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GENERAL INFORMATION
TABLE OF CONTENTS
HIGHLIGHTS
QUEBECOR INC.: 2002 HIGHLIGHTS
OVERVIEW OF QUEBECOR INC.
MESSAGE TO SHAREHOLDERS
QUEBECOR INC.: A symbiotic relationship
with the arts for more than 50 years
Vidéotron
Archambault Group
TVA Television Network
Sun Media Corporation
TVA Publishing
Books
Le SuperClub Vidéotron
Netgraphe
Quebecor World
FINANCIAL SECTION
LIST OF DIRECTORS AND OFFICERS
OF QUEBECOR INC.
2
3
4
6
10
13
14
16
18
22
24
25
26
27
29
96
ANNUAL MEETING
Shareholders are invited to attend the Annual Meeting
of Shareholders to be held at 10:30 a.m. on Thursday,
May 8, 2003 at Studio F, TVA Group Inc.,
1425 Alexandre-DeSève Street, Montréal, Québec.
STOCK EXCHANGE LISTINGS
The Class A Multiple Voting Shares and the Class B Subordinate
Voting Shares are listed on the Toronto Stock Exchange, under the
ticker symbols QBR.A and QBR.B, respectively.
REGISTRAR AND TRANSFER AGENT
Computershare Trust Company of Canada
1500 University Street
Suite 700
Montréal, Québec
H3A 3S8
TRANSFER OFFICES
– Toronto
– Vancouver
– United States (Computershare Trust Company, Inc. – Denver, CO)
AUDITORS
KPMG LLP
INFORMATION
For further information or to obtain copies of the Annual Report and
the Annual Information Form, please contact the Company’s
Corporate Communications at (514) 380-1973, or address
correspondence to:
612 Saint-Jacques Street
Montréal, Québec
H3C 4M8
Web Site: http://www.quebecor.com
Vous pouvez vous procurer un exemplaire français de ce rapport
annuel à l’adresse indiquée ci-dessus.
DUPLICATE COMMUNICATIONS
Shareholders who receive more than one copy of a document,
particularly of the Annual Report or the quarterly reports, are
requested to notify Computershare Trust Company of Canada
at (514) 982-7270 or 1 800 564-6253.
CURRENCY
All dollar amounts appearing in this Annual Report are in Canadian
dollars, except if another currency is specifically mentioned.
CREDITS
Graphic design: Benoit Sauriol
Photography: Daniel Auclair
Printing: Quebecor World Graphique-Couleur
ISBN: 2-922430-11-1
Legal Deposit – Bibliothèque nationale du Québec, 2003
Legal Deposit – National Library of Canada, 2003
Printed in Canada
Q U E B E C O R I N C .
>> H I G H L I G H T S
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
Operations
Revenues
Operating income before amortization, financial expenses,
reserve for restructuring of operations and other special charges,
write-down of goodwill, gains on sale of business, of shares of a
2002
2001
(restated 1)
2001
(restated 1)
(pro forma 2)
2000
(restated1)
$
12,014.0
$
11,633.3
$
12,069.4
$
10,914.8
subsidiary and of a portfolio investment and gains on dilution
2,021.4
1,889.7
2,019.3
1,790.1
Contribution to net income
Continued operations
Goodwill amortization
Unusual items and write-down of goodwill
Discontinued operation
Net income (loss)
129.4
–
(37.5)
–
91.9
66.0
(105.9)
(208.8)
–
(248.7)
89.4
(129.3)
(208.8)
–
(248.7)
Cash flows provided by continued operations
1,137.8
1,103.5
1,220.3
Basic per share data
Contribution to net income
Continued operations
Goodwill amortization
Unusual items and write-down of goodwill
Discontinued operation
Net income (loss)
2
Dividends
Shareholders' equity
Weighted average number of shares outstanding (in millions)
$
2.00
–
(0.58)
–
1.42
–
22.88
64.6
$
1.02
(1.64)
(3.23)
–
(3.85)
0.39
39.70
64.6
$
1.38
(2.00)
(3.23)
–
(3.85)
0.39
39.70
64.6
204.5
(66.8)
702.0
246.1
1,085.8
1,447.6
3.17
(1.03)
10.86
3.81
16.81
0.51
43.23
64.6
$
Financial position
Working capital
Shareholders' equity
Total assets
Employees
Return on average equity
Continued operations
Total
(599.3)
1,478.8
17,130.4
(244.9)
2,565.9
19,503.0
(244.9)
2,565.9
19,503.0
(1,785.8)
2,793.6
17,604.7
50,000
54,000
54,000
52,000
6.4 %
4.5 %
2.5 %
(9.3) %
3.3 %
(9.3) %
9.1 %
48.2 %
1 See note 1(a)(ii) to the consolidated financial statements for the year ended December 31, 2002.
2 This column gives effect to the changes of control over the Cable Television segment and TVA Group Inc. as if they had occurred on January 1, 2001 and, accordingly, to the consolidation of the
activities of these segments as of January 1, 2001 (please refer to note 2 to the consolidated financial statements for the year ended December 31, 2002).
Q U E B E C O R I N C .
Q U E B E C O R I N C.
2 0 0 2
H I G H L I G H T S
Quebecor World signs
new contract with catalogue
retailer Brylane.
Videotron Telecom acquires
bulk of Toronto-based Stream
Intelligent Networks’ strategic
assets.
In a Canadian first,
Canoë Digital, an online
jukebox featuring new releases
by French-language artists,
is launched.
Le SuperClub Vidéotron
signs new, more advantageous
revenue-sharing agreements
with US studios Columbia
and Universal.
Vidéotron
launches
Extreme ultra
high-speed
Internet
service.
Netgraphe closes $6 million financing agreement.
Archambault Group opens
its 12th store at Complexe
Les Ailes in Montréal.
Sun Media metropolitan
dailies launch special
sections Le Journal Votre
Argent, At Home Magazine
and London This Week.
Quebecor
World signs
US$100
million+
contract with
L.L.Bean.
Quebecor World lands three
major contracts: Simon &
Shuster publishing house
(US$230 million); US
grocery chain Albertsons
(US$150 million); printing
telephone directories for the
Yellow Pages Group Co.
($270 million).
Vidéotron’s high-speed cable
Internet service passes 300,000
subscriber mark.
Vidéotron Télécom continues
expansion in southern Ontario
with acquisition of fibre-optic
routes from 360networks.
Webfin.com wins Boomerang award in best financial site
category for second year in a row.
>>
JANUARY
>>
FEBRUARY
>>
MARCH
>>
APRIL
>>
MAY
>>
JUNE
>>
JULY
>>
AUGUST
>>
SEPTEMBER
>>
OCTOBER
>>
NOVEMBER
>>
DECEMBER
Q U E B E C O R I N C .
BBM releases fall 2001 ratings, which give TVA
a 35% market share, more than its two main rivals,
Radio-Canada (20%) and TQS (14%), combined.
Quebecor launches
new convergence
projects exceeding
$5 million.
Quebecor World closes acquisition
of Hachette Filipacchi’s European
printing facilities.
Revue Commerce
ranks four B2C Web
sites developed
by Nurun – Rona.ca,
Archambault.ca,
Lorealparis.ca and
Airtransat.com – among
the best in Québec.
TVA Group acquires Publicor, Quebecor
Media’s magazines division, consolidating
TVA Publishing’s position as the top
magazine publisher in Québec.
Nurun wins an OCTAS award
in the B2C e-business category
for the Rona.ca Web site.
Labour dispute at
Vidéotron Télécom
is settled.
3
A consortium formed by TVA Group and Radio
Nord Communications agrees to acquire seven
Radiomédia radio stations and CFOM-FM.
Netgraphe
sells its
Spanish portal
Micanoa.com.
Nurun signs
contract worth
nearly $3 million
with the Québec
Pension Plan.
Vidéotron launches Personal Video Recorder
(PVR) capable of storing up to 50 hours
of programming.
Quebecor World signs long-term $240 million contract with magazine
publisher Rogers Publishing.
O V E R V I E W O F Q U E B E C O R I N C .
Q U E B E C O R M E D I A I N C .
(Revenue figures are for the 2002 financial year)
Quebecor Media Inc. includes all of Quebecor’s media properties, most of which are industry leaders
in Québec or Canada. Together, Quebecor Media companies have annual revenues of over $2.2 billion.
Cable Television
Revenues: $715.6 M
Vidéotron ltée
• TVA Publishing Inc.: top magazine publisher
in Québec, publishes all Quebecor Media
magazines including former Publicor titles.
Business Telecommunications
Revenues: $91.9 M
(cid:2) Main publications: 7 Jours, Le Lundi,
Vidéotron Télécom ltée
• Largest cable operator in Québec and third-
largest in Canada: 1.4 million subscribers,
including over 170,000 to illico digital
television service.
• One of the largest two-way HFC (hybrid fibre-
optic/coaxial cable) networks in North America.
• Largest provider of high-speed cable Internet
access in Québec with 306,000 subscribers.
TV Hebdo, Dernière Heure, Star inc., Cool !,
Femmes d’aujourd’hui, Guide Internet,
Clin d’œil, Filles d’aujourd’hui,
Femme, Les idées de ma maison,
Décoration Chez-Soi, Rénovation-Bricolage
and Échos Vedettes.
