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

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

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

Second quarter operating highlights:


-- Consolidated adjusted operating income(1) of $2,427,000, an unfavourable
variance of $4,944,000 (-67%) from the same quarter of 2015;
-- $2,431,000 adjusted operating loss(1) in the Broadcasting & Production
segment, a $3,298,000 negative variance due primarily to a 20% increase
in the adjusted operating loss(1) of "TVA Sports" because of lower
advertising sales resulting from the failure of the Montreal Canadiens
and other Canadian teams in the National Hockey League ("NHL") for the
Stanley Cup playoffs;
-- $3,920,000 adjusted operating income(1) in the Magazines segment, up
$2,701,000 (222%) mainly because of the addition for part of the quarter
of the adjusted operating results generated by the magazines acquired
from Transcontinental, the operational synergies realized since the
integration of the acquired magazines, and other cost-cutting
initiatives;
-- $938,000 adjusted operating income(1) in the Film Production &
Audiovisual Services segment ("MELS"), a negative variance of $4,347,000
(-82%) due to lower volume of activities in soundstage and equipment
rental and in visual effects. In the same quarter of 2015, our
soundstages and production equipment were heavily used for the major US
production X-Men Apocalypse.
"Our quarterly results were impacted by the decline in the TVA Sports channel's advertising sales, due in large part to the fact that the Montreal Canadiens didn't make the NHL playoffs. Apart from that unusual circumstance, we are satisfied with the performance of the other units of our Broadcasting & Production segment, particularly TVA Network, which grew its adjusted operating income by 2.2% and increased its market share to 23.4%,(2) up 1.4 percentage points from the same period of 2015. TVA Network carried 4 of the top 5 most-watched programs in Quebec, including La Voix, which was the Number one show again with more than 2.7 million viewers", commented Julie Tremblay, President and Chief Executive Officer of the Corporation.

"The increase in the Magazines segment's operating results was the result of a concerted effort to successfully integrate the magazines acquired from Transcontinental on April 12, 2015. Our editorial and content management teams are constantly improving the content of our brands and magazines in order to address our readers' ever-changing needs. The latest Vividata(3) surveys show that we have grown our print readership by 2% and maintained our leading position in Canada's magazine publishing industry with nearly 9 million readers across all platforms", said Ms Tremblay.

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

Definition

Adjusted operating income (loss)

In its analysis of operating results, the Corporation defines adjusted operating income (loss) as net income (loss) before depreciation of property, plant and equipment, amortization of intangible assets, financial expenses, operational restructuring costs, impairment of assets and others, income taxes and share of loss (income) of associated corporations. Adjusted operating income (loss) as defined above is not a measure of results that is consistent with International Financial Reporting Standards ("IFRS"). Neither is it intended to be regarded as an alternative to other financial performance measures or to the statement of cash flows as a measure of liquidity. This measure should not be considered in isolation or as a substitute for other performance measures prepared in accordance with IFRS. This measure is used by management and the Board of Directors to evaluate the Corporation's consolidated results and the results of its segments. This measure eliminates the significant level of impairment, depreciation and amortization of tangible and intangible assets and is unaffected by the capital structure or investment activities of the Corporation and its segments. Adjusted operating income (loss) is also relevant because it is a significant component of the Corporation's annual incentive compensation programs. The Corporation's definition of adjusted operating income (loss) may not be identical to similarly titled measures reported by other companies.

Forward-looking information disclaimer

The statements in this news release that are not historical facts may be forward-looking statements and are subject to important known and unknown risks, uncertainties and assumptions which could cause the Corporation's actual results for future periods to differ materially from those set forth in the forward-looking statements. Forward-looking statements generally can be identified by the use of the conditional, the use of forward-looking terminology such as "propose," "will," "expect," "may," "anticipate," "intend," "estimate," "plan," "foresee," "believe" or the negative of these terms or variations of them or similar terminology. Factors that may cause actual results to differ from current expectations include seasonality, operational risks (including pricing actions by competitors and risks related to the loss of key customers in the Film Production & Audiovisual Services segment), programming, content and production cost risks, credit risk, government regulation risks, government assistance risks, changes in economic conditions, fragmentation of the media landscape, and labour relation risks.

