.0 | (1.1 | ) | 0.3 | ||||||||||||||
Net income (loss) | $ | 327.1 | $ | (169.7 | ) | $ | 96.5 | $ | 88.2 | $ | 203.9 | |||||||||
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Year Ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Reconciliation of operating income to net income (loss) (U.S. GAAP) (in millions of Canadian dollars) | ||||||||||||||||||||
Operating Income | ||||||||||||||||||||
Cable | $ | 640.4 | $ | 508.8 | $ | 411.4 | $ | 362.2 | $ | 292.6 | ||||||||||
Newspapers | 224.8 | 206.9 | 221.6 | 232.4 | 224.4 | |||||||||||||||
Broadcasting | 62.1 | 43.4 | 58.3 | 87.5 | 81.7 | |||||||||||||||
Leisure and Entertainment | 26.9 | 19.3 | 26.2 | 22.9 | 15.0 | |||||||||||||||
Interactive Technologies and Communications | 2.8 | 7.5 | 3.9 | 2.3 | 1.4 | |||||||||||||||
Internet/Portals | 6.9 | 10.1 | 9.0 | 4.5 | 2.9 | |||||||||||||||
Head office | (5.1 | ) | (2.5 | ) | 3.7 | (4.4 | ) | (3.1 | ) | |||||||||||
958.8 | 793.5 | 734.1 | 707.4 | 614.9 | ||||||||||||||||
Amortization | (287.7 | ) | (257.9 | ) | (229.6 | ) | (225.7 | ) | (226.6 | ) | ||||||||||
Financial expenses | (229.1 | ) | (220.0 | ) | (304.0 | ) | (322.2 | ) | (467.6 | ) | ||||||||||
Reserve for restructuring of operations, impairment of assets and other special charges | (11.6 | ) | (18.9 | ) | 0.2 | (2.8 | ) | (1.8 | ) | |||||||||||
Loss on debt refinancing | (1.0 | ) | (275.7 | ) | (48.5 | ) | (4.8 | ) | (9.6 | ) | ||||||||||
Gain (loss) on sale of businesses and other assets | 0.4 | 2.2 | 1.6 | 9.3 | (1.1 | ) | ||||||||||||||
Impairment of goodwill and intangible assets | (5.4 | ) | (180.0 | ) | — | — | (0.5 | ) | ||||||||||||
Income taxes | (99.7 | ) | 13.3 | (7.6 | ) | (43.4 | ) | 13.8 | ||||||||||||
Non-controlling interest | (17.0 | ) | (1.3 | ) | (18.4 | ) | (35.1 | ) | (34.5 | ) | ||||||||||
Other (expenses) revenues and (loss) income from discontinued operations | 5.2 | 2.0 | 1.0 | (0.8 | ) | 16.5 | ||||||||||||||
Net income (loss) | $ | 312.9 | $ | (142.8 | ) | $ | 128.8 | $ | 81.9 | $ | (96.5 | ) | ||||||||
(2) | Effective January 1, 2007, the Company adopted new financial instruments, hedges and comprehensive income standards pursuant to Canadian GAAP. See see Note 1(b) to our consolidated financial statements included under “Item 17. Financial Statements” of this annual report. | |
(3) | For the purpose of calculating the ratio of earnings to fixed charges, (i) earnings consist of net income (loss) plus non-controlling interest in subsidiary, income taxes, fixed charges, amortized capitalized interest, less interest capitalized and (ii) fixed charges consist of interest expensed and capitalized, plus amortized premiums, discounts and capitalized expenses relating to indebtedness and an estimate of the interest within rental expense. | |
(4) | Our 2006 coverage deficiency was significant due to the non-cash charge related to an impairment of goodwill and intangible assets in the amount of $180.0 million and to our loss on debt refinancing in the amount of $342.6 million pursuant to Canadian GAAP ($275.7 million pursuant to U.S. GAAP). We believe cash flows from continuing operating activities and available sources of financing will be sufficient to cover our operating, investing and financing needs during the twelve months following December 31, 2007. |
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• | Videotron is party to 5 collective bargaining agreements, representing approximately 2,558 employees. Of these collective bargaining agreements, one (representing approximately 40 employees) has expired. Negotiations regarding this collective bargaining agreement will be undertaken in 2008. Two others, representing approximately 2,308 employees, or 90% of Videotron’s unionized employees, will expire in December 2009. The remaining two collective bargaining agreements, representing 210 employees, or 8% of Videotron’s unionized workforce, will expire between January 2010 and August 2011; | ||
• | Sun Media is party to 48 collective bargaining agreements, representing approximately 2,004 employees. Of these, 12 collective bargaining agreements, representing approximately 941 employees, or 47% of Sun Media’s unionized workforce, have expired. Negotiations regarding these 12 collective bargaining agreements are either in progress or will be undertaken in 2008. The other 36 of Sun Media’s collective bargaining agreements, |
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representing approximately 1,063 employees, or 53% of its unionized workforce, are scheduled to expire on various dates through December 2010; |
• | Osprey Media is party to 40 collective bargaining agreements, representing approximately 820 employees. All of Osprey Media’s collective bargaining agreements are scheduled to expire on various date between June 2008 and April 2011; | ||
• | TVA Group is party to 15 collective bargaining agreements, representing approximately 830 employees. Of this number, 7 collective bargaining agreements, representing approximately 120 employees, or 14% of its unionized workforce, are expired. Negotiations regarding these 7 collective bargaining agreements are either in progress or will be undertaken in 2008. 8 of TVA Group’s collective bargaining agreements, representing approximately 710 employees, or 86% of its unionized workforce, will expire between October 2008 and the end of December 2009; and | ||
• | The other 7 collective bargaining agreements, representing approximately 370 or 6% of our unionized employees, will expire between the end of April 2009 and June 2010. |
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• | increase our vulnerability to general adverse economic and industry conditions; | ||
• | require us to dedicate a substantial portion of our cash flow from continuing operations to make interest and principal payments on our indebtedness, reducing the availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes; | ||
• | limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate; | ||
• | place us at a competitive disadvantage compared to our competitors that have less debt or greater financial resources; and | ||
• | limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds on commercially reasonable terms, if at all. |
• | borrow money or sell preferred stock; | ||
• | issue guarantees of debt; | ||
• | make certain types of investments; | ||
• | pay dividends and make other restricted payments; | ||
• | create or permit certain liens; | ||
• | use the proceeds from sales of assets and subsidiary stock; | ||
• | enter into asset sales; | ||
• | create or permit restrictions on the ability of our restricted subsidiaries, if any, to pay dividends or make other distributions; | ||
• | engage in certain transactions with affiliates; and | ||
• | enter into mergers, consolidations and transfers of all or substantially all of our assets. |
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• | On January 9, 2008, Quebecor Media, through a wholly-owned subsidiary, commenced an offer (the “Offer”) to purchase for cash all of the issued and outstanding common shares of Nurun (including common shares issuable upon the exercise of outstanding options, conversion or exchange rights) not already held by Quebecor Media and its affiliates, at a price of $4.75 per common share. As of January 9, 2008, Quebecor Media, together with its affiliates, held 19,576,605 common shares of Nurun, representing approximately 57.5% of the currently issued and outstanding common shares. The Offer was open until February 19, 2008. On February 19, 2008, Quebecor Media announced that it had taken up and acquired an aggregate of 14,640,550 Nurun common shares, representing 91.54% of all Nurun common shares not previously held by Quebecor Media and its affiliates, resulting in Quebecor Media owning, directly and indirectly, 96.20% of all issued and outstanding Nurun common shares, and, on February 26, 2008, Quebecor Media announced that it had acquired the remaining Nurun common shares by means of a statutory compulsory acquisition procedure (commonly known as a squeeze-out) under the applicable provisions of theCanada Business Corporations Actat the same price as the offer price. The Nurun common shares were delisted from the Toronto Stock Exchange on February 27, 2008. The aggregate cash consideration paid by Quebecor Media pursuant to the Offer was approximately $75.4 million. | ||
• | On October 31, 2007, Sun Media entered into a subordinated loan agreement with Quebecor Media of $237.5 million. Sun Media used the proceeds of this subordinated financing and $43.4 million of cash from continuing operations to repay the balance of its Term Loan B, and settle related hedging contracts for a total cash consideration of $277.8 million. In addition, on October 31, 2007, Sun Media entered into a Fifth Amending Agreement to its credit agreement. The agreement extends the term to October 31, 2012 and modifies covenants related to leverage and interest coverage ratios, removes the fixed charge ratio and modifies certain definitions. |
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• | On October 5, 2007, Quebecor Media completed a placement of US$700.0 million aggregate principal amount of its 73/4% senior notes due 2016. Quebecor Media used the net proceeds of $672.2 million (including accrued interest of $16.6 million and before financing costs of $9.8 million) from the placement, as well as its cash and cash equivalents, to repay $420.0 million drawn on the senior bridge credit facility entered into to finance the acquisition of Osprey Media, to repay US$179.7 million outstanding under Sun Media Corporation’s Term Loan B, and to settle the $106.0 million liability related to derivative financial instruments connected to the Sun Media Corporation Term Loan B. The new senior notes were offered on a private placement basis principally in the United States. Pursuant to the terms and conditions set forth in a registration rights agreement, we agreed to file an exchange offer registration statement with the SEC with respect to a registered offer to exchange without novation these privately-placed notes for our new SEC-registered 73/4 % Senior Notes due 2016 evidencing the same continuing indebtedness and having substantially identical terms. We filed a registration statement on Form F-4 with the SEC on November 20, 2007 and commenced the registered exchange offer on February 21, 2008. We currently anticipate completing the registered exchange offer in early April 2008. | ||
• | In early August 2007, Quebecor Media completed its acquisition of Osprey Media for an aggregate purchase price of approximately $414.4 million (excluding assumed Osprey Media debt of $161.8 million). The purchase price was financed through a senior bridge credit facility that Quebecor Media fully repaid with a portion of the proceeds of the offering of its Senior Notes in October 2007. Osprey Media is one of Canada’s leading publishers of daily and non-daily newspapers, magazines and specialty publications. With the acquisition of Osprey Media, Quebecor Media became the largest newspaper publisher in Canada, based on total paid and unpaid circulation. | ||
• | On November 28, 2007 and December 14, 2007, Industry Canada released a policy framework and a licensing framework, respectively, for the 3G Spectrum Auction. Several of the framework elements are expressly intended to encourage new entrants into the Canadian mobile wireless industry, most notably the setting aside of 40 MHz (out of a total of 105 MHz) of spectrum nationally for new entrants, and a decision to mandate digital roaming and antenna tower and site sharing by way of new licence conditions applicable to all existing and new mobile wireless licensees. These licence conditions were finalized on February 29, 2008. The 3G Spectrum Auction is scheduled to commence on May 27, 2008. We have announced that we have filed an application to participate in this auction. | ||
• | During the financial years ended December 31, 2006 and 2005, Quebecor Media’s interest in TVA Group increased as a result of the Substantial Issuer Bid dated May 19, 2005 and various Normal Course Issuer Bids. In 2006 and 2005 respectively, 9,800 and 3,739,599 Class B shares were repurchased under the Normal Course Issuer Bids and the Substantial Issuer Bid and for cash consideration of $0.2 million and $81.9 million, respectively. As a result of these repurchases, Quebecor Media’s interest in TVA Group increased by 5.5 percent, from 39.7% on January 1, 2005 to 45.2% as of December 31, 2007. | ||
• | Between the refinancing on January 17, 2006 and the end of 2006, the balance of Videotron’s revolving credit facility was reduced by $188.0 million, using cash flows provided by operating activities, and repayments and repurchases totalling $39.0 million were made with respect to the bank credit facilities of Sun Media Corporation and Quebecor Media. On December 29, 2006, Sun Media Corporation repurchased a portion of its term loan “B” for $15.0 million and closed out the corresponding portion of its hedge agreements. | ||
• | On January 17, 2006, Quebecor Media issued US$525.0 million aggregate principal amount of its 73/4% Senior Notes due March 2016. Quebecor Media also established new credit facilities consisting of a Term Loan A credit facility in the amount of $125.0 million, maturing in 2011, a Term Loan B credit facility in the amount of US$350.0 million, maturing in 2013, and a five-year revolving credit facility in the amount of $100.0 million, expiring in 2011. | ||
• | Also on January 17, 2006, Quebecor Media repurchased US$561.6 million in aggregate principal amount of its Senior Notes due 2011 (representing 95.7% of the Senior Notes due 2011 outstanding) and US$275.6 million in aggregate principal amount at maturity of our Senior Discount Notes due 2011 (representing 97.4% of the Senior Discount Notes due 2011 outstanding). On July 15, 2006, Quebecor Media purchased the balance of its then-outstanding Senior Notes due 2011 and Senior Discount Notes due 2011. Quebecor Media paid total cash consideration of US$1.4 billion to purchase the notes, including the premium and the cost of settlement of |
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cross-currency swap agreements. The refinancing entailed disbursements exceeding the book value of the repurchased notes, including repayment of liabilities related to cross-currency swap agreements and disbursements related to the loss on debt refinancing and on swap agreements, by $380.0 million, which was financed by issuing long-term debt. In respect of these repurchases, Quebecor Media recognized a $342.1 million loss on debt refinancing ($218.7 million net of income tax) in 2006. See also “Item 5. Operating and Financial Review and Prospects” in this annual report. |
• | On December 12, 2005, Quebecor Media completed its acquisition of Sogides Ltée (now Groupe Sogides inc.), which we refer to as Sogides, a major Québec-based book publishing and distribution group which owns the publishing houses Les Éditions de l’Homme, Le Jour, Utilis, Les Presses Libres and Groupe Ville-Marie Littérature inc. (which includes L’Hexagone, VLB Éditeur and Typo), and owns the distributor Messageries ADP, which is a distributor for more than 160 Québec-based and foreign publishing houses. With this acquisition, Quebecor Media offers a more complete selection of books by Québec authors, will be able to promote Québec writers in Europe through the Sogides network on that continent, and becomes the largest Québec-based publisher and distributor of French-language books in the Province of Québec. For the acquisition of Sogides, we paid cash consideration of $24.0 million, and an additional contingent amount of $5.0 million, which was paid in January 2008. | ||
• | On September 16, 2005, Videotron issued US$175.0 million aggregate principal amount of its 63/8% Senior Notes due December 15, 2015. The net proceeds from this sale of Videotron’s 63/8% Senior Notes were used primarily to refinance the repurchase of all the outstanding Senior Notes issued by our CF Cable TV subsidiary and a portion of the repurchase by Quebecor Media of its Senior Notes due 2011 and Senior Discount Notes due 2011. | ||
• | In August 2005, we announced a plan to invest in a new printing facility located in Toronto, Ontario. In early 2007, Sun Media transferred the printing of24 Hours Torontoto this new facility and, in late 2007, began printing a portion of theToronto Sunat this site. In addition, in August 2005, we announced a plan to relocate the printing of certain Sun Media publications to a new 235,000 square foot printing facility owned by us, located in Saint-Janvier-de-Mirabel, Québec. During the fourth quarter of 2006, this new printing facility began printing certain Québec community publications, as well as theOttawa Sun,24 Hoursin Ottawa and24 Heures(Montréal and Ottawa-Gatineau). In 2007, portions of theJournal de Montréaland theJournal de Québecwere also printed at this site. The new facilities should make it possible to further consolidate some of Quebecor Media’s printing operations in Ontario and Québec, improve the quality of its newspaper products and create additional revenue opportunities as well as strengthen the convergence among our Toronto media properties. Since the implementation of the Toronto and Saint-Janvier-de-Mirabel, Québec initiatives, Quebecor Media has acquired Osprey Media and has been actively reviewing Osprey Media’s operations in order to leverage the synergies between its current operations and those of Osprey Media. In addition, Quebecor Media has undertaken a number of production and sales initiatives with its clients with a view to improving the product and service offering with more types of printed products as well as improving the turnaround time for the printing of daily publications. Such integration, production and sales initiatives will require additional printing capacity. On October 11, 2007, Quebecor Media acquired a building from Quebecor World for a total net consideration of $62.5 million. At the same time, Quebecor World signed a long term operating lease with Quebecor Media to rent a small part of the building for a 17-year period. The two transactions were settled by means of the payment of a net cash consideration of $43.9 million to Quebecor World on the transaction date, and an undertaking by Quebecor Media to pay a sale price balance of $7.0 million in 2013. The building houses three new presses owned by Quebecor Media and is used to print some of its Ontario newspapers. | ||
• | On July 19, 2005, we repurchased and retired US$128.2 million in aggregate principal amount of our 111/8Senior Notes due 2011 and US$12.1 million in aggregate principal amount at maturity of our 133/4% Senior Discount Notes due 2011 pursuant to cash tender offers commenced on June 20, 2005. We paid aggregate cash consideration of $215.3 million to purchase these notes, including the redemption premium and the cost of settlement of related cross-currency swap agreements, recognizing a $60.8 million loss on settlement of debt ($41.0 million after taxes). |
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• | In January 2005, Vidéotron launched its telephony services in the Province of Québec, using VoIP technology. Vidéotron became the first major cable company in Canada to offer consumers residential telephone service over cable. See “Business Overview — Cable” below. |
• | cross-promote our brands, programs and other content across multiple media platforms; | ||
• | provide advertisers with an integrated solution for local, regional and national multi-platform advertising; | ||
• | offer a differentiated, bundled suite of entertainment, information and communication services and products, including digital television, cable Internet access, video-on-demand and other interactive television services, as well as residential and commercial cable telephony services using VoIP technology, and mobile wireless telephony services on an MVNO-basis utilizing wireless voice and data services provided by Rogers Wireless Inc. (“Rogers Wireless”), a subsidiary of Rogers Communications Inc.; |
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• | deliver high-quality services and products, including, for example, our standard cable Internet access service that enables our customers to download data at a higher speed than that currently offered by standard digital subscriber line, or DSL, technology, and the widest range of French-language programming in Canada; | ||
• | leverage our content, management, sales and marketing and production resources to provide superior information and entertainment services to our customers; | ||
• | extend our market reach by leveraging our multimedia platform and cross-marketing expertise and experience to enhance our national media platform; | ||
• | leverage our single, highly contiguous network that covers approximately 80% of Québec’s total addressable market and five of the province’s top six urban areas. We believe that our single cluster and network architecture provides many benefits, including a higher quality and more reliable network, the ability to rapidly and efficiently launch and deploy new products and services, and a lower cost structure through reduced maintenance and technical support costs; and | ||
• | leverage our advanced broadband network, 99% of which is bi-directional which allows us to offer a wide range of advanced services on the same media, such as analog and digital television, video-on-demand, cable Internet access and cable telephony services. We are committed to maintaining and upgrading our network capacity and, to that end, we currently anticipate that future capital expenditures over the next five years will be required to accommodate the evolution of our products and services and to meet the demand for increased capacity resulting from the launch of our telephony service and the offering of our other advanced products and services. |
• | Introduce new and enhanced products and services.We expect a significant portion of our growth in our Cable segment revenues to be driven by the introduction of new products and services (such as Wideband internet technology that is expected to enable us to offer customers internet access speeds of up to 100 mbps) and by the continuing penetration of our existing suite of products and services such as digital cable services, cable Internet access, cable telephony services, high-definition television, video-on-demand and interactive television. Our objective is also to increase our revenue per subscriber by focusing sales and marketing efforts on the bundling of these value-added products and services. | ||
• | Offer multi-platform media advertising solutions.Our multi-platform media assets enable us to provide advertisers with an integrated advertising solution. We are able to provide flexible, bundled advertising packages that allow advertisers to reach local, regional and national markets, as well as special interest and specific demographic groups. We will focus on further integrating our television, newspaper and magazine publishing, and Internet advertising platforms to enable us to tailor advertising packages to customers’ needs. | ||
• | Cross-promote brands, programs and other content.The geographic overlap of our cable, television, newspaper and magazine publishing, music and video store chains, and Internet platforms enables us to cost effectively promote and co-brand media properties. We will continue to promote initiatives to advance these cross-promotional activities, including the cross-promotion of various businesses, cross-divisional advertising and shared infrastructures. | ||
• | Use content across media properties.We are the largest private-sector French-language programming broadcaster, a leading producer of French-language programming, the largest newspaper publisher, and a |
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leading English- and French-language Internet news and information portal in Canada. Our objective is to further accelerate the distribution of our content across platforms. |
• | Leverage geographic clustering.Our Videotron subsidiary holds cable licenses that cover approximately 80% of Québec’s approximately 3.3 million homes and commercial premises passed by cable. Geographic clusters facilitate bundled service offerings and, in addition, allow us to tailor our offerings to certain demographic markets. We aim to leverage the highly clustered nature of our systems to enable us to use marketing dollars more efficiently and to enhance customer awareness, increase use of products and services and build brand support. | ||
• | Maximize customer satisfaction and build customer loyalty.Across our media platform, we believe that maintaining a high level of customer satisfaction is critical to future growth and profitability. An important factor in our historical growth and profitability has been our ability to attract and satisfy customers with high quality products and services and we will continue our efforts to maximize customer satisfaction and build customer loyalty. | ||
• | Manage expenses through success-driven capital spending and technology improvements. In our Cable segment, we aim to support the growth in our customer base and bandwidth requirements through strategic success-driven modernizations of our network and increases in network capacity. In our Newspaper segment, we have undertaken restructurings of certain printing facilities and news production operations, and invested in certain technology improvements with a view to modernizing our operations and cost structure. In addition, we continuously seek to manage our salaries and benefits expenses, which comprise a significant portion of our costs. |
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Twelve Months Ended August 31, | ||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | CAGR(1) | |||||||||||||||||||
(Homes passed and basic cable customers in millions, dollars in billions) | ||||||||||||||||||||||||
�� | ||||||||||||||||||||||||
Canada | ||||||||||||||||||||||||
Industry Revenue | $ | 4.0 | $ | 4.4 | $ | 4.7 | $ | 4.9 | $ | 6.0 | 10.7 | % | ||||||||||||
Homes Passed(2) | 10.5 | 10.9 | 10.5 | 11.2 | 12.7 | 4.9 | % | |||||||||||||||||
Basic Cable Customers | 7.2 | 7.1 | 6.8 | 6.8 | 7.4 | 0.7 | % | |||||||||||||||||
Basic Penetration | 68.6 | % | 65.1 | % | 64.8 | % | 60.7 | % | 58.3 | % | (4.0 | )% |
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Twelve Months Ended August 31, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | CAGR(3) | |||||||||||||||||||
(Homes passed and basic cable customers in millions, dollars in billions) | ||||||||||||||||||||||||
U.S. | ||||||||||||||||||||||||
Industry Revenue | US$ | 51.3 | US$ | 57.6 | US$ | 62.3 | US$ | 68.2 | US$ | 74.7 | 7.8 | % | ||||||||||||
Homes Passed(2) | 102.9 | 108.2 | 110.8 | 111.6 | 123.0 | 3.6 | % | |||||||||||||||||
Basic Cable Customers | 66.0 | 65.4 | 65.4 | 65.6 | 65.1 | (0.3 | )% | |||||||||||||||||
Basic Penetration | 64.1 | % | 60.7 | % | 59.0 | % | 58.8 | % | 52.9 | % | (4.7 | )% |
Source of Canadian data: CRTC. | ||
Source of U.S. data: NCTA, A.C. Nielsen Media Research and Kagan Research LLC. | ||
(1) | Compounded annual growth rate from 2002 through 2006. | |
(2) | “Homes passed” means the number of residential premises, such as single dwelling units or multiple dwelling units, and commercial premises passed by the cable television distribution network in a given cable system service area in which the programming services are offered. | |
(3) | Compounded annual growth rate from 2003 through 2007. |
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• | Basic Service.All of our customers receive a package of basic programming, consisting of local broadcast television stations, the four U.S. commercial networks and PBS, selected Canadian specialty programming services, and local and regional community programming. Our basic service customers generally receive 27 channels on basic cable. | ||
• | Extended Basic Service.This expanded programming level of services, which is generally comprised of approximately 18 channels, includes a package of French- and English-language specialty television programming and U.S. cable channels in addition to the basic service channel line-up described above. Branded as “Telemax”, this service was introduced in almost all of our markets largely to satisfy customer demand for greater flexibility and choice. |
• | Cable Internet Access.Leveraging our advanced cable infrastructure, we offer cable Internet access to our residential customers primarily via cable modems attached to personal computers. We provide this service at speeds of up to 360 times the speed of a conventional telephone modem. In February 2008, we also effected a limited launch (to our customers in Laval, Québec only) of our Wideband services, which offer speeds of up to 900 times the speed of a conventional telephone modem. We currently plan to extend the coverage of this offering later in 2008. As of December 31, 2007, we had 932,989 cable Internet access customers, representing 57.0% of our basic customers and 37.4% of our total homes passed. Based on internal estimates, we are the largest provider of Internet access services in the areas we serve with an estimated market share of 52.9% as of December 31, 2007. | ||
• | Digital Television.We have installed headend equipment capable of delivering digitally encoded transmissions to a two-way digital-capable set-top box in the customer’s home. This digital connection provides significant advantages. In particular, it increases channel capacity, which allows us to increase both programming and service offerings while providing increased flexibility in packaging our services. Our basic digital package includes 25 television channels, 45 audio services providing CD-quality music, 16 AM/FM radio channels, an interactive programming guide as well as television-based e-mail capability. Our extended digital basic television offering, branded as “à la carte” (i.e.individual channel selections), offers customers the ability to select more than 200 additional channels of their choice, including U.S. super-stations and other special entertainment programs, allowing them to customize their choices. This also offers customers significant programming flexibility including the option of French-language only, English-language only or a combination of French- and English-language programming, as well as many foreign-language channels. We also offer pre-packaged themed service tiers in the areas of news, sports and discovery. Customers who purchase basic service and one customized package can also purchase channels on anà la cartebasis at a specified cost per channel per month. As part of our digital service offering, customers can also purchase near-video-on-demand services on a per-event basis. As of December 31, 2007, we had 768,211 customers for our digital television service, representing 46.9% of our basic customers and 30.8% of our total homes passed. Our customers currently have the option to purchase or lease the digital set-top boxes required for digital service. We believe that the sale of equipment to customers improves customer retention, and, as of December 31, 2007, we had over 953,000 set-top boxes deployed, of which approximately 96% were sold to customers and 4% were leased. | ||
• | Cable Telephony. In January 2005, we launched our cable telephony service using VoIP technology in selected areas of the Province of Québec, and since then we have been progressively rolling-out this offering among our other residential and commercial customers in the Province of Québec. As of December 31, 2007, our cable telephony service is available to 96.9% of our homes passed. Our cable telephony service includes both local and long-distance calling, and permits all of our telephony customers, both residential and commercial, to access all service features mandated by CRTC Decision 97-8 and other regulatory decisions and orders, |
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including: enhanced 911 Emergency service; number portability from and to any local exchange carrier; a message relay service allowing subscribers to communicate with the hearing impaired; and a variety of personal privacy features including universal call tracing. We also offer free basic listings in local telephone directories, as well as full operator assistance, including: operator-assisted calls; collect and third-party calls; local, national and international directory assistance; person-to-person calls; and busy-line verification. Finally, we offer as part of our telephony service a host of convenient, optional features, including: name and number caller ID; call waiting with long-distance distinctive ring and audible indicator tone; name and number caller ID on call waiting; visual indicator of a full voice mail box and audible message waiting indicators; automatic call forwarding; three-way conference calling; automatic recalling; and last incoming call identification and recall. VoIP allows us to deliver new cutting-edge features, such as voice-mail to e-mail functionality launched in December 2005, which allows customers to access their voice-mail via e-mail in the form of audio-file attachments. In keeping with our competitive strength of providing differentiated, bundled service offerings, we offer free installation of our telephony service to existing cable television and/or Internet customers and to new bundled customers. We also offer discounts to our bundled customers, when compared to the sum of the prices of the individual services provided to these customers. In addition, we offer discounts for a second telephone line subscription. On October 24, 2007, we launched our Softphone service, our new computer-based service providing users with more flexibility when traveling, the ability to make local calls anywhere in the world, and new communications management capabilities. As of December 31, 2007, we had 636,666 subscribers to our cable telephony service (including 314 Softphone customers), representing a penetration rate of 38.8% of our basic cable subscribers and 25.5% of our homes passed. | |||
• | Mobile Wireless Telephony Services. On August 10, 2006, we launched our MVNO-based mobile wireless telephony services in the Québec City area, utilizing the Rogers Wireless GSM/GPRS network. Since then, the service has been completely rolled out throughout the Province of Québec. Through our strategic relationship with Rogers Wireless, the operator of Canada’s largest integrated wireless voice and data network, we offer Québec consumers a quadruple play of television, broadband Internet, cable telephony and Videotron branded mobile wireless telephony services. Our services include international roaming and popular options such as voicemail, call waiting, call display, call forwarding, text messaging and conference calling. We are responsible for acquiring and billing customers, as well as for providing customer support under our own brand. As of December 31, 2007, over 45,682 lines had been activated. In order to offer our customers integrated mobile multimedia services and be more competitive, we have filed an application to participate in Canada’s 3G Spectrum Auction, which is scheduled to commence on May 27, 2008. | ||
• | Video-On-Demand.Video-on-demand service enables digital cable customers to rent from a library of movies, documentaries and other programming through their digital set-top box. Our digital cable customers are able to rent their video-on-demand selections for a period of 24 hours, which they are then able to watch at their convenience with full stop, rewind, fast forward, pause and replay functionality during that period. Our video-on-demand service is available to 99% of the homes passed by us. We also offer pay television channels on a subscription basis that permit our customers to access and watch any of their video-on-demand selections at any time at their convenience. | ||
• | Other Products and Services.To maintain and enhance our market position, we are focused on increasing penetration of high-definition television and personal video recorders, as well as other high-value products and services. |
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As of December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Homes passed(1) | 2,497,403 | 2,457,213 | 2,419,335 | 2,383,443 | 2,351,344 | |||||||||||||||
Cable | ||||||||||||||||||||
Basic customers(2) | 1,638,097 | 1,572,411 | 1,506,113 | 1,452,554 | 1,424,144 | |||||||||||||||
Penetration(3) | 65.6 | % | 64.0 | % | 62.3 | % | 60.9 | % | 60.6 | % | ||||||||||
Digital customers | 768,211 | 623,646 | 474,629 | 333,664 | 240,863 | |||||||||||||||
Penetration(4) | 46.9 | % | 39.7 | % | 31.5 | % | 23.0 | % | 16.9 | % | ||||||||||
Number of digital set-top boxes | 953,393 | 738,530 | 537,364 | 362,053 | 257,350 | |||||||||||||||
Dial-up Internet Access | ||||||||||||||||||||
Dial-up customers | 9,052 | 13,426 | 18,034 | 23,973 | 28,821 | |||||||||||||||
Cable Internet Access | ||||||||||||||||||||
Cable modem customers | 932,989 | 791,966 | 637,971 | 502,630 | 406,277 | |||||||||||||||
Penetration(3) | 37.4 | % | 32.2 | % | 26.4 | % | 21.1 | % | 17.3 | % | ||||||||||
Telephony Services | ||||||||||||||||||||
Cable telephony customers | 636,666 | 397,860 | 162,979 | 2,135 | — | |||||||||||||||
Penetration(3) | 25.5 | % | 16.2 | % | 6.7 | % | 0.1 | % | ||||||||||||
Wireless telephony lines | 45,682 | 11,826 | — | — | — |
(1) | “Homes passed” means the number of residential premises, such as single dwelling units or multiple dwelling units, and commercial premises passed by the cable television distribution network in a given cable system service area in which the programming services are offered. | |
(2) | Basic customers are customers who receive basic cable service in either the analog or digital mode. The numbers of basic customers for the years 2003 and 2004 were restated in order to permit such numbers to be compared to the 2005 through 2007 numbers of basic customers. | |
(3) | Represents customers as a percentage of total homes passed. | |
(4) | Represents customers for the digital service as a percentage of basic customers. |
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Service | Price Range | |
Basic analog cable(1) | $15.07 — $29.88 | |
Extended basic analog cable(1) | $28.50 — $42.19 | |
Basic digital cable | $13.98 — $15.98 | |
Extended basic digital cable(1) | $27.98 — $76.98 | |
Pay-television | $3.99 — $29.99 | |
Pay-per-view (per movie or event) | $3.99 — $54.99 | |
Video-on-demand (per movie or event) | $0.99 — $29.99 | |
Dial-up Internet access | $9.95 — $19.95 | |