Leisure and Entertainment
• Leading provider of business
telecommunications solutions.
• 10,000 km+ fibre-optic network covering
more than 80% of business locations in
Québec and Ontario urban centres.
• VTL’s network supports direct connectivity
with networks in Ontario, eastern Québec,
the Maritimes and the US.
• Canal Vox: community channel serving most
Revenues: $244.6 M
parts of Québec.
Web Integration | Technology
Archambault Group Inc.
Revenues: $79.8 M
Newspapers
• Largest chain of music stores in eastern
Revenues: $853.6 M
Canada.
Sun Media Corporation
• 2nd largest press group in Canada.
• 8 metropolitan dailies: Le Journal de Montréal,
4
Le Journal de Québec, The Ottawa Sun,
The Toronto Sun, The London Free Press,
The Winnipeg Sun, The Edmonton Sun,
The Calgary Sun.
• 12 stores, including 11 superstores, selling
CDs, books, magazines, videos and DVDs.
• 3 e-commerce sites: Archambault.ca,
Camelot.ca, Paragraphbooks.com.
• Select (formerly Distribution Select, Musicor
and Musicor Vidéo): largest independent
distributor of music and videos in Canada.
Nurun Inc.
• Web agency specializing in cybermarketing,
Web design and development, customer
relationship management (CRM), automated
publishing and interactive television solutions.
• Network of offices in major North American
and European cities serving major corporations
and world brands.
Mindready Solutions Inc.
• Test engineering, automated manufacturing
and real-time communications solutions.
• Services geared to the telecom, automotive,
aerospace, industrial and medical markets.
Internet | Portals
Revenues: $26.8 M
Books segment
• Largest group of publishing houses in Québec:
(cid:2) General literature: Éditions Libre
Expression, Éditions Internationales Alain
Stanké, Éditions du Trécarré, Éditions
Logiques, Éditions Quebecor.
(cid:2) Textbooks: Éditions CEC.
• More than 900 titles released and over
Netgraphe Inc.
3 million copies sold in 2002.
• CANOE network of portals and
• Québec-Livres: major Canadian distributor and
special-interest sites:
marketer of French-language books.
Le SuperClub Vidéotron ltée
• Largest chain of video stores in Québec with
30% market share.
• 173 locations.
• Nearly 24 million rentals per year.
(cid:2) Canoe.ca, Canoe.qc.ca, FYICalgary.com,
FYILondon.com, La Toile du Québec
(toile.com), Webfin.com, Megagiciel.com
and Multimedium.com.
• Commercial online services:
(cid:2) Jobboom.com, MatchContact.com,
Autonet.ca, ClassifiedExtra.ca,
Shop.canoe.ca.
Q U E B E C O R I N C .
• Bowes Publishers Limited and Québec
Community Newspapers division:
(cid:2) 175 weeklies and buyers guides, 18 specialty
publications across Canada.
• Montréal Métropolitain: free commuter daily
in Montréal.
• Messageries Dynamiques: largest print media
distributor in Québec.
Broadcasting
Revenues : $323.4 M
TVA Group Inc.
• Largest French-language private broadcaster
in North America.
• Owner of 6 of the 10 stations in the
TVA network.
• 36% market share in Québec in fall 2002.
• Owner of LCN (Le Canal Nouvelles)
all-news channel.
Q U E B E C O R W O R L D I N C .
Quebecor World is the largest commercial print media services company in the world. It is a leader in most of its
major product categories: magazines, inserts, circulars, books, catalogues, specialty printing, direct mail, directories,
digital premedia, logistics, mail list technology and other value added services.
Highlights
•Largest printer of magazines in the world:
approximately 5 billion copies per year.
•Prints more than 250 million telephone
directories per year.
•World leader in printing catalogues for major
Western retailers.
•Prints one billion books per year for major
publishing houses.
•Specialist in advertising inserts and newspaper
supplements, with print runs of up to 40 million.
•Direct mail: full range of direct marketing services.
•Digital printing: complete prepress, printing,
direct mail and distribution services.
•Quebecor World Logistics: a leader in the
distribution of catalogues, periodicals and direct
mail materials.
•Que-Net MediaTM: digital print, publishing and
Web solutions.
NORTH AMERICA
EUROPE
LATIN AMERICA
Revenues: $7,970.0 M
Revenues: $1,542.1 M
Revenues: $287.3 M
More than 125 printing plants
and service facilities in 30 US
states and 6 Canadian
provinces.
Countries
•Canada
•United States
31 printing plants and service
facilities.
8 printing plants and service
facilities.
•Spain
Countries
•Austria
•Belgium •Sweden
•Finland •United Kingdom
•France
Countries
•Argentina
•Brazil
•Chile
•Colombia
•Mexico
•Peru
•Top commercial print
•Largest supplier of
media services company
in North America by
revenue, production
capacity and technological
expertise.
•Facilities interlinked
by Que-Net MediaTM
fibre-optic network.
commercial print media
services in Europe, with
a network of facilities
tailored to the structure
of the European economy.
•Services cross continental
boundaries to support
customers worldwide.
•One of the largest printers
of textbooks and telephone
directories in Latin
America.
•Rapid growth in the
magazines, catalogues
and inserts segments.
5
Quebecor Media Inc. Management Committee
FRONT ROW: Pierre Francoeur, President and Chief Executive Officer, Sun Media Corporation; Pierre Karl
Péladeau, President and Chief Executive Officer, Quebecor Inc. and Quebecor Media Inc.; Raynald Brière,
President and Chief Executive Officer, TVA Group Inc.
BACK ROW: Eugène Marquis, President and General Manager, Vidéotron Télécom ltée.; Serge Gouin, Chairman
of the Board, Vidéotron ltée; Jacques-Hervé Roubert, President and Chief Executive Officer, Nurun Inc.; Natalie
Larivière, President and General Manager, Archambault Group Inc.; Bruno Leclair, President and Chief
Executive Officer, Netgraphe Inc.; Louis Saint-Arnaud, Vice President, Legal Affairs and Secretary; Claire Syril,
Publisher, Senior Vice President and General Manager, TVA Publishing Inc.; Julie Tremblay, Vice President,
Human Resources; Luc Lavoie, Executive Vice President, Corporate Affairs; Richard Soly, President,
Le SuperClub Vidéotron ltée, and President, Music and Retail Group, Quebecor Media Inc.
Q U E B E C O R I N C .
Quebecor World Inc. Office of the CEO
LEFT TO RIGHT: Claude Hélie, Executive Vice President and Chief Financial Officer;
Érik Péladeau, Vice Chairman of the Board and Senior Executive Vice President;
Jean Neveu, interim President and Chief Executive Officer; Pierre Karl Péladeau,
President and Chief Executive Officer, Quebecor Inc.
MESSAGE TO SHAREHOLDERS
>>
>>
>>
Revenues were $12.01 billion, a 3.3% increase.
Net income was $91.9 million, or $1.42 per basic share.
Between January 1, 2002 and February 3, 2003, the Company reduced its debt by over $1 billion.
Quebecor reported excellent results in 2002 despite
slumping printing, media and communications markets
in North America. Virtually all of the Company’s business
segments posted a year-over-year improvement in
performance. Quebecor also tackled the challenge of
reducing its debt burden: in 2002 and early 2003, the
Company succeeded in cutting its consolidated debt by
over $1 billion. The significant improvement in results
and the substantial reduction in indebtedness were the
Company’s two major achievements in 2002.
Quebecor generated net income of $91.9 million ($1.42
per basic share) in 2002, a major turnaround from the net
loss of $248.7 million ($3.85 per basic share) posted in
2001. The Company’s revenues topped the $12 billion
mark in 2002, increasing 3.3% from the 2001 figure of
$11.63 billion.
Substantial improvement in Quebecor
Media’s results
All Quebecor Media subsidiaries contributed to the
Company’s solid performance in the 2002 financial year.
6
Newspaper subsidiary Sun Media Corporation, steered by
Pierre Francoeur with his habitual attention to detail,
reported stellar results again in 2002, with nearly 11%
growth in operating income. Each of the eight metropolitan
dailies increased its operating income. Together, their
profitability was up by nearly 20%. Year after year, Sun
Media has held its position as one of the highest-grade
and most profitable press groups in North America, main-
taining high operating margins by practicing exemplary
cost containment and consistently growing revenues.
THE MARKET RECOGNIZES SUN MEDIA AS AN
OUTSTANDING NEWSPAPER PUBLISHER
In February 2003, Sun Media closed the refinancing of its
debt on very advantageous terms. The response from
American institutional investors was so positive that the
initial amount of the refinancing was increased to
US$201.5 in Senior Notes (principal amount) and
$425 million in new bank credit facilities. The Senior
Notes bear interest at 7 5/8%. Clearly, the market recog-
nizes Sun Media as an outstanding newspaper publisher.
The notes being refinanced had been issued at 9.5%.
Vidéotron ltée, the largest cable operator in Québec, was
embroiled in a bitter labour dispute, but despite the
difficult circumstances management achieved its objective
of generating positive cash flow. Vidéotron was the only
Canadian cable provider that was cash flow positive in
2002 and one of the few in North America that was able
to reduce its debt. These results explain why Vidéotron
now has one of the lowest debt ratios in the industry
in Canada and the US. Its excellent performance is due
to its attractive line of new products and packages,
continuous improvement of customer service and rigor-
ous management of all cost items.