Investors and others are cautioned that the foregoing list of factors that may affect future results is not exhaustive and that undue reliance should not be placed on any forward-looking statements. For more information on the risks, uncertainties and assumptions that could cause the Corporation's actual results to differ from current expectations, please refer to the Corporation's public filings available at www.sedar.com and http://groupetva.ca, including, in particular, the "Risks and Uncertainties" section of the Corporation's annual Management's Discussion and Analysis for the year ended December 31, 2015 and the "Risk Factors" section in the Corporation's 2015 annual information form.

The forward-looking statements in this news release reflect the Corporation's expectations as of August 1(st), 2016 and are subject to change after this date. The Corporation expressly disclaims any obligation or intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by the applicable securities laws.

TVA Group

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



_____________________________

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

(2) Source: Numeris - French Quebec, April 1 to June 30, 2016, Mon-Sun,
2:00 - 2:00, All 2+

(3) Source : Vividata, Q1 2016, Total Canada, 12+




TVA GROUP INC.

Interim consolidated statements of loss


(unaudited)

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


Three-month periods Six-month periods
ended June 30 ended June 30
------------- -------------

Note 2016 2015 2016 2015
---- ---- ---- ---- ----


Revenues 2 $144,229 $159,424 $289,752 $285,938


Purchases of goods and
services 3 101,227 109,869 204,760 203,280

Employee costs 40,575 42,184 82,268 82,978

Depreciation of property, plant and
equipment and amortization of intangible
assets 8,920 7,079 17,354 13,887

Financial expenses 4 866 870 1,836 2,805

Operational restructuring
costs, impairment of
assets and others 5 708 2,304 1,160 2,711
------------------------- --- --- ----- ----- -----

Loss before tax recovery and share of
(income) loss of associated corporations (8,067) (2,882) (17,626) (19,723)
----------------------------------------- ------ ------ ------- -------


Tax recovery (2,126) (412) (4,225) (6,394)


Share of (income) loss of associated
corporations (222) 258 (328) 4,110
------------------------------------ ---- --- ---- -----

Net loss $(5,719) $(2,728) $(13,073) $(17,439)
======== ======= ======= ======== ========


Net loss attributable to:

Shareholders $(5,676) $(2,588) $(13,065) $(17,299)

Non-controlling interest (43) (140) (8) (140)



Basic and diluted loss per
share attributable to
shareholders 7 c) $(0.13) $(0.06) $(0.30) $(0.50)
========================== === ====== ====== ====== ======


See accompanying notes to interim condensed consolidated financial statements.




TVA GROUP INC.

Interim consolidated statements of comprehensive loss


(unaudited)

(in thousands of Canadian dollars)


Three-month periods Six-month periods
ended June 30 ended June 30
------------- -------------

Note 2016 2015 2016 2015
---- ---- ---- ---- ----


Net loss $(5,719) $(2,728) $(13,073) $(17,439)


Other comprehensive items that may be reclassified
to income:

Cash flow hedge:

Gain (loss) on valuation of
derivative financial instruments 9 71 182 163 (365)

Deferred income taxes 9 (19) (49) (44) 98

Other comprehensive items that will not be
reclassified to income:

Defined benefit
plans:

Re-measurement loss 9 (10,000) - (25,000) -

Deferred income taxes 9 2,685 - 6,685 -
--------------------- --- ----- --- ----- ---

(7,263) 133 (18,196) (267)
------ --- ------- ----

Comprehensive loss $(12,982) $(2,595) $(31,269) $(17,706)
================== ======== ======= ======== ========


Comprehensive loss attributable to:

Shareholders $(12,939) $(2,455) $(31,261) $(17,566)

Non-controlling
interest (43) (140) (8) (140)
================ === ==== === ====


See accompanying notes to interim condensed consolidated financial statements.




TVA GROUP INC.

Interim consolidated statements of equity


(unaudited)

(in thousands of Canadian dollars)


Equity attributable to shareholders Equity Total
attributable equity
to non-
controlling
interest
---

Capital Contributed Retained Accumula-
stock surplus earnings ted other
(note 7) comprehen-
sive loss
(note 9)
--- --------


Balance as at
December 31, 2014 $98,647 $581 $162,595 $(3,618) $ - $258,205

Business acquisitions (note 6) - - - - 565 565

Net loss - - (17,299) - (140) (17,439)

Issuance of share capital, net
of transaction costs 108,725 - - - - 108,725

Other comprehensive loss - - - (267) - (267)
------------------------ --- --- --- ---- --- ----

Balance as at June 30, 2015 207,372 581 145,296 (3,885) 425 349,789

Business acquisitions (note 6) - - - - (148) (148)