Cable Internet access(2) | $27.95 — $89.95 | |
Cable telephony | $16.95 — $22.95 | |
Mobile wireless telephony | $22.65 — $78.35 |
(1) | These rates reflect price increases, effective March 15, 2008, of $1.00 on basic analog cable, extended basic analog cable and extended basic digital cable. | |
(2) | These rates reflect price increases, effective March 1, 2008, of $1.00 on basic internet and $2.00 on high-speed internet. |
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450 MHz | 480 to | 750 to | Two-Way | |||||||||||||
and Under | 625 MHz | 860 MHz | Capability | |||||||||||||
December 31, 2003 | 3 | % | 23 | % | 74 | % | 97 | % | ||||||||
December 31, 2004 | 3 | % | 23 | % | 74 | % | 97 | % | ||||||||
December 31, 2005 | 2 | % | 23 | % | 75 | % | 98 | % | ||||||||
December 31, 2006 | 2 | % | 23 | % | 75 | % | 98 | % | ||||||||
December 31, 2007 | 1 | % | 2 | % | 97 | % | 99 | % |
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• | continue to rapidly deploy advanced products and services such as cable Internet access, digital television, cable telephony and mobile wireless telephony services; | ||
• | design product offerings that provide greater opportunity for customer entertainment and information choices; | ||
• | target marketing opportunities based on demographic data and past purchasing behavior; | ||
• | develop targeted marketing programs to attract former customers, households that have never subscribed to our services and customers of alternative or competitive services; | ||
• | enhance the relationship between customer service representatives and our customers by training and motivating customer service representatives to promote advanced products and services; | ||
• | leverage the retail presence of Le SuperClub Vidéotron and third-party commercial retailers; | ||
• | cross-promote the wide variety of content and services offered within the Quebecor Media group (including, for example, the content of TVA Group productions and the1-900 service for audience voting during reality television shows popular in Québec) in order to distribute our cable, data transmission, cable telephony and mobile wireless telephony services to our existing and future customers; | ||
• | introduce new value-added packages of products and services, which we believe increases average revenue per user, or ARPU, and improves customer retention; and | ||
• | leverage our business market, using the Videotron Telecom network and expertise with our commercial customer base, which should enable us to offer additional bundled services to our customers and may result in new business opportunities. |
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• | Over-the-air Television and Providers of Other Entertainment.Cable television has long competed with broadcast television, which consists of television signals that the viewer is able to receive without charge using an over-the air antenna. The extent of such competition is dependent upon the quality and quantity of broadcast signals available through over-the-air reception compared to the services provided by the local cable system. Cable systems also face competition from alternative methods of distributing and receiving television signals and from other sources of entertainment such as live sporting events, movie theatres and home video products, including videotape recorders, DVD players and video games. The extent to which a cable television service is competitive depends in significant part upon the cable system’s ability to provide a greater variety of programming, superior technical performance and superior customer service than are available over the air or through competitive alternative delivery sources. |
• | Direct Broadcast Satellite.Direct broadcast satellite, or DBS, is a significant competitor to cable systems. DBS delivers programming via signals sent directly to receiving dishes from medium- and high-powered satellites, as opposed to cable delivery transmissions. This form of distribution generally provides more channels than some of our television systems and is fully digital. DBS service can be received virtually anywhere in Canada through the installation of a small rooftop or side-mounted antenna. Like digital cable distribution, DBS systems use video compression technology to increase channel capacity and digital technology to improve the quality of the signals transmitted to their customers. |
• | DSL.The deployment of digital subscriber line technology, known as DSL, provides customers with Internet access at data transmission speeds greater than that available over conventional telephone lines. DSL service is comparable to cable-modem Internet access over cable systems. We also face competition from other providers of DSL service. |
• | VDSL.The CRTC and Industry Canada have authorized video digital subscriber line, or VDSL, services. VDSL technology increases the capacity of DSL lines available, which permits the distribution of digital video. We expect that we will soon face competition from incumbent local exchange carriers, which have been granted licenses to launch video distribution services using this technology. ILECs are currently installing this new technology, which operates over the copper lines in phone lines, in our markets. This technology can achieve speeds as high as 52 Mbps upstream, but VDSL can only operate over a short distance of about 4,000 feet (1,200 metres). As a result, telephone companies are replacing many of their main feeds with fibre-optic cable. By placing a VDSL transceiver, a VDSL gateway, in larger multiple dwelling units, the distance limitation is overcome. Further, as a result of such improvements in broadband speeds over DSL and the evolution of compression technology, incumbent telephone carriers in our service areas may be in a position to enable delivery of digital television over their cable Internet connections (IPTV) in the coming years. Advanced trials are underway in Canada and in other countries. Tests in our service markets are still being performed. If successful, IPTV may provide telecommunications carriers with a way to offer services similar to those offered by cable operators in the consumer market. |
• | Private Cable.Additional competition is posed by satellite master antenna television systems known as “SMATV systems” serving multi-dwelling units, such as condominiums, apartment complexes, and private residential communities. |
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• | Other Cable Distribution.Currently, a cable operator offering television distribution and providing cable-modem Internet access service is serving the greater Montréal area. This cable operator, which has approximately 15,000 customers, is owned by the regional ILEC. |
• | Wireless Distribution.Cable television systems also compete with wireless program distribution services such as multi-channel multipoint distribution systems, or MDS. This technology uses microwave links to transmit signals from multiple transmission sites to line-of-sight antennas located within the customer’s premises. |
• | Grey and Black Market DBS Providers.Cable and other distributors of television signals continue to face competition from the use of access codes and equipment that enable the unauthorized decoding of encrypted satellite signals, from unauthorized access to our analog and digital cable signals (black market) and from the reception of foreign signals through subscriptions to foreign satellite television providers that are not lawful distributors in Canada (grey market). |
• | Telephony Service.Our cable telephony service competes against other telephone companies, including both the incumbent telephone service provider in Québec, which controls a significant portion of the telephony market in Québec, as well as other VoIP telephony service providers and mobile wireless telephone service providers. |
• | Mobile wireless telephony services.Our mobile wireless telephony service competes against a mix of competitors, some of them being active in all the products we offer, while others only offer mobile wireless telephony services in our market. If we were to become a facilities-based wireless provider, we would compete primarily with established incumbent wireless service providers and MVNOs, and could in the future compete with other new entrant companies, including other MVNOs. In addition, users of wireless voice and data systems may find their communications needs satisfied by other current or developing technologies, such as WIFI, “hotspots” or trunk radio systems, which have the technical capability to handle mobile telephone calls. Our facilities-based wireless provider business would also compete with rivals for dealers and retail distribution outlets. |
• | Other Internet Service Providers.In the Internet access business, cable operators compete against other Internet service providers offering residential and commercial Internet access services. The CRTC requires the large Canadian incumbent cable operators to offer access to their high speed Internet system to competitive Internet service providers at mandated rates. |
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• | the Urban Daily Group; and |
• | the Community Newspaper Group. |
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2007 Average Readership | Market Position by | |||||||||||||||
Newspaper | Saturday | Sunday | Mon-Fri | Paid Circulation(1) | ||||||||||||
Journal de Montréal | 611,600 | 397,500 | 588,000 | 1 | ||||||||||||
Journal de Québec | 199,500 | 119,900 | 165,700 | 1 | ||||||||||||
Toronto Sun | 515,200 | 731,100 | 638,000 | 2 | ||||||||||||
London Free Press | 170,700 | 111,600 | 167,000 | 1 | ||||||||||||
Ottawa Sun | 106,400 | 98,000 | 123,100 | 2 | ||||||||||||
Winnipeg Sun | 97,500 | 92,200 | 115,700 | 2 | ||||||||||||
Edmonton Sun | 131,300 | 158,100 | 168,100 | 2 | ||||||||||||
Calgary Sun | 121,400 | 148,100 | 155,600 | 2 | ||||||||||||
Total Average Readership | 1,953,600 | 1,856,500 | 2,121,200 | |||||||||||||
(1) | Based on paid circulation data published by the Audit Bureau of Circulations in September 2007 with respect to non-national newspapers in each relevant market. |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Journal de Montréal | ||||||||||||
Saturday | 308,000 | 309,300 | 303,700 | |||||||||
Sunday | 259,800 | 263,700 | 260,600 | |||||||||
Monday to Friday | 268,200 | 263,400 | 262,900 |
Source: Internal Statistics |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Journal de Québec | ||||||||||||
Saturday | 123,400 | 127,400 | 125,200 | |||||||||
Sunday | 101,400 | 107,300 | 107,000 | |||||||||
Monday to Friday | 99,700 | 104,500 | 104,300 |
Source: Internal Statistics |
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Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Toronto Sun | ||||||||||||
Saturday | 148,000 | 149,000 | 160,800 | |||||||||
Sunday | 326,500 | 328,500 | 332,500 | |||||||||
Monday to Friday | 183,600 | 189,900 | 188,900 |
Source: Internal Statistics |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
London Free Press | ||||||||||||
Saturday | 104,400 | 100,400 | 96,400 | |||||||||
Sunday | 64,600 | 62,800 | 61,900 | |||||||||
Monday to Friday | 87,600 | 84,200 | 81,600 |
Source: Internal Statistics |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Ottawa Sun | ||||||||||||
Saturday | 44,800 | 44,100 | 42,900 | |||||||||
Sunday | 51,000 | 51,200 | 49,700 | |||||||||
Monday to Friday | 51,200 | 50,500 | 49,800 |
Source: Internal Statistics |
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Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Winnipeg Sun | ||||||||||||
Saturday | 40,500 | 38,200 | 38,000 | |||||||||
Sunday | 49,100 | 47,100 | 46,000 | |||||||||
Monday to Friday | 40,600 | 39,500 | 39,000 |
Source: Internal Statistics |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Edmonton Sun | ||||||||||||
Saturday | 68,100 | 64,700 | 59,100 | |||||||||
Sunday | 94,900 | 90,500 | 83,100 | |||||||||
Monday to Friday | 70,000 | 68,000 | 63,900 |
Source: Internal Statistics |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Calgary Sun | ||||||||||||
Saturday | 62,500 | 59,000 | 55,400 | |||||||||
Sunday | 91,500 | 90,000 | 82,100 | |||||||||
Monday to Friday | 62,300 | 60,600 | 57,000 |
Source: Internal Statistics |
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Average Daily | ||||||
Newspaper | Location | Paid Circulation | ||||
Recorder and Times | Brockville, Ontario | 12,200 | ||||
Beacon Herald | Stratford, Ontario | 9,900 | ||||
Daily Herald Tribune | Grande Prairie, Alberta | 7,700 | ||||
Simcoe Reformer | Simcoe, Ontario | 6,800 | ||||
St. Thomas Time-Journal | St. Thomas, Ontario | 6,200 | ||||
Sentinel-Review | Woodstock, Ontario | 5,900 | ||||
Fort McMurray Today | Fort McMurray, Alberta | 3,300 | ||||
Miner & News | Kenora, Ontario | 2,800 | ||||
The Daily Graphic | Portage La Prairie, Manitoba | 2,500 | ||||
Total Average Daily Paid Circulation | 57,300 |
Source: Internal Statistics |
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Location | Average Daily | |||||
Newspaper | (all in Ontario) | Paid Circulation | ||||
St. Catharines Standard | St. Catharines | 35,500 | ||||
Kingston Whig-Standard | Kingston | 26,100 | ||||
Barrie Examiner | Barrie | 24,300 | ||||
Peterborough Examiner | Peterborough | 24,100 | ||||
Brantford Expositor | Brantford | 21,000 | ||||
Niagara Falls Review | Niagara Falls | 20,600 | ||||
Sarnia Observer | Sarnia | 18,200 | ||||
Sault Star | Sault Ste Marie | 18,200 | ||||
Welland Tribune | Welland | 17,000 | ||||
Sudbury Star | Sudbury | 16,900 | ||||
Owen Sound Sun Times | Owen Sound | 15,700 | ||||
Cornwall Standard-Freeholder | Cornwall | 14,100 | ||||
North Bay Nuggett | North Bay | 14,000 | ||||
Belleville Intelligencer | Belleville | 13,400 | ||||
Chatham Daily News | Chatham | 12,800 | ||||
Orillia Packet & Times | Orillia | 11,900 | ||||
Timmins, The Daily Press | Timmins | 8,700 | ||||
Pembrooke, The Daily Observer | Pembrooke | 5,800 | ||||
Cobourg Daily Star | Cobourg | 4,500 | ||||
Port Hope Evening Guide | Port Hope | 2,400 | ||||
Total Average Daily Paid Circulation | 325,200 |
Number of | ||||
Province | Publications | |||
Ontario | 82 | |||
Québec | 53 | |||
Alberta | 43 | |||
Manitoba | 12 | |||
Saskatchewan | 5 | |||
New Brunswick | 1 | |||
Total Publications | 196 |
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Share of Province | ||||
Network | of Québec Television | |||
TVA Group | 26.7 | % | ||
Societé Radio-Canada | 13.0 | % | ||
Réseau TQS | 10.6 | % | ||
Télé-Québec | 3.3 | % | ||
Various French-language specialty cable channels | 38.7 | % | ||
Others | 7.7 | % |
Source: BBM People Meters 2007 (data is based on a measurement methodology using audimetry instead of surveys). |
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Type of Service | Language | Voting Interest | ||||||
Analog Specialty Services: | ||||||||
•LCN — Le Canal Nouvelles | French | TVA1 | 99.9 | % | ||||
•Canal Évasion | French | TVA1 | 8.3 | % | ||||
•CPAC | French and English | V2 | 21.7 | % | ||||
Category One Digital Specialty Services: | ||||||||
•MenTV | English | TVA1 | 51.0 | % | ||||
•Mystery (13th Street) | English | TVA1 | 50.0 | % | ||||
•Mystère (13e rue) | French | TVA1 | 99.9 | % | ||||
•Argent (LCN — Affaires) | French | TVA1 | 99.9 | % | ||||
Category Two Digital Specialty Services: | ||||||||
•Prise 2 (Nostalgie) | French | TVA1 | 99.9 | % | ||||
Pay Per View Services (terrestrial & direct broadcasting satellite): | ||||||||
•Canal Indigo | French | TVA1 | 20.0 | % | ||||
Video-on Demand Services: | ||||||||
•illico sur Demande | French and English | AG3 | 100 | % | ||||
Exempted Programming Service: | ||||||||
•Canal Shopping TVA | French | TVA1 | 99.9 | % |
(1) | TVA Group (“TVA”) controls the programming services. Quebecor Media controls TVA Group. | |
(2) | Videotron (“V”) controls the programming services. Quebecor Media controls Videotron. | |
(3) | Archambault Group (“AG”) controls the programming services. Quebecor Media controls Archambault Group. |
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• | Canoe (canoe.ca), a bilingual, integrated media and Internet services network and one of Canada’s leading Internet portals with more than 259 million page views in September 2007, according to Canoe internal statistics; | ||
• | TVA Group and LCN (tva.canoe.comandlcn.canoe.com) dedicated websites for the TVA television network and the LCN all-news channel, which has begun streaming TVA and LCN programming live on the websites; | ||
also, several websites for popular TVA Group programs, such asOccupation Double (occupationdouble.com) andStar Académie(staracademie.ca). | |||
• | Sun Media dedicated websites for the weeklies and dailies newspapers (such astorontosun.com,edmontonsun.com,journaldequebec.comandcanoe.com/journaldemontreal), which provide local and national news; | ||
• | Canoe.tv, the first Canadian web broadcaster with unique content commissioned by Canoe.TV in addition to content from traditional sources; | ||
• | Canoe Video (video.canoe.ca), launched in June 2007, offers easy access to a range of content from sources including Quebecor Media, the Sun Media network of newspapers and various external partners; | ||
• | Argent and Canoe Money (argent.canoe.caandmoney.canoe.ca), a financial website which offers, among other things, a variety of services ranging from financial information to portfolio management tools (the Argent website (formerly Webfin) was redesigned in early 2005 in partnership with TVA’s financial channel,Argent); | ||
• | Petitmonde (petitmonde.com), a website that Canoe acquired in September 2007 dedicated to children and families; and | ||
• | CanoeKlix (canoeklix.com), a pay-per-click advertising solution developed by Canoe and launched in 2006. |
• | Jobboom.com, a unique Web-based employment site with over 2.0 million members at December 31, 2007, which also includes Édition Jobboom (careers book editors) and Jobboom Formation (an Internet directory of continuing education services); | ||
• | Autonet.ca, one of Canada’s leading Internet sites devoted entirely to automobiles; | ||
• | Canoeclassifieds.caandVitevitevite.ca(formerlycanoeclassees.ca), classified ad sites through which visitors can view more than 100,000 classified ads, reaching potential purchasers across the country by integrating more than 200 dailies and community newspapers. Since June 2007, classifiedextra.ca (vitevitevite.cain French) operates in partnership withSympatico.MSN.ca, which uses theclassifiedextra.cabanner for all classified advertisements, allowing it to reach more than 20 million users; | ||
• | Micasa.ca, one of the leading real-estate listing sites in Québec, providing comprehensive property listing services available to all real estate brokers as well as individual homeowners; | ||
• | ReseauContact.com, a French dating and friendship site with near 500,000 unique visitors per month, as of December 31, 2007, according to internal statistics; and | ||
• | EspaceCanoe.ca,an advanced technology platform for social communities that supports the sharing of videos, photos and opinions by users in an innovative Web 2.0-type environment. |
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Floor Space | ||||||
Address | Use of Property | Press Capacity(1) | Occupied (sq. ft.) | |||
Etobicoke, Ontario | Operations building, | 3 Colorman presses | 531,400 | |||
2250 Islington Avenue (2) | including printing plant — | (36 units) | ||||
Toronto Sun | ||||||
24 Hours(Toronto) | ||||||
Toronto, Ontario | Operations building, | 4 Metro presses | 245,900 | |||
333 King Street East (2) | including printing plant — | (32 units) and | ||||
Toronto Sun | 1 Metroliner press | |||||
(8 units) | ||||||
Saint-Janvier-de-Mirabel, Québec | Operations building, | 3 Colorman presses | 235,000 | |||
1280 Brault Street | including printing plant — | (52 units) | ||||
Journal de Montréal | ||||||
Journal de Québec | ||||||
Ottawa Sun | ||||||
24 Hours(Montreal) | ||||||
Montréal, Québec | Operations building, | 3 Metro presses | 162,000 | |||
4545 Frontenac Street (3) | including printing plant — | (27 units) | ||||
Journal de Montréal | ||||||
London, Ontario | Operations building, | 2 Headliner presses | 147,600 | |||
369 York Street | including printing plant — | (12 units) and | ||||
London Free Press | 1 Urbanite press | |||||
(9 units) | ||||||
Calgary, Alberta | Operations building, | 1 Headliner press | 90,000 | |||
2615-12 Street NE | including printing plant — | (7 units) | ||||
Calgary Sun | ||||||
St. Catharines, Ontario | Operations building — | N/A | 75,000 | |||
17 Queen Street | St. Catharines Standard | |||||
Vanier, Québec | Operations building, | 2 Urbanite presses | 74,000 | |||
450 Bechard Avenue (3) | including printing plant — | (24 units) | ||||
Journal de Québec | ||||||
Peterborough, Ontario | Operations building, | 1 Urbanite press | 63,500 | |||
730 Kingsway | including printing plant — | (12 units) | ||||
Peterborough Examiner | ||||||
Winnipeg, Manitoba | Operations building, | 1 Urbanite press | 63,000 | |||
1700 Church Avenue | including printing plant — | (14 units) | ||||
Winnipeg Sun |
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Floor Space | ||||||
Address | Use of Property | Press Capacity(1) | Occupied (sq. ft.) | |||
Brantford, Ontario | Operations building — | N/A | 57,300 | |||
53 Dalhousie Street | Brantford Expositor | |||||
Edmonton, Alberta | Printing plant — | 1 Metro press | 50,700 | |||
9300-47 Street | Edmonton Sun | (8 units) | ||||
Edmonton, Alberta | Operations building — | N/A | 45,200 | |||
4990-92 Avenue | Edmonton Sun | |||||
(leased until December 2013) | ||||||
Gloucester, Ontario | Distribution facility — | N/A | 23,000 | |||
4080 Belgreen Drive (4) | Ottawa Sun | |||||
Ottawa, Ontario | Operations building | N/A | 19,300 | |||
6 Antares Drive | (leased until October 2013) — | |||||
Ottawa Sun |
(1) | A “unit” is the critical component of a press that determines color and page count capacity. All presses listed have between 6 and 15 units. | |
(2) | In late 2007, the printing of portions of theToronto Sunwas transferred from 333 King Street East in Toronto to the new printing facilities in Etobicoke, Ontario. | |
(3) | In 2007, the printing of a portion of theJournal de Montréaland theJournal de Québec was transferred to the new printing facilities in Saint-Janvier-de-Mirabel, Québec. | |
(4) | In October 2006, the press facilities of theOttawa Sunwere transferred to the new printing facilities in Saint-Janvier-de-Mirabel. Accordingly, this building is currently being used principally as a distribution facility. |
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• | In the first phase, theTelecommunications Actshould be amended to give the federal Cabinet authority to waive the foreign ownership and control restrictions on Canadian telecommunications common carriers when it deems a foreign investment or class of investments to be in the public interest. During the first phase, there should be a presumption that investments in any new start-up telecommunications investment or in any telecommunications common carrier with less than 10% of the revenues in any telecommunications service market are in the public interest. This presumption could be rebutted by evidence related to a particular investor or investment. The presumption should apply to all investments in fixed or mobile wireless telephony markets as well as to investments in new entrants and smaller players (i.e.,those below the 10% limit). To encourage longer-term investment, foreign investors should remain exempt from the foreign investment restrictions if they are successful in growing the market share of their businesses beyond 10%. | ||
• | The second phase of liberalization should be undertaken after completion of the review of broadcasting policy proposed by the Panel. At that time, there should be a broader liberalization of the foreign investment rules in a manner that treats all telecommunications common carriers including the cable telecommunications industry in a fair and competitively neutral manner. The proposed liberalization should apply to the “carriage” business of BDUs, and new broadcasting policies should focus any necessary Canadian ownership restrictions on broadcasting “content” businesses. The Cabinet should retain the authority to screen significant investments in the Canadian telecommunications carriage business to ensure that they are consistent with the public interest. |
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• | Competition and Carriage Rules.The 1998 Regulations provide equitable opportunities for all distributors of broadcasting services. Similar to the signal carriage and substitution requirements that are imposed on existing cable television systems, under the 1998 Regulations, new broadcasting distribution undertakings are also subject to carriage and substitution requirements. The 1998 Regulations prohibit a distributor from giving an undue preference to any person, including itself, or subjecting any person to an undue disadvantage. This gives the CRTC the ability to address complaints of anti-competitive behavior on the part of certain distributors. | ||
• | Signal Substitution. A significant aspect of television broadcasting in Canada is simultaneous program substitution, or simulcasting, a regulatory requirement under which Canadian distribution undertakings, such as cable television systems with over 6,000 customers, are required to substitute the foreign programming service, with local Canadian signal, including Canadian commercials, for broadcasts of identical programs by a U.S. station when both programs are exhibited at the same time. These requirements are designed to protect the program rights that Canadian broadcasters acquire for their respective local markets. The CRTC, however, has |
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suspended the application of these requirements to DTH satellite operators for a period of time, so long as they undertake certain alternative measures, including monetary compensation to a fund designed to help finance regional television productions. | |||
• | Canadian Programming and Community Expression Financing Rules. All distributors, except systems with less than 2,000 customers, are required to contribute at least 5% of their gross annual broadcast revenues to the creation and presentation of Canadian programming including community programming. However, the allocation of these contributions between broadcast and community programming can vary depending on the type and size of the distribution system involved. | ||
• | Inside Wiring Rules.The CRTC determined that the inside wiring portion of cable networks creates a bottleneck facility that could affect competition if open access is not provided to other distributors. Incumbent cable companies may retain the ownership of the inside wiring but must allow usage by competitive undertakings to which the cable company may charge a just and reasonable fee for the use of the inside wire. On September 3, 2002, the CRTC established a fee of $0.52 per customer per month for the use of cable inside wire in MDUs. |
(1) | 30% or more of the households in the licensed service area have access to the services of another broadcasting distribution undertaking. The CRTC has advised that as of August 31, 1997, the 30% availability criterion was satisfied for all licensed cable areas; and | ||
(2) | the number of customers for basic cable service has decreased by at least 5% since the date on which a competitor started offering its basic cable service in the particular area. |
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Quebecor Media’s interest in its main subsidiaries
as at December 31, 2007
Percentage of Equity | Percentage of Votes | |||||||
Videotron Ltd. | 100 | % | 100 | % | ||||
Sun Media Corporation | 100 | % | 100 | % | ||||
Osprey Media Group Inc. | 100 | % | 100 | % | ||||
TVA Group Inc. | 45.2 | % | 99.9 | % | ||||
Archambault Group Inc. | 100 | % | 100 | % | ||||
Quebecor Media Book Group Inc. | 100 | % | 100 | % | ||||
Nurun Inc. | 57.5 | % | 57.5 | % | ||||
Canoe Inc. | 92.5 | % | 99.9 | % | ||||
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Three Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | December 31, | |||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | 2007 | 2006 | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Operating income | ||||||||||||||||||||||||||||
Cable | $ | 642.7 | $ | 512.5 | $ | 413.3 | $ | 363.8 | $ | 289.7 | $ | 175.7 | $ | 139.8 | ||||||||||||||
Newspapers | 225.9 | 207.6 | 222.2 | 227.8 | 224.8 | 76.6 | 63.5 | |||||||||||||||||||||
Broadcasting | 59.4 | 42.1 | 53.0 | 80.5 | 81.5 | 22.8 | 18.9 | |||||||||||||||||||||
Leisure and Entertainment | 27.0 | 19.3 | 27.0 | 22.7 | 14.7 | 10.3 | 10.0 | |||||||||||||||||||||
Interactive Technologies and Communications | 2.8 | 7.5 | 3.9 | 2.3 | 1.1 | — | 3.3 | |||||||||||||||||||||
Internet/Portals | 6.9 | 10.1 | 9.0 | 4.5 | 2.9 | 2.8 | 1.5 | |||||||||||||||||||||
Head office | (0.8 | ) | 0.5 | 3.7 | (4.4 | ) | (3.1 | ) | (1.0 | ) | 1.3 | |||||||||||||||||
963.9 | 799.6 | 732.1 | 697.2 | 611.6 | 287.2 | 238.3 | ||||||||||||||||||||||
Amortization | (290.4 | ) | (260.7 | ) | (231.9 | ) | (225.9 | ) | (226.6 | ) | (75.9 | ) | (68.3 | ) | ||||||||||||||
Financial expenses | (240.0 | ) | (224.6 | ) | (285.3 | ) | (314.6 | ) | (300.1 | ) | (72.2 | ) | (57.6 | ) | ||||||||||||||
Reserve for restructuring of operations, impairment of assets and other special charges | (11.6 | ) | (18.9 | ) | 0.2 | (2.8 | ) | (1.8 | ) | 3.5 | (9.5 | ) | ||||||||||||||||
(Loss) gain on debt refinancing and on repurchase of redeemable preferred shares of a subsidiary | (1.0 | ) | (342.6 | ) | (60.0 | ) | (4.8 | ) | 144.1 | (1.0 | ) | (0.5 | ) | |||||||||||||||
Gain (loss) on sale of businesses and other assets | 0.4 | 2.2 | 0.1 | 9.3 | (1.1 | ) | — | 1.2 | ||||||||||||||||||||
Impairment of goodwill and intangible assets | (5.4 | ) | (180.0 | ) | — | — | (0.5 | ) | (5.4 | ) | (180.0 | ) | ||||||||||||||||
Income taxes | (74.8 | ) | 53.7 | (43.5 | ) | (37.4 | ) | 12.5 | (15.6 | ) | (28.6 | ) | ||||||||||||||||
Non-controlling interest | (19.2 | ) | (0.4 | ) | (16.2 | ) | (31.7 | ) | (34.6 | ) | (8.2 | ) | 6.8 | |||||||||||||||
Income (loss) from discontinued operations | 5.2 | 2.0 | 1.0 | (1.1 | ) | 0.4 | — | 1.1 | ||||||||||||||||||||
Net income (loss) | $ | 327.1 | $ | (169.7 | ) | $ | 96.5 | $ | 88.2 | $ | 203.9 | $ | 112.4 | $ | (97.1 | ) | ||||||||||||
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(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Cash flows from segment operations: | ||||||||||||
Cable | $ | 314.7 | $ | 210.5 | $ | 194.7 | ||||||
Newspapers | 116.0 | 91.8 | 149.3 | |||||||||
Broadcasting | 43.2 | 33.4 | 42.5 | |||||||||
Leisure and Entertainment | 24.2 | 16.1 | 20.1 | |||||||||
Interactive Technologies and Communications | (0.5 | ) | 5.7 | 2.5 | ||||||||
Internet/Portals | 2.3 | 8.2 | 8.3 | |||||||||
Head office and other | 1.4 | 7.8 | 0.4 | |||||||||
501.3 | 373.5 | 417.8 | ||||||||||
Cash interest expense(1) | (225.3 | ) | (402.9 | ) | (211.1 | ) | ||||||
Cash portion of restructuring of operations and other special charges | (11.6 | ) | (18.9 | ) | 0.2 | |||||||
Current income taxes | (11.3 | ) | (5.4 | ) | (19.0 | ) | ||||||
Other | 3.7 | 2.1 | (3.1 | ) | ||||||||
Net change in non-cash balances related to operations | 32.7 | (22.2 | ) | (27.4 | ) | |||||||
Free cash flows from continuing operating activities | $ | 289.5 | $ | (73.8 | ) | $ | 157.4 | |||||
(1) | Interest on long-term debt and other interest, less investment income and interest capitalized to cost of property, plant and equipment (see Note 2 to our consolidated financial statements included under Item 17 of this annual report). |
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Free cash flows from continuing operating activities | $ | 289.5 | $ | (73.8 | ) | $ | 157.4 | |||||
Additions to property plant and equipment | 468.7 | 435.5 | 319.8 | |||||||||
Proceeds from disposal of assets | (6.1 | ) | (9.4 | ) | (5.5 | ) | ||||||
Cash flows from continuing operating activities | $ | 752.1 | $ | 352.3 | $ | 471.7 | ||||||
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(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Operating income | $ | 963.9 | $ | 799.6 | $ | 732.1 | ||||||
Additions to property plant and equipment | (468.7 | ) | (435.5 | ) | (319.8 | ) | ||||||
Proceeds from disposal of assets | 6.1 | 9.4 | 5.5 | |||||||||
Cash flows from segment operations | $ | 501.3 | $ | 373.5 | $ | 417.8 | ||||||
services
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Cash flows from segment operations
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Operating income | $ | 642.7 | $ | 512.5 | $ | 413.3 | ||||||
Additions to property plant and equipment | (330.1 | ) | (302.6 | ) | (219.9 | ) | ||||||
Proceeds from disposal of assets | 2.1 | 0.6 | 1.3 | |||||||||
Cash flows from segment operations | $ | 314.7 | $ | 210.5 | $ | 194.7 | ||||||
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Cash flows from segment operations
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Operating income | $ | 225.9 | $ | 207.6 | $ | 222.2 | ||||||
Additions to property plant and equipment | (111.4 | ) | (116.3 | ) | (74.0 | ) | ||||||
Proceeds from disposal of assets | 1.5 | 0.5 | 1.1 | |||||||||
Cash flows from segment operations | $ | 116.0 | $ | 91.8 | $ | 149.3 | ||||||
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Cash flows from segment operations
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Operating income | $ | 59.4 | $ | 42.1 | $ | 53.0 | ||||||
Additions to property plant and equipment | (16.2 | ) | (9.0 | ) | (12.9 | ) | ||||||
Proceeds from disposal of assets | — | 0.3 | 2.4 | |||||||||
Cash flows from segment operations | $ | 43.2 | $ | 33.4 | $ | 42.5 | ||||||
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Cash flows from segment operations
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Operating income | $ | 27.0 | $ | 19.3 | $ | 27.0 | ||||||
Additions to property plant and equipment | (2.9 | ) | (3.4 | ) | (7.9 | ) | ||||||
Proceeds from disposal of assets | 0.1 | 0.2 | 1.0 | |||||||||
Cash flows from segment operations | $ | 24.2 | $ | 16.1 | $ | 20.1 | ||||||
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Cash flows from segment operations
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Operating income | $ | 2.8 | $ | 7.5 | $ | 3.9 | ||||||
Additions to property plant and equipment | (3.3 | ) | (1.8 | ) | (1.4 | ) | ||||||
Cash flows from segment operations | $ | (0.5 | ) | $ | 5.7 | $ | 2.5 | |||||
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Cash flows from segment operations
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Operating income | $ | 6.9 | $ | 10.1 | $ | 9.0 | ||||||
Additions to property plant and equipment | (4.6 | ) | (1.9 | ) | (0.7 | ) | ||||||
Proceeds from disposal of assets | — | — | — | |||||||||
Cash flows from segment operations | $ | 2.3 | $ | 8.2 | $ | 8.3 | ||||||
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(in millions of Canadian dollars)
Less than | 5yrs | |||||||||||||||||||
Total | 1yr | 1-3yrs | 3-5yrs | and more | ||||||||||||||||
Long-term debt | $ | 3,077.8 | $ | 24.7 | $ | 303.4 | $ | 221.2 | $ | 2,528.5 | ||||||||||
Interest payments (1) | 1,796.0 | 257.9 | 513.9 | 488.8 | 535.4 | |||||||||||||||
Operating leases | 167.0 | 47.5 | 61.1 | 32.5 | 25.9 | |||||||||||||||
Capital asset purchases and other commitments | 187.7 | 143.5 | 40.5 | 3.7 | — | |||||||||||||||
Derivative financial instruments(2) | 508.2 | 0.6 | 1.3 | 1.3 | 505.0 | |||||||||||||||
Total contractual obligations | $ | 5,736.7 | $ | 474.2 | $ | 920.2 | $ | 747.5 | $ | 3,594.8 | ||||||||||
(1) | Estimate of interest to be paid on long-term debt based on the interest rates and foreign exchange rate at December 31, 2007. | |
(2) | Estimated future disbursements on derivative financial instruments related to foreign exchange hedging. |
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Fair value of derivative financial instruments
(in millions of Canadian dollars)
December 31, 2007 | ||||||||
Fair Value | ||||||||
Notional Value | asset (liability) | |||||||
Derivative Financial Instruments | ||||||||
Interest rate swap agreements | CA$ | 75.0 | $ | 0.2 | ||||
Foreign-exchange forward contracts | ||||||||
- In US$ | US$ | 73.1 | (4.2 | ) | ||||
- In€ | € | 13.0 | (0.2 | ) | ||||
- In CHF | CHF | 6.7 | (0.1 | ) | ||||
Cross-currency interest rate swap agreements | US$ | 2,598.9 | (534.2 | ) | ||||
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• | Videotron is party to 5 collective bargaining agreements, representing approximately 2,558 employees. Of these collective bargaining agreements, one (representing approximately 40 employees) has expired. Negotiations regarding this collective bargaining agreement will be undertaken in 2008. Two others, representing approximately 2,308 employees, or 90% of Videotron’s unionized employees, will expire in December 2009. The remaining two collective bargaining agreements, representing 210 employees, or 8% of Videotron’s unionized workforce, will expire between January 2010 and August 2011; | ||
• | Sun Media is party to 48 collective bargaining agreements, representing approximately 2,004 employees. Of these, 12 collective bargaining agreements, representing approximately 941 employees, or 47% of Sun Media’s unionized workforce, have expired. Negotiations regarding these 12 collective bargaining agreements are either in progress or will be undertaken in 2008. The other 36 of Sun Media’s collective bargaining agreements, representing approximately 1,063 employees, or 53% of its unionized workforce, are scheduled to expire on various dates through December 2010; | ||
• | Osprey Media is party to 40 collective bargaining agreements, representing approximately 820 employees. All of Osprey Media’s collective bargaining agreements are scheduled to expire on various date between June 2008 and April 2011; | ||
• | TVA Group is party to 15 collective bargaining agreements, representing approximately 830 employees. Of this number, 7 collective bargaining agreements, representing approximately 120 employees, or 14% of its unionized workforce, are expired. Negotiations regarding these 7 collective bargaining agreements are either in progress or will be undertaken in 2008. 8 of TVA Group’s collective bargaining agreements, representing approximately 710 employees, or 86% of its unionized workforce, will expire between October 2008 and the end of December 2009; and | ||