Vidéotron posted the strong 2002 results despite fierce
competition from satellite operators. One of them, a
company that enjoys a near-monopoly in residential
telephone service in Québec, is using that privilege to
engage in competition in television distribution that we
consider to be unfair and contrary to the public interest.
Vidéotron also waged a major campaign against television
signal piracy, a practice which is responsible for annual
losses of over $400 million to the Canadian broadcasting
system. Independent surveys have found that nearly 20%
of owners of satellite dishes supplied by Canada’s largest
satellite television operator are pirating television signals.
Due to its configuration and its efforts over the past
30 years to fight this criminal activity, Vidéotron has one
of the lowest piracy rates in Canada, barely 1.5%. Since
Canada’s artists and cultural producers derive a significant
portion of their income from the royalties paid by cable
operators, piracy deprives them of a major source of
compensation and funding, one to which they are fully
entitled. The battle against piracy, and against the satellite
services that are primarily responsible for it, will remain at
the centre of our public efforts until an effective solution
is adopted and implemented by the industry. We will con-
tinue arguing that piracy is undermining Québec’s broad-
casting industry, which has been built in large part on
home-grown programming and on the contribution of
Québec’s cultural producers.
In the broadcasting segment, 2002 was the first year in
which TVA Group contributed revenues and earnings to
Quebecor Media for a full 12-month period. Despite the
proliferation of specialty channels and fierce competition
in the television market, TVA, under the hands-on
leadership of Raynald Brière and his team, continues to
Q U E B E C O R I N C .
During the year, Publicor was merged with TVA Publishing
Inc., headed by Quebecor veteran Claire Syril. The
transaction consolidates our magazine properties in
Québec and is expected to yield substantial operating
economies. It has further solidified our position as the
number one player in magazine publishing in Québec.
TVA CONTINUES TO ENJOY A HUGE
MARKET SHARE: 36% IN FALL 2002
Our Leisure and Entertainment segment, which includes
our distribution and retail operations and Quebecor
Media’s publishing houses, had another standout year in
2002 in terms of both the top line and the bottom line.
The excellent results were due to the fine work of the
segment’s two management teams, headed by Natalie
Larivière at Archambault Group and Richard Soly for Le
SuperClub Vidéotron and Quebecor Media’s Music and
Retail group.
Through the Leisure and Entertainment segment’s two
major chains, Quebecor Media is able to reach consumers
directly and promote its products, including Vidéotron’s
cable television and Internet access services, through
cross-promotions.
7
When Quebecor Media acquired Groupe Vidéotron in fall
2000, its Vidéotron Télécom ltée (VTL) subsidiary was
bleeding money. The new management team, under the
energetic leadership of Eugène Marquis, has turned the
operation around and saved VTL from the fate of almost all
other Competitive Local Exchange Carriers (CLECs), many
of which have either disappeared, followed by the
liquidation of their assets, or been forced to reorganize
their assets, generally resulting in considerable losses for
the initial investors. While the industry remains unstable
and very competitive, VTL has significantly increased its
contribution to Quebecor Media’s profitability.
Finally, we want to draw our shareholders’ attention to the
marked improvement in the financial performance of our
Internet businesses, the Web agency Nurun, headed by
President and Chief Executive Officer Jacques-Hervé
Roubert, and the Internet services network Netgraphe,
under the stewardship of Hugues Simard (now Chairman of
Netgraphe). These companies had been swept up by the
enjoy a huge market share: 36% in fall 2002 according to
the BBM ratings released at the beginning of 2003.
Meanwhile, LCN has emerged as one of Canada’s best
managed and most profitable specialty channels.
However, the general-interest television market
is
approaching the saturation point and TVA must look to
other areas for future growth. Therefore, in September
2002, TVA made its first foray into radio by acquiring,
in partnership with Radio Nord Communications,
Radiomédia’s AM radio stations – including the Québec
institutions CKAC in Montréal and CHRC in Québec City
– and an FM station. In February 2003, Quebecor Media
submitted two major projects to the CRTC: the creation
of a new FM chain with stations in four Québec cities
and the upgrading of the newly acquired AM stations.
We argued before the CRTC that TVA must be allowed
to move into other media in order to accelerate its
development and increase its contribution to the
community. If we receive authorization to proceed with
these projects, TVA will reinvigorate Québec’s AM radio
industry by launching an unprecedented marketing
campaign. TVA’s plan could therefore help promote the
diversity of editorial voices in Québec.
Q U E B E C O R I N C .
MESSAGE TO SHAREHOLDERS
continued
hi-tech bubble and subsequently incurred large losses after
the beginning of 2000, something a company such as
Quebecor could not long tolerate. The emphasis was
therefore placed on profitability, with no distinction
between these new pioneering businesses and Quebecor’s
more traditional media properties. We went back to
the Quebecor credo: every unit must make money or
disappear. The results were quick to follow.
Despite continuing market softness for Internet businesses,
Nurun and Netgraphe were brilliantly successful in turning
around their finances. They owe their success to stringent
cost control and the wise decision to focus their
development on their areas of excellence, the fields in
which they possess a clear competitive advantage. Nurun
and Netgraphe were among the first North American
companies in their industries to reorganize their
operations and bring their cost structures in line with their
revenue prospects. Fast action proved to be the right
decision. While so many of their competitors have
disappeared, Nurun and Netgraphe are alive and well,
financially sound and well positioned to take advantage of
the shakeout in the Internet economy. They are expected
NURUN AND NETGRAPHE WERE BRILLIANTLY
SUCCESSFUL IN TURNING AROUND THEIR FINANCES
8
to make a still greater contribution to Quebecor Media’s
growth, profitability and potential for synergies and
cross-promotions in the future.
Quebecor World: superior performance
in the second half of the year
Our giant commercial printing subsidiary Quebecor
World, still number one in the world in its industry,
reported fairly satisfactory results in 2002, although it fell
short of shareholders’ expectations. In an encouraging
sign, Quebecor World generated increased operating
income as well as operating margins above the North
American industry average in the second half of the 2002
financial year, despite excess production capacity in the
industry and increased price pressure. In 2003, Quebecor
World will build on these accomplishments and step up its
efforts to cut costs and administrative expenses.
In Europe, Quebecor World reported mixed results. While
our plants in Great Britain and Austria posted excellent
performances, the results were tarnished by the
disappointing performance of our French operations. We
QUEBECOR WORLD GENERATED INCREASED
OPERATING INCOME AS WELL AS OPERATING MARGINS
ABOVE THE NORTH AMERICAN INDUSTRY AVERAGE IN
THE SECOND HALF OF THE 2002 FINANCIAL YEAR
have been operating in France since 1994 and have been
highly successful there in the past. There is no reason
why we should not be able to trim costs and step up our
sales efforts in order to get back in the black. These are
precisely the challenges our management teams will be
tackling in 2003.
At the beginning of 2003, we announced the appointment
of Michel Desbiens to the position of President and Chief
Executive Officer of Quebecor World, and of Claude Hélie
to the position of Vice President and Chief Financial
Officer. The two long-time Quebecor executives had
occupied similar posts at Donohue, a Quebecor subsidiary
from 1987 to 2000. Mr. Hélie also served as Chief Financial
Officer of Quebecor Inc. and Quebecor Media for the last
two years. Unfortunately, Mr. Desbiens was forced to resign
from the position soon after his appointment, on account
of family reasons. The Board of Directors of Quebecor
World then asked Jean Neveu, President and Chief
Executive Officer of Quebecor Printing (the forerunner of
Quebecor World) from 1989 to 1997 and Chairman of the
company from 1989 to 2002, to serve as President of
Quebecor World on an interim basis. Mr. Neveu has more
than 30 years of experience in the printing industry and
media. He was involved in all of Quebecor World’s acquisi-
tions and strategic decisions from the establishment of the
company until recently. Under the circumstances, he was
the ideal person to step in and we are truly grateful to him
for agreeing to do so without hesitation.
The appointments coincide with the departure of
executives who were instrumental in making Quebecor
World into the jewel in Quebecor’s crown. We are
thinking in particular of Charles G. Cavell, a member of
the management team who joined the firm in 1988. We
thank Mr. Cavell for his steadfast commitment to the
success of this great company, the only Montréal-based
business to rank first in the world in its industry.
Quebecor’s debt pared by more than $1 billion
Quebecor’s debt had become a popular topic of discussion
and speculation in Canadian investment circles. It is true
that the acquisition of Groupe Vidéotron temporarily
increased the Company’s debt load due to the accounting
principles governing the consolidation of our companies,
Q U E B E C O R I N C .
but this was not the first time Quebecor’s debt had grown
following an acquisition. The same had occurred after the
acquisition of Donohue in 1987, Maxwell Graphics in
1990, Sun Media Corporation in 1998 and World Color
Press in 1999. In the case of all these transactions,
Quebecor had to increase its debt ratios in order to take
advantage of opportunities for vertical integration, and
they all proved to be eminently sound business decisions
for the Company and its shareholders.
Quebecor therefore has an excellent track record for debt
management and we intend to continue acting with the
same caution and discipline, holding to the course that has
established the Company’s solid reputation in this area.