Net (loss) income - - (37,927) - 399 (37,528)

Transaction costs related to
issuance of share capital (92) - - - - (92)

Other comprehensive loss - - - (2,589) - (2,589)
------------------------ --- --- --- ------ --- ------

Balance as at December 31, 2015 207,280 581 107,369 (6,474) 676 309,432

Net loss - - (13,065) - (8) (13,073)

Other comprehensive loss - - - (18,196) - (18,196)
------------------------ --- --- --- ------- --- -------

Balance as at June
30, 2016 $207,280 $581 $94,304 $(24,670) $668 $278,163
================== ======== ==== ======= ======== ==== ========


See accompanying notes to interim condensed consolidated financial statements.







TVA GROUP INC.

Interim consolidated balance sheets


(unaudited)

(in thousands of Canadian dollars)


June 30, December 31,
2016 2015
---- ----


Assets


Current assets

Cash $5,312 $11,996

Accounts receivable 138,299 150,930

Income taxes 7,830 6,787

Programs, broadcast rights and
inventories 59,127 79,495

Prepaid expenses 6,987 4,064
---------------- ----- -----

217,555 253,272

Non-current assets

Broadcast rights 49,269 36,321

Investments 12,629 12,594

Property, plant and equipment 208,027 208,103

Intangible assets 35,999 39,770

Goodwill 77,985 77,985

Deferred income taxes 17,443 7,069
--------------------- ------ -----

401,352 381,842
------- -------

Total assets $618,907 $635,114
============ ======== ========



Note June 30, December 31,
2016 2015
---- ----


Liabilities and equity


Current liabilities

Bank overdraft $6,244 $ -

Accounts payable and accrued
liabilities 103,099 112,914

Income taxes 341 1,769

Broadcast rights payable 91,301 88,867

Provisions 5,573 7,107

Deferred revenues 17,023 28,148

Short-term debt 5,156 4,219
--------------- ----- -----

228,737 243,024

Non-current liabilities

Long-term debt 69,144 68,812

Defined benefit plan liability 30,349 2,322

Other liabilities 9,707 8,652

Deferred income taxes 2,807 2,872
--------------------- ----- -----

112,007 82,658

Equity

Capital stock 7 207,280 207,280

Contributed surplus 581 581

Retained earnings 94,304 107,369

Accumulated other comprehensive loss 9 (24,670) (6,474)
------------------------------------ --- ------- ------

Equity attributable to shareholders 277,495 308,756

Non-controlling interest 668 676
------------------------ --- ---

278,163 309,432
------- -------

Total liabilities and equity $618,907 $635,114
============================ ======== ========


See accompanying notes to interim condensed consolidated financial statements.


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





TVA GROUP INC.

Interim consolidated statements of cash flows


(unaudited)

(in thousands of Canadian dollars)


Three-month periods Six-month periods
ended June 30 ended June 30
------------- -------------

Note 2016 2015 2016 2015
---- ---- ---- ---- ----


Cash flows related to operating activities

Net loss $(5,719) $(2,728) $(13,073) $(17,439)

Adjustments for:

Depreciation and amortization 8,989 7,148 17,492 14,063

Share of (income) loss of
associated corporations (222) 258 (328) 4,110

Deferred income taxes (2,032) (334) (3,800) (6,027)

Loss on contingent consideration
receivable 5 198 - 198 -

Loss on valuation of derivative
financial instruments 1 2 3 17
-------------------------------- --- --- --- ---

1,215 4,346 492 (5,276)

Net change in
non-cash
balances
related to
operating
activities 6,325 42,122 2,272 76,871
-------------- ----- ------ ----- ------

Cash flows provided by operating activities 7,540 46,468 2,764 71,595
------------------------------------------- ----- ------ ----- ------


Cash flows related to investing activities

Additions to
property, plant
and equipment (3,306) (6,034) (16,197) (12,094)

Additions to
intangible
assets (546) (391) (1,045) (899)

Net change in
investments 10 a) 293 (539) 293 (2,620)

Net business
acquisitions 6 222 (55,200) 222 (55,200)
------------- --- --- ------- --- -------

Cash flows used in investing activities (3,337) (62,164) (16,727) (70,813)
--------------------------------------- ------ ------- ------- -------


Cash flows related to financing activities

Change in bank
overdraft (5,574) - 6,244 (4,486)

Increase in
long-term debt 2,058 2,909 1,131 3,098

Repayment of
credit facility
from parent
corporation 10 b) - - - (100,000)

