Quebecor Inc. Q1 2010 Earnings Call Transcript

Quebecor Inc. Q1 2010 Earnings Call Transcript
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Quebecor Inc. (QBCAF.PK)

Q1 2010 Earnings Call

May 12, 2010 04:30 am ET

Executives

Serge Sasseville - VP, Corporate and Institutional Affairs

Pierre Karl Péladeau - President and CEO

Jean-François Pruneau - VP, Finance

Robert Dépatie - President & CEO, Videotron

Analysts

Maher Yaghi - Desjardins

Jeff Fan - Scotia Capital

Dvai Ghose - Canaccord

Vince Valentini

David McFadgen

Randal Rudniski

Glen Campbell

Presentation

Operator

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Welcome to the Quebecor Media Incorporated Conference Call. I would now like to introduce Serge Sasseville, Vice President of Public Affairs Quebecor Media Inc.

Serge Sasseville

Ladies and gentlemen welcome to this Quebecor conference call. My name is Sasseville, Vice President Corporate and Institutional Affairs. And joining me to discuss Quebecor’s financial and operating results for the first quarter of 2010 are Pierre Karl Péladeau, Chief Executive Officer; Jean-Francois Pruneau, Vice President, Finance, and Robert Dépatie President and CEO of Videotron. You will be able to listen to this conference call on tape until June the 12th by dialing 877-293-8133 and access code #349844. This information is also available on Quebecor’s website at www.quebecor.com. I also want to inform you that certain statements made on the call today maybe considered forward-looking and we would refer you to the risk factors outlined in today's press release and reports filed by the company with regulatory authority. Let's now move on with our first speaker, Pierre Karl Péladeau.

Pierre Karl Péladeau

Thank you, Serge and thank you and good afternoon everyone. So we are pretty pleased to report another excellent quarter. Our financial performance reflects the continued success of our multiplatform strategies from which all our assets can benefit. Our telecommunications segment exhibited a 19th consecutive quarter of customer growth to all of its services. Our news media segment once again reported strong EBITDA growth, resulting in the IS operating margin on the last twelve month basis amongst Canadian peers. Videotron continue to exhibit industry leading performance with revenue up 11% for the quarter, while EBITDA was up 13%. This stellar performance was realized while remaining focused on the necessary steps required for the successful launch of our wireless 3G service.

We have conducted multi-phase testing to maintain the reliability of our platform. We have also reached agreement in respective sitting and tower sharing for nearly 90% of the antenna sites required to launch our service. The equipment has been or is being installed on more than 70% of those sites. Our network build out and commercial launch will be funded from cash flow generated by our operations and should it be necessary with more than $400 million of cash currently on hand as well as $800 million of unused lines of credit.

For a second consecutive quarter, our news media segment reported significant EBITDA growth following the 27% growth exhibited in last quarter of 2009. Our operations continue to improve in the first quarter of this year with the growth of 35%. We are seeing signs of stabilization in our advertising markets, particularly in our national and retail advertising. In addition, our cost saving initiative which we have spoken about for the better part of 2009 continue to fuel meaningful improvement in our operating performance.

Our TV broadcasting operation somewhat suffered from the Vancouver Olympics exhibiting a decline in its operating performance. We however remain confident that our programming strategy and the deployment of our content on multiple platforms will benefit our operation in the long run. It indeed seems that the merits of the content and multi-distribution channel strategy we have been talking about for the last ten years are finally being appropriately recognized as other players in the industry are now positioning themselves to replicate it. I will now let Jean-François to review our consolidated financial result.

Jean-François Pruneau

Thank you, Karl. Quebecor Media’s revenues were up 5% for the first quarter to $948 million mainly due to the growth exhibited by our telecommunications and our interactive technologies and communications operation, however, partly offset by the decline in our news media and leisure and entertainment operations. Revenues from our telecom operations grew 11% to $528 million, and our interactive technologies and communications revenue increased 5% to $24 million. Our news media operations exhibited a revenue decline of 2% to $248 million. Quebecor Media's EBITDA improved $26 million for the quarter to $299 million, a 10% growth.

Excluding the impact of the stock option expense which resulted in an unfavorable variance of $11 million in the quarter as well as the retroactive application of the impact of the settlement reached in the last quarter of last year with the federal government over the CRTC Part II fees, our EBITDA growth stood at 12% in the quarter. The growth of our consolidated EBITDA resulted mainly from a 13% growth from our telecom operation, and at 35% from our news media segments, which was fuelled by the impact of our productivity improvement initiatives implemented throughout fiscal year 2009. EBITDA in our TV broadcasting units exhibited a 45% decline on lower advertising revenues during the Vancouver Olympics and a higher content costs, as a result of our programming strategy.

Quebecor Media’s net income decreased from $105 million in the first quarter of last year to $102 million this year, a 3% decline. The increase in our EBITDA and the decrease in our income tax expense were fully compensated by a $19 million in favorable variance and valuation of financial instruments by a $12 million increase in financial expenses which included $8 million foreign exchange loss on short-term monetary items by a $10 million loss on debt refinancing and by the increase in our depreciation charge.

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