Already in 2001, Quebecor had set about refinancing the
debt contracted at the time of the acquisition of Groupe
Vidéotron. Among other things, it raised net proceeds of
US$850 million in one of the largest offerings ever made
by a Canadian company on the US market. With the
financial operations carried out between the beginning
of 2002 and the beginning of February 2003, Quebecor
has completed another important stage in the process
of putting its financial house in order. Over a period of
slightly more than 13 months, the Company reduced its
debt by more than $1 billion by using cash flow and the
proceeds from the sale of Quebecor World stock. Quebecor
World’s debt was cut by $531 million, Quebecor Media’s by
$430 million, and Quebecor Inc.’s by $82 million.
Financing raised by Sun Media Corporation in February
2003 enabled us to rebalance our capital structure at
advantageous interest rates. The operation also increased
financial flexibility between Quebecor Media and its
subsidiaries, a development which was unanimously
welcomed by institutional investors and credit rating
agencies.
In conclusion, we can state that each of our subsidiaries has
one of the lowest debt ratios in its industry.
Staying committed to our ambitions and our plans
for the future
We are the first to admit that the past couple of years have
been a difficult period for companies that, like Quebecor,
are engaged in the printing, communications and media
industries. Clearly, the unfavourable economic conditions
have curbed the ambitions of some businesses in these
industries. However, as our shareholders have seen,
Quebecor has stayed the course despite the choppy waters
and has continued to focus on maximizing the profitability
of each of its business units and capturing synergies among
them – when and only when such synergies benefit our
customers. So, where many competitors have failed,
Quebecor continues to pursue a distinctive strategy for
assembling media properties which has proven its
effectiveness to customers and earned the respect and
confidence of our financial partners.
We made a concerted effort in 2002 to publicize Quebecor
Media’s power as a vehicle for advertisers. To win the
battle with our competitors, we need to convince the
maximum number of advertisers of the superiority of our
proposition. We remain fully committed to this objective
for, in the spirit of the Company’s founder and of the new
generation of managers now at the helm, Quebecor always
plays to win!
QUEBECOR HAS CONTINUED TO FOCUS ON
MAXIMIZING THE PROFITABILITY OF ITS BUSINESS
UNITS AND CAPTURING SYNERGIES
In conclusion, we thank our employees – more than
50,000 around the world – for their commitment to the
Company’s success. We thank our directors for their
valuable contribution during the difficult period the
Company has experienced over the past few years, and our
shareholders for their patience and support.
9
Finally, we want to express our gratitude to all our
customers, from the multinational corporation that
contracts us to print millions of catalogues to the
consumer who picks up a Quebecor Media magazine at
the newsstand and the customer who has remained loyal
to Vidéotron, choosing the best high-speed Internet
service available. Their trust in us, demonstrated day
after day, is the reason we’re in business and the force
that drives us to continuously improve our offerings of
products and services.
Jean Neveu
Chairman of
the Board
Pierre Karl Péladeau
President and Chief
Executive Officer
Q U E B E C O R I N C .
Quebecor Inc.
A SYMBIOTIC RELATIONSHIP
WITH THE ARTS FOR MORE THAN 50 YEARS
Ever since it was founded, Quebecor has played a
crucial role in promoting Québec culture in its myriad
shapes and forms. More than any other media
company, Quebecor has helped foster and nurture
the star system that now enshrines Québec’s
distinctiveness and sustains its cultural vitality.
10
Our founder Pierre Péladeau had boundless admiration for
artists. In fact, his first dream was to become a concert
promoter. Throughout his career in business, Pierre
Péladeau maintained close ties to the cultural community,
and particularly to classical music ensembles, the music he
had always loved best. His passion for the arts and for
artists infused all echelons of the Company and became
firmly rooted in Quebecor’s corporate culture. And it has
left a deep imprint on the Company’s development,
spurring Quebecor to expand into fields where it felt it
could best serve the arts as well as the bottom line.
When television came to Quebec in the early 1950s,
Pierre Péladeau was quick to grasp the new medium’s full
potential. He realized that television was destined to
become not a rival to print media, as was widely believed
at the time, but a natural complement. The “Péladeau
newspapers,” as they were then known, helped turn
Québec television personalities into stars in those early
days. In the process, they also helped boost sales
of records, concert tickets and books. That was the
beginning of an informal, mutually beneficial alliance
between culture and Quebecor companies that has never
frayed or broken.
As Quebecor grew, in tandem with Québec’s cultural
community and its leading lights, the Company
gradually became a vital force in the arts, part and
parcel of the fabric of Québec’s cultural life.
Q U E B E C O R I N C .
TODAY, QUEBECOR’S CONTRIBUTION TO THE ARTS AND CULTURE TAKES MANY FORMS.
HERE ARE A FEW:
Quebecor provides thousands of direct and indirect
jobs for cultural workers in Québec and elsewhere. For
example, when TVA commissions a writer to produce
a script for a mini-series or hires musicians for a
late-night talk show, it creates work for artists and
cultural producers, enabling them to make a living
from their talents and to continue growing, creating
and weaving the cloth of Québec culture.
Through its television network, newspapers, magazines,
weeklies and Internet portals, Quebecor is also the
biggest booster of culture in Québec. One or more –
sometimes virtually all – of our media properties
cover everything that is written, exhibited, staged or
broadcast in Québec.
The programs aired on our television network, the chat
sessions carried on our Canoë Internet portal, and the
book and record launches organized at our retail loca-
tions also serve to showcase artists and bring their work
to the attention of the public.
>>
>>
>>
>>
Quebecor’s retail sales and distribution network –
which includes Select, the Archambault chain and Le
SuperClub Vidéotron – provides a vehicle for artists to
market their work. The retail chains let artists reach the
consumers who buy or rent their films and buy their
CDs and books. We make a sustained effort to stimulate
the dissemination of our cultural producers’ work. They
benefit and so do we.
>>
>>
>>
Quebecor and its media subsidiaries make culture
accessible by organizing contests, premieres, television
studio tours and Internet chat sessions. By breaking
down barriers between artists and their audience,
Quebecor helps demystify the creative process and
bring culture to the people.
Vidéotron, the largest cable operator in Québec and
third-largest in Canada, invests a significant portion of
its revenues in culture. For example, Vidéotron pays
substantial royalties to television channels that
promote culture, as well as retransmission and music
royalties to organizations that distribute the money to
artists and other cultural workers. Vidéotron also
11
WE MAKE A SUSTAINED EFFORT TO STIMULATE
THE DISSEMINATION OF OUR CULTURAL
PRODUCERS’ WORK
injects a portion of its revenues into the Canadian
Television Fund, which
in television
production, and the Vidéotron Fund, which helps
develop educational and interactive programming.
invests
In addition to all these activities conducted in the
normal course of business, Quebecor runs a donations and
sponsorships program that supports many cultural organ-
izations, events and festivals. Quebecor’s contributions of
funding and advertising space have grown year after year
in tandem with the Company’s revenues.
Q U E B E C O R I N C .
A SYMBIOTIC RELATIONSHIP WITH THE ARTS FOR MORE THAN 50 YEARS |continued
THE COMPANIES IN THE QUEBECOR FOLD ARE
PROUD OF THEIR CONNECTION WITH CULTURE.
FOR US, IT’S NOT JUST BUSINESS; WE ARE
DEVOTED FANS OF OUR IMMENSELY TALENTED
HOME-GROWN ARTISTS. TO US, THEY ARE THE
BEST IN THE WORLD IN THEIR DISCIPLINES.
The companies in the Quebecor fold are proud of their
connection with culture. For us, it’s not just business; we are
devoted fans of our immensely talented home-grown
artists. To us, they are the best in the world in their disci-
plines. At Quebecor, we live and breathe culture. It is at the
heart of what we do and who we are.
We cannot give a full account here of everything Quebecor’s
365 directly and indirectly owned subsidiaries do that relates
to culture. The following pages give only an overview of
some of the most important and potent ways in which
Quebecor and its major subsidiaries support the arts.
12
Quebecor’s deep and wide-ranging contribution to the
vitality of Québec culture and the development of artists
and cultural producers is instrumental in keeping the
wheels of cultural industries turning. If the Québec cultural
scene is more vibrant today than ever, and if its artists are
exploring uncharted territory, this is due in no small
measure to the fact that growing numbers of cultural
workers are now able to live – and live well – from their art.
Québec’s bustling cultural scene is in fact one of the most
dynamic facets of Québec society. To a large degree, it
defines Québec’s identity: more than many societies, Québec
has supported and nurtured its cultural industries, which
have withstood the trend towards cultural homogeneity in
the West and still preserve their distinctive character and
power to serve as a unifying force. In the increasingly
globalized cultural landscape of the 21st century, Québec has
been a pocket of resistance. And globalization has not
prevented Québec artists from succeeding at home and
abroad – on the contrary.
We are very gratified that so many Québec artists have made
their mark beyond Québec’s borders and are recognized
around the world for their talent. Our leading musicians,
comics, dramatists, filmmakers, dancers, writers and visual
artists have become exporters of the imagination, bringing
made-in-Québec content to the world and benefiting
Québec society as a whole. But first they built their careers in
Québec, and in almost every case, one of Quebecor’s media
companies was part of the story. This is a source of deep
satisfaction to us. The cultural enterprises that are Québec’s
pride today had to make it at home before they could
succeed on the world stage, just as Quebecor itself began
by putting down roots in Québec before expanding into
international markets.