Issuance of
share capital,
net of
transaction
costs 7 - - - 108,725

Repayment of
derivative
financial
instruments (46) (54) (96) (110)
------------- --- --- --- ----

Cash flows (used in) provided by financing
activities (3,562) 2,855 7,279 7,227
------------------------------------------ ------ ----- ----- -----

Net change in cash 641 (12,841) (6,684) 8,009

Cash at beginning of period 4,671 20,850 11,996 -
--------------------------- ----- ------ ------ ---

Cash at end of period $5,312 $8,009 $5,312 $8,009
===================== ====== ====== ====== ======

Interest and taxes reflected as operating activities

Net interest
paid $637 $836 $1,271 $2,551

Income taxes
paid (net of
refunds) 936 44 2,046 1,460
============= === === ===== =====


See accompanying notes to interim condensed consolidated financial statements.


TVA GROUP INC.

Notes to interim condensed consolidated financial statements

Three-month and six-month periods ended June 30, 2016 and 2015 (unaudited)

(Tabular amounts are expressed in thousands of Canadian dollars, except per share and per option amounts)

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

The Corporation's businesses experience significant seasonality due to, among other factors, seasonal advertising patterns, consumers' viewing, reading and listening habits, and demand for production facilities from international and local producers. Because the Corporation depends on the sale of advertising for a significant portion of its revenues, operating results are also sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising expenditures. Accordingly, the results of operations for interim periods should not necessarily be considered indicative of full-year results.

1. Basis of presentation

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

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

2. Revenues

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







Three-month periods Six-month periods

ended June 30 ended June 30
------------- -------------

2016 2015 2016 2015
---- ---- ---- ----


Advertising
services $70,252 $76,311 $134,702 $134,943

Royalties,
rental and
postproduction
services and
other
services
rendered 48,307 55,117 102,327 101,875

Product sales 25,670 27,996 52,723 49,120
------------- ------ ------ ------ ------

$144,229 $159,424 $289,752 $285,938
======== ======== ======== ========


3. Purchases of goods and services

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




Three-month periods Six-month periods

ended June 30 ended June 30
------------- -------------

2016 2015 2016 2015
---- ---- ---- ----


Royalties, rights and
production costs $67,514 $75,209 $137,971 $144,353

Printing and
distribution 8,635 8,778 16,823 12,778

Services rendered by
parent corporation

-Commissions on advertising
sales 5,447 5,595 10,315 8,746

- Others 2,189 2,237 4,391 4,689

Building costs 5,154 5,497 10,777 9,829

Marketing, advertising
and promotion 5,597 4,543 9,194 9,110

Others 6,691 8,010 15,289 13,775
------ ----- ----- ------ ------

$101,227 $109,869 $204,760 $203,280
======== ======== ======== ========


4. Financial expenses







Three-month periods Six-month periods

ended June 30 ended June 30
------------- -------------

2016 2015 2016 2015
---- ---- ---- ----


Interest on long-
term debt $603 $773 $1,276 $1,611

Interest on
credit facility
from parent
corporation
(note 10 b)) - - - 805

Foreign exchange
loss 98 25 233 166

Amortization of
financing costs 69 69 138 176

Interest expense
on net defined
benefit
liability 87 13 174 26

Loss on valuation
of derivative
financial
instruments 1 2 3 17

Others 8 (12) 12 4
------ --- --- --- ---

$866 $870 $1,836 $2,805
==== ==== ====== ======


5. Operational restructuring costs, impairment of assets and others

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




Three-month periods Six-month periods
ended June 30
ended June 30
-------------

2016 2015 2016 2015
---- ---- ---- ----


Broadcasting
&
Production $404 $465 $404 $465

Magazines 76 1,280 390 1,280

Film
Production
&
Audiovisual
Services 18 90 96 335
------------ --- --- --- ---

$498 $1,835 $890 $2,080
==== ====== ==== ======


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

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

6. Business acquisitions and disposals

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

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

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






Assets acquired

Current assets $20,930

Investment 2,237

Property, plant and equipment 867

Intangible assets 19,250

Goodwill 34,162

Deferred income taxes 400
--------------------- ---

77,846

Liabilities assumed

Current liabilities (21,143)
------------------- -------

(21,143)
-------

Net assets acquired at fair value 56,703
--------------------------------- ------