• | The other 7 collective bargaining agreements, representing approximately 370 or 6% of our unionized employees, will expire between the end of April 2009 and June 2010. |
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Foreign Exchange Forward Contracts
At December 31, 2007
(in millions of dollars)
Average | ||||||||||||
Currencies (sold/bought) | Maturing | Exchange Rate | Notional Amount | |||||||||
Quebecor Media Inc. | ||||||||||||
$/Euro | Less than 1 year | 1.4501 | $ | 18.9 | ||||||||
$/CHF | Less than 1 year | 0.8897 | 6.0 | |||||||||
Sun Media Corporation | ||||||||||||
$/US$ | February 15, 2013 | 1.5227 | 312.2 | |||||||||
Videotron Ltd. and its subsidiaries | ||||||||||||
$/US$Euro | Less than 1 year | 1.0511 | 76.8 | |||||||||
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Cross-currency interest rate swaps
At December 31, 2007
(in millions of dollars)
CDN dollar exchange | ||||||||||||||||||||
rate on interest | ||||||||||||||||||||
Annual | Annual | and capital | ||||||||||||||||||
Period | Notional | effective | nominal | payments per | ||||||||||||||||
covered | amount | interest rate | interest rate | one U.S. dollar | ||||||||||||||||
Quebecor Media Inc.: | ||||||||||||||||||||
Senior Notes | 2007 to 2016 | US$ | 700.0 | 7.69 | % | 7.75 | % | 0.9990 | ||||||||||||
Senior Notes | 2006 to 2016 | US$ | 525.0 | 7.39 | % | 7.75 | % | 1.1600 | ||||||||||||
Term loan B credit facilities | 2006 to 2009 | US$ | 196.5 | 6.27 | % | LIBOR | 1.1625 | |||||||||||||
plus 2.00 | % | |||||||||||||||||||
Term loan B credit facilities | 2009 to 2013 | US$ | 196.5 | Bankers’ | LIBOR | 1.1625 | ||||||||||||||
acceptance | plus 2.00 | % | ||||||||||||||||||
3 months | ||||||||||||||||||||
plus 2.22% | ||||||||||||||||||||
Term loan B credit facilities | 2006 to 2013 | US$ | 147.4 | 6.44 | % | LIBOR | 1.1625 | |||||||||||||
plus 2.00 | % | |||||||||||||||||||
Videotron Ltd. and its subsidiaries: | ||||||||||||||||||||
Senior Notes | 2004 to 2014 | US$ | 190.0 | Bankers’ | 6.875 | % | 1.2000 | |||||||||||||
acceptance | ||||||||||||||||||||
3 months | ||||||||||||||||||||
plus 2.80 | % | |||||||||||||||||||
Senior Notes | 2004 to 2014 | US$ | 125.0 | 7.45 | % | 6.875 | % | 1.1950 | ||||||||||||
Senior Notes | 2003 to 2014 | US$ | 200.0 | Bankers’ | 6.875 | % | 1.3425 | |||||||||||||
acceptance | ||||||||||||||||||||
3 months | ||||||||||||||||||||
plus 2.73 | % | |||||||||||||||||||
Senior Notes | 2003 to 2014 | US$ | 135.0 | 7.66 | % | 6.875 | % | 1.3425 | ||||||||||||
Senior Notes | 2005 to 2015 | US$ | 175.0 | 5.98 | % | 6.375 | % | 1.1781 | ||||||||||||
Sun Media Corporation and its subsidiaries: | ||||||||||||||||||||
Senior Notes | 2003 to 2008 | US$ | 155.0 | 8.17 | % | 7.625 | % | 1.5227 | ||||||||||||
Senior Notes | 2008 to 2013 | US$ | 155.0 | Bankers’ | 7.625 | % | 1.5227 | |||||||||||||
acceptance | ||||||||||||||||||||
3 months | ||||||||||||||||||||
plus 3.70 | % | |||||||||||||||||||
Senior Notes | 2003 to 2013 | US$ | 50.0 | Bankers’ | 7.625 | % | 1.5227 | |||||||||||||
acceptance | ||||||||||||||||||||
3 months | ||||||||||||||||||||
plus 3.70 | % | |||||||||||||||||||
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Interest Rate Swaps
At December 31, 2007
(in millions of dollars)
Maturity | Notional Amount | Pay/Receive | Fixed Rate | Floating Rate | ||||||||||||
Osprey Media Publishing Inc. | ||||||||||||||||
April 2008 | $75.0 | Pay fixed/Receive Floating | 4.05% | Bankers’ acceptance | ||||||||||||
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Carrying Value and Fair Value of Financial Instruments
As at December 31, 2007
(in millions of dollars)
December 31, 2007 | December 31, 2006(1) | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
Quebecor Media Inc. | ||||||||||||||||
Long-term debt (2) | $ | (1,664.9 | ) | $ | (1,646.6 | ) | $ | (1,191.6 | ) | $ | (1,206.3 | ) | ||||
Cross-currency interest rate swaps | (159.8 | ) | (159.8 | ) | 3.8 | (17.8 | ) | |||||||||
Foreign exchange forward contracts | (0.3 | ) | (0.3 | ) | 2.2 | 2.2 | ||||||||||
Videotron Ltd. and its subsidiaries | ||||||||||||||||
Long-term debt (2) | (973.3 | ) | (938.2 | ) | (1,021.2 | ) | (1,010.6 | ) | ||||||||
Cross-currency interest rate swaps | (241.3 | ) | (241.3 | ) | (71.8 | ) | (141.1 | ) | ||||||||
Foreign exchange forward contracts | (4.2 | ) | (4.2 | ) | — | 2.1 | ||||||||||
Sun Media Corporation and its subsidiaries | ||||||||||||||||
Long-term debt (2) | (238.0 | ) | (234.1 | ) | (486.8 | ) | (492.9 | ) | ||||||||
Cross-currency interest rate swaps and foreign exchange forward contract | (133.1 | ) | (133.1 | ) | (148.8 | ) | (176.1 | ) | ||||||||
Osprey Media Group Inc. and its subsidiaries | ||||||||||||||||
Long-term debt (2) | (145.3 | ) | (145.3 | ) | — | — | ||||||||||
Interest rate swap | 0.2 | 0.2 | — | — | ||||||||||||
TVA Group Inc. and its subsidiaries | ||||||||||||||||
Long-term debt (2) | (56.3 | ) | (56.3 | ) | (96.5 | ) | (96.5 | ) | ||||||||
(1) | See “— Changes in accounting policies” below. | |
(2) | The carrying value of long-term debt excludes adjustments to record changes in fair value of long-term debt related to hedged interest risk, embedded derivatives and financing fees. |
Twelve month period ending December 31, | ||||
(in millions) | ||||
2008 | $ | 24.7 | ||
2009 | 181.8 | |||
2010 | 121.6 | |||
2011 | 171.9 | |||
2012 | 49.3 | |||
2013 and thereafter | $ | 2,528.5 |
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• | persuasive evidence of an arrangement exists; | ||
• | delivery has occurred or services have been rendered; | ||
• | the seller’s price to the buyer is fixed or determinable; and | ||
• | the collection of the sale is reasonably assured. |
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• | Quebecor Media uses foreign exchange forward contracts to hedge the foreign currency rate exposure on (i) anticipated equipment or inventory purchases in foreign currency and (ii) principal payments on certain long-term debt in foreign currency. These foreign exchange forward contracts are designated as cash flow hedges. | ||
• | Quebecor Media uses cross-currency interest rate swaps to hedge (i) the foreign currency rate exposure on interest and principal payments on certain foreign currency denominated debt and/or (ii) the fair value exposure on certain debt resulting from changes in interest rates. The cross-currency interest rate swaps that set in fixed Canadian dollars all future interest and principal payments on U.S. denominated debt are designated as cash flow hedges. The Company’s cross-currency interest rate swaps that set in Canadian dollars all future interest and principal payments on U.S. denominated debt in addition to converting the interest rate from a fixed rate to a floating rate or to converting a floating rate index to another floating rate index, are designated as fair value hedges. | ||
• | Quebecor Media uses interest rate swaps to manage the fair value exposure on certain debt resulting from changes in interest rates. These swap agreements require a periodic exchange of payments without the exchange of the notional principal amount on which the payments are based. These interest rate swaps are designated as fair value hedges when they convert the interest rate from a fixed rate to a floating rate or as cash flow hedges when they convert the interest rate from a floating rate to a fixed rate. |
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• | decrease in other assets of $44.4 million; | ||
• | increase in the liability related to derivative financial instruments of $88.9 million; | ||
• | decrease in long-term debt of $65.5 million; | ||
• | decrease in future income tax liabilities of $18.0 million; | ||
• | increase in deficit of $14.3 million; and | ||
• | increase in accumulated other comprehensive loss of $35.5 million. |
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Name and Municipality of Residence | Age | Position | ||||
Serge Gouin Outremont, Québec | 64 | Director, Chairman of the Board of Directors and Chairman of the Compensation Committee | ||||
Pierre Karl Péladeau Montréal, Québec | 46 | Director, Vice Chairman of the Board of Directors and Chief Executive Officer | ||||
Érik Péladeau | 52 | Director and Vice Chairman of the Board of Directors | ||||
Rosemère, Québec | ||||||
Jean La Couture, FCA | 61 | Director and Chairman of the Audit Committee | ||||
Montréal, Québec | ||||||
André Delisle | 61 | Director and Member of the Audit Committee | ||||
Montréal, Québec | ||||||
A. Michel Lavigne, FCA Brossard, Québec | 57 | Director and Member of the Audit Committee and the Compensation Committee | ||||
Samuel Minzberg | 58 | Director Member of the Compensation Committee | ||||
Westmount, Québec | ||||||
The Right Honourable Brian Mulroney,P.C., C.C., LL.D. | 69 | Director | ||||
Westmount, Québec | ||||||
Jean Neveu | 67 | Director | ||||
Longueuil, Québec | ||||||
Normand Provost | 53 | Director | ||||
Brossard, Québec | ||||||
Pierre Francoeur | 55 | President and Chief Operating Officer | ||||
Ste-Adèle, Québec | ||||||
Luc Lavoie | 52 | Executive Vice President, Corporate Affairs | ||||
Montréal, Québec | ||||||
Bruno Péloquin | 43 | Senior Vice President, Strategic Development, Customer Relations | ||||
Montréal, Québec | ||||||
Hughes Simard | 40 | Senior Vice President, Development and Strategy | ||||
Outremont, Québec | ||||||
Louis Morin | 50 | Vice President and Chief Financial Officer | ||||
Kirkland, Québec | ||||||
Sylvie Cordeau | 43 | Vice President, Communications | ||||
Verdun, Québec | ||||||
Michel Ethier | 53 | Vice President, Taxation | ||||
Montréal, Québec |
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Name and Municipality of Residence | Age | Position | ||||
Pierre Lampron | 62 | Vice President, Institutional Relations | ||||
Outremont, Québec | ||||||
Bruno Leclaire | 42 | Vice President, Interactive Media | ||||
Saint-Bruno, Québec | ||||||
Roger Martel | 59 | Vice President, Internal Audit | ||||
Montréal, Québec | ||||||
André Maynard | 50 | Vice President, Business Opportunities | ||||
Montreal, Québec | ||||||
Denis Sabourin | 47 | Vice President and Corporate Controller | ||||
Kirkland, Québec | ||||||
Claudine Tremblay | 54 | Vice President and Secretary | ||||
Nuns’ Island, Québec | ||||||
Julie Tremblay | 48 | Vice President, Human Resources | ||||
Westmount, Québec | ||||||
Marc Tremblay | 47 | Vice President, Legal Affairs | ||||
Westmount, Québec | ||||||
Edouard G. Trépanier | 57 | Vice President, Regulatory Affairs | ||||
Boucherville, Québec | ||||||
Jean-François Pruneau | 37 | Treasurer | ||||
Repentigny, Québec | ||||||
Christian Marcoux | 33 | Assistant Secretary | ||||
Laval, Québec | ||||||
Dominique Poulin Gouin | 52 | Assistant Secretary | ||||
Outremont, Québec |
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Years of Participation | ||||||||||||||||||||
Compensation | 10 | 15 | 20 | 25 | 30 | |||||||||||||||
$116,667 or more | $ | 23,333 | $ | 35,000 | $ | 46,667 | $ | 58,333 | $ | 70,000 |
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Years of Credited Service | ||||||||||||||||||||
Compensation | 10 | 15 | 20 | 25 | 30 | |||||||||||||||
$200,000 | $ | 16,667 | $ | 25,000 | $ | 33,333 | $ | 41,667 | $ | 50,000 | ||||||||||
$400,000 | $ | 56,667 | $ | 85,000 | $ | 113,333 | $ | 141,667 | $ | 170,100 | ||||||||||
$600,000 | $ | 96,667 | $ | 145,000 | $ | 193,333 | $ | 241,667 | $ | 290,000 | ||||||||||
$800,000 | $ | 136,667 | $ | 205,000 | $ | 273,333 | $ | 341,667 | $ | 410,000 | ||||||||||
$1,000,000 | $ | 176,667 | $ | 265,000 | $ | 353,333 | $ | 441,667 | $ | 530,000 | ||||||||||
$1,200,000 | $ | 216,667 | $ | 325,000 | $ | 433,333 | $ | 541,667 | $ | 650,000 | ||||||||||
$1,400,000 | $ | 256,667 | $ | 385,000 | $ | 513,333 | $ | 641,667 | $ | 770,000 |
Total number | Number of employees under | Number of | ||||||||||
Operations | of employees | collective agreements | collective agreements | |||||||||
Cable | 4,350 | 2,558 | 5 | |||||||||
Newspapers | 8,260 | 2,824 | 88 | |||||||||
Broadcasting | 1,910 | 830 | 15 | |||||||||
Leisure and Entertainment | 1,480 | 370 | 7 | |||||||||
Interactive Technologies and Communications | 750 | 0 | 0 | |||||||||
Internet / Portals | 400 | 0 | 0 | |||||||||
Others | 150 | 0 | 0 | |||||||||
Total | 17,300 | 6,582 | 115 | |||||||||
• | Videotron is party to 5 collective bargaining agreements, representing approximately 2,558 employees. Of these collective bargaining agreements, one (representing approximately 40 employees) has expired. Negotiations regarding this collective bargaining agreement will be undertaken in 2008. Two others, representing approximately 2,308 employees, or 90% of Videotron’s unionized employees, will expire in December 2009. The remaining two collective bargaining agreements, representing 210 employees, or 8% of Videotron’s unionized workforce, will expire between January 2010 and August 2011; |
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• | Sun Media is party to 48 collective bargaining agreements, representing approximately 2,004 employees. Of these, 12 collective bargaining agreements, representing approximately 941 employees, or 47% of Sun Media’s unionized workforce, have expired. Negotiations regarding these 12 collective bargaining agreements are either in progress or will be undertaken in 2008. The other 36 of Sun Media’s collective bargaining agreements, representing approximately 1,063 employees, or 53% of its unionized workforce, are scheduled to expire on various dates through December 2010; | ||
• | Osprey Media is party to 40 collective bargaining agreements, representing approximately 820 employees. All of Osprey Media’s collective bargaining agreements are scheduled to expire on various date between June 2008 and April 2011; | ||
• | TVA Group is party to 15 collective bargaining agreements, representing approximately 830 employees. Of this number, 7 collective bargaining agreements, representing approximately 120 employees, or 14% of its unionized workforce, are expired. Negotiations regarding these 7 collective bargaining agreements are either in progress or will be undertaken in 2008. 8 of TVA Group’s collective bargaining agreements, representing approximately 710 employees, or 86% of its unionized workforce, will expire between October 2008 and the end of December 2009; and | ||
• | The other 7 collective bargaining agreements, representing approximately 370 or 6% of our unionized employees, will expire between the end of April 2009 and June 2010. |
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(a) | standard rights of first refusal with respect to certain transfers of QMI Shares; | ||
(b) | standard preemptive rights which permit shareholders to maintain their respective holdings of QMI Shares on a fully diluted basis in the event of issuances of additional QMI Shares or our convertible securities; | ||
(c) | rights of representation on our Board of Directors in proportion to shareholdings, with Quebecor initially having five nominees (now six nominees) and Capital CDPQ having four nominees to our Board of Directors; | ||
(d) | consent rights in certain circumstances with respect to matters relating to us and our non-reporting issuer (public) subsidiaries, including (1) a substantial change in the nature of our business and our subsidiaries taken as a whole, (2) an amendment to our articles or certain of our subsidiaries, (3) the merger or amalgamation of us or certain of our subsidiaries with a person other than an affiliate, (4) the issuance by us or certain of our subsidiaries of shares or of securities convertible into shares except in the event of an initial public offering of QMI Shares, (5) any transaction having a value of more than $75,000,000, other than the sale of goods and services in the normal course of business, (6) a business acquisition in a business sector unrelated to sectors in which we and certain of our subsidiaries are involved, and (7) in respect of capital expenditures in excess of certain amounts for each of the first five years of our operations; | ||
(e) | standard rights of first refusal in favor of Capital CDPQ with respect to the sale of all or substantially all of the shares or assets of TVA Group or Videotron; |
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(f) | so long as Capital CDPQ holds at least 22.5% of the QMI Shares on a fully diluted basis, if the Péladeau family (as defined in the shareholders’ agreement) ceases to control Quebecor, Capital CDPQ shall have at its option either a “call” on Quebecor’s interest in us at fair market value, or a “put” right in respect of Capital CDPQ’s interest in us to Quebecor or its new controlling shareholder at fair market value, provided that the “call” right shall not apply if the Péladeau family (as defined in the shareholders’ agreement) has offered a standard right of first refusal on its Quebecor control block to Capital CDPQ before selling control of Quebecor, and all of the above-mentioned rights shall cease to apply five years following the approval by the CRTC of the acquisition by us of Videotron; and | ||
(g) | a non-competition covenant by Quebecor in respect of it and its affiliates pursuant to which Quebecor and its affiliates shall not compete with QMI and its subsidiaries in their areas of activity so long as Quebecor has “de jure” or “de facto” control of us, subject to certain limited exceptions. |
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• | 123,602,807 common shares outstanding, of which 67,636,713 were held by Quebecor and 55,966,094 were held by Capital CDPQ; and | ||
• | 110,000 Cumulative First Preferred Shares, Series C, outstanding, all of which were held by 9101-0835 Québec Inc.; and | ||
• | 2,555,000 Cumulative First Preferred Shares, Series G, outstanding, 1,995,000 of which were held by 9101-0835 Québec Inc. and 560,000 of which were held by Bowes Publishers Limited, a subsidiary of Sun Media. |
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1. | We were incorporated, in Canada, under Part IA of theCompanies Act(Québec) (the “Companies Act”) as 9093-9687 Québec Inc. on August 8, 2000 under registration number 1149501992. On August 18, 2000, a Certificate of Amendment was filed to change our name to Media Acquisition Inc. Our name was further changed to Quebecor Media Inc. on September 26, 2000. Our Articles do not describe our object and purpose. |
2. | (a) | Our by-laws provide that we may transact business with one or more of our directors or with any firm of which one or more of our directors are members or employees or with any corporation or association of which one or more of our directors are shareholders, directors, officers or employees. The director who has an interest in the transaction shall disclose his interest to us and to the other directors and shall abstain from discussing and voting on the transaction, except if his vote is required to bind us in respect of the transaction. |
(b) | Neither the Articles nor our by-laws contain provisions with respect to directors’ power, in the absence of an independent quorum, to determine their remuneration. | ||
(c) | Subject to any restriction which may from time to time be included in the Articles or our by-laws, or the terms, rights or restrictions of any of our shares or securities outstanding, the directors may authorize us to borrow money and obtain advances upon the credit of our company, from any bank, corporation, firm, association or person, upon such terms and conditions, in all respects, as they think fit. The directors may authorize the issuance of bonds or other evidences of indebtedness of our company, and may authorize the pledge or sale of the same upon such terms and conditions, in all respects, as they think fit. The directors are also authorized to hypothecate the property, undertaking and assets, movable or immovable, of our company to secure payment for any bonds or other evidences of indebtedness or otherwise give guarantees to secure the payment of loans. |
3. | The rights, preferences and restrictions attaching to our Common Shares, Cumulative First Preferred Shares (consisting of the Series A Shares, the Series B Shares, the Series C Shares, the Series D Shares, the Series F Shares and the Series G Shares) and our Preferred Shares, Series E are set forth below: |
(a) | Dividend rights: Subject to the rights of the holders of our Preferred Shares, each common share shall be entitled to receive such dividends as our Board of Directors shall determine. | ||
(b) | Voting rights: The holders of our common shares shall be entitled to receive notice of any meeting of our shareholders and to attend and vote on all matters to be voted on by our shareholders, except at meetings at |
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which only the holders of another specified series or class of shares are entitled to vote. At each such meeting, each common share shall entitle the holder thereof to one vote. | |||
(c) | Rights to share in our profits: Other than as provided in paragraph (a) above (the holders of our common shares are entitled to receive dividends as determined by our Board of Directors) and paragraph (d) below (the holders of our common shares are entitled to participation in our remaining property and assets available for distribution in the event of our liquidation, dissolution or reorganization), none. | ||
(d) | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of winding up our affairs, whether voluntarily or involuntarily, the holders of our common shares shall be entitled, subject to the rights of the holders of Preferred Shares, to participate equally, share for share, in our remaining property and assets available for distribution to our shareholders, without preference or distinction. | ||
(e) | Redemption provisions: None | ||
(f) | Sinking fund provisions: None | ||
(g) | Liability to capital calls by Quebecor Media: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to theCompanies Act(Québec) and as determined by the Board of Directors. Our directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares. | ||
(h) | Provisions discriminating against existing or prospective holders of common shares as a result of such holder owning a substantial number of shares: None |
(a) | Dividend rights: The holders of record of the Series A Shares shall be entitled to receive in each fiscal year fixed cumulative preferred dividends at the rate of 12.5% per share per annum. No dividends may be paid on any shares ranking junior to the Series A Shares unless all dividends which shall have become payable on the Series A Shares have been paid or set aside for payment. |
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(b) | Voting rights: Holders of Series A Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders unless we shall have failed to pay semi-annual dividends on the Series A Shares. In that event and only for so long as the dividend remains in arrears, the holders of Series A Shares shall be entitled to receive notice of, and to attend and vote at, all shareholders’ meetings, except meetings at which only holders of another specified series or class of shares are entitled to vote. At each such meeting, each Series A Share shall entitle the holder thereof to one vote. | ||
(c) | Rights to share in our profits: Except as provided in paragraph (a) above (the holders of Series A Shares are entitled to receive a 12.5% cumulative preferential dividend) and paragraph (d) below (the holders of Series A Shares are entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series A Share and any accumulated and unpaid dividends with respect thereto in the event of our liquidation, dissolution or reorganization), none. | ||
(d) | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of Series A Shares shall be entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series A Share and any accumulated and unpaid dividends with respect thereto. | ||
(e) | Redemption provisions: Holders of Series A Shares may require us to redeem the Series A preferred shares at any time at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. In addition, we may, at our option, redeem the Series A Shares at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. | ||
(f) | Sinking fund provisions: None. | ||
(g) | Liability to capital calls by us: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to theCompanies Act(Québec) and as determined by the Board of Directors. The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares. | ||
(h) | Provisions discriminating against existing or prospective holders of Series A Shares as a result of such holders owning a substantial number of shares: None. |
(a) | Dividend rights: The holders of record of the Series B Shares shall be entitled to receive a single dividend, payable in cash, in an amount to be determined by our Board of Directors in accordance with the Articles, which dividend, once determined by our Board of Directors, shall be paid on the date of conversion of the Series B Shares into our common shares. No dividends may be paid on any shares ranking junior to the Series B Shares unless all dividends which shall have become payable on the Series B Shares have been paid or set aside for payment. | ||
(b) | Voting rights: Holders of Series B Shares, as such, shall not be entitled to receive notice of, and to attend or vote at, any meeting of our shareholders, unless we shall have failed to pay the dividend due to such holders. In that event and only for so long as the said dividend remains in arrears, the holders of Series B Shares shall be entitled to receive notice of, and to attend and vote at, all shareholders’ meetings, except meetings at which only holders of another specified series or class of shares are entitled to vote. At each such meeting, each Series B Share shall entitle the holder thereof to one vote. | ||
(c) | Rights to share in our profits: Except as provided in paragraph (a) above (the holders of Series B Shares are entitled to receive the dividend referred to in paragraph (a) above) and paragraph (d) below (the holders of the Series B Shares are entitled to receive, in preference to the holders of common shares, an amount equal to $1.00 |
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per Series B Share and the dividend referred to in paragraph (a) above in the event of liquidation, dissolution or reorganization), none. | |||
(d) | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of Series B Shares shall be entitled to receive, in preference to the holders of common shares, an amount equal to $1.00 per Series B Share held and the dividend referred to in paragraph (a) above. | ||
(e) | Redemption provisions: Holders of Series B Shares may require us to redeem the Series B Shares at any time at a price of $1.00 per share plus the dividend referred to in paragraph (a) above. In addition, we may, at our option, redeem the Series B Shares at a price of $1.00 per share plus the dividend referred to in paragraph (a) above. | ||
(f) | Sinking fund provisions:None. | ||
(g) | Liability to capital calls by us: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to theCompanies Act(Québec) and as determined by the Board of Directors. The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares. | ||
(h) | Provisions discriminating against existing or prospective holders of Series B Shares as a result of such holders owning a substantial number of shares: None. |
(a) | Dividend rights: The holders of record of the Series C Shares shall be entitled to receive in each fiscal year fixed cumulative preferred dividends at the rate of 11.25% per share per annum. No dividends may be paid on any shares ranking junior to the Series C Shares unless all dividends which shall have become payable on the Series C Shares have been paid or set aside for payment. | ||
(b) | Voting rights: Holders of Series C Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders unless we shall have failed to pay certain dividends on the Series C Shares. In that event and only for so long as the dividend remains in arrears, the holders of Series C Shares shall be entitled to receive notice of, and to attend and vote at, all shareholders’ meetings, except meetings at which only holders of another specified series or class of shares are entitled to vote. At each such meeting, each Series C Share shall entitle the holder thereof to one vote. | ||
(c) | Rights to share in our profits: Except as provided in paragraph (a) above (the holders of Series C Shares are entitled to receive a 11.25% cumulative preferential dividend) and paragraph (d) below (the holders of Series C Shares are entitled to receive, in preference to the holders of Common Shares, an amount equal to $1,000 per Series C Share and any accumulated and unpaid dividends with respect thereto in the event of our liquidation, dissolution or reorganization), none. | ||
(d) | Rights upon liquidation:In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of Series C Shares shall be entitled to receive, in preference to the holders of Common Shares, an amount equal to $1,000 per Series C Share and any accumulated and unpaid dividends with respect thereto. | ||
(e) | Redemption provisions: Holders of Series C Shares may require us to redeem the Series C preferred shares at any time at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. In addition, we may, at its option, redeem the Series C Shares at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. |
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(f) | Sinking fund provisions: None. | ||
(g) | Liability to capital calls by us: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to theCompanies Act(Québec) and as determined by the Board of Directors. The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares. | ||
(h) | Provisions discriminating against existing or prospective holders of Series C Shares as a result of such holders owning a substantial number of shares: None. |
(a) | Dividend rights: The holders of record of the Series D Shares shall be entitled to receive in each fiscal year fixed cumulative preferred dividends at the rate of 11.0% per share per annum. No dividends may be paid on any shares ranking junior to the Series D Shares unless all dividends which shall have become payable on the Series D Shares have been paid or set aside for payment. | ||
(b) | Voting rights: Holders of Series D Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders unless we shall have failed to pay certain dividends on the Series D Shares. In that event and only for so long as the dividend remains in arrears, the holders of Series D Shares shall be entitled to receive notice of, and to attend and vote at, all shareholders’ meetings, except meetings at which only holders of another specified series or class of shares are entitled to vote. At each such meeting, each Series D Share shall entitle the holder thereof to one vote. | ||
(c) | Rights to share in our profits: Except as provided in paragraph (a) above (the holders of Series D Shares are entitled to receive a 11.0% cumulative preferential dividend) and paragraph (d) below (the holders of Series D Shares are entitled to receive, in preference to the holders of Common Shares, an amount equal to $1,000 per Series D Share and any accumulated and unpaid dividends with respect thereto in the event of our liquidation, dissolution or reorganization), none. | ||
(d) | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of Series D Shares shall be entitled to receive, in preference to the holders of Common Shares, an amount equal to $1,000 per Series D Share and any accumulated and unpaid dividends with respect thereto. | ||
(e) | Redemption provisions: Holders of Series D Shares may require us to redeem the Series D preferred shares at any time at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. In addition, we may, at its option, redeem the Series D Shares at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. | ||
(f) | Sinking fund provisions: None. | ||
(g) | Liability to capital calls by us: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to theCompanies Act(Québec) and as determined by the Board of Directors. The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares. | ||
(h) | Provisions discriminating against existing or prospective holders of Series D Shares as a result of such holders owning a substantial number of shares: None. |
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(a) | Dividend rights: The holders of record of the Series F Shares shall be entitled to receive in each fiscal year fixed cumulative semi-annual dividends at the rate of 10.85% per share per annum. No dividends may be paid on any shares ranking junior to the Series F Shares unless all dividends which shall have become payable on the Series F Shares have been paid or set aside for payment. | ||
(b) | Voting rights: Holders of Series F Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders unless we shall have failed to pay eight semi-annual dividends on the Series F Shares. In that event and only for so long as the dividend remains in arrears, the holders of Series F Shares shall be entitled to receive notice of, and to attend and vote at, all shareholders’ meetings, except meetings at which only holders of another specified series or class of shares are entitled to vote. At each such meeting, each Series F Share shall entitle the holder thereof to one vote. | ||
(c) | Rights to share in our profits: Except as provided in paragraph (a) above (holders of Series F Shares are entitled to receive a 10.85% cumulative preferential semi-annual dividend) and paragraph (d) below (the holders of Series F Shares are entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series F Share and any accumulated and unpaid dividends with respect thereto in the event of our liquidation, dissolution or reorganization), none. | ||
(d) | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of Series F Shares shall be entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series F Share and any accumulated and unpaid dividends with respect thereto. | ||
(e) | Redemption provisions: Holders of Series F Shares may require us to redeem the Series F preferred shares at any time at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. In addition, we may, at our option, redeem the Series F Shares at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. | ||
(f) | Sinking fund provisions: None. | ||
(g) | Liability to capital calls by Quebecor Media: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to theCompanies Act(Québec) and as determined by the Board of Directors. The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares. | ||
(h) | Provisions discriminating against existing or prospective holders of Series F Shares as a result of such holders owning a substantial number of shares: None. |
(a) | Dividend rights: The holders of record of the Series G Shares shall be entitled to receive in each fiscal year fixed cumulative semi-annual dividends at the rate of 10.85% per share per annum. No dividends may be paid on any shares ranking junior to the Series G Shares unless all dividends which shall have become payable on the Series G Shares have been paid or set aside for payment. | ||
(b) | Voting rights: Holders of Series G Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders unless we shall have failed to pay eight semi-annual dividends on the Series G Shares. In that event and only for so long as the dividend remains in arrears, the holders of Series G Shares shall be entitled to receive notice of, and to attend and vote at, all shareholders’ meetings, except meetings at which |
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only holders of another specified series or class of shares are entitled to vote. At each such meeting, each Series G Share shall entitle the holder thereof to one vote. | |||
(c) | Rights to share in our profits: Except as provided in paragraph (a) above (holders of Series G Shares are entitled to receive a 10.85% cumulative preferential semi-annual dividend) and paragraph (d) below (the holders of Series G Shares are entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series G Share and any accumulated and unpaid dividends with respect thereto in the event of our liquidation, dissolution or reorganization), none. | ||
(d) | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of Series G Shares shall be entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series G Share and any accumulated and unpaid dividends with respect thereto. | ||
(e) | Redemption provisions: Holders of Series G Shares may require us to redeem the Series G preferred shares at any time at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. In addition, we may, at our option, redeem the Series G Shares at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto. | ||
(f) | Sinking fund provisions: None. | ||
(g) | Liability to capital calls by Quebecor Media: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to theCompanies Act(Québec) and as determined by the Board of Directors. The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares. | ||
(h) | Provisions discriminating against existing or prospective holders of Series G Shares as a result of such holders owning a substantial number of shares: None. |
(a) | Dividend rights: The holders of record of the Series E Shares shall be entitled to receive a maximum non-cumulative preferential monthly dividend at the rate of 1.25% per share per month, which dividend shall be calculated based on the redemption price (the amount equal to the aggregate consideration for such share). The Series E Shares rank senior to the common shares but junior to the Series A Shares, Series B Shares, Series C Shares and Series D Shares. | ||
(b) | Voting rights: Holders of Series E Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders. | ||
(c) | Rights to share in our profits: Except as provided in paragraph (a) above (the holders of Series E Shares are entitled to receive a 1.25% maximum non-cumulative preferential monthly dividend) and paragraph (d) below (the holders of Series E Shares are entitled to receive, in preference to the holders of common shares, but subsequent to the holders of Series A Shares, Series B Shares, Series C Shares and Series D Shares, an amount equal to the redemption price of the Series E Shares and the amount of any declared but unpaid dividends on the Series E Shares referred to in paragraph (a) above), none. | ||
(d) | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of Series E Shares shall be entitled to receive, in preference to the holders of common |