Q U E B E C O R I N C .
Vidéotron
A KEY PLAYER ON THE CULTURAL SCENE
Vidéotron is a major backer of Québec culture, injecting substantial sums of money into the arts, as the
following table of 2002 payments shows. A large portion of the $105 million-plus contribution went directly to
Québec’s prolific artists and cultural producers.
CONTRIBUTION
Retransmission royalties1
Music royalties2
Canadian Television Fund3
Vidéotron Fund4
Royalties to cultural
channels in Québec5
Contribution by Canal Vox6
TOTAL
AMOUNT
(in million)
3.7
$
2.0
12.9
3.2
82.7
0.9
$ 1 0 5 .4
1 Amounts paid to organizations such as the Society of Composers, Authors and Music Publishers of
Canada (SOCAN), the Copyright Collective of Canada and others for the right to broadcast
programs.
2 Amounts paid to SOCAN for the right to broadcast music to which the rights are held by the
composer.
3 Vidéotron contributes 3% of its cable revenues to the Canadian Television Fund and the Vidéotron
Fund. A large proportion of the money paid to the Canadian Television Fund is injected into
productions with cultural content.
4 Formerly known as the “Fonds du savoir,” the Vidéotron Fund supports the development of
interactive and educational programming.
5 Vidéotron pays royalties to all the speciality channels, many of which (RDI, Canal D, APTN,
VRAK-TV, ARTV, Musique Plus, LCN, Musimax, Canal Vie, Historia, Évasion, Télétoon and Z) are
devoted, in whole or in part, to Québec culture.
6 Money allocated to community television channels across Québec to support local production, part
of which is dedicated to culture.
that
Anti-piracy campaign
Television signal theft is, unfortunately, widespread in
Canada, particularly since the advent of the satellite dish;
the equipment provided by certain satellite operators makes
piracy notoriously easy. Piracy is a
destructive practice
costs
Canada’s broadcasting system an
estimated $400 million per year,
including approximately $100 million
in Québec alone. In November 2002,
industry players – artists, producers,
technicians, creators, cable operators,
conventional
and
specialty pay channels – joined forces
to demand action by the federal
government on this issue of vital
concern to cultural industries.
broadcasters
13
Vidéotron helped the Coalition Against Satellite Signal
Theft mount a major public education campaign,
providing free air time and advertising space between
November 22, 2002 and January 1, 2003.
The Company’s other media outlets –
television stations, newspapers, magazines,
Internet portals – were also mustered to
support the campaign, at a total cost of
over $1 million to Quebecor Media.
In March 2003, a meeting of Canadian
cable company CEOs was held at
Vidéotron’s initiative to find construc-
tive, long-term solutions to the difficult
problem of television piracy and help
safeguard our cultural industries.
Q U E B E C O R I N C .
Archambault Group
A QUÉBEC INSTITUTION SERVING UP MUSIC AND LITERATURE
Archambault is more than a retailer of books and music. With its 12 stores, including 11 superstores, it is a
Québec cultural institution, one which moves and lives in sync with Québec artists. Archambault is keenly aware
of its place in Québec’s cultural life: it has established a literary prize and is constantly searching for new ways
to promote and disseminate the work of Québec singers and musicians.
In 2002, Archambault invested more than $8 million to
open two new stores in Montréal and Trois-Rivières,
providing additional outlets for the sale of cultural products.
Select: putting the music on the shelves
In 2002, Archambault Group’s distribution division, now
known as Select (formerly Distribution Sélect, Musicor and
Musicor Vidéo), earned the Félix trophy as distributor of the
year, awarded by the Québec music industry association
ADISQ, for the 10th year in a row. Select, the largest
independent distributor in Canada, distributes more than
60% of French-language CDs sold in Québec, the
vast majority of which are by Québec artists.
14
Engaged with recording artists,
day in, day out
Quebecor has played an important and
distinctive role in music distribution since it
acquired Distribution
Trans-Canada
in 1976. Often, Quebecor has provided
Québec artists with the only distribution
channel independent of the multinational
labels. The multinationals’ interest in
recording and distributing Québec music is
dependent on trends, economic cycles, and
business decisions made outside Québec. This
is not the case with Quebecor.
Quebecor maintains a close and active
relationship with Québec labels in order to
ensure that local recording artists are always
able to record and distribute their work. Select
is a critically important partner for the record
labels: they need a distributor dedicated to
local talent.
MusicAction, Fonds RadioStar, the Canadian Music Council
and the SODEC records and concerts commission.
Nurturing new talent
Select knows how the star system works and uses its
experience to support up-and-coming artists. No other
distributor in Canada carries as many CDs by new, as yet
unknow artists. Select has developed strategies to encourage
music stores to stock work by rising artists and give it
a chance, even when that requires patience, for it can take
some time before consumers respond to the promotional
and advertising campaigns conducted by the music labels,
in cooperation with Select.
Select – and Distribution Trans-Canada before it – have
always been willing to take risks and commit financially to
young songwriters, composers and performers who are not
yet household names. These investments flow from our
commitment to new artists and our readiness to help them
take the critical first steps in their careers. How many
multinational distributors can say the same?
Select is also actively involved in industry
issues, participating in the work of all
major industry bodies including ADISQ,
Putting up the money
Québec record labels have always been able to rely on
financial support from Select. Every year, Select pays out
SELECT HAS ALWAYS BEEN WILLING TO TAKE RISKS AND COMMIT FINANCIALLY TO RISING YOUNG
SONGWRITERS, COMPOSERS AND PERFORMERS
Q U E B E C O R I N C .
Q U E B E C O R I N C .
millions of dollars in advances to enable the recording of
CDs and other audio-visual products. Without this money,
many of these products would never see the light of day,
depriving audiences of a multitude of original voices that
enrich the diversity of cultural expression in Québec.
Championing emerging and established artists
Archambault Group sponsors many musical activities
through its support programs. For example, it applies a
special pricing policy on musical
instruments
for emerging artists
distributed by Select and gives new
releases prominent display space at its
points of sale.
Archambault’s “À découvrir”
concept spotlights literary
and musical works by
artists deserving of wider public
recognition. Every month, one CD and
one book are promoted in the stores and in Québec’s four
major dailies. The program’s growing success in 2002 has
made it a distinctive product that Archambault customers
watch for.
IN 2002, ARCHAMBAULT SPONSORED
T H E F O L L O W I N G M A J O R E V E N T S :
M ONTRÉAL I NTE R NATI ONAL JA Z Z FE STIVAL
QUÉBEC CITY SUMMER FESTIVAL | LES FRANCOFOLIES DE MONTRÉAL
BLUE METROPOLIS | DIVERS/CITÉ | BLACK & BLUE FESTIVAL
Archambault also continued backing Québec cultural organizations
outside Montréal, sponsoring the Laval, Québec City and Trois-Rivières
symphony orchestras, the Opéra de Québec, the Festival des Nations in
Sherbrooke and many others.
Prestigious literary
award with $10,000 purse
The Grand Prix littéraire Archambault,
created in 2001 to give recognition to
Québec literature and writers, is
awarded every year to a Québec
author chosen by the public from a
list of 12 nominees. The 2002 winner
was Marie Laberge for the first two
volumes of her trilogy Le goût du
bonheur, published by Éditions Boréal. The award is
accompanied by $10,000 in prize money and promotion
at the 12 Archambault bookstores in Québec. The
publishing house also receives $2,000 to promote the book.
Specialty offerings
The Paragraphe bookstore in
downtown Montréal, specializing
in English-language literature,
hosted a number of book
launches in 2002. Publishers
capitalize on the bookstore’s
reputation for excellence in order
to promote their Montréal writers.
Also during the last year, the
Camelot-Info bookstore chain
diversified its product line to better meet the demand from
schools and the community.
15
Archambault.ca:
North America’s largest
French online music shop
The Archambault.ca
e-commerce site, the
largest French-language
online store selling cultural
products in North America,
increased its sales by
35% in 2002. The titles
available on
Archambault.ca include
208,000 CDs,
314,000 books,
31,000 videos,
15,000 DVDs and
45 MP3s. The site is
an important platform for
Québec writers, musicians
and filmmakers. It
received an average
of 84,000 visitors per
week in 2002.
Q U E B E C O R I N C .
TVA Television Network
WHERE CULTURE IS DAILY FARE
For 43 years, TVA’s success has been bound up with
that of Québec’s artists, producers and creative
talents. TVA is by far the largest employer of cultural
workers in Québec and the network that has
spearheaded the dissemination of high-calibre
popular culture.
In the BBM ratings for fall 2002, released at the beginning
of January 2003, TVA had a 36% market share, more than
its two main rivals, Radio-Canada and TQS, combined. TVA
has achieved these stellar results by bringing Québec talent
to the fore.
16
TVA airs programs scripted by major Québec writers such as
Fabienne Larouche, Michel D’Astous, Anne Boyer, Martin
Forget and Louis Saïa, whose works have made an
important contribution to cultural expression in Québec.