Non-controlling interest (417)
------------------------ ----

Consideration in cash $56,286
===================== =======


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

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

Global Vision

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

7. Capital stock

a) Authorized capital stock

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

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

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

b) Issued and outstanding capital stock




June 30, December 31,

2016 2015
---- ----


4,320,000 Class A common
shares $72 $72

38,885,535 Class B shares 207,208 207,208
------------------------- ------- -------

$207,280 $207,280
======== ========


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

c) Loss per share attributable to shareholders

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




Three-month periods Six-month periods

ended June 30 ended June 30
------------- -------------

2016 2015 2016 2015
---- ---- ---- ----


Net loss
attributable to
shareholders $(5,676) $(2,588) $(13,065) $(17,299)
================ ======= ======= ======== ========


Weighted average
number of basic
and diluted
shares
outstanding 43,205,535 43,205,535 43,205,535 34,449,274
================ ========== ========== ========== ==========


Basic and diluted
loss per share
attributable to
shareholders $(0.13) $(0.06) $(0.30) $(0.50)
================= ====== ====== ====== ======


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

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




Six-month period ended June 30, 2016
------------------------------------

Corporation's Class B Quebecor Media

stock options stock options
------------- -------------

Number Weighted Number Weighted
average average
exercise exercise
price price
--------- ---------


Balance
as
at
December
31,
2015 463,371 $13.30 226,200 $61.70

Exercised - - (3,800) 57.39

Expired (49,250) 15.99 - -
------- ------- ----- --- ---

Balance
as
at
June
30,
2016 414,121 $12.98 222,400 $61.78
======= ======= ====== ======= ======


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

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

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

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

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

9. Accumulated other comprehensive loss




Cash flow Defined Total

hedge benefit plans
----- -------------


Balance as at
December 31, 2014 $ - $(3,618) $(3,618)

Other comprehensive
loss (267) - (267)
------------------- ---- --- ----

Balance as at June
30, 2015 (267) (3,618) (3,885)

Other comprehensive
loss (71) (2,518) (2,589)
------------------- --- ------ ------

Balance as at
December 31, 2015 (338) (6,136) (6,474)

Other comprehensive
income (loss) 119 (18,315) (18,196)
------------------- --- ------- -------

Balance as at June
30, 2016 $(219) $(24,451) $(24,670)
================== ===== ======== ========


10. Related party transactions

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

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

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

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

b) Credit facility from parent corporation

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

11. Fair value of financial instruments

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



Level 1: quoted prices (unadjusted) in
active markets for identical
assets or liabilities;


Level 2: inputs other than quoted prices
included in Level 1 that are
observable for the asset or
liability, either directly (i.e.,
as prices) or indirectly (i.e.,
derived from prices); and


Level 3: inputs that are not based on
observable market data
(unobservable inputs).


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

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




June 30, 2016 December 31, 2015
------------- -----------------

Carrying Fair Carrying Fair
amount value amount value
------ ----- ------ -----


Derivative
financial
instrument $558 $558 $814 $814

Long-term
debt(1) 74,928 74,928 73,797 73,797
========= ====== ====== ====== ======

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


12. Segmented information

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

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


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



Three-month periods Six-month periods

ended June 30 ended June 30
------------- -------------

2016 2015 2016 2015
---- ---- ---- ----


Revenues

Broadcasting & Production $105,061 $110,578 $211,024 $214,101

Magazines 29,197 31,347 56,684 46,225

Film Production & Audiovisual
Services 12,650 19,855 28,162 30,104

Intersegment items (2,679) (2,356) (6,118) (4,492)
------------------ ------ ------ ------ ------

144,229 159,424 289,752 285,938

Adjusted operating income
(loss) (1)

Broadcasting & Production (2,431) 867 (6,315) (7,792)

Magazines 3,920 1,219 5,979 2,184

Film Production & Audiovisual
Services 938 5,285 3,060 5,288
------------------------------ --- ----- ----- -----

2,427 7,371 2,724 (320)

Depreciation of property,
plant and equipment and
amortization of intangible
assets 8,920 7,079 17,354 13,887

Financial expenses 866 870 1,836 2,805

Operational restructuring
costs, impairment of
assets and others 708 2,304 1,160 2,711
------------------------- --- ----- ----- -----

Loss before tax recovery
and share of (income) loss
of associated corporations $(8,067) $(2,882) $(17,626) $(19,723)
=========================== ======= ======= ======== ========




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


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


SOURCE TVA Group

TVA Group

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

Web Site: tva.canoe.ca/groupetva


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