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shares, but subsequent to the holders of Series A Shares, Series B Shares, Series C Shares and Series D Shares, an amount equal to the redemption price of the Series E Shares held and the amount of any declared but unpaid dividends on the Series E Shares referred to in paragraph (a) above. | |||
(e) | Redemption provisions: Holders of Series E Shares may require us to redeem the Series E preferred shares at any time at a price equal to the redemption price plus an amount equal to any dividends declared thereon but unpaid up to the date of redemption. The redemption price shall be equal to the aggregate consideration received for such share. | ||
(f) | Sinking fund provisions: None. | ||
(g) | Liability to capital calls by us: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to theCompanies Act(Québec) and as determined by the Board of Directors. The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares. | ||
(h) | Provisions discriminating against existing or prospective holders of Series E Shares: None. |
4. | For a description of the action necessary to change the rights of holders of our Cumulative First Preferred Shares, see “Section 3. Cumulative First Preferred Shares” above. As regards our Preferred Shares, Series E, we will not, unless consented to by the holders of the Series E Shares and upon compliance with the provisions of theCompanies Act(Québec), repeal, amend or otherwise alter any provisions of the Articles relating to the Series E Shares. Under the general provisions of theCompanies Act(Québec), (i) our Articles may be amended by the affirmative vote of the holders of two-thirds (2/3) of the vote cast by the shareholders at a special meeting, and (ii) our by-laws may be amended by our directors and ratified by a majority of the vote cast by the shareholders at a meeting called for such purpose. | |
5. | Our by-laws provide that the annual meetings of the shareholders shall be held at such time, on such date and at such place as the Board of Directors determines from time to time. Annual meetings of the shareholders may be called at any time by order of the Board of Directors, the chairman of the board, or, provided they are directors of our company, by the president or any vice president. Special general meetings of the shareholders shall be held at such time, on such date and at such place as the Board of Directors determines from time to time. Special general meetings of the shareholders may be called at any time by order of the Board of Directors, the chairman of the board, or, provided they are directors of our company, by the president or any vice president. | |
For any general meeting, our by-laws provide that a notice specifying the date, time and place of the meeting and the items to be discussed at the meeting must be sent to each shareholder entitled to vote at that meeting (at the address indicated in our books) at least twenty-one (21) days before the date of such a meeting. If the convening of any meeting of shareholders is a matter of urgency, notice of a meeting may be given not less than 48 hours before such meeting is to be held. | ||
The Chairman of the Board or, in his absence, the President, if he is a director or, in his absence, one of the Vice Presidents who is a director of our company shall preside at all meetings of shareholders. If all of the aforesaid officers are absent or decline to act, the persons present and entitled to vote may choose one of their number to act as chairman of the meeting. | ||
Our by-laws provide that the holders of not less than 50.1% of the outstanding shares of our share capital carrying rights to vote at such meeting, present in person or represented by proxy, shall constitute a quorum for any meeting of our shareholders. | ||
6. | There is no limitation imposed by Canadian law or by the Articles or other constituent documents on the right of |
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nonresidents or foreign owners to hold or vote shares, other than as provided in theInvestment Canada Act(Canada). TheInvestment Canada Actrequires “non-Canadian” (as defined in theInvestment Canada Act) (Canada) individuals, governments, corporations and other entities who wish to acquire control of a “Canadian business” (as defined in theInvestment Canada Act(Canada)) to file either an application for review (when certain asset value thresholds are met) or a post closing notification with the Director of Investments appointed under theInvestment Canada Act(Canada), unless a specific exemption applies. TheInvestment Canada Act(Canada) requires that, when an acquisition of control of a Canadian business by a “non-Canadian” is subject to review, it must be approved by the Minister responsible for theInvestment Canada Act(Canada) on the basis that the Minister is satisfied that the acquisition is “likely to be of net benefit to Canada”, having regard to criteria set forth in theInvestment Canada Act(Canada). | ||
7. | The Articles provide that none of our shares may be transferred without the consent of the directors expressed in a resolution duly adopted by them. In addition, the total number of shareholders of our company is limited to fifty, exclusive of present or former employees of our company or a subsidiary. | |
A register of transfers containing the date and particulars of all transfers of shares of our share capital shall be kept either at our head office or at another of our offices or at such other place in the Province of Québec as may be determined, from time to time, by the Board of Directors. | ||
8. | Not applicable. | |
9. | Not applicable. | |
10. | Not applicable. |
(a) | Indenture relating to US$700,000,000 of our 73/4% Senior Notes due March 15, 2016, dated as of October 5, 2007, by and between Quebecor Media Inc., and U.S. Bank National Association, as trustee. | ||
On October 5, 2007, we issued US$700,000,000 aggregate principal amount of our 73/4% Senior Notes due March 15, 2016 pursuant to an Indenture, dated as of October 5, 2007, by and between Quebecor Media and U.S. Bank National Association, as trustee. These notes are unsecured and are due on March 15, 2016. Interest on these notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2007. These notes are not guaranteed by our subsidiaries. These notes are redeemable, at our option, under certain circumstances and at the redemption prices set forth in these indentures. These indentures contain customary restrictive covenants with respect to Quebecor Media and certain of its subsidiaries and customary events of default. If an event of default occurs and is continuing, other than our bankruptcy or insolvency, the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare all the notes to be due and payable immediately. | |||
In connection with the issuance of these notes, we agreed to file, within 120 days after the issue date of the notes, a registration statement relating to the exchange of these privately placed notes for publicly registered exchange notes with substantially identical terms evidencing the same continuing indebtedness. We also agreed to use our best efforts to cause the registration statement to become effective within 210 days after the issue date of the notes and to consummate the exchange offer with 255 days after the issue date of the notes. In this regard, we filed a registration statement on Form F-4 with the SEC on November 20, 2007 and commenced the registered exchange offer on February 21, 2008. These notes were issued under a different indenture than, and do not form a single series and are not fungible with, our 73/4 % Senior Notes due 2016 which we issued in 2006, as described in the next paragraph. |
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(b) | Indenture relating to US$525,000,000 of our 73/4% Senior Notes due March 15, 2016, dated as of January 17, 2006, by and between Quebecor Media Inc., and U.S. Bank National Association, as trustee. | ||
On January 17, 2006, we issued US$525,000,000 aggregate principal amount of our 73/4% Senior Notes due March 15, 2016 pursuant to an Indenture, dated as of January 17, 2006, by and between Quebecor Media and U.S. Bank National Association, as trustee. These notes are unsecured and are due on March 15, 2016. Interest on these notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2006. These notes are not guaranteed by our subsidiaries. These notes are redeemable, at our option, under certain circumstances and at the redemption prices set forth in these indentures. These indentures contain customary restrictive covenants with respect to Quebecor Media and certain of its subsidiaries and customary events of default. If an event of default occurs and is continuing, other than our bankruptcy or insolvency, the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare all the notes to be due and payable immediately. | |||
In connection with the issuance of these notes, we agreed to file an exchange offer registration statement with the SEC with respect to a registered offer to exchange without novation the unregistered notes for our new SEC-registered 73/4 % Senior Notes due 2016 evidencing the same continuing indebtedness and having substantially identical terms. We filed a registration statement on Form F-4 with the SEC on May 8, 2006 and completed the registered exchange offer on July 14, 2006. | |||
(c) | Credit Agreement, dated as of January 17, 2006, by and among Quebecor Media Inc., as Borrower, the financial institutions party thereto from time to time, as Lenders, and Bank of America, N.A., as Administrative Agent. | ||
On January 17, 2006, in connection with our refinancing plan, we entered into Senior Secured Credit Facilities comprised of (i) a 5-year $100.0 million revolving credit facility that matures in January 2011, (ii) a 5-year $125.0 million term loan A that matures in January 2011, and (iii) a 7-year US$350.0 million term loan B facility that matures in January 2013. The Senior Secured Credit Facilities also include an uncommitted $350 million incremental facility that may be available to us, subject to compliance at all times with all financial covenants, absence of default and lenders being willing to fund the incremental amount. This incremental facility will have a term to be agreed with the lenders, although the maturity of borrowings under the incremental facility will be required to have a maturity falling on or extending beyond the maturity of the term loan B facility. We may draw Letters of Credit under the Senior Secured Credit Facilities. The proceeds of the term loan A and term loan B were used to refinance existing debt. The proceeds of our revolving facility may be used for our general corporate purposes. | |||
Borrowings under the revolving credit facility, term loan A and term loan B bear interest at the Canadian prime rate, the U.S. prime rate, the bankers’ acceptance rate or LIBOR, plus, in each case, an applicable margin. | |||
Borrowings under the revolving credit facility are repayable in full in January 2011. Borrowings under our term loan A facility are repayable in full in January 2011 and borrowing under our term loan B facility are repayable in full in January 2013. We are also required to make specified quarterly repayments of amounts borrowed under the term loan A and term loan B. | |||
Borrowings under the Senior Secured Credit Facilities and under eligible derivative instruments are secured by a first-ranking hypothec and security agreement (subject to certain permitted encumbrances) on all of our movable property and first-ranking pledges of all of the shares (subject to certain permitted encumbrances) of Sun Media and Videotron. | |||
The Senior Secured Credit Facilities contain customary covenants that restrict and limit our ability to, among other things, enter into merger or amalgamation transactions, grant encumbrances, sell assets, pay dividends or make other distributions, issue shares of capital stock, incur indebtedness and enter into related party transactions. In addition, the Senior Secured Credit Facilities contain customary financial covenants. The Senior Secured Credit Facilities contain customary events of default including the non-payment of principal or |
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interest, the breach of any financial covenant, the failure to perform or observe any other covenant, certain bankruptcy events relating to Quebecor Media and its subsidiaries, and the occurrence of a change of control. | |||
(d) | Indenture relating to US$650,000,000 of Videotron’s 67/8 % Senior Notes due January 15, 2014, dated as of October 8, 2003, by and among Vidéotron ltée, the guarantors party thereto and Wells Fargo Bank Minnesota, N.A. (now Wells Fargo Bank, National Association) as trustee, as supplemented. | ||
On October 8, 2003, Videotron issued US$335.0 million aggregate principal amount of 67/8 % Senior Notes due January 15, 2014 and, on November 19, 2004, Videotron issued an additional US$315.0 million in aggregate principal amount of these notes, pursuant to an Indenture, dated as of October 8, 2003, by and among Videotron, the guarantors party thereto and Wells Fargo Bank Minnesota, N.A. (now Wells Fargo Bank, National Association), as trustee. These notes are unsecured and are due January 15, 2014. Interest on these notes is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2004. These notes are guaranteed on a senior unsecured basis by most, but not all, of Videotron’s subsidiaries. The notes are redeemable, at Videotron’s option, under certain circumstances and at the redemption prices set forth in the indenture. The indenture contains customary restrictive covenants with respect to Videotron and certain of its subsidiaries and customary events of default. If an event of default occurs and is continuing (other than Videotron’s bankruptcy or insolvency) the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare all the notes to be due and payable immediately. | |||
(e) | Indenture relating to US$175,000,000 of Videotron’s 63/8 % Senior Notes due December 15, 2015, dated as of September 16, 2005, by and among Vidéotron ltée, the guarantors party thereto, and Wells Fargo, National Association, as trustee. | ||
On September 16, 2005, Videotron issued US$175,000,000 aggregate principal amount of its 63/8 Senior Notes due December 15, 2015, pursuant to an Indenture, dated as of September 16, 2005, by and among Videotron, the guarantors party thereto, and Wells Fargo, National Association, as trustee. These notes are unsecured and are due on December 15, 2015. Interest on these notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2005. These notes are guaranteed on a senior unsecured basis by most, but not all, of Videotron’s subsidiaries. These notes are redeemable, at Videotron’s option, under certain circumstances and at the redemption prices set forth in the indenture. The indenture contains customary restrictive covenants with respect to Videotron and certain of its subsidiaries, and customary events of default. If an event of default occurs and is continuing, other than Videotron’s bankruptcy or insolvency, the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare all the notes to be due and payable immediately. | |||
(f) | Amended and Restated Credit Agreement, dated as of November 19, 2004, by and among Vidéotron ltée, as borrower, the guarantors party thereto, the financial institutions party thereto from time to time, as lenders, and Royal Bank of Canada, as administrative agent, as amended. | ||
On November 19, 2004, concurrently with the closing of the private placement of a new series of Videotron’s 67/8 % Senior Notes due January 15, 2014, Videotron amended and restated its credit agreement, dated as of November 28, 2000, by executing and delivering the seventh amending agreement to its credit agreement. Pursuant to this amendment, Videotron’s amended and restated credit agreement provides for a $450.0 million revolving credit facility maturing in 2009. The proceeds of Videotron’s revolving credit facility are to be used for Videotron’s general corporate purposes, including for distributions to Videotron’s shareholder in certain circumstances. | |||
Borrowings under Videotron’s amended and restated credit facility bear interest at the Canadian prime rate, the bankers’ acceptance rate or LIBOR, plus, in each case, an applicable margin. Borrowings under Videotron’s revolving credit facility are repayable in full in November 2009. | |||
Borrowings under this amended and restated credit facility and under eligible derivative instruments are secured by a first-ranking hypothec or security interest (subject to certain permitted encumbrances) on most but not all |
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of Videotron’s current and future assets, as well as those of the guarantors party thereto, including most but not all of Videotron’s subsidiaries (the “Videotron Group”), guarantees of all the members of the Videotron Group, pledges of the shares of Videotron and the members of the Videotron Group, and other security. | |||
This amended and restated credit facility contains customary covenants that restrict and limit the ability of Videotron and the members of the Videotron Group to, among other things, enter into merger or amalgamation transactions, grant encumbrances, sell assets, pay dividends or make other distributions, issue shares of capital stock, incur indebtedness and enter into related party transactions. In addition, this amended and restated credit facility contains customary financial covenants. It also contains customary events of default including the non-payment of principal or interest, the breach of any financial covenant, the failure to perform or observe any other covenant, certain bankruptcy events relating to Videotron and the members of the Videotron Group, and the occurrence of a change of control. | |||
(g) | Indenture relating to US$205,000,000 of Sun Media’s 75/8 % Senior Notes due February 15, 2013, dated as of February 7, 2003 by and among Sun Media Corporation, the guarantors party thereto, and National City Bank, as trustee, as supplemented. | ||
On February 7, 2003 Sun Media issued US$205.0 million aggregate principal amount of its 75/8% Senior Notes due February 15, 2013 under an Indenture, dated as of February 7, 2003, as supplemented, by and among Sun Media, the guarantors party thereto, and National City Bank, as trustee. These notes are unsecured and are due February 15, 2013. Interest on these notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2003. These notes are guaranteed on a senior unsecured basis by most, but not all, of Sun Media’s subsidiaries. These notes are redeemable, at Sun Media’s option, under certain circumstances and at the redemption prices set forth in the indenture. The indenture contains customary restrictive covenants with respect to Sun Media and certain of its subsidiaries and customary events of default. If an event of default occurs and is continuing, other than Sun Media’s bankruptcy or insolvency, the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare all the notes to be due and payable immediately. | |||
(h) | Credit Agreement, dated as of February 7, 2003, by and among Sun Media Corporation, the guarantors party thereto, Banc of America Securities LLC, Credit Suisse First Boston Canada, the lenders party thereto, and Bank of America, N.A., as Administrative Agent, as amended. | ||
On February 7, 2003, as part of the refinancing of its indebtedness, Sun Media entered into a secured credit facility consisting of a five-year revolving credit facility of $75.0 million and a six-year US$230.0 million term loan B. In connection with Quebecor Media’s 2006 refinancing, Sun Media’s credit facility was amended for the addition of a $40.0 million term loan C in January 2006. On October 31, 2007, Sun Media repaid in full and terminated its term loan B. In addition, on October 31, 2007, Sun Media entered into a Fifth Amending Agreement to its credit agreement. The amendment reduced the revolving credit facility from $75.0 million to $70.0 million, extends the term of the credit facilities to October 31, 2012, and modifies certain definitions and covenants related to leverage and interest coverage ratios, while removing the fixed charge ratio. | |||
Borrowings under the revolving credit facility and the term loan C are repayable in full in October 2012. Sun Media is also required to make specified quarterly repayments of amounts borrowed under the term loan C. | |||
Borrowings under the revolving credit facility and the term loan C facility are in Canadian dollars and bear interest at the Canadian prime rate or the bankers’ acceptance rate plus an applicable margin. The proceeds of the term loan C were used to refinance existing debt and for permitted distributions to Sun Media’s shareholder. The proceeds of Sun Media’s revolving facility may be used for general corporate purposes including distributions to Sun Media’s shareholder in certain circumstances. | |||
Borrowings under this amended and restated credit facility and under eligible derivative instruments are secured by a first-ranking hypothec and security agreement (subject to certain permitted encumbrances) on all of Sun Media’s current and future assets, as well as those of the guarantors party thereto, including most, but not all, of |
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Sun Media’s subsidiaries (the “Sun Media Group”), guarantees of all the members of the Sun Media Group, pledges of shares of the members of the Sun Media Group, and other security. | |||
This credit facility contains customary covenants that restrict and limit the ability of Sun Media and its subsidiaries to, among other things, enter into merger or amalgamation transactions, grant encumbrances, sell assets, pay dividends or make other distributions, issue shares of capital stock, incur indebtedness and enter into related party transactions. In addition, this credit facility contains customary financial covenants. This credit facility also contains customary events of default including the non-payment of principal or interest, the breach of any financial covenant, the failure to perform or observe any other covenant, certain bankruptcy events relating to Sun Media and members of the Sun Media Group, and the occurrence of a change of control. | |||
(i) | Share Purchase Agreement dated December 22, 2003 between Carlyle VTL Holdings, L.P. and Carlyle Partners III (Vidéotron), L.P., and Quebecor Media Inc. and 9101-0827 Québec Inc. relating to the purchase by 9101-0827 Québec Inc. of 5,000 Class C Preferred Shares of 3662527 Canada Inc., as amended by a First Amendment to Share Purchase Agreement dated as of December 31, 2004, and by an Assignment and Assumption Agreement dated as of June 30, 2006. | ||
On December 22, 2003, 9101-0827 Québec Inc., a wholly-owned subsidiary of Quebecor Media entered into an agreement with Carlyle VTL Holdings, L.P. and Carlyle Partners III (Vidéotron), L.P. (collectively “Carlyle”) to purchase the 5,000 Class C Preferred Shares held by Carlyle in 3662527 Canada Inc., the parent company of Vidéotron Télécom Ltd., Quebecor Media’s business telecommunications venture. The acquisition was made for a purchase price with a value estimated at approximately $125 million at closing. A payment of $55 million was made to Carlyle at closing on December 22, 2003. The balance of the purchase price was subject to variation on the basis of the valuation of the common shares of Quebecor Media and was payable on demand at any time after December 15, 2004, but no later than December 15, 2008. Quebecor Media held an option to pay this Additional Amount in cash, at its fair value for a period of 30 days following each of June 15, 2007 and June 15, 2008. At the date of the transaction, both parties had agreed that the initial value of the Additional Amount payable was $70.0 million ($122.0 million as at December 31, 2006), and on July 23, 2007, Quebecor Media exercised its option to pay in full the Additional Amount payable to The Carlyle Group for total cash consideration of $127.2 million. | |||
(j) | Fourth Amended and Restated Credit Agreement, dated as of September 28, 2007, by and among 4411986 Canada Inc., Osprey Media LP and Osprey Media Income Fund, as borrowers, the financial institutions party thereto from time to time, as lenders, and The Bank of Nova Scotia, as administrative agent, as amended. | ||
On September 28, 2007, 4411986 Canada Inc., Osprey Media LP and Osprey Media Income Fund entered into a fourth amended and restated secured credit facility consisting of a 39-month revolving credit facility of $65.0 million and a 39-month $133.3 million term facility. Borrowings under the revolving credit facility and the term facility are repayable in full in January 2011. | |||
Borrowings under the revolving credit facility and the term facility are in Canadian dollars and bear interest at the Canadian prime rate or the bankers’ acceptance rate plus an applicable margin. The proceeds of the term facility were used to refinance existing debt. The proceeds of Osprey Media’s revolving facility may be used for general corporate purposes including acquisitions, capital expenditures and distributions to Osprey Media’s shareholder (subject in each case to certain restrictions). | |||
Borrowings under this Fourth Amended and Restated Credit Agreement and under eligible derivative instruments are secured by a first-ranking hypothec and security agreement (subject to certain permitted encumbrances) on all of Osprey Media’s current and future assets, as well as those of its subsidiaries (the “Osprey Media Group”) and other security. | |||
This credit facility contains customary covenants that restrict and limit the ability of Osprey Media and its subsidiaries to, among other things, enter into merger or amalgamation transactions, grant encumbrances, sell |
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assets, pay dividends or make other distributions, issue shares of capital stock, incur indebtedness and enter into related party transactions. In addition, this credit facility contains customary financial covenants. This credit facility also contains customary events of default including the non-payment of principal or interest, the breach of any financial covenant, the failure to perform or observe any other covenant, and certain bankruptcy events relating to Osprey Media and members of the Osprey Media Group. |
• | dealers in stocks, securities or currencies; | ||
• | securities traders that use a mark-to-market accounting method; | ||
• | banks and financial institutions; | ||
• | insurance companies; | ||
• | regulated investment companies; | ||
• | real estate investment trusts; | ||
• | tax-exempt organizations; | ||
• | persons holding notes as part of a hedging or conversion transaction or a straddle; | ||
• | persons deemed to sell notes under the constructive sale provisions of the Code; | ||
• | persons who or that are, or may become, subject to the expatriation provisions of the Code; |
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• | persons whose functional currency is not the U.S. dollar; and | ||
• | direct, indirect or constructive owners of 10% or more of our outstanding voting shares. |
• | an individual citizen or resident alien of the United States; | ||
• | a corporation or other entity treated as such formed in or under the laws of the United States, any state thereof or the District of Columbia; | ||
• | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or | ||
• | a trust, if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more “U.S. persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust, or if a valid election is in effect to be treated as a U.S. person. |
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• | a portion of the initial purchase price of the note is attributable to pre-issuance accrued interest, | ||
• | the first stated interest payment on the note is to be made within one year of the note’s issue date, and | ||
• | the first stated interest payment will equal or exceed the amount of the pre-issuance accrued interest. |
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• | the amount of cash and the fair market value of any property received (less any portion allocable to the payment of accrued interest or, in the case of 2007 OID notes, OID not previously included in income, which amount will be taxable as ordinary interest income); and | ||
• | the U.S. Holder’s adjusted tax basis in the notes. |
• | fails to furnish a social security number or other taxpayer identification number (“TIN”) certified under penalty of perjury within a reasonable time after the request for the TIN; | ||
• | furnishes an incorrect TIN; | ||
• | is notified by the IRS that is has failed to report properly interest or dividends; or | ||
• | under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN furnished is the correct number and that such holder is not subject to backup withholding. |
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F — | Dividends and Paying Agents | |
Not applicable. | ||
G — | Statement by Experts | |
Not applicable. | ||
H — | Documents on Display |
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I — | Subsidiary Information | |
Not applicable. |
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Twelve month period ending December 31, | ||||
(in millions) | ||||
2008 | $ | 24.7 | ||
2009 | 181.8 | |||
2010 | 121.6 | |||
2011 | 171.9 | |||
2012 | 49.3 | |||
2013 and thereafter | 2,528.5 |
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2007 | 2006 | |||||||
Audit Fees(1) | $ | 2,723,699 | $ | 2,520,904 | ||||
Audit-related Fees(2) | 921,489 | 614,494 | ||||||
Tax Fees(3) | 76,024 | 23,580 | ||||||
All Other Fees(4) | 724,564 | 19,115 | ||||||
Total | $ | 4,445,776 | $ | 3,178,093 |
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(1) | Audit Fees consist of fees approved for the annual audit of the Company’s consolidated financial statements and quarterly reviews of interim financial statements of the Company with the SEC, including required assistance or services that only the external auditor reasonably can provide and accounting consultations on specific issues. | |
(2) | Audit-related Fees consist of fees billed for assurance and related services that are traditionally performed by the external auditor, and include consultations concerning financial accounting and reporting standards on proposed transactions, due diligence or accounting work related to acquisitions; employee benefit plan audits, and audit or attestation services not required by statute or regulation and audit and attestation services required by statute or regulation, such as comfort letters and consents, SEC prospectus and registration statements, other filings and other offerings, including annual reports and SEC forms and statutory audits. | |
(3) | Tax Fees include fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refunds, tax consultations, such as assistance and representation in connection with tax audits and appeals, tax advice related to mergers, acquisitions and divestitures, transfer pricing, and requests for advance tax rulings or technical interpretations. | |
(4) | All Other Fees include fees billed for forensic accounting and occasional training services, assistance with respect to internal controls over financial reporting and disclosure controls and procedures. |
Exhibit | ||
Number | Description | |
1.1 | Articles of Incorporation of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit 3.1 to Quebecor Media Inc.’s Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792). | |
1.2 | Certificate of Amendment of Articles of Incorporation filed February 3, 2003 (translation) (incorporated by |
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Exhibit | ||
Number | Description | |
reference to the applicable exhibit to Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2002, filed on March 31, 2003). | ||
1.3 | By-laws of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit 3.2 to Quebecor Media Inc.’s Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792). | |
1.4 | Certificate of Amendment of Articles of Incorporation filed December 5, 2003 (translation) (incorporated by reference to the applicable exhibit to Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2003, filed on March 31, 2004). | |
1.5 | Certificate of Amendment of Articles of Incorporation filed January 16, 2004 (translation) (incorporated by reference to the applicable exhibit to Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2003, filed on March 31, 2004). | |
1.6 | Certificate of Amendment of Articles of Incorporation filed November 26, 2004 (translation) (incorporated by reference to Exhibit 1.6 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2004, filed on March 31, 2005). | |
1.7 | By-law number 2004-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit 1.7 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2004, filed on March 31, 2005). | |
1.8 | By-law number 2004-2 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit 1.8 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2004, filed on March 31, 2005). | |
1.9 | Certificate of Amendment of Articles of Incorporation of Quebecor Media Inc., as of January 14, 2005 (translation) (incorporated by reference to Exhibit 1.9 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006). | |
1.10 | By-law number 2005-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit 1.10 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 31, 2006). | |
1.11 | Certificate of Amendment of Articles of Incorporation of Quebecor Media, Inc., as of January 12, 2007 (translation) (incorporated by reference to Exhibit 1.11 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2006, filed on March 30, 2007). | |
1.12 | By-law number 2007-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit 1.12 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2006, filed on March 30, 2007). | |
1.13 | Certificate of Amendment of Articles of Incorporation of Quebecor Media Inc., as of November 30, 2007 (translation). | |
1.14 | By-law number 2007-2 of Quebecor Media Inc. (translation). | |
2.1 | Form of 73/4 % Senior Note due 2016 originally issued on January 17, 2006 (included as Exhibit A to Exhibit 2.2 below) (incorporated by reference to Exhibit 2.7 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006). | |
2.2 | 73/4% Senior Notes Indenture, dated as of January 17, 2006, by and between Quebecor Media Inc., and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 2.8 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006). | |
2.3 | Form of 73/4 % Senior Note due 2016 originally issued on October 5, 2007 (included as Exhibit A to Exhibit 2.4 below) (incorporated by reference to Exhibit 4.3 of Quebecor Media’s Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No. 333-147551). | |
2.4 | 73/4% Senior Notes Indenture, dated as of October 5, 2007, by and between Quebecor Media Inc., and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.4 of Quebecor Media’s |
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Exhibit | ||
Number | Description | |
Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No. 333-147551). | ||
2.5 | Form of Sun Media Corporation 75/8% Senior Note due 2013 (included in Exhibit A to Exhibit 2.6 below) (incorporated by reference to Exhibit A to Exhibit 4.2 to Sun Media Corporation’s Registration Statement on Form F-4 dated April 10, 2003, Registration Statement No. 333-103998). | |
2.6 | Indenture relating to Sun Media Corporation 75/8% Senior Notes due 2013, dated as of February 7, 2003, among Sun Media Corporation, the subsidiary guarantors signatory thereto, and National City Bank, as trustee (incorporated by reference to Exhibit 4.2 to Sun Media Corporation’s Registration Statement on Form F-4 dated April 10, 2003, Registration Statement No. 333-103998). | |
2.7 | Sun Media Corporation First Supplemental Indenture, dated as of July 30, 2004, by and among Sun Media Corporation, the subsidiary guarantors signatory thereto, and U.S. Bank Corporate Trust Services (formerly National City Bank), as trustee (incorporated by reference to Exhibit 2.4 of Sun Media Corporation’s annual report on Form 20-F for the year ended December 31, 2004, filed on March 24, 2005). | |
2.8 | Form of Vidéotron ltée 67/8% Senior Notes due January 15, 2014 (incorporated by reference to Exhibit A to Exhibit 4.3 to Vidéotron’s Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No. 333-110697). | |
2.9 | Form of Notation of Guarantee by the subsidiary guarantors of the 67/8% Vidéotron ltée Senior Notes due January 15, 2014 (incorporated by reference to Exhibit E to Exhibit 4.3 to Vidéotron’s Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No. 333-110697). | |
2.10 | Indenture relating to Vidéotron ltée 67/8% Notes due 2014, dated as of October 8, 2003, by and among Vidéotron ltée, the subsidiary guarantors signatory thereto and Wells Fargo Bank Minnesota, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Vidéotron ltée’s Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No. 333-110697). | |
2.11 | Vidéotron ltée First Supplemental Indenture, dated as of July 12, 2004, by and among Vidéotron ltée, SuperClub Vidéotron Canada inc., Les Propriétés SuperClub inc. and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.4 to Vidéotron’s Registration Statement on Form F-4 dated January 18, 2005, Registration Statement No. 333-121032). | |
2.12 | Form of Vidéotron ltée 63/8% Senior Note due 2015 (included as Exhibit A to Exhibit 2.14 below). | |
2.13 | Form of Notation of Guarantee by the subsidiary guarantors of Vidéotron ltée’s 63/8% Senior Notes due 2015 (included as Exhibit E to Exhibit 2.14 below). | |
2.14 | Indenture relating to Vidéotron ltée 63/8% Senior Notes, dated as of September 16, 2005, by and between Vidéotron ltée, the guarantors party thereto, and Wells Fargo, National Association, as trustee (incorporated by reference to Exhibit 4.3 of Vidéotron ltée’s Registration Statement on Form F-4 dated October 14, 2005, Registration Statement No. 333-128998). | |
3.1 | Shareholders’ Agreement dated December 11, 2000 by and among Quebecor Inc., Capital Communications CDPQ inc. (now known as Capital d’Amérique CDPQ inc.) and Quebecor Media, together with a summary thereof in the English language (incorporated by reference to Exhibit 9.1 to Quebecor Media Inc.’s Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792). | |
3.2 | Letter Agreement dated December 11, 2000 between Quebecor Inc. and Capital Communications CDPQ inc. (now known as Capital d’Amérique CDPQ inc.) (translation) (incorporated by reference to Exhibit 9.2 to Quebecor Media Inc.’s Registration Statement on Form F-4 dated September 5, 2001 Registration Statement 333-13792). | |