Popularity of home-grown
programming sets Québec apart
Quebecers are a special case among Western television
audiences: Québec is one of the few places in the
world where the top-rated television shows are invariably
locally produced and always have been. Québec’s
flourishing culture and the ability of its creative talents
to produce works audiences can relate to have helped it
withstand the global hegemony of American television.
The language barrier has also obstructed the invasion
of American content.
TVA’s most popular shows are made in Québec and the
network allocates 87% of its $46.0 million programming
budget to Québec productions.
TOP-RATED TVA PROGRAMS IN FALL 2002
D r a m a s
TV Show
Km/h
Histoires de filles
Les poupées russes
Tabou
Tribu.com
Emma
Ciné-dimanche : Laura Cadieux … la suite
Ciné-dimanche : La vie après l’amour
Annie et ses hommes
Source: BBM surveys, fall 2002
Audience
1,672,000
1,437,000
1,416,000
1,221,000
1,094,000
1,010,000
947,000
912,000
865,000
Given the small size of the Québec market – slightly more
than 5 million French speakers above the age of 2 – an
audience of over one million for a television program is
an impressive exploit. TVA succeeded in breaking the
one-million viewer mark every week during the survey
period and sometimes several times a week!
Made by Quebecers for Quebecers, TVA programs reflect
Québec’s values and popular culture. They resonate with
audiences because they are rooted in Quebecers’ lives.
TVA IS THE NETWORK THAT HAS SPEARHEADED THE DISSEMINATION OF HIGH-CALIBRE POPULAR CULTURE
Q U E B E C O R I N C .
The standard-bearer of culture in the rest of Québec
TVA is a powerful force in the economic, social and cultural
life of Québec outside Montréal. Its stations in Québec City,
Sherbrooke, Trois-Rivières, Chicoutimi and Rimouski
provide daily coverage of the local cultural scene, publicizing
concerts, plays, book fairs and shows. TVA provides
hundreds of cultural organizations with a vehicle to promote
their activities, from street fairs to symphony concerts.
A partner in the
success of Québec
artists
In 2002, TVA’s schedule
boasted no fewer than
five weekly programs cov-
ering cultural activities in
the Montréal area: Salut
Bonjour !, Deux filles le
matin, Michel
Jasmin,
Le grand blond avec
un show sournois and
Les Incontournables. And
that’s not counting the
arts reports on the TVA
and LCN newscasts or the
enormously popular Gala
des Oliviers and Gala
MétroStar specials aired
on TVA every year, which
celebrate the success of
Québec artists. For the
past four years, TVA has
also been a partner of the
Festival Juste pour Rire.
TVA starts the day with
Salut Bonjour !
in the
morning and signs off
with Le grand blond avec
un show sournois on week-
day evenings, both of
which dominate their
time slot. The arts figure
prominently on both pro-
grams: they deliver huge
audiences to the artists and performers in all disciplines
who come to promote their work. Guest appearances on the
TVA shows have become a must in Québec show business.
Star Académie, a talent contest also featuring well-known
guest performers every week, aired during the winter 2003
Some of the major events TVA supports in Québec’s regions:
•Québec City: Arts and Culture Awards, Québec Carnival
(Télé 4);
•Rimouski: Carrousel international du film de Rimouski,
a major children’s film festival (CFER);
•Eastern Townships: Mondial des Cultures de Drummondville
(Télé 7);
•Saguenay-Lac St-Jean: La Fabuleuse Histoire d’un Royaume
(CJPM).
season. The concept was an original way to give prime-time
exposure to the Québec chanson and singers, something
increasingly scarce on television. TVA decided to reverse the
trend by airing a show centred on the chanson. The ratings
for Star Académie demonstrate that the formula has
tremendous popular appeal and is filling a gap in variety
programming.
From the TV screen to the movie screen
Through TVA Films, TVA brings Québec audiences films
that depart from Hollywood’s beaten track. Recent
examples include Jean-Pierre Jeunet’s Le fabuleux destin
d’Amélie Poulain (Amelie) and Roman Polanski’s The Pianist,
winner of the Palme d’Or at the Cannes Festival in 2002.
17
And that’s not all. TVA Films has been involved
in producing films by some of Québec’s most
brilliant filmmakers. At the time of writing (March
2003), TVA Films is supporting projects by the
following directors:
>>
François Girard, internationally acclaimed director of
The Red Violin, who is working on a feature film called
The Far Road;
>>
Jean-Marc Vallée, director of the 1996 Québec hit Liste
noire, who is filming Crazy, starring Michel Côté;
>>
Playwright Wajdi
Mouawad, who
is making a film
version of his
successful play
Littoral.
Q U E B E C O R I N C .
Sun Media Corporation / Metropolitan Dailies
A NATURAL ALLIANCE WITH THE ARTS
Sun Media Corporation, Canada’s second-largest newspaper group, publishes metropolitan dailies,
community newspapers and entertainment weeklies. All play a key role in covering and promoting arts and
culture across the land.
The print media have always been natural allies of the arts
and culture. Sun Media’s major metropolitan dailies, of
which two are located in Québec, three in Ontario, two in
Alberta and one in Manitoba, are active ingredients in the
exciting cultural mix of their communities.
Quebecor Media’s newspapers use a proven formula
combining editorial content on the arts and artists, local
advertising content and contests related to cultural events
to spark public interest.
Over 8,000 pages on culture per year in
Le Journal de Montréal
Each issue of Le Journal de Montréal contains an average of
10 pages on culture and entertainment, not counting the
minimum 96-page weekend arts and entertainment
supplement. That adds up to more than 8,000 pages on
18
OUR TWO MAJOR QUÉBEC DAILIES TOGETHER
INVESTED OVER $4 MILLION IN SPONSORSHIPS
TO PROMOTE CULTURE IN 2002
the arts and culture in Le Journal de Montréal every year,
much of it on Québec culture and artists. Twelve full-time
journalists and several freelancers report on culture in
Québec’s largest circulation daily. Le Journal de Montréal
makes it a point of honour to cover all launches by new
artists, who may be little known or unknown today but
are destined to become the stars of the future.
Fruitful partnership with the arts
Le Journal de Montréal and Le Journal de Québec have
established partnerships with promoters of the performing
arts, movies, festivals and other cultural events in Québec.
In exchange for visibility as a sponsor, our newspapers
help promote the events to their readers.
Q U E B E C O R I N C .
In 2002 alone, Le Journal de Montréal sponsored Montréal
performances by more than 60 local and international
French-speaking artists, some 15 festivals and cultural
events, summer theatre and a dozen new films produced in
Québec. In all, Le Journal de Montréal provided advertising
space worth $2.6 million under these partnership
agreements in 2002. Le Journal de Québec supported
12 cultural events, 57 shows, 8 Québec films and 4 theatre
companies with advertising space worth a total of
$1.5 million. Therefore, our two major Québec dailies
together invested over $4 million in sponsorships to
promote culture in 2002.
Contests to promote Québec and foreign films
Le Journal de Montréal and Le Journal de Québec supported
66 and 43 film premieres respectively in 2002 with a media
investment worth a total of more than $1.1 million. The
newspapers also organized contests for each of the
premieres; Le Journal de Montréal was flooded by more than
half a million entry forms!
Our two mass-circulation dailies pulled out all the stops for
the four big Québec-made box office hits of 2002 –
Québec-Montréal, L’Odyssée d’Alice Tremblay, La mystérieuse
Mademoiselle C and Séraphin, un homme et son péché – by
giving them extra advertising space and organizing monster
promotions.
19
>>
LIKE THE QUÉBEC DAILIES, Sun Media’s six metropolitan dailies outside Québec – The Ottawa Sun, The Toronto Sun, The
London Free Press, The Winnipeg Sun, The Edmonton Sun and The Calgary Sun – all support a host of cultural events and give
voice to the diversity of Canadian culture. Bowes Publishers Limited’s community weeklies and six local dailies do likewise in their
communities. Wherever Sun Media publishes dailies and weeklies, the Company backs the arts and culture in ways that count and
celebrates artistic creativity across the land.
Q U E B E C O R I N C .
Sun Media Corporation / Community Weeklies
SUPPORTING ARTISTS IN EVERY CORNER OF QUÉBEC
In 2002, Sun Media’s Québec weeklies contributed
more than $300,000 in sponsorships to a host of
local cultural events across Québec.
Like the metropolitan dailies, the community weeklies
establish partnerships with local promoters and cultural
venues. They also organize promotions and draws for free
tickets to premieres of cultural events. The 46 Sun Media
weeklies spread across Québec are a natural complement to
the metropolitan dailies and make a strong contribution to
cultural dynamism in Québec’s smaller centres.
IN EVERY REGION, OUR WEEKLIES ARE THE MEDIA
OUTLETS THAT ARE CLOSEST TO THE COMMUNITY
20
Big stars with
small-town roots
Many artists hail from
small-town Québec, and
often they received their
first media exposure in an
interview with the local
weekly’s entertainment
columnist. Here are a
few examples of the role
our weeklies have played
in publicizing some of
Québec’s biggest talents.
>>
WE WERE THERE…
>>
A few years ago, our
weekly La Voix Gaspésienne
wrote about a young singer
from Matane and her mana-
ger. It was the first media
coverage of Isabelle Boulay,
now a superstar vocalist,
and Josélito Michaud, now
artistic director of TVA’s Star
Académie,
the hit of the
winter television season.