3.3 | Written Resolution adopted by the Shareholders of Quebecor Media Inc. on May 5, 2003 relating to the increase in the size of the Board of Directors of Quebecor Media Inc. (translation) (incorporated by reference to the applicable exhibit to Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2003, filed on March 31, 2004). | |
4.1 | Lease Agreement dated November 24, 1993 between Le Groupe Vidéotron ltée and National Bank of |
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Exhibit | ||
Number | Description | |
Canada for the property located at 300 Viger Avenue East, Montréal, Province of Québec, Canada, together with a summary thereof in the English language (incorporated by reference to Exhibit 10.3 to Quebecor Media Inc.’s Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792). | ||
4.2 | Credit Agreement, dated as of January 17, 2006, by and among Quebecor Media Inc., as Borrower, the financial institutions party thereto from time to time, as Lenders, and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 4.2 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006). | |
4.3 | Credit Agreement dated as of February 7, 2003 among Sun Media Corporation, as borrower, Bank of America, N.A., Banc of America Securities LLC and Credit Suisse First Boston Corporation, as arrangers, Bank of America, N.A., as administrative agent, and the financial institutions signatory thereto, as lenders (incorporated by reference to Exhibit 10.4 to Sun Media Corporation’s Registration Statement on Form F-4 dated April 10, 2003, Registration Statement No. 333-103998). | |
4.4 | First Amending Agreement, dated as of December 3, 2003, amending the Credit Agreement dated as of February 7, 2003 among Sun Media Corporation, Banc of America Securities LLC and Credit Suisse First Boston Canada and the lenders thereto (incorporated by reference to the applicable exhibit to Sun Media’s Annual Report on Form 20-F for the year ended December 31, 2003, filed on March 30, 2004). | |
4.5 | Second Amending Agreement, dated as of October 12, 2004, amending the Credit Agreement dated as of February 7, 2003 among Sun Media Corporation, Banc of America Securities LLC and Credit Suisse First Boston Canada and the lenders thereto (incorporated by reference to Exhibit 4.5 of Sun Media Corporation’s Annual Report on Form 20-F for the year ended December 31, 2004, filed on March 24, 2005, Commission file No. 333-6690). | |
4.6 | Third Amending Agreement, dated as of January 17, 2006, amending the Credit Agreement dated as of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC, Credit Suisse First Boston Canada, the lenders party thereto, and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 4.6 of Sun Media Corporation’s Annual Report on Form 20-F for the year ended December 31, 2005, filed on March 21, 2006, Commission file no. 333-6690). | |
4.7 | Credit Agreement dated as of November 28, 2000 among Vidéotron ltée, RBC Dominion Securities Inc., Royal Bank of Canada and the co-arrangers and lenders thereto, together with the First Amending Agreement dated as of January 5, 2001 and the Second Amending Agreement dated as of June 29, 2001 (incorporated by reference to Exhibit 10.5 to Quebecor Media Inc.’s Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792). | |
4.8 | Sixth Amending Agreement, dated as of October 8, 2003, to the Credit Agreement dated as of November 28, 2000, among Vidéotron ltée, Royal Bank of Canada, as administrative agent, and the financial institutions signatory thereto and acknowledged by Le SuperClub Vidéotron ltée, Groupe de Divertissement SuperClub inc., Vidéotron (1998) ltée, CF Cable TV Inc., Videotron (Regional) Ltd, Télé-Câble Charlevoix (1997) inc., Vidéotron TVN inc. and Câblage QMI inc., as guarantors and by Quebecor Media Inc. (incorporated by reference to Exhibit 10.1 to Vidéotron ltée’s Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No. 333-110697). | |
4.9 | Seventh Amending Agreement dated as of November 19, 2004 to the Credit Agreement dated as of November 28, 2000, among Vidéotron ltée, Royal Bank of Canada, as administrative agent, and the financial institutions signatory thereto and acknowledged by Le SuperClub Vidéotron ltée, Groupe de Divertissement SuperClub inc., Vidéotron (1998) ltée, CF Cable TV Inc., Videotron (Regional) Ltd., 9139-3256 Québec inc., Vidéotron TVN inc., Les Propriétés SuperClub inc. and SuperClub Vidéotron Canada inc., as guarantors (the “Guarantors”), and by Quebecor Media Inc. (incorporated by reference to Exhibit 10.2 to Vidéotron ltée’s Registration Statement on Form F-4 dated January 18, 2005, Registration Statement No. 333-121032). | |
4.10 | Form of Amended and Restated Credit Agreement entered into as of November 28, 2000, as amended by a First Amending Agreement dated as of January 5, 2001, as Second Amending Agreement dated as of |
167
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Exhibit | ||
Number | Description | |
June 29, 2001, a Third Amending Agreement dated December 12, 2001 and accepted by the Lenders as of December 21, 2001, a Fourth Amending Agreement dated as of December 23, 2002, a Fifth Amending Agreement dated as of March 24, 2003, a Sixth Amending Agreement dated as of October 8, 2003 and a Seventh Amending Agreement dated as of November 19, 2004, among Vidéotron ltée, Royal Bank of Canada, as administrative agent, and the financial institutions signatory thereto (incorporated by reference to Schedule 2 to Exhibit 10.2 to Vidéotron’s Registration Statement on Form F-4 dated January 18, 2005, Registration Statement No. 333-121032). | ||
4.11 | Form of Guarantee under the Vidéotron ltée Credit Agreement (incorporated by reference to Schedule D of Exhibit 10.5 to Quebecor Media’s Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792). | |
4.12 | Form of Share Pledge of the shares of Vidéotron ltée and of the guarantors of the Vidéotron ltée Credit Agreement (incorporated by reference to Schedule E of Exhibit 10.5 to Vidéotron’s Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792). | |
4.13 | Credit Agreement, dated as of April 7, 2006, by and between Société Générale (Canada), as lender, and Quebecor Media Inc., as borrower (incorporated by reference to Exhibit 10.3 of Quebecor Media’s Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No. 333-147551). | |
4.14 | Fourth Amending Agreement, dated as of April 27, 2006, amending the Credit Agreement dated as of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC, Credit Suisse First Boston Canada and the lenders party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.8 of Quebecor Media’s Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No. 333-147551). | |
4.15 | Fifth Amending Agreement, dated as of October 31, 2007, amending the Credit Agreement dated as of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC, Credit Suisse First Boston Canada and the lenders party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.9 of Quebecor Media’s Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No. 333-147551). | |
4.16 | Fourth Amended and Restated Credit Agreement, dated as of September 28, 2007, between 4411986 Canada Inc., Osprey Media LP, Osprey Media Income Fund, as borrowers, the financial institutions party thereto, as Credit Facility lenders, the Canadian Imperial Bank of Commerce, as syndication agent, Bank of Montreal, as documentation agent, and the Bank of Nova Scotia, as administrative agent, including the First Amendment, made as of January 1, 2008, to the Fourth Amended and Restated Credit Agreement. | |
7.1 | Statement regarding calculation of ratio of earnings to fixed charges. | |
8.1 | Subsidiaries of Quebecor Media Inc. | |
11.1 | Code of Ethics (incorporated by reference to Exhibit 11.1 of Quebecor Media’s Annual Report on Form 20-F for fiscal year ended December 31, 2003, filed on March 31, 2004). | |
12.1 | Certification of Pierre Karl Péladeau, Vice Chairman and Chief Executive Officer of Quebecor Media Inc., pursuant to 15 U.S.C. Section 78(m)(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
12.2 | Certification of Louis Morin, Vice President and Chief Financial Officer of Quebecor Media Inc., pursuant to 15 U.S.C. Section 78(m)(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
13.1 | Certification of Pierre Karl Péladeau, Vice Chairman and Chief Executive Officer of Quebecor Media Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
13.2 | Certification of Louis Morin, Vice President and Chief Financial Officer of Quebecor Media Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
168
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QUEBECOR MEDIA INC. | ||||
By: | /s/ Louis Morin | |||
Name: | Louis Morin | |||
Title: | Vice President and Chief Financial Officer | |||
169
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2007, 2006 and 2005
Report of Independent Registered Public Accounting Firm to the Board of Directors and to the shareholders of Quebecor Media Inc. | F-2 | |||
Financial statements | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-8 | ||||
F-10 | ||||
F-13 |
Table of Contents
F-2
Table of Contents
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Revenues | $ | 3,365.9 | $ | 2,998.6 | $ | 2,695.4 | ||||||
Cost of sales and selling and administrative expenses | 2,402.0 | 2,199.0 | 1,963.3 | |||||||||
Amortization | 290.4 | 260.7 | 231.9 | |||||||||
Financial expenses (note 2) | 240.0 | 224.6 | 285.3 | |||||||||
Reserve for restructuring of operations, impairment of assets and other special charges (note 3) | 11.6 | 18.9 | (0.2 | ) | ||||||||
Loss on debt refinancing (note 4) | 1.0 | 342.6 | 60.0 | |||||||||
Gain on sale of businesses and other assets | (0.4 | ) | (2.2 | ) | (0.1 | ) | ||||||
Impairment of goodwill and intangible assets (note 5) | 5.4 | 180.0 | – | |||||||||
Income (loss) before income taxes and non-controlling interest | 415.9 | (225.0 | ) | 155.2 | ||||||||
Income taxes (note 7) | 74.8 | (53.7 | ) | 43.5 | ||||||||
Income (loss) before non-controlling interest | 341.1 | (171.3 | ) | 111.7 | ||||||||
Non-controlling interest | (19.2 | ) | (0.4 | ) | (16.2 | ) | ||||||
Income (loss) from continuing operations | 321.9 | (171.7 | ) | 95.5 | ||||||||
Income from discontinued operations (note 8) | 5.2 | 2.0 | 1.0 | |||||||||
Net income (loss) | $ | 327.1 | $ | (169.7 | ) | $ | 96.5 | |||||
F-3
Table of Contents
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Net income (loss) | $ | 327.1 | $ | (169.7 | ) | $ | 96.5 | |||||
Other comprehensive income (loss), net of income taxes: | ||||||||||||
Unrealized (loss) gain on translation of net investments in foreign operations | (2.0 | ) | 1.2 | (1.3 | ) | |||||||
Unrealized gain on derivative instruments, including income tax recovery of $11.5 million in 2007 | 48.0 | — | — | |||||||||
46.0 | 1.2 | (1.3 | ) | |||||||||
Comprehensive income (loss) | $ | 373.1 | $ | (168.5 | ) | $ | 95.2 | |||||
F-4
Table of Contents
(in millions of Canadian dollars)
Accumulated | ||||||||||||||||||||
other | ||||||||||||||||||||
comprehensive | Total | |||||||||||||||||||
Capital | Contributed | income (loss) | shareholders’ | |||||||||||||||||
stock | surplus | Deficit | (note 20) | equity | ||||||||||||||||
Balance as of December 31, 2004 | $ | 1,773.7 | $ | 3,216.8 | $ | (2,529.6 | ) | $ | (1.0 | ) | $ | 2,459.9 | ||||||||
Net income | — | — | 96.5 | — | 96.5 | |||||||||||||||
Dividends | — | — | (105.0 | ) | — | (105.0 | ) | |||||||||||||
Other comprehensive loss, net of income taxes | — | — | — | (1.3 | ) | (1.3 | ) | |||||||||||||
Balance as of December 31, 2005 | 1,773.7 | 3,216.8 | (2,538.1 | ) | (2.3 | ) | 2,450.1 | |||||||||||||
Net loss | — | — | (169.7 | ) | — | (169.7 | ) | |||||||||||||
Dividends | — | — | (23.7 | ) | — | (23.7 | ) | |||||||||||||
Reduction in paid-up capital | (21.3 | ) | — | — | — | (21.3 | ) | |||||||||||||
Purchase of tax credits from a company under common control | — | 0.4 | — | — | 0.4 | |||||||||||||||
Other comprehensive income, net of income taxes | — | — | — | 1.2 | 1.2 | |||||||||||||||
Balance as of December 31, 2006 | 1,752.4 | 3,217.2 | (2,731.5 | ) | (1.1 | ) | 2,237.0 | |||||||||||||
Cumulative effect of changes in accounting policies (note 1(b)) | — | — | (14.3 | ) | (35.5 | ) | (49.8 | ) | ||||||||||||
Net income | — | — | 327.1 | — | 327.1 | |||||||||||||||
Dividends | — | — | (110.0 | ) | — | (110.0 | ) | |||||||||||||
Other comprehensive income, net of income taxes | — | — | — | 46.0 | 46.0 | |||||||||||||||
Balance as of December 31, 2007 | $ | 1,752.4 | $ | 3,217.2 | $ | (2,528.7 | ) | $ | 9.4 | $ | 2,450.3 | |||||||||
F-5
Table of Contents
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Cash flows related to operations: | ||||||||||||
Income (loss) from continuing operations | $ | 321.9 | $ | (171.7 | ) | $ | 95.5 | |||||
Adjustments for: | ||||||||||||
Amortization of property, plant and equipment | 275.4 | 251.2 | 225.3 | |||||||||
Amortization of deferred charges and other assets | 15.0 | 9.5 | 6.6 | |||||||||
Impairment of goodwill and intangible assets (note 5) | 5.4 | 180.0 | — | |||||||||
Net loss on derivative instruments and on foreign currency translation of financial instruments | 4.7 | 1.2 | 4.4 | |||||||||
Loss on revaluation of the Additional Amount payable (note 14) | 5.2 | 10.5 | 10.1 | |||||||||
Loss (gain) on sale of businesses, property, plant and equipment, and other assets | 4.7 | (0.4 | ) | (1.7 | ) | |||||||
Loss on debt refinancing (note 4) | 1.0 | 342.6 | 60.0 | |||||||||
Repayment of accrued interest on Senior Discount Notes | — | (197.3 | ) | (3.0 | ) | |||||||
Amortization of financing costs and long-term debt discount | 4.8 | 7.3 | 62.7 | |||||||||
Future income taxes | 63.5 | (59.1 | ) | 24.5 | ||||||||
Non-controlling interest | 19.2 | 0.4 | 16.2 | |||||||||
Other | (1.4 | ) | 0.3 | (1.5 | ) | |||||||
719.4 | 374.5 | 499.1 | ||||||||||
Net change in non-cash balances related to operations | 32.7 | (22.2 | ) | (27.4 | ) | |||||||
Cash flows provided by continuing operations | 752.1 | 352.3 | 471.7 | |||||||||
Cash flows provided by discontinued operations | 1.4 | 2.1 | 1.0 | |||||||||
Cash flows provided by operations | 753.5 | 354.4 | 472.7 | |||||||||
Cash flows related to investing activities: | ||||||||||||
Additions to property, plant and equipment | (468.7 | ) | (435.5 | ) | (319.8 | ) | ||||||
Business acquisitions, net of cash and cash equivalents (note 6) | (438.6 | ) | (10.5 | ) | (110.5 | ) | ||||||
Proceeds from disposal of businesses, net of cash and cash equivalents (note 8) | 8.5 | 0.5 | 4.3 | |||||||||
Net decrease in temporary investments | 1.2 | 39.2 | 59.1 | |||||||||
Proceeds from disposal of assets | 6.1 | 9.4 | 5.5 | |||||||||
Acquisition of tax deductions from parent company (note 24) | (14.9 | ) | (16.1 | ) | — | |||||||
Decrease (increase) in advances receivable from parent company | — | 15.9 | (15.9 | ) | ||||||||
Proceeds from disposal of tax deductions to the parent company (note 24) | — | — | 15.9 | |||||||||
Other | (1.5 | ) | (3.4 | ) | (3.6 | ) | ||||||
Cash flows used in investing activities | (907.9 | ) | (400.5 | ) | (365.0 | ) | ||||||
Sub-total, balance carried forward | $ | (154.4 | ) | $ | (46.1 | ) | $ | 107.7 |
F-6
Table of Contents
Consolidated statements of cash flows (continued)
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Sub-total, balance brought forward | $ | (154.4 | ) | $ | (46.1 | ) | $ | 107.7 | ||||
Cash flows related to financing activities: | ||||||||||||
Net (decrease) increase in bank indebtedness | (6.6 | ) | 7.9 | 12.3 | ||||||||
Net (repayments) borrowings under revolving and bridge bank facilities | (56.7 | ) | 38.4 | 72.2 | ||||||||
Issuance of long-term debt, net of financing fees | 756.1 | 1,225.8 | 200.9 | |||||||||
Repayments of long-term debt and unwinding of hedging contracts | (301.3 | ) | (1,201.2 | ) | (315.9 | ) | ||||||
Repayment of the Additional Amount payable (note 14) | (127.2 | ) | — | — | ||||||||
Net decrease (increase) in prepayments under cross-currency swap agreements | — | 21.6 | (34.1 | ) | ||||||||
Dividends and reduction of Common Shares paid-up capital | (110.0 | ) | (105.0 | ) | (45.0 | ) | ||||||
Dividends paid to non-controlling shareholders | (4.0 | ) | (4.5 | ) | (5.2 | ) | ||||||
Other | (3.1 | ) | (0.6 | ) | (3.6 | ) | ||||||
Cash flow provided by (used in) financing activities | 147.2 | (17.6 | ) | (118.4 | ) | |||||||
Net decrease in cash and cash equivalents | (7.2 | ) | (63.7 | ) | (10.7 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies | (0.8 | ) | 0.4 | (0.7 | ) | |||||||
Cash and cash equivalents at beginning of year | 34.1 | 97.4 | 108.8 | |||||||||
Cash and cash equivalents at end of year | $ | 26.1 | $ | 34.1 | $ | 97.4 | ||||||
Cash and cash equivalents consist of: | ||||||||||||
Cash | $ | 6.8 | $ | 13.9 | $ | 14.9 | ||||||
Cash equivalents | 19.3 | 20.2 | 82.5 | |||||||||
$ | 26.1 | $ | 34.1 | $ | 97.4 | |||||||
Additional information on the consolidated statements of cash flows: | ||||||||||||
Changes in non-cash balances related to operations (net of effect of business acquisitions and disposals): | ||||||||||||
Accounts receivable | $ | (41.5 | ) | $ | (14.5 | ) | $ | (57.6 | ) | |||
Inventories and investments in televisual products and movies | (6.4 | ) | (2.7 | ) | (20.3 | ) | ||||||
Accounts payable and accrued charges | 35.5 | (15.8 | ) | 43.7 | ||||||||
Accrued stock-based compensation (current and long-term portion) | 54.1 | 24.4 | 10.9 | |||||||||
Other | (9.0 | ) | (13.6 | ) | (4.1 | ) | ||||||
$ | 32.7 | $ | (22.2 | ) | $ | (27.4 | ) | |||||
Cash interest payments | $ | 243.3 | $ | 446.3 | $ | 233.5 | ||||||
Cash income taxes payments (net of refunds) | (1.0 | ) | 7.0 | 13.5 | ||||||||
F-7
Table of Contents
(in millions of Canadian dollars)
2007 | 2006 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 26.1 | $ | 34.1 | ||||
Temporary investments | 0.2 | 1.4 | ||||||
Accounts receivable (note 9) | 496.0 | 426.2 | ||||||
Income taxes | 10.5 | 17.3 | ||||||
Amounts receivable from parent company and companies under common control | 1.9 | — | ||||||
Inventories and investments in televisual products and movies (note 10) | 169.0 | 158.7 | ||||||
Prepaid expenses | 32.7 | 24.4 | ||||||
Future income taxes (note 7) | 153.6 | 65.9 | ||||||
890.0 | 728.0 | |||||||
Properly, plant and equipment (note 11) | 2,110.2 | 1,830.1 | ||||||
Future income taxes (note 7) | 57.4 | 61.1 | ||||||
Other assets (note 12) | 422.0 | 243.6 | ||||||
Goodwill (note 13) | 4,081.3 | 3,721.1 | ||||||
$ | 7,560.9 | $ | 6,583.9 | |||||
F-8
Table of Contents
consolidated balance sheets (continued)
(in millions of Canadian dollars)
2007 | 2006 | |||||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Bank indebtedness | $ | 16.3 | $ | 20.6 | ||||
Accounts payable and accrued charges | 756.0 | 592.4 | ||||||
Deferred revenue | 202.7 | 177.6 | ||||||
Income taxes | 19.2 | 8.8 | ||||||
Amounts payable to parent company and companies under common control | — | 11.9 | ||||||
Additional Amount payable (note 14) | — | 122.0 | ||||||
Current portion of long-term debt (note 15) | 24.7 | 23.1 | ||||||
1,018.9 | 956.4 | |||||||
Long-term debt (note 15) | 3,002.8 | 2,773.0 | ||||||
Derivative financial instruments (note 23) | 538.7 | 231.3 | ||||||
Other liabilities (note 16) | 103.5 | 125.2 | ||||||
Future income taxes (note 7) | 292.5 | 118.9 | ||||||
Non-controlling interest (note 17) | 154.2 | 142.1 | ||||||
Shareholders’ equity: | ||||||||
Capital stock (note 18) | 1,752.4 | 1,752.4 | ||||||
Contributed surplus | 3,217.2 | 3,217.2 | ||||||
Deficit | (2,528.7 | ) | (2,731.5 | ) | ||||
Accumulated other comprehensive income (loss) (note 20) | 9.4 | (1.1 | ) | |||||
2,450.3 | 2,237.0 | |||||||
Commitments and contingencies (note 21) | ||||||||
Guarantees (note 22) | ||||||||
Subsequent events (note 28) | ||||||||
$ | 7,560.9 | $ | 6,583.9 | |||||
F-9
Table of Contents
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Revenues: | ||||||||||||
Cable | $ | 1,552.6 | $ | 1,309.5 | $ | 1,080.3 | ||||||
Newspapers | 1,028.1 | 928.2 | 915.6 | |||||||||
Broadcasting | 415.5 | 393.3 | 401.4 | |||||||||
Leisure and Entertainment | 329.8 | 315.8 | 255.4 | |||||||||
Interactive Technologies and Communications | 82.0 | 73.9 | 65.1 | |||||||||
Internet/Portals | 48.3 | 41.6 | 35.2 | |||||||||
Head Office and inter-segment | (90.4 | ) | (63.7 | ) | (57.6 | ) | ||||||
$ | 3,365.9 | $ | 2,998.6 | $ | 2,695.4 | |||||||
F-10
Table of Contents
Segmented information(continued)
(in millions of Canadian dollars)
2007 | 2006 | 2005 | ||||||||||
Income before amortization, financial expenses, reserve for restructuring of operations, impairment of assets and other special charges, loss on debt refinancing, gain on sale of businesses and other assets and impairment of goodwill and intangible assets: | ||||||||||||
Cable | $ | 642.7 | $ | 512.5 | $ | 413.3 | ||||||
Newspapers | 225.9 | 207.6 | 222.2 | |||||||||
Broadcasting | 59.4 | 42.1 | 53.0 | |||||||||
Leisure and Entertainment | 27.0 | 19.3 | 27.0 | |||||||||
Interactive Technologies and Communications | 2.8 | 7.5 | 3.9 | |||||||||
Internet/Portals | 6.9 | 10.1 | 9.0 | |||||||||
964.7 | 799.1 | 728.4 | ||||||||||
General corporate (expenses) revenues | (0.8 | ) | 0.5 | 3.7 | ||||||||
$ | 963.9 | $ | 799.6 | $ | 732.1 | |||||||
2007 | 2006 | 2005 | ||||||||||
Amortization: | ||||||||||||
Cable | $ | 219.4 | $ | 198.4 | $ | 179.7 | ||||||
Newspapers | 44.7 | 36.5 | 30.3 | |||||||||
Broadcasting | 13.2 | 14.3 | 13.7 | |||||||||
Leisure and Entertainment | 7.9 | 7.2 | 4.3 | |||||||||
Interactive Technologies and Communications | 3.0 | 2.3 | 1.7 | |||||||||
Internet/Portals | 1.6 | 1.1 | 0.8 | |||||||||
Head Office | 0.6 | 0.9 | 1.4 | |||||||||
$ | 290.4 | $ | 260.7 | $ | 231.9 | |||||||
2007 | 2006 | 2005 | ||||||||||
Additions to property, plant and equipment: | ||||||||||||
Cable | $ | 330.1 | $ | 302.6 | $ | 219.9 | ||||||
Newspapers | 111.4 | 116.3 | 74.0 | |||||||||
Broadcasting | 16.2 | 9.0 | 12.9 | |||||||||
Leisure and Entertainment | 2.9 | 3.4 | 7.9 | |||||||||
Interactive Technologies and Communications | 3.3 | 1.8 | 1.4 | |||||||||
Internet/Portals | 4.6 | 1.9 | 0.7 | |||||||||
Head Office | 0.2 | 0.5 | 3.0 | |||||||||
$ | 468.7 | $ | 435.5 | $ | 319.8 | |||||||
F-11
Table of Contents
Segmented information(continued)
(in millions of Canadian dollars)
2007 | 2006 | |||||||||||
Assets: | ||||||||||||
Cable | $ | 4,460.1 | $ | 4,253.5 | ||||||||
Newspapers | 2,364.9 | 1,579.2 | ||||||||||
Broadcasting | 407.9 | 408.9 | ||||||||||
Leisure and Entertainment | 176.9 | 178.0 | ||||||||||
Interactive Technologies and Communications | 85.9 | 92.8 | ||||||||||
Internet/Portals | 61.9 | 59.8 | ||||||||||
Head Office | 3.3 | 11.7 | ||||||||||
$ | 7,560.9 | $ | 6,583.9 | |||||||||
F-12
Table of Contents
(tabular amounts in millions of Canadian dollars, except for option data)
(a) | Basis of presentation: |
(b) | Change in accounting policies: |
(i) | Comprehensive income: |
(ii) | Financial instruments: |
F-13
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
(b) | Change in accounting policies (continued): |
(ii) | Financial instruments (continued): |
(iii) | Hedges: |
F-14
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(b) | Change in accounting policies (continued): | ||
On adoption of these new standards, the transition rules require that the Company adjust either the opening retained earnings or accumulated other comprehensive income as if the new rules had always been applied in the past, without restating comparative figures for prior years. Accordingly, the following adjustments were recorded in the consolidated financial statements as of January 1, 2007: |
• | Decrease in other assets of $44.4 million | ||
• | Increase in the liability related to derivative financial instruments of $88.9 million | ||
• | Decrease in long-term debt of $65.5 million | ||
• | Decrease in future income tax liabilities of $18.0 million | ||
• | Increase in deficit of $14.3 million | ||
• | Increase in accumulated other comprehensive loss of $35.5 million |
The adoption of the new standards resulted in a decrease of $6.0 million in net income during the year ended December 31, 2007. | |||
(c) | Foreign currency translation: | ||
Financial statements of self-sustaining foreign operations are translated using the rate in effect at the balance sheet date for asset and liability items, and using the average exchange rates during the year for revenues and expenses. Adjustments arising from this translation are recorded in other comprehensive income and are reclassified in income only when a reduction in the investment in these foreign operations is realized. | |||
Other foreign currency transactions are translated using the temporal method. Translation gains and losses are included in financial expenses. | |||
(d) | Use of estimates: | ||
The preparation of consolidated financial statements in accordance with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related amounts of revenues and expenses, and disclosure of contingent assets and liabilities. Significant areas requiring the use of management estimates relate to the determination of pension and post-retirements benefits costs, key economic assumptions used in determining the allowance for doubtful accounts, the provision for obsolescence, the allowance for sales returns, legal contingencies, reserves for the restructuring of operations, the useful life of assets for amortization and evaluation of expected future cash flows to be generated by those assets, the determination of implied fair value of goodwill and fair value of assets and liabilities for business purchase price allocations purposes and goodwill impairment tests purposes, fair value of broadcasting licences for impairment tests purposes, provisions for income taxes and determination of future income tax assets and liabilities, and the determination of fair value of financial instruments and derivatives instruments. Actual results could differ from these estimates. |
F-15
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(e) | Impairment of long-lived assets: | ||
The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss is recognized when the carrying amount of a group of assets held for use exceeds the sum of the undiscounted cash flows expected from its use and eventual disposition. Measurement of an impairment loss is based on the amount by which the group of assets carrying amount exceeds its fair value. Fair value is determined using quoted market prices, when available, or using accepted valuation techniques such as the discounted future cash flows method. | |||
(f) | Revenue recognition: | ||
The Company recognizes its operating revenues when the following criteria are met: |
• | persuasive evidence of an arrangement exists; | ||
• | delivery has occurred or services have been rendered; | ||
• | the seller’s price to the buyer is fixed or determinable; and | ||
• | the collection of the sale is reasonably assured. |
The portion of revenue that is unearned is recorded under “Deferred revenue” when customers are invoiced. | |||
Revenue recognition policies for each of the Company’s main segments are as follows: | |||
Cable segment | |||
The Cable segment provides services under arrangements with multiple deliverables, which are comprised of two separate accounting units: one for subscriber services (cable television, Internet, IP telephony or wireless telephone, including connecting fees) and the other for equipment sales to subscribers. | |||
Cable connection fee revenues of the Cable segment are deferred and recognized as revenues over the estimated average 30-month period that subscribers are expected to remain connected to the network. The incremental and direct costs related to cable connection fees, in an amount not exceeding the revenue, are deferred and recognized as an operating expense over the same 30-month period. Operating revenues from cable and other services, such as Internet access, IP telephony and wireless telephone, are recognized when services are rendered. Revenue from equipment sales to subscribers and their costs are recognized in income when the equipment is delivered and in the case of wireless phones, revenue from equipment sales are recognized when the phone is delivered and activated. Revenues from video rentals are recorded as revenue when services are provided. Promotion offers related to subscriber services are accounted for as a reduction in the related service revenue when customers take advantage of the offer. Promotion offers related to equipment are accounted for as a reduction in the related equipment sales when the equipment is delivered. Operating revenues related to service contracts are recognized in income over the life of the specific contracts on a straight-line basis over the period in which the services are provided. | |||
Newspapers segment | |||
Revenues of the Newspapers segment, derived from circulation and advertising are recognized when the publication is delivered, net of provisions for estimated returns. Revenues from the distribution of publications and products are recognized upon delivery. |
F-16
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(f) | Revenue recognition (continued): | ||
Broadcasting segment | |||
Revenues of the Broadcasting segment derived from the sale of advertising airtime are recognized when the advertisement has been broadcasted. Revenues derived from subscription to speciality television channels are recognized on a monthly basis at the time service is rendered. Revenues derived from circulation and advertising from publishing activities are recognized when publication is delivered. | |||
Revenues derived from the distribution of televisual products and movies and from television program rights are recognized when the customer can begin the exploitation, exhibition or sale, or when the license period of the arrangement has begun. | |||
Theatrical revenues are recognized over the period of presentation and are based on a percentage of revenues generated by movie theatres. Revenues generated from the distribution of video are recognized at the time of delivery of the videocassettes and DVDs, less a provision for future returns, or are accounted for based on a percentage of retail sales. | |||
Leisure and Entertainment segment | |||
Revenues derived from retail stores, book publishing and distribution activities are recognized on delivery of the products, net of provisions for estimated returns based on the segment’s historical rate of products return. | |||
(g) | Barter transactions: | ||
In the normal course of operations, the Newspapers, the Broadcasting and the Internet/Portals segments offer advertising in exchange for goods and services. Revenues thus earned and expenses incurred are accounted for on the basis of the fair value of the goods and services obtained. | |||
For the year ended December 31, 2007, the Company recorded $19.0 million of barter advertising ($19.5 million in 2006 and $17.7 million in 2005). | |||
(h) | Cash and cash equivalents: | ||
Cash and cash equivalents include highly liquid investments purchased three months or less from maturity and are recorded at fair value. As of December 31, 2007, these highly liquid investments consisted mainly of bankers’ acceptances. | |||
(i) | Temporary investments: | ||
Temporary investments consisted mainly of bankers’ acceptances as of December 31, 2007. These temporary investments, classified as held for trading, are recorded at fair value. | |||
(j) | Trade receivable: | ||
The Company establishes an allowance for doubtful accounts based on the specific credit risk of its customers and historical trends. |
F-17
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(k) | Tax credits and government assistance: | ||
The Broadcasting and Leisure and Entertainment segments have access to several government programs designed to support production and distribution of televisual products and movies and magazine and book publishing in Canada. The financial aid for production is accounted for as a reduction of expenses. The financial aid for broadcast rights is applied against investments in televisual products or used directly to reduce operating expenses during the year. The financial aid for magazine and book publishing is accounted for in revenues when the conditions for acquiring the government assistance are met. | |||
The Interactive Technologies and Communications and Leisure and Entertainment segments receive tax credits mainly related to their research and development activities and publishing activities. These tax credits are accounted for using the cost reduction method. Under this method, tax credits related to eligible expenses are accounted for as a reduction in related costs, whether they are capitalized or expensed, in the year the expenses are incurred, as long as there is reasonable assurance of their realization. | |||
(l) | Inventories: | ||
Inventories are valued at the lower of cost, determined by the first-in, first-out method or the weighted-average cost method, and net realizable value. Net realizable value represents the market value for all inventories, except for raw materials and supplies, for which it is replacement cost. Work in progress is valued at the pro-rata billing value of the work completed. | |||
(m) | Investments in televisual products and movies: |
(i) | Programs produced and productions in progress: | ||
Programs produced and productions in progress related to broadcast activities are accounted for at the lower of cost and net realizable value. Cost includes direct charges for goods and services and the share of labour and general expenses relating to each production. The cost of each program is charged to cost of sales when the program is broadcasted. | |||
(ii) | Broadcast rights: | ||
Broadcast rights are essentially contractual rights allowing limited or unlimited broadcast of televisual products or movies. The Broadcasting segment records the broadcast rights acquired as an asset and the obligations incurred under a licence agreement as a liability when the broadcast licence period begins and all of the following conditions have been met: (a) the cost of each program, movies or series is known or can be reasonably determined; (b) the programs, movies or series have been accepted in accordance with the conditions of the broadcast licence agreement; (c) the programs, movies or series are available for the first showing or telecast. | |||
Amounts paid for broadcast rights before all of the above conditions are met are recorded as prepaid broadcast rights. |
F-18
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(m) | Investments in televisual products and movies (continued): |
(ii) | Broadcast rights (continued): | ||
Broadcast rights are classified as short or long term, based on management’s estimates of the broadcast period. These rights are amortized when televisual products and movies are broadcasted over the contract period, based on the estimated number of showings, using an amortization method based on future revenues. This amortization is presented in cost of sales and selling and administrative expenses. Broadcast rights are valued at the lower of unamortized cost or net realizable value. Broadcast rights payable are classified as current or long-term liabilities based on the payment terms included in the licence. | |||
(iii) | Distribution rights: | ||
Distribution rights relate to the distribution of televisual products and movies. The costs include costs for televisual products and movies distribution rights and other operating costs incurred, which provide future economic benefits. The net realizable value of distribution rights represents the Broadcasting segment’s share of future estimated revenues to be derived, net of future costs. The Broadcasting segment records an asset and a liability for the distribution rights and obligations incurred under a licence agreement when (a) the cost of the licence is known or can be reasonably estimated, (b) the televisual product and movie has been accepted in accordance with the conditions of the licence agreement and, (c) the televisual product or movie is available for distribution. | |||
Amounts paid for distribution rights before all of the above conditions are met are recorded as prepaid distribution rights. Distribution rights are amortized using the individual film forecast computation method based on actual revenues realized over total expected revenues. | |||
Estimates of revenues related to distribution of television products and movies are examined periodically by Broadcasting segment management and revised as necessary. The value of unamortized costs is reduced to net realizable value, as necessary, based on this assessment. The amortization of distribution rights is presented in cost of sales and selling and administrative expenses. |
(n) | Income taxes: | ||
The Company follows the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on future income tax assets and liabilities is recognized in income in the period that includes the enactment or substantive enactment date. A valuation allowance is established, if necessary, to reduce any future income tax asset to an amount that is more likely than not to be realized. | |||
In the course of the Company’s operations, there are a number of uncertain tax positions due to the complexity of certain transactions and to the fact that related tax interpretations and legislation are continually changing. When a tax position is uncertain, the Company recognizes an income tax benefit or reduces an income tax liability only when the likelihood is high that the tax benefit will be realized in the future or that the income tax liability will be extinguished. |
F-19
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(o) | Long-term investments: | ||
Investments in joint ventures are accounted for using the proportionate consolidation method. Joint ventures represent a negligible portion of the Company’s operations. Investments in companies subject to significant influence are accounted for by the equity method. As described in note 1(b)(ii), all portfolio investments are classified as available-for–sale. Accordingly, these investments are measured at fair value or at cost, in the case that they do not have a quoted market price in an active market, and changes in fair value are recorded in comprehensive income. Prior to 2007, all portfolio investments were accounted for at cost. Carrying values of investments accounted for by the equity method or at cost are reduced to estimated market values if there is other than a temporary decline in the value of the investment. | |||
(p) | Property, plant and equipment: | ||