>>
In 2001, Objectif Plein Jour of Baie-Comeau ran an inter-
view with a brilliant young local filmmaker called Manon
Briand, then shooting a film entitled La turbulence des fluides
(Chaos and Desire). It went on to win a Québec film industry
Jutra award.
>>
Before making it big, singer France D’Amour made
headlines in L’Écho du Nord after a performance at the local
community college. Since the beginning of her career, she
has been distributed by Select, a Quebecor subsidiary that
specializes in distributing Québec music.
>>
On the Gaspé Peninsula, home of singing idol Kevin
Parent, the star of the future may be performing today in a
small bar on Chaleur Bay. People will read about it in the
pages of Le Havre, Le Pharillon, L’Aviron or L’Écho de la Baie.
>>
In 2002, three weeks before the film’s big-city release, a
sneak preview of the smash hit Séraphin, un homme et son
péché was presented in Sainte-
Adèle, where the film was shot.
The local weekly Le Journal des
Pays d’en Haut was there to
cover the event. It also organized
a successful contest for tickets
to the screening.
>>
From Sept-Îles to Saint-
Jérôme, Longueuil to Lotbinière,
Quebecor weeklies are enthusiastic
participants in cultural life.
In every region, they are the
media that is closest to the
community. And in every locality,
they are number one.
La Frontière of Rouyn-
Noranda has been a proud
sponsor of
the Festival
International du cinéma for
more than 20 years.
Q U E B E C O R I N C .
Sun Media Corporation / Arts and Entertainment Weeklies
DEDICATED TO COVERING THE ARTS IN EVERY FORM
In recent years, entertainment weeklies with an alternative bent
have become important sources of information on big-city cultural
events. They take a different tack, reporting on avant garde artists
(who almost always start out on the fringe circuit) and on the
underground arts scene that the mainstream media cannot always
cover. The alternative entertainment weeklies play a pivotal role in
discovering and promoting edgy new talent.
ICI Montréal and Mirror are proud of their
role in sponsoring cultural events such as
Canadian Music Week, Festival de
musique actuelle de Victoriaville, Mutek,
Rencontre Internationale de Capoeira,
Fringe Festival, L’OFF Festival de Jazz de
Montréal, Just for Laughs, Gay and
Lesbian Pride, Festival Image et Nation,
Elektra Festival. In 2002, the total value of
the sponsorships was close to $50,000.
21
ICI Montréal and the
French-language market
With its innovative content, ICI Montréal
has quickly carved out a niche in the
Montréal market. It boasts the most
complete entertainment calendar in
town, providing full listings of live
music, movies and the performing arts.
Its editorial content focuses on the new
generation of artists.
Mirror, the dean of Montréal’s
entertainment weeklies
Mirror, founded in 1985, was the first
alternative entertainment weekly in
Montréal and remains the leader in the
English-language market. It is known
and respected for the superior quality of
its writing, brash style and incisive
reviews, as well as its comprehensive
entertainment listings.
THE ALTERNATIVE ENTERTAINMENT WEEKLIES PLAY A PIVOTAL
ROLE IN DISCOVERING AND PROMOTING EDGY NEW TALENT
Sponsorships
As the chroniclers of the flourishing alternative arts scene, the two
weeklies sponsor over 30 cultural events (theatre, dance, music festivals
and film festivals) and more than 25 films every year.
Q U E B E C O R I N C .
TVA Publishing
QUEBECOR AND QUÉBEC ARTISTS:
TOGETHER SINCE THE BEGINNING
Celebrity weeklies were the original cornerstones of Pierre Péladeau’s media
company. Those weeklies, and the magazines that followed, publicized local
celebrities in every field and played a key role in the emergence of the Québec
star system.
FROM THE EARLY DAYS OF THE CELEBRITY TABLOID ÉCHOS VEDETTES TO THE LARGE STABLE OF WEEKLIES
AND MAGAZINES PUBLISHED TODAY BY TVA PUBLISHING, NOW RESPONSIBLE FOR ALL OF QUEBECOR MEDIA’S MAGAZINE
OPERATIONS, WE HAVE ALWAYS BEEN THERE TO BEAR WITNESS TO THE VITALITY OF QUÉBEC’S ARTS SCENE
Readership of TVA Publishing’s
magazines and celebrity weeklies
Publication
Readership
(per issue)
Monthlies
22
Les idées de ma maison
Clin d’œil
Décoration Chez-Soi
Rénovation-Bricolage
Filles d’aujourd’hui
Femmes d’aujourd’hui
Star Inc.
Femme
Cool !
Weeklies
TV Hebdo
7 Jours
Le Lundi
Échos Vedettes
Dernière Heure
Source: Print Measurement Bureau, 2002.
859,000
833,000
753,000
672,000
506,000
472,000
442,000
390,000
372,000
1,399,000
1,197,000
790,000
594,000
562,000
Support for the arts: a few examples
It is impossible to describe here the contribution of all our
magazines and celebrity weeklies to cultural life. Here are
just a few examples:
>> The teen magazines Cool ! and Filles d’aujourd’hui
feature columns on movies, videos, music and the Internet.
They publish the lyrics to the latest Québec hits, interviews
with young people’s favourite stars, and reports on cultural
events in Montréal and Québec City.
Q U E B E C O R I N C .
The magazine Femme
often carries feature
articles on women in the
arts. In 2002, it turned
the spotlight on comic
Lise Dion, journalist
Sophie Thibault, writer
Fabienne Larouche,
actor Louise Portal and
many others.
Clin d’œil, edited by
well-known personality
Mitsou Gélinas,
devotes ample space
to culture, publishing
articles on music,
theatre, cinema and
books, and interviews
with artists who are
making waves.
>> 7 jours magazine is perhaps the leading proponent of
high-quality popular culture in Québec. It carries interviews
with artists in the news, reports on television programs
(including several specials on prime-time dramas each year)
and on cultural events (such as the Gémeaux television
awards and the ADISQ music awards). When the
film Séraphin, un homme et son péché was released, 7 jours
devoted a 14-page special section to the event. The film
made the magazine’s cover three times.
>> Le Lundi is another popular publication that
showcases Québec culture.
>> TV Hebdo and TV 7 jours carry the weekly television
schedule as well as articles on the programs aired on all the
networks. Both publish special issues on Québec’s popular
prime-time dramas.
>> Échos Vedettes, a Québec institution, devotes 30 to
35 pages per issue to culture. That adds up to more than
1,500 pages per year.
23
Discovering the stars of tomorrow
Our magazines Cool !, Dernière Heure, 7 Jours, Le Lundi and
Filles d’aujourd’hui gave extensive coverage in 2002 to
VRAK-TV’s hit talent contest for Québec teens MixMania.
Filles d’aujourd’hui also organized a singing contest, “À la
recherche de la nouvelle jeune diva du Québec,” in
cooperation with the Archambault stores. More than
500 demo tapes were received and judged by a jury of
industry professionals. The winner shared the stage with
Québec’s top female vocalists at the “Divas du Québec”
show at the Le Capitole theatre in Québec City in March
2003. The concert was recorded and the CD will be
distributed by Select.
Q U E B E C O R I N C .
Books
HUNDREDS OF AUTHORS PUBLISHED, MILLIONS OF BOOKS SOLD
In 2002, Quebecor Media’s Books segment published, reissued or reprinted 928 titles and sold more than
3 million copies, a 23% increase from 2001. Those figures speak for themselves: Quebecor Media is the
largest book publisher in Québec.
2002 bestsellers
24
>>
The 2002 highlights give an indication of our Books segment’s
importance as a publishing and distribution channel for
authors, journalists and editors with things to say.
ÉDITIONS LIBRE EXPRESSION dominated
the
bestseller lists. Its high-profile successes included Aux
commandes du destin, a biography of celebrated pilot Robert
Piché by reporter Pierre Cayouette; La Croix de feu, the
French translation of Diana Gabaldon’s novel The Fiery
Cross; Catalina by reporter and television host Gilles
Gougeon; and Plaisirs partagés by actor Francine Ruel.
>>
>>
>>
ÉDITIONS INTERNATIONALES ALAIN STANKÉ sales were
boosted by successful film adaptations of two titles in its
catalogue, Un homme et son péché, directed by Charles
Binamé, and Arrête-moi si tu peux (Catch Me If You Can),
directed by Steven Spielberg.
ÉDITIONS DU TRÉCARRÉ broke into the US market,
a first for Quebecor Media’s Books segment.
Educational publisher ÉDITIONS LOGIQUES updated its
catalogue of computer books. Éditions Logiques also
publishes best-selling novelist Denis Monette.
>>
>>
ÉDITIONS QUEBECOR realized nearly 40% of its sales
abroad. Its sales in France, Germany, Spain, Italy, the
Netherlands, Portugal and Mexico boosted its revenues and
helped raise the international profile of Québec writers.
ÉDITIONS CEC maintained its position as Québec’s
leading publisher of textbooks. Working with a host of
writers, illustrators and other professionals, CEC has
assembled an impressive catalogue that lists many works on
Québec culture, including the well-known Anthologie de la
littérature québécoise.
QUEBECOR MEDIA IS THE LARGEST
BOOK PUBLISHER IN QUÉBEC
Québec-Livres: Distribution is key
Distribution is essential to success for authors just as it is for
musicians. Québec-Livres continues to perform a vital role
in distributing and marketing the books published by
Quebecor Media’s Books segment and other major Québec
publishing houses.