Property, plant and equipment are stated at cost, net of government grants and investment tax credits. Cost represents acquisition or construction costs, including preparation, installation and testing costs and interest incurred with respect to the property, plant and equipment until they are ready for commercial production. In the case of projects to construct and connect receiving and distribution networks of cable, cost includes equipment, direct labour and direct overhead costs. Projects under development may also be comprised of advances for equipment under construction. Expenditures for additions, improvements and replacements are capitalized, whereas maintenance and repair expenditures are expensed as incurred. | |||
Amortization is principally calculated on the straight-line basis over the following estimated useful lives: |
Estimated | ||||
Assets | useful life | |||
Buildings | 25 to 40 years | |||
Machinery and equipment | 3 to 20 years | |||
Receiving, distribution and telecommunication networks | 3 to 20 years | |||
Leasehold improvements are amortized over the term of the lease. | |||
The Company does not record an asset retirement obligation in connection with its cable distribution networks. The Company expects to renew all of its agreements with utility companies to access their support structures in the future, making the retirement date, relating to these assets, undeterminable. |
F-20
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(q) | Goodwill and other intangible assets: | ||
Goodwill and intangible assets with indefinite useful lives are not amortized. | |||
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit is compared to its fair value. When the fair value of a reporting unit exceeds its carrying amount, then the goodwill of the reporting unit is considered not to be impaired and the second step is not required. The second step of the impairment test is carried out when the carrying amount of a reporting unit exceeds its fair value, in which case the implied fair value of the reporting unit’s goodwill is compared to its carrying amount to measure the amount of the impairment loss, if any. When the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess. | |||
Intangible assets acquired, such as broadcasting licences and mastheads, that have an indefinite useful life, are also tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test compares the carrying amount of the intangible asset to its fair value, and an impairment loss is recognized in the statement of income for the excess, if any. | |||
Intangible assets with definite useful lives, such as customer relationships and non-competition agreements, are amortized over their useful life using the straight-line method over a period of 3 to 10 years. | |||
During the second quarter of 2007, the Company changed the date of its annual impairment tests for goodwill and broadcasting licenses from October 1st to April 1st. | |||
(r) | Deferred start-up costs and financing fees: | ||
Deferred start-up costs are recorded at cost and include development costs related to new specialty services and pre-operating expenditures and are amortized when commercial operations begin using the straight-line method over periods of three to five years. Prior to 2007, financing fees that related to long-term financing were capitalized as other assets while, effective January 1, 2007, they are capitalized in reduction of long-term debt as described in note 1(b)(ii). Financing fees are amortized using the effective interest rate method. | |||
(s) | Stock-based compensation: | ||
The compensation cost attributable to stock-based awards to employees that call for settlement in cash or other assets, at the option of the employee is recognized in operating expenses over the vesting period. Changes in the intrinsic value of the stock option awards between the grant date and the measurement date result in a change in the measurement of the liability and compensation cost. | |||
In the case of the employee share purchase plans of the Company’s subsidiaries, the contribution paid by the subsidiary on behalf of its employees is considered a compensation expense. The contribution paid by employees for the purchase of shares is credited to the subsidiary’s capital stock. |
F-21
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(t) | Derivative financial instruments and hedge accounting: | ||
The Company uses various derivative financial instruments to manage its exposure to fluctuations in foreign currency exchange rates and interest rates. The Company does not hold or use any derivative instruments for trading purposes. Under hedge accounting, the Company documents all hedging relationships between derivatives and hedged items, its strategy for using hedges and its risk-management objective and also designates its derivative instruments either as fair value hedges or cash flow hedges. The Company assesses the effectiveness of derivatives when the hedge is put in place and on an ongoing basis. | |||
The Company enters into the following types of derivative instruments: |
• | The Company uses foreign exchange forward contracts to hedge the foreign currency rate exposure on (i) anticipated equipment or inventory purchases in foreign currency and (ii) principal payments on certain long-term debt in foreign currency. These foreign exchange forward contracts are designated as cash flow hedges. | ||
• | The Company uses cross-currency interest rate swaps to hedge (i) the foreign currency rate exposure on interest and principal payments on certain foreign currency denominated debt and/or (ii) the fair value exposure on certain debt resulting from changes in interest rates. The cross-currency interest rate swaps that set in fixed Canadian dollars all future interest and principal payments on U.S. denominated debt are designated as cash flow hedges. The Company’s cross-currency interest rate swaps that set in Canadian dollars all future interest and principal payments on U.S. denominated debt in addition to converting the interest rate from a fixed rate to a floating rate or to converting a floating rate index to another floating rate index, are designated as fair value hedges. | ||
• | The Company uses interest rate swaps to manage the fair value exposure on certain debt resulting from changes in interest rates. These swap agreements require a periodic exchange of payments without the exchange of the notional principal amount on which the payments are based. These interest rate swaps are designated as fair value hedges when they convert the interest rate from a fixed rate to a floating rate or as cash flow hedges when they convert the interest rate from a floating rate to a fixed rate. |
Prior to 2007, under hedge accounting, the Company recorded its hedges relationships as follows: |
• | For purchases hedged by foreign exchange forward contracts, foreign exchange translation gains and losses were recognized as an adjustment to the cost of property, plant and equipment or inventories, when the transaction was recorded. | ||
• | For long-term debt in foreign currency hedged by foreign exchange forward contracts and cross-currency interest rate swaps, foreign exchange translation gains and losses on long-term debt were deferred and recorded as derivative instruments under other assets or other liabilities. The fees on forward foreign exchange contracts and on cross-currency swaps were recognized as an adjustment to interest expenses over the term of the agreement. | ||
• | For long-term debt hedged by interest rate swaps, interest expense on the debt was adjusted to include payments made or received under interest rate swaps. |
F-22
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(t) | Derivative financial instruments and hedge accounting (continued): |
• | In addition, realized and unrealized gains or losses associated with derivative instruments that were terminated or ceased to be effective prior to maturity for purposes of hedge accounting, were deferred under other current or non-current assets or liabilities on the balance sheet and recognized in income in the period in which the underlying hedged transaction was recognized. In the event a designated hedged item was sold, extinguished or matured prior to the termination of the related derivative instrument, any realized or unrealized gain or loss on such derivative instrument was recognized in income. |
Effective January 1, 2007, under hedge accounting, the Company follows the accounting policies described in note 1(b)(iii). | |||
Interest expense on hedged long-term debt is reported at the hedged interest and foreign currency rates. | |||
Derivative instruments that are ineffective or that are not designated as hedges are reported on a market-to-market basis in the consolidated financial statements. Any change in the fair value of these derivative instruments is recorded in income as financial expenses. | |||
Finally, some of the Company’s cross-currency swap agreements repurchased in 2006 were subject to a floor limit on negative fair market value, below which the Company was required to make prepayments to reduce the lenders’ exposure. Such prepayments were reimbursed by reductions in the Company’s future payments under the agreements. The portion of these reimbursements related to interest was accounted for as a reduction in financial expenses. The prepayments were presented on the balance sheet as a reduction of the derivative instrument liability. | |||
(u) | Pension plans and postretirement benefits: |
(i) | Pension plans: | ||
The Company offers defined benefit pension plans and defined contribution pension plans to some of its employees. Defined benefit pension plan costs are determined using actuarial methods and are funded through contributions determined in accordance with the projected benefit method pro-rated on service, which incorporates management’s best estimate of future salary levels, other cost escalations, retirement ages of employees and other actuarial factors. Pension plan expense is charged to operations and includes: |
• | Cost of pension plan benefits provided in exchange for employee services rendered during the year. | ||
• | Amortization of the initial net transition asset, prior service costs and amendments on a straight-line basis over the expected average remaining service period of the active employee group covered by the plans. | ||
• | Interest cost of pension plan obligations, expected return on pension fund assets, and amortization of cumulative unrecognized net actuarial gains and losses, in excess of 10.0% of the greater of the accrued benefit obligation or the fair value of plan assets, over the expected average remaining service period of the active employee group covered by the plans. |
When an event gives rise to both a curtailment and a settlement, the curtailment is accounted for prior to the settlement. | |||
Actuarial gains and losses arise from the difference between the actual rate of return on plan assets for a period and the expected rate of return on plan assets for that period, or from changes in actuarial assumptions used to determine the accrued benefit obligation. |
F-23
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): |
(u) | Pension plans and postretirement benefits (continued): |
(i) | Pension plans (continued): | ||
The Company uses the fair value at end of the year to evaluate plan assets for the purpose of calculating the expected return on plan assets | |||
(ii) | Postretirement benefits: | ||
The Company offers health, life and dental insurance plans to some of its retired employees. The cost of postretirement benefits is determined using actuarial methods and the related benefits are funded by the Company as they become due. The Company amortizes the cumulative unrecognized net actuarial gains and losses, in excess of 10.0% of the accrued benefit obligation, over the expected average remaining service life of the active employee group covered by the plans. |
(v) | Rates subject to CRTC regulation: | ||
The Cable segment operations are subject to rate regulations on certain services based on geographical regions, mainly by the Broadcasting Act (Canada) and the Telecommunications Act (Canada), both managed by the Canadian Radio-television and Telecommunication Commissions. Accordingly, the Cable segment’s operating revenues could be affected by changes in regulations or decisions made by this regulating body. The Company does not select accounting policies that would differ from GAAP, even though the Company is subject to these regulations. | |||
(w) | Future changes in accounting standards | ||
In December 2006, the CICA issued a new accounting standard, Section 1535, Capital Disclosures, which requires the disclosure of both qualitative and quantitative information that enables users of financial statements to evaluate the entity’s objectives, policies and processes for managing capital. The new standard applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. | |||
In December 2006, the CICA issued two new accounting standards, Section 3862, Financial Instruments – Disclosures, and Section 3863, Financial Instruments – Presentation, which require additional disclosures relating to financial instruments. The new sections apply to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. | |||
In March 2007, the CICA issued a new accounting standard, Section 3031, Inventories, which provides more extensive guidance on the recognition and measurement of inventories, and related disclosures. This new standard applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2008. The Company does not expect this standard to have a material effect on its consolidated financial statements. | |||
In January 2008, the CICA issued Section 3064, Goodwill and Intangible Assets, which will replace Section 3062, Goodwill and Other Intangible Assets, and results in the withdrawal of Section 3450, Research and Development Costs and Emerging Issues Committee (“EIC”) Abstract 27, Revenues and Expenditures During the Pre-operating Period, and amendments to Accounting Guideline (“AcG”) 11, Enterprises in the Development Stage. The standard provides guidance on the recognition of intangible assets in accordance with the definition of an asset and the criteria for asset recognition as well as clarifying the application of the concept of matching revenues and expenses, whether these assets are separately acquired or internally developed. This standard applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008. The Company is currently evaluating the effects of adopting this standard. |
F-24
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
2. | FINANCIAL EXPENSES: |
2007 | 2006 | 2005 | ||||||||||
Interest on long-term debt | $ | 232.4 | $ | 215.0 | $ | 212.7 | ||||||
Amortization of financing costs and long-term debt discount | 4.8 | 7.3 | 62.7 | |||||||||
Net loss on derivative instruments and on foreign currency translation of financial instruments1, 2 | 4.7 | 1.2 | 4.4 | |||||||||
Loss on revaluation of the Additional Amount payable | 5.2 | 10.5 | 10.1 | |||||||||
Other | 0.7 | 1.3 | 0.9 | |||||||||
Investment income | (2.8 | ) | (1.5 | ) | (4.5 | ) | ||||||
245.0 | 233.8 | 286.3 | ||||||||||
Interest capitalized to the cost of property, plant and equipment | (5.0 | ) | (9.2 | ) | (1.0 | ) | ||||||
$ | 240.0 | $ | 224.6 | $ | 285.3 | |||||||
1 | During the year ended December 31, 2007, the Company recorded a loss of $44.3 million on embedded derivatives not closely related to their host contract and on derivative instruments for which hedge accounting is not used ($4.1 million in 2006 and $13.1 million in 2005). | |
2 | During the year ended December 31, 2007, the Company recorded a gain of $4.8 million for the ineffective portion of fair value hedges. |
3. | RESERVE FOR RESTRUCTURING OF OPERATIONS, IMPAIRMENT OF ASSETS AND OTHER SPECIAL CHARGES: |
(a) | Newspapers segment: | ||
In August 2005, the Company announced a plan to invest in two new printing facilities located in Toronto (Ontario) and in Saint-Janvier-de-Mirabel (Québec). As part of the plan, Sun Media Corporation is transfering the printing of certain of its publications in Ontario and Québec to the new facilities. These projects resulted in the elimination of the production positions atThe Toronto Sunand atThe Ottawa Sun, and inserters’ positions atLe Journal de Montréal. In 2007, special termination benefits of $6.7 million were recorded relating to the positions atThe Toronto SunandThe Ottawa Sun. In addition, an accrual of $4.4 million relating to the closure of the printing facility in London (Ontario) was reversed in the fourth quarter of 2007. | |||
In June 2006, the Newspapers segment announced a plan to restructure its news production operations by introducing new content management technologies, and streamlining the news gathering process. In 2007, the Newspapers segment recorded additional severance costs of $2.3 million ($2.8 million in 2006) relating to the elimination of editorial positions in operations across the organization. | |||
Finally, in 2006, Sun Media Corporation implemented a voluntary workforce reduction program atThe London Free Pressand several smaller involuntary workforce reduction programs, namely atThe Toronto SunandBowes Publishers. In 2007, the Newspapers segment recorded termination benefits of $5.3 million ($3.2 million in 2006) relating to these workforce reduction initiatives. | |||
The Company does not expect any material restructuring charges in 2008 related to these initiatives. |
F-25
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
3. | RESERVE FOR RESTRUCTURING OF OPERATIONS, IMPAIRMENT OF ASSETS AND OTHER SPECIAL CHARGES (continued): |
(a) | Newspaper segment (continued): | ||
Continuity of reserve for restructuring |
2007 | 2006 | |||||||
Balance at beginning of year | $ | 12.7 | $ | — | ||||
Workforce reduction initiatives | 9.9 | 17.0 | ||||||
Payments | (16.6 | ) | (4.3 | ) | ||||
Balance at end of year | $ | 6.0 | $ | 12.7 | ||||
(b) | Other segments: | ||
In 2007, other segments recorded restructuring costs and other special charges of $1.7 million ($1.9 million in 2006) mainly in the Broadcasting segment. |
4. | LOSS ON DEBT REFINANCING: |
(a) | Quebecor Media Inc.: | ||
The Company used the net proceeds of $672.2 million (including accrued interest of $16.6 million and before financing fees of $9.8 million) from the issuance of new Senior Notes on October 5, 2007 (note 15 (iv)) and cash on hand to (i) repay in full the $420.0 million of advances under the Company’s Senior Bridge Credit Facility entered into to finance the acquisition of Osprey Media Publishing Inc. in August 2007 (note 6) and terminate this facility on October 9, 2007 as well as (ii) to repay the Sun Media Term Loan B and settle related hedging contracts on October 31, 2007 for a total cash consideration of $277.8 million, resulting in a loss of $1.0 million. | |||
On January 17, 2006, the Company recorded a loss of $331.6 million as a result of the refinancing of substantially all of its 11.125% Senior Notes and 13.75% Senior Discount Notes. The loss represents the excess of the consideration paid of $1.3 billion, including debt repurchase premiums and disbursements for unwinding hedging contracts, over the book value of the notes and the hedging contracts, and the write-off of deferred financing costs. The refinancing transactions carried out were as follows: |
• | The Company issued new 7.75% Senior Notes of US$525.0 million in aggregate principal amount (note 15 (iii)). | ||
• | The Company entered into new credit facilities comprised of (i) a five-year $125.0 million term loan “A” credit facility, (ii) a seven-year US$350.0 million term loan “B” credit facility and (iii) a new $100.0 million five-year revolving credit facility (note 15 (i)). | ||
• | Videotron Ltd. borrowed $237.0 million under its existing revolving credit facility and Sun Media Corporation amended its existing credit facilities to borrow $40.0 million under a new term loan “C” maturing in 2009 (note 15 (ix)). |
F-26
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
4. | LOSS ON DEBT REFINANCING (continued): |
(a) | Quebecor Media Inc. (continued): |
• | The proceeds from new Senior Notes, the full amount of new term loans “A” and “B”, the Videotron Ltd. drawing from its existing revolving credit facility and Sun Media Corporation’s new term loan “C” were used to repurchase US$561.6 million in aggregate principal amount of the Company’s 11.125% Senior Notes and US$275.6 million in aggregate principal amount at maturity of the Company’s 13.75% Senior Discount Notes. |
On July 15, 2006, the Company repurchased the remaining balances of its 11.125% Senior Notes and 13.75% Senior Discount Notes for a total cash consideration of $39.3 million. The repurchase resulted in a loss of $10.5 million. | |||
On July 19, 2005, as a result of the repurchase of a first portion of its 11.125% Senior Notes and its 13.75% Discount Notes, the Company recorded a loss of $60.8 million, comprised of the excess of the consideration paid of $215.3 million, including debt repurchase premiums and disbursements for unwinding hedging contracts, over the carrying value of the notes and of the hedging contracts, and the write-off of related financing costs. The Company repurchased US$128.2 million and US$12.1 million, respectively, in aggregate principal amounts of its Senior Notes and Senior Discount Notes. | |||
(b) | Videotron Ltd.: | ||
On July 15, 2005, Videotron Ltd., Cable segment, repurchased the entire aggregate principal amount of its subsidiary, CF Cable TV Inc., Senior Secured First Priority Notes, which bore interest at 9.125%, for a total cash consideration of $99.3 million, including the cost of unwinding a hedging contract. The repurchase resulted in a gain of $0.8 million. | |||
(c) | Sun Media Corporation: | ||
On December 29, 2006, Sun Media Corporation made a partial repayment of US$15.0 million on its term loan ”B” credit facility (note 15 (ix)) and settled a corresponding portion of its hedging contracts. As a result, a loss of $0.5 million was recorded. |
5. | IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS: | |
In the fourth quarter 2007, the Company concluded that the goodwill of its Cable segment related to the DVDs and games rental operations in Ontario was impaired. Accordingly, an impairment charge of $5.4 million was recorded. | ||
In 2006, the Company completed its annual impairment test for its broadcasting licenses and goodwill. Based on the results, the Company concluded that the carrying values of the broadcasting licenses and goodwill of its Broadcasting segment were impaired. Conventional television broadcasters are experiencing pressures on their advertising revenues caused by the fragmentation of the television market. Accordingly, the Company reviewed its business plan and recorded a total impairment charge of $179.2 million in 2006: $30.8 million for one of its broadcasting licenses and $148.4 million for the goodwill. | ||
In addition, in 2006, the Broadcasting segment recorded an impairment charge of $0.8 million related to an operating licence co-owned with another entity. |
F-27
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
6. | BUSINESS ACQUISITIONS: | |
During the years ended December 31, 2007, 2006 and 2005, the Company acquired or increased its interest in several businesses and has accounted for these by the purchase method. Certain purchase price allocations related to the 2007 acquisitions are preliminary and should be finalized as soon as Company’s management has gathered all the significant information believed to be available and considered necessary. The Company is currently in the process of reviewing Osprey Media Publishing Inc.’s operations and developing its integration plan. The results of operations of these businesses have been included in the Company’s consolidated financial statements from the dates of their respective acquisitions. | ||
2007 |
• | In August 2007, the Company acquired all outstanding units of Osprey Media Income Fund, which subsequently became Osprey Media Publishing Inc. as a result of a corporate reorganisation, for a total cash consideration, excluding assumed debt, of $415.2 million (including transaction costs of $0.8 million). As part of the acquisition, the Company assumed the debt of $161.8 million under Osprey Media Publishing Inc.’s credit facilities (note 15(xi)). Osprey Media Publishing Inc. is one of Canada’s leading publishers of daily and non-daily newspapers, magazines and specialty publications. Its publications include 20 daily newspapers and 33 non-daily newspapers together with shopping guides, magazines and other publications. | ||
• | During the year ended December 31, 2007, the Company acquired or increased its interest in several businesses, mainly in the Newspaper segment, for total consideration of $20.5 million, resulting in preliminary goodwill of $17.4 million. | ||
• | In January 2007, TVA Group Inc. and Sun Media Corporation paid the balance payable in the amount of $3.4 million related to the acquisition of SUN TV in 2004. |
2006 |
• | Several businesses, mainly in the Interactive Technologies and Communications segment, were acquired for a total consideration of $14.0 million, including $12.6 million in cash and $1.4 million in Common Shares of a subsidiary, resulting in additional goodwill of $7.6 million. |
2005 |
• | A total of 3,739,599 Class B non-voting Common Shares of TVA Group Inc., Broadcasting segment, were repurchased for a cash consideration of $81.9 million, resulting in preliminary additional goodwill of $22.3 million, which was reduced by $7.3 million in 2006 when the purchase price allocation was finalized. | ||
• | On December 12, 2005, the Company acquired Sogides Ltée, a major book publishing and distribution group in Quebec, for a cash consideration of $24.0 million and an additional contingent payment of $5.0 million based on the achievement of specific conditions in 2008. This acquisition resulted in a preliminary additional goodwill of $7.8 million, which was reduced by $2.9 million in 2006 when the purchase price allocation was finalized. | ||
• | Other businesses were acquired for considerations including cash of $4.6 million and the operating assets of the community newspaperBeauport Express, resulting in additional goodwill of $3.5 million. |
F-28
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
6. | BUSINESS ACQUISITIONS (continued): | |
Business acquisitions for 2007 are summarized as follows: |
2007 | ||||||||||||
Osprey Media | ||||||||||||
Publishing Inc. | Other | Total | ||||||||||
Assets acquired: | ||||||||||||
Cash and cash equivalents | $ | — | $ | 0.5 | $ | 0.5 | ||||||
Non-cash current operating assets | 38.5 | 0.4 | 38.9 | |||||||||
Property, plant and equipment | 54.3 | 0.5 | 54.8 | |||||||||
Other assets1 | 234.4 | 0.5 | 234.9 | |||||||||
Goodwill | 351.0 | 17.4 | 368.4 | |||||||||
Non-controlling interest | — | 1.9 | 1.9 | |||||||||
678.2 | 21.2 | 699.4 | ||||||||||
Liabilities assumed: | ||||||||||||
Bank indebtedness | (2.3 | ) | — | (2.3 | ) | |||||||
Non-cash current operating liabilities | (27.3 | ) | (0.7 | ) | (28.0 | ) | ||||||
Long-term debt | (161.8 | ) | — | (161.8 | ) | |||||||
Other liabilities | (5.4 | ) | — | (5.4 | ) | |||||||
Future income taxes | (66.2 | ) | — | (66.2 | ) | |||||||
(263.0 | ) | (0.7 | ) | (263.7 | ) | |||||||
Net assets acquired at fair value and cash consideration paid | $ | 415.2 | $ | 20.5 | $ | 435.7 | ||||||
1 | Other assets include mainly intangible assets relating to customer relationship and non-competition agreements with afair value of $130.3 million and mastheads with a fair value of $103.4 million. |
F-29
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
6. | BUSINESS ACQUISITIONS (continued): | |
Business acquisitions for 2006 and 2005 are summarized as follows (continued): |
2006 | 2005 | ||||||||
Assets acquired: | |||||||||
Cash and cash equivalents | $ | 2.1 | $ | — | |||||
Non-cash current operating assets | 2.5 | 13.0 | |||||||
Property, plant and equipment | 0.2 | 8.0 | |||||||
Other assets | 4.4 | 19.9 | |||||||
Goodwill | 7.6 | 22.9 | |||||||
Non-controlling interest | 1.2 | 60.3 | |||||||
18.0 | 124.1 | ||||||||
Liabilities assumed: | |||||||||
Bank indebtedness | — | (0.4 | ) | ||||||
Non-cash current operating liabilities | (3.1 | ) | (3.2 | ) | |||||
Future income taxes | (0.9 | ) | (5.3 | ) | |||||
(4.0 | ) | (8.9 | ) | ||||||
Net assets acquired at fair value | $ | 14.0 | $ | 115.2 | |||||
Consideration: | |||||||||
Cash | $ | 12.6 | $ | 110.5 | |||||
Issuance of Common Shares by Nurun Inc. | 1.4 | — | |||||||
Balance payable | — | 3.6 | |||||||
Community newspaper (Beauport Express) | — | 1.1 | |||||||
$ | 14.0 | $ | 115.2 | ||||||
7. | INCOME TAXES: | |
Income taxes on continuing operations are as follows: |
2007 | 2006 | 2005 | ||||||||||
Current | $ | 11.3 | $ | 5.4 | $ | 19.0 | ||||||
Future | 63.5 | (59.1 | ) | 24.5 | ||||||||
$ | 74.8 | $ | (53.7 | ) | $ | 43.5 | ||||||
F-30
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
7. | INCOME TAXES (continued): | |
The following table reconciles income taxes at the Company’s domestic statuary tax rate of 32.0% in 2007 (32.0% in 2006 and 31.0% in 2005) and income taxes in the consolidated statement of income: |
2007 | 2006 | 2005 | |||||||||||
Income taxes at domestic statutory tax rate | $ | 133.2 | $ | (72.0 | ) | $ | 48.1 | ||||||
Increase (reduction) resulting from: | |||||||||||||
Effect of provincial tax rates differences | (0.9 | ) | — | (0.3 | ) | ||||||||
Effect of non-deductible charges, non-taxable income and differences between current and future tax rates | (7.8 | ) | (9.8 | ) | 6.6 | ||||||||
Change in valuation allowance | (3.6 | ) | (7.8 | ) | (7.5 | ) | |||||||
Change in future income tax balances due to a change in enacted tax rates | (35.9 | ) | (12.9 | ) | 11.9 | ||||||||
Tax consolidation transaction with the parent company | (7.7 | ) | — | (15.9 | ) | ||||||||
Impairment of goodwill | — | 47.5 | — | ||||||||||
Other | (2.5 | ) | 1.3 | 0.6 | |||||||||
Income taxes | $ | 74.8 | $ | (53.7 | ) | $ | 43.5 | ||||||
2007 | 2006 | |||||||
Losses carryforward | $ | 245.1 | $ | 336.1 | ||||
Accounts payable and accrued charges | 55.5 | 36.2 | ||||||
Deferred charges | 9.9 | 10.3 | ||||||
Long-term debt and derivative financial instruments | 28.0 | — | ||||||
Property, plant and equipment | (228.1 | ) | (217.5 | ) | ||||
Goodwill and other assets | (75.3 | ) | (27.5 | ) | ||||
Other | (4.8 | ) | 13.6 | |||||
30.3 | 151.2 | |||||||
Valuation allowance | (111.8 | ) | (143.1 | ) | ||||
Net future income tax (liabilities) assets | $ | (81.5 | ) | $ | 8.1 | |||
F-31
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
7. | INCOME TAXES (continued): | |
The current and long-term future income tax assets and liabilities are as follows: |
2007 | 2006 | |||||||
Future income tax assets: | ||||||||
Current | $ | 153.6 | $ | 65.9 | ||||
Long-term | 57.4 | 61.1 | ||||||
211.0 | 127.0 | |||||||
Future income tax liabilities: | ||||||||
Long-term | (292.5 | ) | (118.9 | ) | ||||
Net future income tax (liabilities) assets | $ | (81.5 | ) | $ | 8.1 | |||
Subsequent recognition of tax benefits relating to the valuation allowance as of December 31, 2007 will be reported mainly in the consolidated statement of income. | ||
As of December 31, 2007, the Company had loss carry forwards for income tax purposes of $1,104.4 available to reduce future taxable income, including $414.0 million that will expire from 2008 to 2027 and $690.4 million that can be carried forward indefinitely. Of the latter amount, $667.4 million represent capital losses to be applied against future capital gains. | ||
The Company has not recognized a future income tax liability for the undistributed earnings of its subsidiaries in the current or prior years since the Company does not expect to sell or repatriate funds from those investments. Any such liability cannot reasonably be determined at the present time. | ||
8. | DISCONTINUED OPERATIONS: | |
On June 30, 2007, the Company completed the sale of Progisia Informatique, the information technology consulting division of Canoe Inc., Internet/Portals segment. The sale resulted in a gain on disposal of $4.0 million (net of income tax and non-controlling interest). The results of the disposed business were reclassified and disclosed in the consolidated statements of income as “Income from discontinued operations” while the cash flows related to the operations of this disposed business were reclassified and disclosed in the consolidated statements of cash flows as “Cash flows provided by discontinued operations”. | ||
9. | ACCOUNTS RECEIVABLE: |
2007 | 2006 | ||||||||
Trade | $ | 442.8 | $ | 383.3 | |||||
Other | 53.2 | 42.9 | |||||||
$ | 496.0 | $ | 426.2 | ||||||
F-32
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
10. | INVENTORIES AND INVESTMENTS IN TELEVISUAL PRODUCTS AND MOVIES: |
2007 | 2006 | |||||||
Raw materials and supplies | $ | 44.2 | $ | 42.0 | ||||
Work in progress | 17.1 | 12.8 | ||||||
Finished goods | 61.8 | 63.8 | ||||||
Investments in televisual products and movies | 45.9 | 40.1 | ||||||
$ | 169.0 | $ | 158.7 | |||||
11. | PROPERTY, PLANT AND EQUIPMENT: |
2007 | ||||||||||||
Accumulated | ||||||||||||
Cost | amortization | Net amount | ||||||||||
Land | $ | 41.2 | $ | — | $ | 41.2 | ||||||
Buildings and leasehold improvements | 314.8 | 60.7 | 254.1 | |||||||||
Machinery and equipment | 873.2 | 447.2 | 426.0 | |||||||||
Receiving, distribution and telecommunication networks | 2,191.1 | 921.1 | 1,270.0 | |||||||||
Projects under development | 118.9 | — | 118.9 | |||||||||
$ | 3,539.2 | $ | 1,429.0 | $ | 2,110.2 | |||||||
2006 | ||||||||||||
Accumulated | ||||||||||||
Cost | amortization | Net amount | ||||||||||
Land | $ | 26.4 | $ | — | $ | 26.4 | ||||||
Buildings and leasehold improvements | 185.2 | 48.3 | 136.9 | |||||||||
Machinery and equipment | 698.8 | 409.1 | 289.7 | |||||||||
Receiving, distribution and telecommunication networks | 1,952.2 | 756.9 | 1,195.3 | |||||||||
Projects under development | 181.8 | — | 181.8 | |||||||||
$ | 3,044.4 | $ | 1,214.3 | $ | 1,830.1 | |||||||
F-33
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
12. | OTHER ASSETS: |
2007 | 2006 | |||||||
Customer relationships and non-competition agreements, net of accumulated amortization | $ | 145.6 | $ | 27.4 | ||||
Mastheads | 103.4 | — | ||||||
Broadcasting licenses | 84.2 | 84.2 | ||||||
Investments in televisual products and movies | 27.2 | 29.4 | ||||||
Deferred pension charge (note 25) | 20.7 | 9.5 | ||||||
Deferred connection costs | 18.8 | 18.2 | ||||||
Long-term investments | 11.4 | 13.0 | ||||||
Derivative financial instruments | 0.2 | 16.7 | ||||||
Financing costs, net of accumulated amortization | — | 33.6 | ||||||
Other | 10.5 | 11.6 | ||||||
$ | 422.0 | $ | 243.6 | |||||
13. | GOODWILL: | |
For the years ended December 31, 2007, 2006 and 2005, the changes in the carrying amounts of goodwill were as follows: |
2007 | ||||||||||||||||||||
Adjustment of | ||||||||||||||||||||
Balance as at | Business | purchase price | Balance as at | |||||||||||||||||
December 31, | acquisitions | allocation and | December 31, | |||||||||||||||||
2006 | (disposals) | Impairment | other | 2007 | ||||||||||||||||
Cable | $ | 2,581.7 | $ | 0.6 | $ | (5.4 | ) | $ | — | $ | 2,576.9 | |||||||||
Newspapers | 1,002.5 | 364.1 | — | — | 1,366.6 | |||||||||||||||
Broadcasting | 51.4 | 0.1 | — | (0.1 | ) | 51.4 | ||||||||||||||
Leisure and Entertainment | 43.4 | — | — | — | 43.4 | |||||||||||||||
Interactive Technologies and Communications | 11.2 | 3.1 | — | (1.8 | ) | 12.5 | ||||||||||||||
Internet/Portals | 30.9 | (0.4 | ) | — | — | 30.5 | ||||||||||||||
Total | $ | 3,721.1 | $ | 367.5 | $ | (5.4 | ) | $ | (1.9 | ) | $ | 4,081.3 | ||||||||
F-34
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
13. | GOODWILL (continued): |
2006 | ||||||||||||||||||||
Adjustment of | ||||||||||||||||||||
Balance as at | Business | purchase price | Balance as at | |||||||||||||||||
December 31, | acquisitions | allocation and | December 31, | |||||||||||||||||
2005 | (disposals) | Impairment | other | 2006 | ||||||||||||||||
Cable | $ | 2,581.8 | $ | (0.1 | ) | $ | — | $ | — | $ | 2,581.7 | |||||||||
Newspapers | 1,002.0 | 0.5 | — | — | 1,002.5 | |||||||||||||||
Broadcasting | 207.1 | — | (148.4 | ) | (7.3 | ) | 51.4 | |||||||||||||
Leisure and Entertainment | 46.9 | (0.6 | ) | — | (2.9 | ) | 43.4 | |||||||||||||
Interactive Technologies and Communications | 3.6 | 6.7 | — | 0.9 | 11.2 | |||||||||||||||
Internet/Portals | 30.5 | 0.4 | — | — | 30.9 | |||||||||||||||
Total | $ | 3,871.9 | $ | 6.9 | $ | (148.4 | ) | $ | (9.3 | ) | $ | 3,721.1 | ||||||||
2005 | ||||||||||||||||
Adjustment of | ||||||||||||||||
Balance as at | Business | purchase price | Balance as at | |||||||||||||
December 31, | acquisitions | allocation and | December 31, | |||||||||||||
2004 | (disposals) | other | 2005 | |||||||||||||
Cable | $ | 2,581.8 | $ | — | $ | — | $ | 2,581.8 | ||||||||
Newspapers | 1,011.2 | 1.0 | (10.2 | ) 1 | 1,002.0 | |||||||||||
Broadcasting | 185.3 | 22.3 | (0.5 | ) | 207.1 | |||||||||||
Leisure and Entertainment | 39.1 | 7.8 | — | 46.9 | ||||||||||||
Interactive Technologies and Communications | 3.1 | 1.3 | (0.8 | ) | 3.6 | |||||||||||
Internet/Portals | 30.5 | — | — | 30.5 | ||||||||||||
Total | $ | 3,851.0 | $ | 32.4 | $ | (11.5 | ) | $ | 3,871.9 | |||||||
1 | Recognition of tax benefits not recognized as of the business acquisition date. |
14. | ADDITIONAL AMOUNT PAYABLE: | |
In July 2007, the Company exercised its rights to repay the Additional Amount payable in the amount of $127.2 million. Until its repayment, the value of the Additional Amount payable, resulting from the repurchase of the redeemable preferred shares of a subsidiary in 2003, fluctuated based on a formula established as per the repurchase agreement. Changes in the amount payable were recorded as financial expenses in the consolidated statements of income. |
F-35
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
Effective interest | ||||||||||||||||
rate as of | ||||||||||||||||
December 31, 2007 | Year of maturity | 2007 | 2006 | |||||||||||||
Quebecor Media Inc.: | ||||||||||||||||
Bank credit facilities (i) | 7.07 | % | 2011-2013 | $ | 439.1 | $ | 520.6 | |||||||||
Other credit facility (ii) | 5.15 | % | 2015 | 66.7 | 59.2 | |||||||||||
Senior Notes (iii) | 7.75 | % | 2016 | 514.8 | 611.8 | |||||||||||
Senior Notes (iv) | 8.81 | % | 2016 | 644.3 | — | |||||||||||
1,664.9 | 1,191.6 | |||||||||||||||
Videotron Ltd. and its subsidiaries (v): | ||||||||||||||||
Bank credit facility (vi) | 5.58 | % | 2009 | 147.7 | 49.0 | |||||||||||
Senior Notes (vii) | 6.59 | % | 2014 | 652.8 | 769.1 | |||||||||||
Senior Notes (viii) | 6.44 | % | 2015 | 172.8 | 203.1 | |||||||||||
973.3 | 1,021.2 | |||||||||||||||
Sun Media Corporation and its subsidiaries (v): | ||||||||||||||||
Bank credit facilities (ix) | 6.27 | % | 2012 | 39.1 | 250.8 | |||||||||||
Senior Notes (x) | 7.88 | % | 2013 | 198.9 | 236.0 | |||||||||||
238.0 | 486.8 | |||||||||||||||
Osprey Media Publishing Inc. (v): | ||||||||||||||||
Bank credit facilities (xi) | 6.13 | % | 2011 | 145.3 | — | |||||||||||
TVA Group Inc. and its subsidiaries (v): | ||||||||||||||||
Revolving credit facility (xii) | 5.48 | % | 2010 | 56.3 | 96.5 | |||||||||||
Total long-term debt | 3,077.8 | 2,796.1 | ||||||||||||||
Change in fair value related to hedged interest rate risk | (24.1 | ) | — | |||||||||||||
Adjustments related to embedded derivatives | 11.4 | — | ||||||||||||||
Financing fees, net of amortization | (37.6 | ) | — | |||||||||||||
(50.3 | ) | — | ||||||||||||||
3,027.5 | 2,796.1 | |||||||||||||||
Less current portion: | ||||||||||||||||
Quebecor Media Inc. | 24.7 | 20.0 | ||||||||||||||
Sun Media Corporation and its subsidiaries | — | 3.1 | ||||||||||||||
24.7 | 23.1 | |||||||||||||||
$ | 3,002.8 | $ | 2,773.0 | |||||||||||||
F-36
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
15. | LONG-TERM DEBT (continued): |
(i) | The bank credit facilities are comprised of (i) a $125.0 million term loan “A” credit facility, bearing interest at bankers’ acceptance rate, London Interbanking Offered Rate (“LIBOR”) or Canadian prime rate, plus a premium determined by a leverage ratio, and maturing in January 2011, (ii) a US$350.0 million term loan “B” credit facility, bearing interest at U.S. prime rate, plus a premium of 1.0%, or at LIBOR, plus a premium of 2.0%, and maturing in January 2013, and (iii) a $100.0 million revolving credit facility, bearing interest at bankers’ acceptance rate, LIBOR or Canadian prime rate, plus a premium determined by a leverage ratio, and maturing in January 2011. These new credit facilities contain covenants concerning certain financial ratios and restricting the declaration and payment of dividends and other distributions. They are collateralized by liens on all of the movable property and assets of the Company (primarily shares of its subsidiaries), now owned or hereafter acquired. As of December 31, 2007, the carrying value of the Company’s assets guaranteeing the credit facilities was $4,384.3 million ($3,640.2 million in 2006). The Company shall repay the term loan “A” in quarterly repayments equal to 2.5% of the principal amount during the first three years of the term, 5.0% in the fourth year and 12.5% in the fifth year of the term. It shall repay the principal amount of its term loan “B” in quarterly repayments of 0.25% of the principal amount and the balance at the end of the term. The Company has fully hedged the foreign currency risk associated with the term loan by using cross-currency interest rate swaps, under which all payments have been set in Canadian dollars. As of December 31, 2007 and 2006, no amount had been drawn on the revolving credit facility, while $102.0 million ($115.6 million in 2006) and US$343.9 million (US$347.4 million in 2006) were drawn the term “A” and “B” credit facilities, respectively. | ||
(ii) | The long-term committed credit facility with Société Générale (Canada) for the Canadian dollar equivalent of€59.4 million, bears interest at bankers’ acceptance rate, plus a premium, and matures in 2015. The facility is secured by all the property and assets of the Company, now owned and hereafter acquired. This facility mostly contains the same covenants as the bank facilities described in (i). | ||
(iii) | In January 2006, the Company issued Senior Notes of US$525.0 million in aggregate principal amount for net proceeds of $609.0 million, before issuance fees of $9.0 million. The notes bear interest at 7.75% and mature in March 2016. These notes contain certain restrictions on the Company, including limitations on its ability to incur additional indebtedness and pay dividends or make other distributions. The notes are unsecured and are redeemable at the option of the Company at a decreasing premium, commencing on March 15, 2011. The Company has fully hedged the foreign currency risk associated with the new Senior Notes by using cross-currency interest rate swaps, under which all payments have been set in Canadian dollars. | ||
(iv) | In October 2007, the Company issued Senior Notes of US$700.0 million in aggregate principal amount at a discount price of 93.75% for net proceeds of $672.2 million, including accrued interest of $16.6 million and before financing fees of $9.8 million. The new senior notes bear interest at 7.75% for an effective interest rate of 8.81% and mature in March 2016. These notes contain certain restrictions for the Company, including limitations on its ability to incur additional indebtedness and pay dividends or make other distributions. The notes are unsecured and are redeemable at the option of the Company at a decreasing premium, commencing on March 15, 2011. The Company has fully hedged the foreign currency risk associated with the new Senior Notes by using cross-currency interest rate swaps, under which all payments have been set in Canadian dollars. | ||
(v) | The debts of these subsidiaries are non-recourse to the parent company, Quebecor Media Inc. |
F-37
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
15. | LONG-TERM DEBT (continued): |
(vi) | The credit facility of $450.0 million is a revolving credit facility maturing in November 2009 and bears interest at bankers’ acceptance or Canadian prime rates, plus a margin, depending on Videotron Ltd.’s leverage ratio. The credit facility is secured by a first ranking hypothec on the universality of all tangible and intangible assets, current and future, of Videotron Ltd. and its subsidiaries. As of December 31, 2007, the carrying value of assets guaranteeing the credit facility of Videotron Ltd. was $4,389.4 million ($4,253.5 million in 2006). The credit facility contains covenants such as maintaining certain financial ratios and some restrictions on the payment of dividends and asset acquisitions and dispositions. | ||
(vii) | In October 2003, a first series of US$335.0 million in aggregate principal amount of Senior Notes was issued at discount for net proceeds of $445.6 million, before issuance fees of $7.6 million. In November 2004, a second series of US$315.0 million in aggregate principal amount of Senior Notes was issued at premium for net proceeds of $405.1 million including accrued interest of $8.9 million and before issuance fees of $7.4 million. These notes bear interest at a rate of 6.875%, payable every six months on January 15 and July 15, and mature in January 2014. The notes contain certain restrictions on Videotron Ltd., including limitations on its ability to incur additional indebtedness, and are unsecured. The Senior Notes are guaranteed by specific subsidiaries of Videotron Ltd. Videotron Ltd. has fully hedged the foreign currency risk associated with the Senior Notes by using cross-currency interest rate swaps, under which all payments were set in Canadian dollars. The notes are redeemable at the option of the Company, in whole or in part, at any time on or after January 15, 2009, at a decreasing premium. | ||
(viii) | On September 16, 2005, US$175.0 million in aggregate principal amount of Senior Notes were issued at discount for net proceeds of $205.2 million, before issuance fees of $3.8 million. These notes bear interest at a rate of 6.375% payable every six months on December 15 and June 15, and mature on December 15, 2015. The notes contain certain restrictions for Videotron Ltd., including limitations on its ability to incur additional indebtedness, and are unsecured. The Senior Notes are guaranteed by specific subsidiaries of Videotron Ltd. Videotron Ltd. has fully hedged the foreign currency risk associated with the Senior Notes by using cross-currency interest rate swaps, under which all payments were set in Canadian dollars. The notes are redeemable at the option of the Company, in whole or in part, at any time on or after December 15, 2010, at a decreasing premium. | ||
(ix) | The bank credit facilities amended on October 31, 2007, are comprised of (i) a revolving credit facility amounting to $70.0 million, maturing in 2012, and (ii) a term loan “C” credit facility amounting to $40.0 million also maturing in 2012. The credit facilities are collateralized by liens on all of the property and assets of Sun Media Corporation and its operating subsidiaries, now owned or hereafter acquired. The bank credit facilities contain covenants concerning certain financial ratios and restrictions on the declaration and payment of dividends and other distributions. As of December 31, 2007, the carrying value of assets guaranteeing the bank credit facilities was $1,984.3 million ($1,419.0 million in 2006). Any amount borrowed under the revolving credit facility bears interest at Canadian bankers’ acceptance and/or Canadian prime rate plus an applicable margin determined by financial ratios. Advances under the term “C” credit facility bear interest at Canadian bankers’ acceptance rate plus a margin of 1.50% per annum or Canadian prime rate plus a margin of 0.50% per annum. As of December 31, 2007 and 2006, no amount had been drawn on the revolving credit facility, while $39.1 million ($39.3 million in 2006) were drawn down on the term loan “C” credit facilities. In 2006, US$181.4 million were drawn down on the term loan “B” credit facility repaid on October 31, 2007 (note 4 (a)). |
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Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
15. | LONG-TERM DEBT (continued): |
(x) | The US$205.0 million in aggregate principal amount Senior Notes were issued in February 2003 at discount for net proceeds of $306.8 million, before issuance fees of $6.2 million. These notes bear interest at a rate of 7.625% and mature in 2013. The notes contain certain restrictions for Sun Media Corporation, including limitations on its ability to incur additional indebtedness and to make other distributions, and are unsecured. The Senior Notes are guaranteed by specific subsidiaries of Sun Media Corporation Inc. Sun Media Corporation has fully hedged the foreign currency risk associated with the Senior Notes by using cross-currency interest rate swaps and a foreign exchange forward contract, under which all payments were set in Canadian dollars. The notes are redeemable at the option of the Company, in whole or in part, at any time on or after February 15, 2008, at a decreasing premium. | ||
(xi) | The credit facilities are comprised of revolving credit facility in the amount of $65.0 million and a term facility in the amount of $133.3 million maturing in January 2011. The credit facilities bear interest at Canadian prime rate or bankers’ acceptance rate plus an applicable margin determined by financial ratios and they contain covenants concerning, among other things, certain financial ratios and restrictions on the declaration and payment of any distributions. The credit facilities are secured by liens on all assets of Osprey Media Publishing Inc. and its subsidiaries. As of December 31, 2007, $13.4 million was drawn on the revolver credit facility and $131.9 million was drawn on the term facility. | ||
(xii) | The revolving credit facility of a maximum of $160.0 million bears interest at the prime rate of a Canadian chartered bank or bankers’ acceptances rates, plus a variable margin determined by certain financial ratios. In 2005, the revolving credit facility maturity was extended to June 15, 2010. The credit facility contains certain restrictions, including the obligation to maintain certain financial ratios. |
On December 31, 2007, the Company and its subsidiaries were in compliance with all debt covenants. | ||
Principal repayments of long-term debt over the next years are as follows: |
2008 | $ | 24.7 | ||
2009 | 181.8 | |||
2010 | 121.6 | |||
2011 | 171.9 | |||
2012 | 49.3 | |||
2013 and thereafter | 2,528.5 | |||
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
16. | OTHER LIABILITIES: |
2007 | 2006 | |||||||
Accrued stock-based compensation1 | $ | 12.7 | $ | 57.2 | ||||
Accrued pension and post-retirement benefits liability (note 25) | 48.3 | 37.0 | ||||||
Deferred revenues | 36.7 | 24.0 | ||||||
Other | 5.8 | 7.0 | ||||||
$ | 103.5 | $ | 125.2 | |||||
1 | A current portion of accrued stock-based compensation in the amount of $98.6 million is included in accounts payable and accrued charges (nil at December 31, 2006). |
17. | NON-CONTROLLING INTEREST: | |
Non-controlling interest represents the interest of non-controlling shareholders in the participating shares of the Company’s subsidiaries. As of December 31, 2007, the most significant non-controlling interests were as follows: |
Non-controlling interest | ||||||||||||
Subsidiary | Segment | %voting | %equity | |||||||||
TVA Group Inc. | Broadcasting | 0.08 | % | 54.76 | % | |||||||
Nurun Inc. | Interactive Technologies and Communications | 42.51 | % | 42.51 | % |
18. | CAPITAL STOCK: |
(a) | Authorized capital stock: | ||
An unlimited number of Common Shares, without par value; | |||
An unlimited number of non-voting Cumulative First Preferred Shares, without par value; the number of preferred shares in each series and the related characteristics, rights and privileges are to be determined by the Board of Directors prior to each issue; |
• | An unlimited number of Cumulative First Preferred Shares, Series A (“Preferred A Shares”), carrying a 12.5% annual fixed cumulative preferential dividend, redeemable at the option of the holder and retractable at the option of the Company; | ||
• | An unlimited number of Cumulative First Preferred Shares, Series B (“Preferred B Shares”), carrying a fixed cumulative preferential dividend generally equivalent to the Company’s credit facility interest rate, redeemable at the option of the holder and retractable at the option of the Company; | ||
• | An unlimited number of Cumulative First Preferred Shares, Series C (“Preferred C Shares”), carrying an 11.25% annual fixed cumulative preferential dividend, redeemable at the option of the holder and retractable at the option of the Company; |
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
18. | CAPITAL STOCK (continued): |
(a) | Authorized capital stock (continued): |
• | An unlimited number of Cumulative First Preferred Shares, Series D (“Preferred D Shares”), carrying an 11.00% annual fixed cumulative preferential dividend, redeemable at the option of the holder and retractable at the option of the Company; | ||
• | An unlimited number of Cumulative First Preferred Shares, Series F (“Preferred F Shares”), carrying a 10.85% annual fixed cumulative preferential dividend, redeemable at the option of the holder and retractable at the option of the Company; | ||
• | An unlimited number of Cumulative First Preferred Shares, Series G (“Preferred G Shares”), carrying a 10.85% annual fixed cumulative preferential dividend, redeemable at the option of the holder and retractable at the option of the Company; |
An unlimited number of non-voting Preferred Shares, Series E (“Preferred E Shares”), carrying a non-cumulative dividend subsequent to the holders of Cumulative First Preferred Shares, redeemable at the option of the holder and retractable at the option of the Company. | |||
(b) | Issued capital stock: |
Common Shares | ||||||||
Number | Amount | |||||||
Balance as of December 31, 2005 | 123,602,807 | $ | 1,773.7 | |||||
Reduction of paid-up capital | — | (21.3 | ) | |||||
Balance as of December 31, 2006 and 2007 | 123,602,807 | $ | 1,752.4 | |||||
In 2006, the Company reduced its Common Share paid-up capital by $21.3 million in the form of cash distributions to its shareholders. | |||
As of December 31, 2007, Sun Media Corporation and its subsidiaries, Newspaper segment, owned 560,000 Preferred G Shares for a total amount of $560.0 million while as of December 31, 2006 Sun Media Corporation and its subsidiaries owned 235,000 Preferred A Shares and 320,000 Preferred F Shares for a total amount of $555.0 million. In addition, as of December 31, 2007, 9101-0835 Quebec Inc., owned 110,000 Preferred C Shares (275,000 Preferred C Shares in 2006) for an amount of $110.0 million ($275.0 million in 2006), and 1,995,000 Preferred G Shares for an amount of $1,995.0 million (1,000,000 Preferred F Shares in 2006 which were converted in G Shares in 2007). These shares are eliminated on consolidation. |
F-41
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
18. | CAPITAL STOCK (continued): |
(c) | Transactions during the year: | ||
2007 | |||
On January 3, 2007, the Company issued 1,000,000 Preferred F Shares to 9101-0835 Québec Inc. which were converted in Preferred G Shares on January 12, 2007. | |||
On May 31, 2007, the Company issued 995,000 Preferred G Shares to 9101-0835 Quebec Inc. for a total amount of $995.0 million. | |||
On July 13, 2007, the Company redeemed 235,000 Preferred A Shares, owned by Sun Media Corporation and its subsidiaries, for an amount of $235.0 million. On December 20, 2007, 320,000 Preferred F Shares, owned by Sun Media Corporation and its subsidiaries, were converted into 320,000 Preferred G Shares while on July 27, 2007, the Company issued 240,000 Preferred G Shares to Sun Media Corporation and its subsidiaries for an amount of $240.0 million. | |||
On November 1, 2007 and on December 20, 2007, the Company redeemed 165,000 Preferred C Shares, owned by 9101-0835 Quebec Inc., for an amount of $165.0 million. | |||
2006 | |||
On June 12 and December 28, 2006, the Company redeemed 255,000 and 500,000 Preferred A Shares, respectively, owned by Sun Media Corporation and its subsidiaries, for a total amount of $755.0 million. On the same respective days, the Company issued 120,000 Preferred F shares for an amount of $120.0 million and redeemed 55,000 Preferred F shares for an amount of $55.0 million to Sun Media Corporation and its subsidiaries. | |||
On April 25, April 30, June 9 and June 29, 2006, the Company issued 25,000, 44,000, 50,000 and 40,000 Preferred C Shares respectively, for a total amount of $159.0 million, to 9101-0835 Québec Inc. On October 12, 2006, the Company redeemed 31,950 Preferred C Shares owned by 9101-0835 Quebec inc. for an amount of $32.0 million. | |||
2005 | |||
On January 14, 2005, the Company redeemed 150,000 Preferred A Shares for an amount of $150.0 million from Sun Media Corporation and its subsidiaries and issued 255,000 Preferred F Shares for an amount of $255.0 million to Sun Media Corporation and its subsidiaries. | |||
On March 9, 2005 and April 29, 2005, the Company issued a total of 61,950 Preferred C Shares to 9101-0835 Quebec inc. for a total amount of $61.9 million. On August 2, 2005, the Company redeemed 184,000 Preferred C Shares for an amount of $184.0 million. |
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
19. | STOCK-BASED COMPENSATION PLANS: |
(a) | Quebecor Media Inc. stock option plan: | ||
Under a stock option plan established by the Company, a number of Common Shares of the Company are currently set aside for officers, senior employees, directors and other key employees of the Company and its subsidiaries. In 2007, the stock option plan of the Company was amended in order to increase, until December 31, 2008, the total number of shares issuable under the plan from 6,185,714 to 8,034,000. After that date, the number of shares issuable under the plan will automatically be re-established at a number of shares equal to 5% of the shares then issued and outstanding. Each option may be exercised within a maximum period of 10 years following the date of grant at an exercise price not lower than, as the case may be, the fair market value of the Common Shares of Quebecor Media Inc. at the date of grant, as determined by its Board of Directors (if the Common Shares of Quebecor Media Inc. are not listed on a stock exchange at the time of the grant) or the five-day weighted average closing price ending on the day preceding the date of grant of the Common Shares of the Company on the stock exchanges where such shares are listed at the time of grant. Unless authorized by the Company Compensation Committee in the context of a change of control, no options may be exercised by an optionee if the shares of the Company have not been listed on a recognized stock exchange. Should the Common Shares of Quebecor Media Inc. have not been so listed on March 1, 2008, optionees may exercise from March 1 to March 30, from June 1 to June 29, from September 1 to September 29 and from December 1 to December 30 of each year, starting March 1, 2008, their right to receive an amount in cash (equal to the difference between the fair market value, as determined by the Company’s Board of Directors, and the exercise price of their vested options) or, subject to certain stated conditions, exercise their options to purchase Common Shares of Quebecor Media Inc. at the exercise price. Except under specific circumstances, and unless the Compensation Committee decides otherwise, options vest over a five-year period in accordance with one of the following vesting schedules as determined by the Compensation Committee at the time of grant: (i) equally over five years with the first 20% vesting on the first anniversary of the date of the grant; (ii) equally over four years with the first 25% vesting on the second anniversary of the date of grant; and (iii) equally over three years with the first 33 1/3% vesting on the third anniversary of the date of grant. |
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
19. | STOCK-BASED COMPENSATION PLANS (continued): |
(a) | Quebecor Media Inc. stock option plan (continued): | ||
The following table gives summary information on outstanding options granted as of December 31, 2007 and 2006: |
2007 | 2006 | |||||||||||||||
Weighted average | Weighted average | |||||||||||||||
Options | exercise price | Options | exercise price | |||||||||||||
Balance at beginning of year | 3,781,767 | $ | 21.38 | 3,228,321 | $ | 18.90 | ||||||||||
Granted | 3,359,563 | 44.38 | 795,393 | 31.60 | ||||||||||||
Cancelled | (111,473 | ) | 29.49 | (241,947 | ) | 21.86 | ||||||||||
Balance at end of year | 7,029,857 | $ | 32.25 | 3,781,767 | $ | 21.38 | ||||||||||
Vested options at end of year | 2,517,181 | $ | 18.42 | 1,639,460 | $ | 17.59 | ||||||||||
The following table gives summary information on outstanding options as of December 31, 2007: |
Outstanding options | Vested options | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Weighted | average | average | ||||||||||||||||||
Range of | average years | exercise | exercise | |||||||||||||||||
exercise price | Number | to maturity | price | Number | price | |||||||||||||||
$15.19 to 21.77 | 2,709,224 | 5.00 | $ | 17.97 | 2,342,813 | $ | 17.58 | |||||||||||||
22.98 to 33.41 | 995,070 | 8.04 | 30.55 | 174,368 | 29.74 | |||||||||||||||
37.82 to 47.29 | 3,325,563 | 9.60 | 44.38 | — | — | |||||||||||||||
$15.19 to 47.29 | 7,029,857 | 7.60 | $ | 32.25 | 2,517,181 | $ | 18.42 | |||||||||||||
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
19. | STOCK-BASED COMPENSATION PLANS (continued): |
(b) | TVA Group Inc. plans: |
(i) | Stock option plan for senior executives and directors | ||
Under this stock option plan, 1,400,000 Class B shares of TVA Group Inc. have been set aside for senior executives and directors of TVA Group Inc. and its subsidiaries. The terms and the conditions of options granted are determined by TVA Group Inc.’s Compensation Committee. The subscription price of an option cannot be less than the closing price of Class B shares on the Toronto Stock Exchange the day before the option is granted. Except under specific circumstances, and unless the Compensation Committee decides otherwise, options will vest over a five-year period in accordance with one of the following vesting schedules as determined by the Compensation Committee at the time of grant: (i) equally over five years with the first 20% vesting on the first anniversary of the date of the grant; (ii) equally over four years with the first 25% vesting on the second anniversary of the date of grant; and (iii) equally over three years with the first 33 1/3% vesting on the third anniversary of the grant. The term of an option cannot exceed 10 years. Holders of options under the plan have the choice, at the time of exercising their options, to receive from TVA Group Inc. an amount in cash (equal to the number of shares corresponding to the options exercised, multiplied by the difference between the fair market value and the exercise price of the option) or, subject to certain conditions, exercise their options to purchase Class B shares of TVA Group Inc. at the exercise price. The fair market value is defined by the average closing market price of the Class B share for the last five trading days preceeding the date on which the option was exercised. | |||
The following table gives details on changes to outstanding options for the years ended December 31, 2007 and 2006: |
2007 | 2006 | |||||||||||||||
Weighted average | Weighted average | |||||||||||||||
Options | exercise price | Options | exercise price | |||||||||||||
Balance at beginning of year | 489,695 | $ | 17.59 | 310,177 | $ | 20.27 | ||||||||||
Granted | 561,875 | 14.82 | 503,684 | 15.62 | ||||||||||||
Exercised | — | — | (27,500 | ) | 14.00 | |||||||||||
Cancelled | (67,877 | ) | 15.52 | (296,666 | ) | 17.36 | ||||||||||
Balance at end of year | 983,693 | $ | 16.16 | 489,695 | $ | 17.59 | ||||||||||
Vested options at end of year | 84,082 | $ | 20.61 | 31,625 | $ | 20.75 | ||||||||||
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
19. | STOCK-BASED COMPENSATION PLANS (continued): |
(b) | TVA Group Inc. plans (continued): |
(i) | Stock option plan for senior executives and directors (continued) | ||
The following table gives summary information on outstanding options as of December 31, 2007: |
Outstanding options | Vested options | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Weighted | average | average | ||||||||||||||||||
Range of | average years | exercise | exercise | |||||||||||||||||
exercise price | Number | to maturity | price | Number | price | |||||||||||||||
$14.50 to 16.40 | 789,562 | 9.4 | $ | 14.99 | 3,923 | $ | 15.81 | |||||||||||||
16.41 to 21.38 | 194,131 | 6.7 | 20.90 | 80,159 | 20.84 | |||||||||||||||
$14.50 to 21.38 | 983,693 | 8.9 | $ | 16.16 | 84,082 | $ | 20.61 | |||||||||||||
Had the vested options been exercised as of December 31, 2007, Quebecor Media Inc.’s interest in TVA Group Inc. would have decreased from 45.24% to 45.10% (45.24% to 45.23% as of December 31, 2006). | |||
(ii) | Share purchase plan for executives and employees | ||
In 1998, TVA Group Inc. introduced a share purchase plan relating to 375,000 TVA Group Inc. Class B shares for its executives and a share purchase plan relating to 375,000 TVA Group Inc. Class B shares for its employees. The plans provide that participants can acquire shares on certain terms related to their salary. The shares can be acquired at a price equal to 90% of the average closing market price of TVA Group Inc. Class B shares. The plans also provide financing terms free of interest. No Class B shares were issued under the plans during the years ended December 31, 2007, 2006 and 2005. The remaining balance that may be issued under the share purchase plan for executives is 332,643 TVA Group Inc. Class B shares as of December 31, 2007, 2006 and 2005. The remaining balance that may be issued under the share purchase plan for employees is 229,753 TVA Group Inc. Class B shares as of December 31, 2007, 2006 and 2005. | |||
(iii) | Deferred share unit plan | ||
In 2000, TVA Group Inc. introduced a long-term profit sharing plan for certain members of senior management of TVA Group Inc., and its subsidiaries. The deferred share units (“DSU“s) are redeemable only upon termination of the participant’s employment. The redemption price is payable in cash or, at TVA Group Inc.’s discretion, in Class B shares of TVA Group Inc. or by a combination of cash and shares. Under this plan, a maximum of 25,000 Class B shares of TVA Group Inc. can be issued. No DSUs were issued under this plan during the years ended December 31, 2007, 2006 and 2005. |
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Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
19. | STOCK-BASED COMPENSATION PLANS (continued): |
(c) | All Stock-based option plans: | ||
For the year ended December 31, 2007, a charge of $50.8 million related to all stock-based option plans is included in income ($24.8 million in 2006 and $10.9 million in 2005). |
20. | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): |
�� | ||||||||||||
Translation of net | ||||||||||||
investments in | Cash flow | |||||||||||
foreign operations | hedges | Total | ||||||||||
Balance as of December 31, 2004 | $ | (1.0 | ) | $ | — | $ | (1.0 | ) | ||||
Other comprehensive loss, net of income taxes | (1.3 | ) | — | (1.3 | ) | |||||||
Balance as of December 31, 2005 | (2.3 | ) | — | (2.3 | ) | |||||||
Other comprehensive income, net of income taxes | 1.2 | — | 1.2 | |||||||||
Balance as of December 31, 2006 | (1.1 | ) | — | (1.1 | ) | |||||||
Cumulative effect of changes in accounting policies (note 1(b)) | — | (35.5 | ) | (35.5 | ) | |||||||
Other comprehensive income, net of income taxes | (2.0 | ) | 48.0 | 46.0 | ||||||||
Balance as of December 31, 2007 | $ | (3.1 | ) | $ | 12.5 | $ | 9.4 | |||||
No significant amount is expected to be reclassified in income over the next 12 months in connection with derivative financial instruments designated as cash flow hedges, while the balance of accumulated other comprehensive loss is expected to be reversed over an 8-year period. |
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Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
21. | COMMITMENTS AND CONTINGENCIES: |
(a) | Leases and purchasing agreements: | ||
The Company rents premises and equipment under operating leases and has entered into long-term commitments to purchase services, capital equipment and distribution and broadcasting rights that call for total future payments of $354.7 million. The minimum payments for the coming years are as follows: |
Other | ||||||||
Leases | commitments | |||||||
2008 | $ | 47.6 | $ | 143.5 | ||||
2009 | 33.1 | 33.2 | ||||||
2010 | 28.0 | 7.3 | ||||||
2011 | 18.7 | 3.2 | ||||||
2012 | 13.7 | 0.5 | ||||||
2013 and thereafter | 25.9 | — | ||||||
Operating lease expenses amounted to $46.1 million, $44.8 million and $42.4 million for the years ended December 31, 2007, 2006 and 2005, respectively. | |||
(b) | Other commitments: | ||
As part of the acquisition of Group TVA Inc. in 2001 and Sun TV in 2004, the Company was committed, over a period ending in 2011, to invest $58.2 million in the Canadian TV industry and in the Canadian communications industry to promote Canadian TV content and the development of communications. As of December 31, 2007, $4.9 million remained to be invested. | |||
(c) | Contingencies: | ||
On July 20, 2007, a motion to certify a class action lawsuit was filed in the Province of Québec against Videotron in connection with an interruption of Internet service on July 18, 2007 and other sporadic interruptions of Internet service. The plaintiff is claiming a credit for the portion of the fees paid for the Internet service for the duration of the interruptions. The plaintiff is also seeking punitive damages and damages for troubles and inconveniences. The class certification hearing has not been scheduled yet. Although it is not possible as of the date of these financial statements to determine with a reasonable degree of certainty the outcome of this legal proceeding, the Company’s management believes that the suit is without merit and intends to vigorously defend its position. | |||
A number of other legal proceedings against the Company and its subsidiaries are still outstanding. In the opinion of the management of the Company and its subsidiaries, the outcome of these proceedings is not expected to have a material adverse effect on the Company’s results or its financial position. |
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
22. | GUARANTEES: | |
In the normal course of business, the Company enters into numerous agreements containing guarantees, including the following: | ||
Operating leases: | ||
The Company has guaranteed a portion of the residual values of certain assets under operating leases for the benefit of the lessor. Should the Company terminate these leases prior to term (or at the end of these lease term) and should the fair value of the assets be less than the guaranteed residual value, then the Company must, under certain conditions, compensate the lessor for a portion of the shortfall. In addition, the Company has provided guarantees to the lessor of certain premise leases, with expiry dates through 2015. Should the lessee default under the agreement, the Company must, under certain conditions, compensate the lessor. As of December 31, 2007, the maximum exposure with respect to these guarantees was $18.5 million and no liability has been recorded in the consolidated balance sheet since the Company does not expect to make any payments pertaining to these guarantees and since the Company was unable to determine the fair value of these guarantees. | ||
Business and asset disposals: | ||
In the sale of all or part of a business or an asset, in addition to possible indemnification relating to failure to perform covenants and breach of representations or warranties, the Company may agree to indemnify against claims related to its past conduct of the business. Typically, the term and amount of such indemnification will be limited by the agreement. The nature of these indemnification agreements prevents the Company from estimating the maximum potential liability it could be required to pay to guaranteed parties. The Company has not accrued any amount in respect of these items in the consolidated balance sheet since the Company was unable to determine the fair value of these guarantees. | ||
Outsourcing companies and suppliers: | ||
In the normal course of its operations, the Company enters into contractual agreements with outsourcing companies and suppliers. In some cases, the Company agrees to provide indemnifications in the event of legal procedures initiated against them. In other cases, the Company provides indemnification to counterparties for damages resulting from the outsourcing companies and suppliers. The nature of the indemnification agreements prevents the Company from estimating the maximum potential liability it could be required to pay. No amount has been accrued in the consolidated financial statements with respect to these indemnifications since the Company was unable to determine the fair value of these guarantees. |
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Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
23. | FINANCIAL INSTRUMENTS: | |
The Company is exposed to risks relating to foreign exchange fluctuations and to risks relating to interest rate fluctuations. In order to manage these risks, the Company and its subsidiaries use derivative financial instruments (i) to achieve a targeted balance of fixed and variable rate debts and (ii) to set in Canadian dollars all future payments on debts denominated in U.S. dollars (interest and principal) and on certain capital or inventory expenditures denominated in foreign currency. None of these instruments is held or issued for speculative purposes. The Company designates its derivative financial instruments either as fair value hedges or cash flow hedges. |
(a) | Description of derivative financial instruments: |
(i) | Foreign exchange forward contracts: |
Average | Notional | |||||||||||
Currencies (sold/bought) | Maturing | exchange rate | amount | |||||||||
Quebecor Media Inc. | ||||||||||||
$/Euro | Less than 1 year | 1.4501 | $ | 18.9 | ||||||||
$/CHF | Less than 1 year | 0.8897 | 6.0 | |||||||||
Sun Media Corporation | ||||||||||||
$/ US$ | February 15, 2013 | 1.5227 | 312.2 | |||||||||
Videotron Ltd. and its subsidiaries: | ||||||||||||
$/ US$ | Less than 1 year | 1.0511 | 76.8 | |||||||||
F-50
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
23. | FINANCIAL INSTRUMENTS (continued): |
(a) | Description of derivative financial instruments (continued): |
(ii) Cross-currency interest rate swaps: |
CDN dollar | ||||||||||||||||||||
exchange rate | ||||||||||||||||||||
Annual | Annual | of interest | ||||||||||||||||||
effective | nominal | and capital | ||||||||||||||||||
Period | Notional | interest | interest | payments per | ||||||||||||||||
covered | amount | rate | rate | one US dollar | ||||||||||||||||
Quebecor Media Inc.: | ||||||||||||||||||||
Senior Notes | 2007 to 2016 | US$ | 700.0 | 7.69 | % | 7.75 | % | 0.9990 | ||||||||||||
Senior Notes | 2006 to 2016 | US$ | 525.0 | 7.39 | % | 7.75 | % | 1.1600 | ||||||||||||
Term loan B credit facilities | 2006 to 2009 | US$ | 196.5 | 6.27 | % | LIBOR | 1.1625 | |||||||||||||
+2.00 | % | |||||||||||||||||||
Term loan B credit facilities | 2009 to 2013 | US$ | 196.5 | Bankers' | LIBOR | 1.1625 | ||||||||||||||
acceptances | +2.00 | % | ||||||||||||||||||
3 months | ||||||||||||||||||||
+2.22 | % | |||||||||||||||||||
Term loan B credit facilities | 2006 to 2013 | US$ | 147.4 | 6.44 | % | LIBOR | 1.1625 | |||||||||||||
+2.00 | % | |||||||||||||||||||
Videotron Ltd. and its subsidiaries: | ||||||||||||||||||||
Senior Notes | 2004 to 2014 | US$ | 190.0 | Bankers' | 6.875 | % | 1.2000 | |||||||||||||
acceptances | ||||||||||||||||||||
3 months | ||||||||||||||||||||
+2.80 | % | |||||||||||||||||||
Senior Notes | 2004 to 2014 | US$ | 125.0 | 7.45 | % | 6.875 | % | 1.1950 | ||||||||||||
Senior Notes | 2003 to 2014 | US$ | 200.0 | Bankers' | 6.875 | % | 1.3425 | |||||||||||||
acceptances | ||||||||||||||||||||
3 months | ||||||||||||||||||||
+2.73 | % | |||||||||||||||||||
Senior Notes | 2003 to 2014 | US$ | 135.0 | 7.66 | % | 6.875 | % | 1.3425 | ||||||||||||
Senior Notes | 2005 to 2015 | US$ | 175.0 | 5.98 | % | 6.375 | % | 1.1781 |
F-51
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
23. | FINANCIAL INSTRUMENTS (continued): |
(a) | Description of derivative financial instruments (continued): |
(ii) | Cross-currency interest rate swaps (continued): |
CDN dollar | ||||||||||||||||||||
exchange rate | ||||||||||||||||||||
Annual | Annual | of interest | ||||||||||||||||||
effective | nominal | and capital | ||||||||||||||||||
Period | Notional | interest | interest | payments per | ||||||||||||||||
covered | amount | rate | rate | one US dollar | ||||||||||||||||
Sun Media Corporation and its subsidiaries: | ||||||||||||||||||||
Senior Notes | 2003 to 2008 | US$ | 155.0 | 8.17 | % | 7.625 | % | 1.5227 | ||||||||||||
Senior Notes | 2008 to 2013 | US$ | 155.0 | Bankers' | 7.625 | % | 1.5227 | |||||||||||||
acceptances | ||||||||||||||||||||
3 months | ||||||||||||||||||||
+3.70 | % | |||||||||||||||||||
Senior Notes | 2003 to 2013 | US$ | 50.0 | Bankers' | 7.625 | % | 1.5227 | |||||||||||||
acceptances | ||||||||||||||||||||
3 months | ||||||||||||||||||||
+3.70 | % | |||||||||||||||||||
The cross-currency swap agreements settled as part of the refinancing of the Company’s debts on January 17, 2006, were subject to a floor limit on negative fair market value, below which the Company was required to make prepayments to limit the exposure of the counterparties. Such prepayments were offset by equal reductions in the Company’s commitments under the agreements. The Company was required to make prepayments of $75.9 million in 2005 under this provision. | |||
Also, certain cross-currency interest rate swaps entered into by the Company and its subsidiaries include an option that allows each party to unwind the transaction on a specific date at the then-market value. | |||
(iii) | Interest rate swaps |
Notional | Pay/ | Fixed | Floating | |||||||||||||
Maturity | amount | receive | rate | rate | ||||||||||||
Osprey Media Publishing Inc. | ||||||||||||||||
April 2008 | $ | 75.0 | Pay fixed/ | 4.05 | % | Bankers' | ||||||||||
receive floating | acceptance | |||||||||||||||
3 months | ||||||||||||||||
F-52
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
23. | FINANCIAL INSTRUMENTS (continued): |
(b) | Fair value of financial instruments: | ||
The carrying amount of accounts receivable from external or related parties (classified as loans and receivables), accounts payable and accrued charges to external or related parties (classified as other liabilities) approximates their fair value since these items will be realized or paid within one year or are due on demand. | |||
Carrying value and fair value of long-term debt and derivative financial instruments as of December 31, 2007 and 2006 are as follows: |
2007 | 2006 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
value | Fair value | value | Fair value | |||||||||||||
Quebecor Media Inc. | ||||||||||||||||
Long-term debt1 | $ | (1,664.9 | ) | $ | (1,646.6 | ) | $ | (1,191.6 | ) | $ | (1,206.3 | ) | ||||
Cross-currency interest rate swaps | (159.8 | ) | (159.8 | ) | 3.8 | (17.8 | ) | |||||||||
Foreign exchange forward contracts | (0.3 | ) | (0.3 | ) | 2.2 | 2.2 | ||||||||||
Videotron Ltd. and its subsidiaries | ||||||||||||||||
Long-term debt1 | (973.3 | ) | (938.2 | ) | (1,021.2 | ) | (1,010.6 | ) | ||||||||
Cross-currency interest rate swaps | (241.3 | ) | (241.3 | ) | (71.8 | ) | (141.1 | ) | ||||||||
Foreign exchange forward contract | (4.2 | ) | (4.2 | ) | — | 2.1 | ||||||||||
Sun Media Corporation and its subsidiaries | ||||||||||||||||
Long-term debt1 | (238.0 | ) | (234.1 | ) | (486.8 | ) | (492.9 | ) | ||||||||
Cross-currency interest rate swaps and foreign exchange forward contract | (133.1 | ) | (133.1 | ) | (148.8 | ) | (176.1 | ) | ||||||||
Osprey Media Publishing Inc. | ||||||||||||||||
Long-term debt1 | (145.3 | ) | (145.3 | ) | — | — | ||||||||||
Interest rate swap | 0.2 | 0.2 | — | — | ||||||||||||
TVA Group Inc. and its subsidiaries | ||||||||||||||||
Long-term debt1 | (56.3 | ) | (56.3 | ) | (96.5 | ) | (96.5 | ) | ||||||||
1 | The carrying value of long-term debt excludes adjustments to record changes in fair value of long term debt related to hedged interest risk, embedded derivatives and financing fees. |
The fair value of long-term debt is estimated based on discounted cash flows using year-end market yields or market value of similar instruments with the same maturity. The fair value of the derivative financial instruments is estimated using year-end market rates, and reflects the amount the Company would receive or pay if the instruments were closed out at those dates. |
F-53
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
23. | FINANCIAL INSTRUMENTS (continued): |
(c) | Credit risk management: | ||
The Company is exposed to credit losses resulting from defaults by counterparties when using financial instruments. | |||
When the Company enters into derivative contracts, the counterparties (either foreign or Canadian) must have at least credit ratings in accordance with the Company’s credit risk management policy and are subject to concentration limits. The Company does not foresee any failure by counterparties in meeting their obligations. | |||
In the normal course of business, the Company continuously monitors the financial condition of its customers and reviews the credit history of each new customer. As of December 31, 2007, no customer balance represented a significant portion of the Company’s consolidated trade receivables. The Company establishes an allowance for doubtful accounts based on the specific credit risk of its customers and historical trends. | |||
The Company believes that its product-lines and the geographic diversity of its customer base is instrumental in reducing its credit risk, as well as the impact of fluctuations in product-line demand. The Company does not believe that it is exposed to an unusual level of customer credit risk. |
24. | RELATED PARTY TRANSACTIONS: | |
Operating transactions | ||
During the year, the Company made purchases and incurred rent charges from companies under common control and from affiliated companies in the amount of $64.3 million ($89.6 million in 2006 and $91.0 million in 2005), included in the cost of sales and selling and administrative expenses. The Company made sales to companies under common control and to an affiliated company in the amount of $18.3 million ($18.1 million in 2006 and $21.7 million in 2005). These transactions were concluded and accounted for at the exchange value. | ||
During the year ended December 31, 2007, Nurun Inc., Interactive Technologies and Communications segment, received interest of $0.9 million ($0.9 million in 2006 and $0.8 million in 2005) from Quebecor Inc. As of December 31, 2007, cash and cash equivalents totalling $19.3 million ($20.2 million as of December 31, 2006) have been invested on a revolving basis in Quebecor Inc. under the terms of an agreement for the consolidation of bank operations. These advances on demand bear interest at prime rate less 1.4%. | ||
In 2007, the Company signed a 10 years manufacturing agreement with Quebecor World Inc., a company under common control, for the printing of directories in its Toronto and Saint-Janvier-de-Mirabel printing facilities. | ||
Transfer of assets | ||
In October 2007, the Company increased its investment in Nurun Inc. by acquiring from Quebecor World Inc., a company under common control, 500,000 common shares of Nurun Inc. for a cash consideration of $1.7 million. | ||
On October 11, 2007, the Company acquired a property from Quebecor World Inc., a company under common control, for a total net consideration of $62.5 million. Simultaneously, Quebecor World Inc. entered into a long-term operating lease with the Company to rent a portion of the property over a term of 17 years. The consideration for the two transactions was settled by the payment to Quebecor World Inc. of a net amount $43.9 million as of the date of the transactions and the assumption by the Company of a $7.0 million balance of sale, including interest, payable in 2013. The transactions were concluded and accounted at the exchange value. |
F-54
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
24. | RELATED PARTY TRANSACTIONS (continued): | |
Transfer of assets (continued) | ||
In 2005, the Company acquired certain assets from Quebecor World Inc., for a cash consideration of $3.3 million. The transaction was recorded at the carrying value of the assets transferred. | ||
Management arrangements | ||
Quebecor Inc. (the “parent company”) has entered into management arrangements with the Company. Under these management arrangements, the parent company and the Company provide each other management services on a cost reimbursement basis. The expenses subject to reimbursement include the salaries of the Company’s executive officers who also serve as executive officers of the parent company. Also, in connection with the Company’s previous credit facility, which was secured by the Company’s shareholders, an annual security fee equivalent to 1% of the credit facility was charged to the Company by its shareholders. The current credit facilities, entered into in January 2006, are not secured by the Company’s shareholders. In 2007, the Company received an amount of $3.0 million, which is included as a reduction in selling and administrative expenses ($3.0 million in 2006 and 2005) and the Company has incurred management fees of $1.1 million ($1.1 million in 2006 and in 2005) with the shareholders. In 2005, the Company incurred security fees of $1.1 million with its shareholders. | ||
Tax transactions | ||
During the year ended December 31, 2006, some of the Company’s subsidiaries acquired tax benefits amounting to $6.5 million from Quebecor World Inc., a company under common control, that were recorded as income taxes receivable. These transactions allowed the Company to realize a gain of $0.4 million (net of non-controlling interest) which was recorded as contributed surplus. | ||
On December 14, 2005, the Company entered into a tax consolidation transaction by which the Company has transferred to its parent company $192.0 million of capital losses for a cash consideration of $15.9 million. In addition, in 2007 and 2006, the parent company transferred to certain of the Company’s subsidiaries $66.5 million and $74.2 million of non-capital losses, respectively, in exchange of cash considerations of $14.9 million and $16.1 million. These transactions were recorded at the exchange amounts. As a result, the Company has recorded reductions of $7.7 million and $15.9 million, respectively, of its income tax expense in 2007 and 2005 and expects to reduce its income tax expense by $6.4 million in the future. |
F-55
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
25. | PENSION PLANS AND POSTRETIREMENT BENEFITS: | |
The Company maintains various flat-benefit plans, final-pay plans with indexation features from none to 2%, and defined contribution plans. The Company’s policy is to maintain its contribution at a level sufficient to cover benefits. Actuarial valuations of the Company’s numerous pension plans were performed once at least in the last three years and the next required valuations will be performed at least over the next three years. | ||
The Company provides postretirement benefits to eligible employees. The costs of these benefits, which are principally health care, are accounted for during the employee’s active service period. | ||
The following tables give a reconciliation of the changes in the plans’ benefit obligations and the fair value of plan assets for the years ended December 31, 2007 and 2006, and a statement of the funded status as of those dates: |
Pension benefits | Postretirement benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Change in benefit obligations: | ||||||||||||||||
Benefit obligations at beginning of year | $ | 595.8 | $ | 555.9 | $ | 40.7 | $ | 40.4 | ||||||||
Service costs | 24.9 | 22.1 | 1.4 | 1.3 | ||||||||||||
Interest costs | 31.9 | 29.0 | 2.0 | 1.9 | ||||||||||||
Plan participants’ contributions | 11.1 | 11.7 | — | — | ||||||||||||
Actuarial (loss) gain | (34.8 | ) | 1.8 | (1.0 | ) | 1.3 | ||||||||||
Benefits and settlements paid | (30.2 | ) | (25.6 | ) | (0.6 | ) | (1.7 | ) | ||||||||
Plan amendments | 5.0 | 0.7 | — | (3.1 | ) | |||||||||||
Curtailment gain | (0.5 | ) | — | — | — | |||||||||||
Acquisition | 32.4 | — | 1.0 | — | ||||||||||||
Other | — | 0.2 | — | 0.6 | ||||||||||||
Benefit obligations at end of year | $ | 635.6 | $ | 595.8 | $ | 43.5 | $ | 40.7 | ||||||||
Pension benefits | Postretirement benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets at beginning of year | $ | 560.4 | $ | 480.8 | $ | — | $ | — | ||||||||
Actual return on plan assets | 5.4 | 68.5 | — | — | ||||||||||||
Employer contributions | 25.0 | 25.0 | 0.6 | 1.7 | ||||||||||||
Plan participants’ contributions | 11.1 | 11.7 | — | — | ||||||||||||
Benefits and settlements paid | (30.2 | ) | (25.6 | ) | (0.6 | ) | (1.7 | ) | ||||||||
Acquisition | 32.3 | — | — | — | ||||||||||||
Fair value of plan assets at end of year | $ | 604.0 | $ | 560.4 | $ | — | $ | — | ||||||||
F-56
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
25. | PENSION PLANS AND POSTRETIREMENT BENEFITS (continued): | |
The plan assets are comprised of: |
2007 | 2006 | |||||||
Equity securities | 56.8 | % | 59.8 | % | ||||
Debt securities | 38.2 | 36.5 | ||||||
Other | 5.0 | 3.7 | ||||||
100.0 | % | 100.0 | % | |||||
As of December 31, 2007, plan assets included shares of the parent company and of a company under common control representing an amount of $2.2 million ($2.5 million as of December 31, 2006). |
Pension benefits | Postretirement benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Reconciliation of funded status: | ||||||||||||||||
Excess of benefit obligations over fair value of plan assets at end of year | $ | (31.6 | ) | $ | (35.4 | ) | $ | (43.5 | ) | $ | (40.7 | ) | ||||
Unrecognized actuarial loss | 47.7 | 47.9 | 11.5 | 13.0 | ||||||||||||
Unrecognized net transition (asset) obligation | (4.6 | ) | (5.2 | ) | 0.4 | 0.5 | ||||||||||
Unrecognized prior service cost (benefit) | 19.9 | 17.0 | (4.6 | ) | (5.1 | ) | ||||||||||
Valuation allowance | (22.8 | ) | (19.5 | ) | — | — | ||||||||||
Net amount recognized | $ | 8.6 | $ | 4.8 | $ | (36.2 | ) | $ | (32.3 | ) | ||||||
Included in the above benefit obligations and fair value of plan assets at year-end are the following amounts in respect of plans that are not fully funded: |
Pension benefits | Postretirement benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Benefit obligations | $ | (457.8 | ) | $ | (585.5 | ) | $ | (43.5 | ) | $ | (40.7 | ) | ||||
Fair value of plan assets | 417.2 | 548.8 | — | — | ||||||||||||
Funded status — plan deficit | $ | (40.6 | ) | $ | (36.7 | ) | $ | (43.5 | ) | $ | (40.7 | ) | ||||
F-57
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
25. | PENSION PLANS AND POSTRETIREMENT BENEFITS (continued): | |
Amounts recognized in the consolidated balance sheets are as follows: |
Pension benefits | Postretirement benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Deferred pension charge | $ | 20.7 | $ | 9.5 | $ | — | $ | — | ||||||||
Accrued benefit liability | (12.1 | ) | (4.7 | ) | (36.2 | ) | (32.3 | ) | ||||||||
Net amount recognized | $ | 8.6 | $ | 4.8 | $ | (36.2 | ) | $ | (32.3 | ) | ||||||
Components of the net benefit costs are as follows: |
Pension benefits | Postretirement benefits | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | |||||||||||||||||||
Service costs | $ | 24.9 | $ | 22.1 | $ | 15.3 | $ | 1.4 | $ | 1.3 | $ | 1.8 | ||||||||||||
Interest costs | 31.9 | 29.0 | 27.7 | 2.0 | 1.9 | 2.2 | ||||||||||||||||||
Actual return on plan assets | (5.4 | ) | (68.5 | ) | (47.2 | ) | — | — | — | |||||||||||||||
Current actuarial gain (loss) | (34.8 | ) | 1.8 | 68.7 | (1.0 | ) | 1.3 | 4.5 | ||||||||||||||||
Current prior service costs (benefits) | 4.9 | 0.7 | 5.6 | — | (3.1 | ) | — | |||||||||||||||||
Curtailment gain and other | (0.5 | ) | — | — | — | — | (1.6 | ) | ||||||||||||||||
Elements of net benefit costs before adjustments to recognize the long-term nature and valuation allowance | 21.0 | (14.9 | ) | 70.1 | 2.4 | 1.4 | 6.9 | |||||||||||||||||
Difference between actual and expected return on plan assets | (36.5 | ) | 33.0 | 15.1 | — | — | — | |||||||||||||||||
Deferral of amounts arising during the period: | ||||||||||||||||||||||||
Actuarial gain (loss) | 34.8 | (1.8 | ) | (68.7 | ) | 1.0 | (1.3 | ) | (4.5 | ) | ||||||||||||||
Prior service (costs) benefits | (4.9 | ) | (0.7 | ) | (5.6 | ) | — | 3.1 | — | |||||||||||||||
Amortization of previously deferred amounts: | ||||||||||||||||||||||||
Actuarial gain (loss) | 1.9 | 2.0 | (0.2 | ) | 0.6 | 0.6 | (0.1 | ) | ||||||||||||||||
Prior service (costs) benefits | 2.0 | 1.8 | 1.6 | (0.5 | ) | (0.7 | ) | (0.3 | ) | |||||||||||||||
Transitional obligations | (0.5 | ) | (0.5 | ) | (0.5 | ) | — | — | 0.1 | |||||||||||||||
Total adjustments to recognize the long-term nature of benefit costs | (3.2 | ) | 33.8 | (58.3 | ) | 1.1 | 1.7 | (4.8 | ) | |||||||||||||||
Valuation allowance | 3.3 | 2.1 | 1.0 | — | — | — | ||||||||||||||||||
Net benefit costs | $ | 21.1 | $ | 21.0 | $ | 12.8 | $ | 3.5 | $ | 3.1 | $ | 2.1 | ||||||||||||
F-58
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
25. | PENSION PLANS AND POSTRETIREMENT BENEFITS (continued): | |
The expense related to defined contribution pension plans amounted to $11.1 million in 2007 ($10.9 million in 2006 and $9.7 million in 2005). | ||
The total cash amount paid or payable for employee future benefits for all plans, consisting of cash contributed by the Company to its funded pension plans, cash payment directly to beneficiaries for its unfunded other benefit plans, and cash contributed to its defined contribution plans, totalled $36.7 million for the year ended December 31, 2007 ($37.6 million in 2006 and $29.0 million in 2005). | ||
The weighted average rates used in the measurement of the Company’s benefit obligations as of December 31, 2007, 2006 and 2005 and current periodic costs are as follows: |
Pension benefits | Postretirement benefits | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | |||||||||||||||||||
Benefit obligations | ||||||||||||||||||||||||
Rates as of year-end: | ||||||||||||||||||||||||
Discount rate | 5.50 | % | 5.00 | % | 5.00 | % | 5.50 | % | 5.00 | % | 5.00 | % | ||||||||||||
Rate of compensation increase | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | ||||||||||||||||||
Current periodic costs | ||||||||||||||||||||||||
Rates as of preceding year-end: | ||||||||||||||||||||||||
Discount rate | 5.00 | % | 5.00 | % | 6.00 | % | 5.00 | % | 5.00 | % | 6.00 | % | ||||||||||||
Expected return on plan assets1 | 7.25 | 7.25 | 7.50 | — | — | — | ||||||||||||||||||
Rate of compensation increase | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | ||||||||||||||||||
1 | After management and professional fees. |
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligations was 9.0% at the end of 2007. The cost, as per an estimate, is expected to decrease gradually for the next eight years to 5.0% and remain at that level thereafter. A one-percentage point change in the assumed health care cost trend would have the following effects: |
Postretirement | ||||||||
benefits | ||||||||
1% | 1% | |||||||
Sensitivity analysis | increase | decrease | ||||||
Effect on service and interest costs | $ | 0.6 | $ | (0.5 | ) | |||
Effect on benefit obligations | 6.7 | (5.2 | ) | |||||
F-59
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES: | |
The Company’s consolidated financial statements are prepared in accordance with Canadian GAAP, which differ in some respects from those applicable in the United States (U.S.). The following tables set forth the impact of material differences between Canadian and U.S. GAAP on the Company’s consolidated financial statements: |
(a) | Consolidated statements of income: |
2007 | 2006 | 2005 | ||||||||||
Net income (loss), as reported in the consolidated statements of income per Canadian GAAP | $ | 327.1 | $ | (169.7 | ) | $ | 96.5 | |||||
Adjustments: | ||||||||||||
Development, pre-operating and start-up costs (i) | 1.9 | (0.7 | ) | (1.3 | ) | |||||||
Pension and postretirement benefits (ii) | 0.8 | 0.9 | 2.1 | |||||||||
Change in fair value and ineffective portion of derivative instruments (iii) | 11.0 | 71.6 | (7.2 | ) | ||||||||
Stock-based compensation (iv) | (6.9 | ) | (4.8 | ) | — | |||||||
Income taxes (v), (vi) | (21.0 | ) | (40.1 | ) | 37.2 | |||||||
Non-monetary transactions (vii) | — | — | 1.5 | |||||||||
(14.2 | ) | 26.9 | 32.3 | |||||||||
Net income (loss), as adjusted per U.S. GAAP | $ | 312.9 | $ | (142.8 | ) | $ | 128.8 | |||||
(b) | Consolidated statements of comprehensive income (loss): |
2007 | 2006 | 2005 | ||||||||||
Comprehensive income (loss) as per Canadian GAAP | $ | 373.1 | $ | (168.5 | ) | $ | 95.2 | |||||
Adjustments to net income (loss) as per (a) above | (14.2 | ) | 26.9 | 32.3 | ||||||||
Adjustments to other comprehensive income | ||||||||||||
Pension and post-retirement benefits (ii) | (5.9 | ) | 17.6 | (18.8 | ) | |||||||
Derivative instruments (iii) | 3.0 | 132.0 | (22.0 | ) | ||||||||
Income taxes (v), (vi) | 0.9 | (64.4 | ) | 73.3 | ||||||||
(2.0 | ) | 85.2 | 32.5 | |||||||||
Comprehensive income (loss) as per U.S. GAAP | $ | 356.9 | $ | (56.4 | ) | $ | 160.0 | |||||
F-60
Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued): |
(b) | Consolidated comprehensive income (loss) (continued): | ||
Accumulated other comprehensive loss as of December 31, 2007, 2006 and 2005 is as follows: |
2007 | 2006 | 2005 | ||||||||||
Accumulated other comprehensive income (loss) as per Canadian GAAP | $ | 9.4 | $ | (1.1 | ) | $ | (2.3 | ) | ||||
Adjustments: | ||||||||||||
Pension and post-retirement benefits (ii) | (58.2 | ) | (52.3 | ) | (30.2 | ) | ||||||
Derivative instruments (iii) | 3.0 | (44.4 | ) | (176.4 | ) | |||||||
Income taxes (ii), (v) | 17.8 | 25.8 | 77.8 | |||||||||
(37.4 | ) | (70.9 | ) | (128.8 | ) | |||||||
Accumulated other comprehensive loss at end of year | $ | (28.0 | ) | $ | (72.0 | ) | $ | (131.1 | ) | |||
(c) | Consolidated balance sheets: |
2007 | 2006 | |||||||||||||||
Canada | United States | Canada | United States | |||||||||||||
Goodwill | $ | 4,081.3 | $ | 4,077.5 | $ | 3,721.1 | $ | 3,717.1 | ||||||||
Other assets | 422.0 | 388.3 | 243.6 | 197.1 | ||||||||||||
Current liabilities | (1,018.9 | ) | (1,053.2 | ) | (956.4 | ) | (945.9 | ) | ||||||||
Long-term debt | (3,002.8 | ) | (2,991.4 | ) | (2,773.0 | ) | (2,743.2 | ) | ||||||||
Derivative financial instruments | (538.7 | ) | (538.7 | ) | (231.3 | ) | (322.8 | ) | ||||||||
Other liabilities | (103.5 | ) | (129.3 | ) | (125.2 | ) | (148.1 | ) | ||||||||
Future income tax liabilities | (292.5 | ) | (252.9 | ) | (118.9 | ) | (81.0 | ) | ||||||||
Non-controlling interest | (154.2 | ) | (150.0 | ) | (142.1 | ) | (137.1 | ) | ||||||||
Contributed surplus (vi), (viii) | (3,217.2 | ) | (3,400.9 | ) | (3,217.2 | ) | (3,395.2 | ) | ||||||||
Deficit | 2,528.7 | 2,717.4 | 2,731.5 | 2,920.3 | ||||||||||||
Accumulated other comprehensive loss | (9.4 | ) | 28.0 | 1.1 | 72.0 | |||||||||||
(i) | Under GAAP in Canada, certain development and pre-operating costs that satisfy specified criteria for recoverability are deferred and amortized. Also, under GAAP in Canada, certain start-up costs incurred in connection with various projects have been recorded in the consolidated balance sheets under the item “Other assets”, and are amortized over a period not exceeding five years. Under GAAP in the United States, these costs must be included in income as incurred. |
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued): |
(c) | Consolidated balance sheets (continued): |
(ii) | Under GAAP in the United States, Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (SFAS 158) was issued in 2006 and requires the recognition in the balance sheet of the over or under funded positions of defined benefit pension and other postretirement plans, along with a corresponding non-cash adjustment, which will be recorded in the accumulated other comprehensive loss. SFAS 158 was adopted prospectively on December 31, 2006 and did not have an impact on the Company’s consolidated statement of income. | ||
Under GAAP in the United States, for 2006 and prior years, if the accumulated benefit obligation exceeded the fair value of a pension plan’s assets, the Company was required to recognize a minimum accrued liability equal to the unfunded accumulated benefit obligation, which was recorded in accumulated other comprehensive loss. The additional minimum liability concept has been eliminated with the adoption of SFAS 158. | |||
On the adoption of SFAS 158, an adjustment of $27.3 million was recorded as a component of the ending balance of accumulated other comprehensive loss as of December 31, 2006 to reflect the unfunded status of benefit plans and the reversal of the minimum pension liability that was recognized in accordance with SFAS 87. Adjustments were also recorded to increase other liabilities by $54.2 million, decrease future income tax liabilities by $12.4 million and to decrease non-controlling interest by $14.5 million. | |||
Under GAAP in Canada, a company is not required to recognize the over or under funded positions or to recognize an additional minimum liability. However, when a defined benefit plan gives rise to an accrued benefit asset, a company must recognize a valuation allowance for the excess of the adjusted benefit asset over the expected future benefit to be realized from the plan asset. GAAP in the United States does not provide for a valuation allowance against pension assets. | |||
(iii) | Prior to 2007, under GAAP in Canada, derivative financial instruments were accounted for on an accrual basis. Realized and unrealized gains and losses were deferred and recognized in income in the same period and in the same financial statement category as the income or expense arising from the corresponding hedged positions. Since January 1, 2007, standards for hedge accounting under Canadian GAAP are now similar to those under U.S. GAAP, as established by the Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. | ||
However, under Canadian GAAP, certain embedded derivatives, such as early settlement options included in certain of the Company’s borrowing agreements, do not meet the criteria to be considered closely related to their host contracts and therefore must be recorded at their fair value with changes in the consolidated statement of income. Under U.S. GAAP, these embedded derivatives are considered closely related to their host contract and do not have to be recorded at their fair value. Accordingly, measurement of hedging relationships ineffectiveness recorded in the consolidated statement of income under U.S. GAAP could differ from the measurement under Canadian GAAP. | |||
Further differences result from the different transition rules and timing of the adoption of the current standards in Canada and in the United States for derivative financial instruments and hedge accounting. |
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued): |
(c) | Consolidated balance sheets (continued): |
(iv) | Under U.S. GAAP, the Company adopted the new standards of FASB No. 123(R), Share-Based Payment (SFAS 123(R)) in 2006. In accordance with SFAS 123(R), the liability related to stock-based awards that call for settlement in cash or other assets, must be measured at its fair value based on the fair value of stock options awards, and shall be remeasured at the end of each reporting period through settlement. Prior to 2006, the Company used the intrinsic value method for the liability related to its stock option plan. Under Canadian GAAP, the liability is measured and remeasured based on the intrinsic value of the stock options awards instead of the fair value. | ||
(v) | Under U.S. GAAP, on January 1, 2007, the FASB issued interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN48), an interpretation of FASB Statement No. 109. FIN48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance as to derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. As a result of the adoption of FIN48, the Company recorded adjustments to increase its opening deficit under U.S. GAAP by $0.3 million, to increase future income tax assets by $4.8 million, to decrease future income tax liabilities by $25.8 million, to increase other liabilities by $31.1 million and to decrease non-controlling interest by $0.2 million. | ||
Under Canadian GAAP, there is no such interpretation and therefore, the reserve related to income taxes contingencies is not based on the same level of likelihood as the new rules of FIN48. | |||
Furthermore, under Canadian GAAP, income taxes are measured using substantially enacted tax rates, while under U.S. GAAP, measurement is based on enacted tax rates. | |||
Other adjustments represent the tax impact of U.S. GAAP adjustments. | |||
(vi) | The Company or its subsidiaries have entered into tax consolidation transactions with the Company’s parent company by which tax losses were transferred between the parties. Under GAAP in Canada, these transactions were recorded in accordance with CICA Handbook 3840, Related Party Transactions. It resulted in the recognition of a deferred credit of $8.4 million in 2006 and $5.7 million in 2007 of which $7.7 million was recognized in income in 2007, and in a reduction of $15.9 million of the Company’s income tax expense in 2005. Under U.S. GAAP, since these transactions related to asset transfers between a subsidiary and its parent company, the difference between the carrying value of the tax benefits transferred and the cash consideration received or paid would have been recognized in contributed surplus. |
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Table of Contents
Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued): |
(c) | Consolidated balance sheets (continued): |
(vii) | In April 2005, Sun Media Corporation, Newspaper segment, exchanged a community publication for another community publication. Under U.S GAAP, this exchange of businesses is recorded in accordance with FASB Statement No. 141, Business Combinations and the cost of the purchase should be determined as the fair value of the consideration given or the fair value of the net assets or equity interest received, whichever is more reliably measurable. Under Canadian GAAP, since this exchange of businesses is a non-monetary transaction, it is accounted for in accordance with CICA Handbook 3830, Non-monetary Transactions, and recorded at the carrying value of the asset or service given up in the exchange adjusted by any monetary consideration received or given. | ||
Accordingly, under US GAAP, this transaction resulted in a gain on disposal of a publication and also resulted in an increase of the purchase price of the publication acquired. | |||
(viii) | Under GAAP in Canada, in 2003, the Company recorded a gain on repurchase of redeemable preferred shares of a subsidiary of $153.7 million in the statement income. Under GAAP in the United States, this gain would have been recognized in contributed surplus. | ||
(ix) | The adjustments to comply with U.S. GAAP, with respect to the consolidated statements of cash flows for the years ended December 31, 2007, 2006 and 2005 would have no effect on cash provided by operations, cash used in investing activities and cash provided by (used in) financing activities. |
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Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
27. | NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY: | |
The Company has access to the cash flow generated by its subsidiaries by way of dividends declared by its public subsidiaries and dividends and advances from its private subsidiaries. However, some of the Company’s subsidiaries have restrictions, based on contractual debt obligations and corporate solvency tests, regarding the amounts of dividends and advances that could be paid to the Company. | ||
The U.S Securities and Exchange Commission requires that the non-consolidated financial statements of the parent company be presented when its subsidiaries have restrictions that may limit the amount of cash that can be paid to the parent company. These non-consolidated and condensed financial statements, as prepared under Canadian GAAP, are as follows: | ||
Non-consolidated and condensed statements of income and comprehensive income (loss) |
2007 | 2006 | 2005 | ||||||||||
Revenues | ||||||||||||
Management fees | $ | 65.4 | $ | 41.8 | $ | 30.0 | ||||||
Interest on loan to subsidiaries | 3.4 | 0.7 | 6.9 | |||||||||
Other | — | 7.3 | 28.0 | |||||||||
68.8 | 49.8 | 64.9 | ||||||||||
Expenses | ||||||||||||
General and administrative | (66.5 | ) | (49.1 | ) | (53.7 | ) | ||||||
Depreciation and amortization | (0.6 | ) | (0.8 | ) | (1.2 | ) | ||||||
Financial | (138.8 | ) | (106.4 | ) | (171.3 | ) | ||||||
Loss before undernoted items | (137.1 | ) | (106.5 | ) | (161.3 | ) | ||||||
Gain on disposal of investments and other assets | 1.0 | 0.1 | — | |||||||||
Loss on debt refinancing | — | (342.1 | ) | (60.8 | ) | |||||||
Loss before income taxes | (136.1 | ) | (448.5 | ) | (222.1 | ) | ||||||
Income taxes | 41.8 | (93.6 | ) | (24.9 | ) | |||||||
(177.9 | ) | (354.9 | ) | (197.2 | ) | |||||||
Equity income from subsidiaries | 505.0 | 185.2 | 293.7 | |||||||||
Net income (loss) | $ | 327.1 | $ | (169.7 | ) | $ | 96.5 | |||||
2007 | 2006 | 2005 | ||||||||||
Net income (loss) | $ | 327.1 | $ | (169.7 | ) | $ | 96.5 | |||||
Other comprehensive income, net of income taxes | 34.5 | — | — | |||||||||
Share of other comprehensive income (loss) from subsidiaries | 11.5 | 1.2 | (1.3 | ) | ||||||||
46.0 | 1.2 | (1.3 | ) | |||||||||
Comprehensive income (loss) | $ | 373.1 | $ | (168.5 | ) | $ | 95.2 | |||||
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Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
27. | NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued): | |
Non-consolidated and condensed statements of cash flows |
2007 | 2006 | 2005 | ||||||||||
Cash flows related to operations | ||||||||||||
Net income (loss) | $ | 327.1 | $ | (169.7 | ) | $ | 96.5 | |||||
Amortization of plant, property and equipment | 0.6 | 0.8 | 1.2 | |||||||||
Net loss on derivative instruments and on foreign currency translation of financial instruments | 5.4 | — | — | |||||||||
Gain on disposal of investments and other assets | (1.0 | ) | (0.1 | ) | — | |||||||
Loss on debt refinancing | — | 342.1 | 60.8 | |||||||||
Repayment of accrued interest on Senior Discount Notes | — | (197.3 | ) | (3.0 | ) | |||||||
Amortization of financing costs and of long term debt discount | 1.5 | 4.8 | 61.2 | |||||||||
Loss on revaluation of the Additional Amount payable | 5.1 | 13.8 | — | |||||||||
Future income taxes | 41.8 | (93.3 | ) | (25.7 | ) | |||||||
Excess of equity income over equity distributions from subsidiaries | (420.3 | ) | (86.3 | ) | (111.2 | ) | ||||||
Net change in non-cash balances related to operations | 56.5 | 21.2 | (29.7 | ) | ||||||||
Cash flows provided by (used in) operations | 16.7 | (164.0 | ) | 50.1 | ||||||||
Cash flows related to investing activities | ||||||||||||
Net acquisitions of investments in subsidiaries | (484.9 | ) | (100.3 | ) | (39.9 | ) | ||||||
Dividends received in excess of accumulated equity income from subsidiaries | — | 10.0 | 210.0 | |||||||||
Reduction to paid-up capital of subsidiaries | 299.6 | 164.6 | — | |||||||||
Proceeds from disposal of a business to a subsidiary | 3.5 | 7.7 | — | |||||||||
Proceeds from disposal of tax deductions to a subsidiary | — | — | 35.2 | |||||||||
Net decrease in temporary investments | — | — | 78.4 | |||||||||
Other | 1.2 | 8.3 | (1.6 | ) | ||||||||
Cash flows (used in) provided by investing activities | (180.6 | ) | 90.3 | 282.1 | ||||||||
Sub-total, balance carried forward | $ | (163.9 | ) | $ | (73.7 | ) | $ | 332.2 |
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Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
27. | NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued): | |
Non-consolidated and condensed statements of cash flows (continued) |
2007 | 2006 | 2005 | ||||||||||
Sub-total, balance brought forward | $ | (163.9 | ) | $ | (73.7 | ) | $ | 332.2 | ||||
Cash flows related to financing activities | ||||||||||||
Proceeds from issuance of redeemable preferred shares | 2,235.0 | 279.0 | 316.9 | |||||||||
Repurchases of redeemable preferred shares | (400.0 | ) | (842.0 | ) | (334.0 | ) | ||||||
Net increase in bank indebtedness | (0.1 | ) | 1.9 | — | ||||||||
Repayments of long-term debt and unwinding of hedging contracts | (20.7 | ) | (1,174.2 | ) | (212.7 | ) | ||||||
Issuance of long-term debt, net of financing fees | 657.5 | 1,186.5 | — | |||||||||
Repayment of the Additional Amount payable | (127.2 | ) | — | — | ||||||||
Net decrease (increase) in prepayments under cross-currency swap agreements | — | 21.6 | (34.1 | ) | ||||||||
Dividends and reduction of Common Shares paid-up capital | (110.0 | ) | (105.0 | ) | (45.0 | ) | ||||||
Net (increase) decrease in convertible obligations, subordinated loans and notes receivable — subsidiaries | (2,072.5 | ) | 563.0 | 17.1 | ||||||||
Net decrease (increase) in advances to or from subsidiaries | 2.1 | 124.9 | (36.9 | ) | ||||||||
Cash flows provided by (used in) financing activities | 164.1 | 55.7 | (328.7 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 0.2 | (18.0 | ) | 3.5 | ||||||||
Cash and cash equivalents at beginning of year | — | 18.0 | 14.5 | |||||||||
Cash and cash equivalents at end of year | $ | 0.2 | $ | — | $ | 18.0 | ||||||
Non-consolidated and condensed balance sheets |
2007 | 2006 | |||||||
Assets | ||||||||
Current assets | $ | 119.3 | $ | 101.4 | ||||
Advances to subsidiaries | 38.7 | 216.3 | ||||||
Investments in subsidiaries | 4,005.6 | 3,448.7 | ||||||
Convertible obligations, subordinated loans and notes receivable — subsidiaries | 2,902.5 | 830.0 | ||||||
Other assets | 40.2 | 155.5 | ||||||
$ | 7,106.3 | $ | 4,751.9 | |||||
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Notes to consolidated financial statements (continued)
(tabular amounts in millions of Canadian dollars, except for option data)
27. | NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued): | |
Non-consolidated and condensed balance sheets (continued) |
2007 | 2006 | |||||||
Liabilities and Shareholders’ equity | ||||||||
Current liabilities | $ | 119.9 | $ | 199.4 | ||||
Long-term debt | 1,626.3 | 1,171.4 | ||||||
Advances from subsidiaries | 69.7 | 245.3 | ||||||
Other liabilities | 175.1 | 68.8 | ||||||
Redeemable preferred shares issued to subsidiaries | 2,665.0 | 830.0 | ||||||
Shareholders’ equity | 2,450.3 | 2,237.0 | ||||||
$ | 7,106.3 | $ | 4,751.9 | |||||
28. | SUBSEQUENT EVENTS | |
In February 2008, the Company acquired all of the non-controlling interest in Nurun Inc., pursuant to its offer to purchase their shares at a price of $4.75 per common share for a total cash consideration of $75.4 million. Common shares of Nurun Inc. were de-listed from the Toronto Stock Exchange after this transaction. | ||
In January 2008, Quebecor World Inc., a company under common control, filed for creditor protection under the Companies’ Creditors Arrangement Act. The Company does not expect any significant impact on its operations in relation with this situation. |
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