Q U E B E C O R I N C .
Le SuperClub Vidéotron
T O N S O F C O P I E S O F Q U É B E C F I L M S
Video rental chain Le SuperClub Vidéotron contributes
to Québec culture by stocking a huge selection of
Québec films at every one of its locations.
Choice display space for Québec productions
Most SuperClub Vidéotron locations have a Québec film
section where all Québec productions available for rental
are displayed.
Every month, new video and DVD releases are announced
in the chain’s magazine, Le VideoMagazine. In 2002,
three Québec productions made the front or back cover:
Les Boys III, La mystérieuse Mademoiselle C. and L’Odyssée
d’Alice Tremblay. Whenever their box office success
warrants, Le SuperClub Vidéotron gives its prime advertising
space to Québec productions. It’s another way to support
local talent.
Le VideoMagazine also includes an “upcoming releases”
section that describes Québec films scheduled for release
in the next month. And in June 2002, Le SuperClub
Vidéotron’s television commercials featured the film
Les Boys III.
25
Practical support for young filmmakers
In 2002, Le SuperClub Vidéotron agreed to be a partner of
L’Art qui fait Boum!, a triennial festival for young visual artists
to be held April 16 to June 8, 2003. Le SuperClub Vidéotron
will distribute the videos produced by the finalists in the film
category and lend them out free of charge at its stores. It will also
sponsor the Prix du Public Le SuperClub Vidéotron/Silence On Court!
The focus on local product sets Le SuperClub Vidéotron
apart from the other video chains in Québec. A large
portion of Le SuperClub Vidéotron’s acquisitions budget is
allocated to Québec films on video and DVD.
QUÉBEC FILMS PURCHASED IN 2002
Febuary La loi du cochon
March L’ange de goudron
Une jeune fille à la fenêtre
Mariages
April Le ciel sur la tête
May Un crabe dans la tête
June Les Boys III
Moïse : l’affaire Roch Thériault
(Québec/English Canada coproduction)
July Crème glacée, chocolat et autres consolations
August Le collectionneur
October La mystérieuse Mademoiselle C.
November La vie, la vie (for sale)
Lance et compte (for sale)
Lance et compte : nouvelle génération (for sale)
L’Odyssée d’Alice Tremblay
Q U E B E C O R I N C .
Netgraphe
A WORLD OF CULTURE , A MOUSE- CLICK AWAY
26
VIRTUAL JUKE BOX ON CANOË DIGITAL
>>
Canoë has quickly
become a popular hub
for music, interviews
and videos featuring
recording artists in all
genres. Canoë Digital
lets music lovers listen
to new releases by
well-known artists, and
introduces new
also
faces and new voices
in the section devoted
to rising artists. It is
a unique platform for
promoting Québec music
on the Web.
2002, Netgraphe
In
launched the
innovative
Canoë Digital site, an online
to
juke box dedicated
Québec music. The site
quickly became a popular
hub for music, interviews
featuring
and
recording artists in all gen-
res. Canoë Digital lets music
lovers listen to new releases
by well-known artists, and
also introduces new faces
and new voices in the section devoted to rising artists. It is a
unique platform for promoting Québec music on the Web.
videos
Canoë Digital is a vehicle of choice for the Québec
recording artists distributed by Select, Archambault Group’s
music and video distribution division. Nowhere on the
Web, on the radio or on television is there a place entirely
dedicated to Québec music – except on Canoë!
To support sales, hyperlinks
on the site lead visitors who
are interested in a particular
artist to the CDs available
at the Archambault.ca
online shop.
Connected to culture
The Culture & Showbiz section on the Canoe.qc.ca portal
carries non-stop coverage of cultural news: concerts, new
CDs, new books, exhibits, theatre, film. Special attention is
paid to Québec content. In 2002, special reports were
Netgraphe, an Internet leader in Québec and the
rest of Canada, operates a string of general and
special-interest portals that cover the arts extensively.
produced on many Québec summer festivals and on
the release of many Québec films. Reviews, interviews
and close-ups complement the original cultural content
available on Canoe.qc.ca.
Culture on Jobboom
To meet the demand from cultural industries, Éditions
Jobboom launched a new careers guide entitled 100 carrières
de la culture at the beginning of 2003. The guide covers
careers in six fields:
>> performing arts
>> audiovisual arts
>> multimedia and hi-tech arts
>> crafts and visual arts
>> literature and publishing
>> museology and heritage
100 carrières de la culture, the only guide to provide such
a complete survey of jobs in the arts, draws attention
to career opportunities and challenges in the fascinating
field of culture. Its success in the bookstores attests to the
growing interest in the field among young people.
Netgraphe and Jobboom are proud of their contribution
to career counselling and training for the cultural workers
of the future.
E-cards on Canoë
With e-cards for all occasions booming in popularity,
Netgraphe has turned to Québec artists to design exclusive
cards for Canoë, including illustrator Philippe Béha, graffiti
artist Zilon, illustrator Elsa Myotte and cartoonist Manon
Éthier. Writer-composer Shilvi composed and recorded
a Christmas song, available exclusively on Canoë Digital.
It was illustrated by Julie Fréchette to produce the first
musical e-card available on Canoe.qc.ca
All these initiatives help publicize the work of our talented
Québec illustrators, designers and other artists.
Q U E B E C O R I N C .
Quebecor World
A GLOBAL GIANT PARTNERING WITH CULTURAL
ENTERPRISES IN QUÉBEC AND AROUND THE WORLD
The Company’s flagship subsidiary, Quebecor World, the world’s largest commercial
printing company, is the only Canadian company that is the global leader in its industry.
Quebecor World is known primarily for its print
products:
>>
catalogues for major retail chains such as L.L.Bean,
Home Depot, IKEA and Pottery Barn;
>>
telephone directories in North America, Latin
America, Europe and even India for many prestigious
customers, including the Yellow Pages Group Co. in Canada
and ADSA, a subsidiary of Telmex, in Mexico;
>>
magazines and books for the world’s largest publishers,
such as Time Inc., Condé Nast Publications and Hachette
Filipacchi Médias, which publish hundreds of titles;
>>
supplements and advertising inserts, such as
USA Weekend and Parade, for mass-circulation North
American newspapers;
>>
a wide array of direct mail products, logistical
services, digital printing services, and more.
Supporting the professional development
of young graphic artists
Quebecor World supports the Québec Institute of Graphic
Communications, affiliated with Collège Ahuntsic in
Montréal, and the Graphic Communications Department of
Ryerson University in Toronto. The two institutions
dispense advanced training to students who want to pursue
a career in graphic arts and design, integral components of
the visual arts and culture.
Q U E B E C O R I N C .
27
QUEBECOR WORLD HAS LONG BEEN AND WILL LONG REMAIN A VALUED PARTNER
FOR CULTURAL ENTERPRISES AND ARTISTS IN QUÉBEC AND ACROSS CANADA
is also
involved
Quebecor World
in culture. The
company, founded in Montréal, is attached to its roots. It
continues to print promotional materials for many theatre
and dance companies and sponsors a large number of
performances. In all Canadian markets, Quebecor World
prints many magazines devoted in whole or in part to the
arts. Quebecor World has long been and will long remain a
valued partner for cultural enterprises and artists in Québec
and across Canada.
28
Quebecor World:
disseminating culture around the world
What do the latest Harry Potter novel, the Larousse English-
Spanish dictionary and magazines such as Time, People and
Paris-Match have in common? All are printed at one of
Quebecor World’s 165 printing plants around the world.
From Guttenberg to the present day, the printing press has
spread knowledge far and wide, more so than any other
technology. Today, Quebecor World prints a billion books a
year, primarily in the US, Europe and Latin America. It also
produces more than a thousand different magazines in
North America, Latin America and Europe for the world’s
largest publishers.
Q U E B E C O R I N C .
F I N A N C I A L S E C T I O N
A N N U A L R E P O R T 2 0 0 2 | Q U E B E C O R I N C .
M a n a g e m e n t ’ s D i s c u s s i o n a n d A n a l y s i s
S e l e c t e d F i n a n c i a l D a t a
S e l e c t e d Q u a r t e r l y F i n a n c i a l D a t a
30
41
42
M a n a g e m e n t ’ s Re s p o n s i b i l i t y f o r F i n a n c i a l S t a t e m e n t s
43
A u d i t o r ’ s Re p o r t t o t h e S h a r e h o l d e r s o f Q u e b e c o r I n c .
C o n s o l i d a t e d S t a t e m e n t s o f I n c o m e
C o n s o l i d a t e d S t a t e m e n t s o f Re t a i n e d E a r n i n g s
C o n s o l i d a t e d S t a t e m e n t s o f C a s h F l o w s
C o n s o l i d a t e d B a l a n c e S h e e t s
S e g m e n t e d I n f o r m a t i o n
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43
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45
46
48
50
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
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Q U E B E C O R I N C .
>> M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
A N N U A L R E P O R T 2 0 0 2 | Q U E B E C O R I N C .
CORPORATE STRUCTURE
Quebecor Inc. is a communications company with operations
in North America, Europe, Latin America and Asia. It has two
operating subsidiaries:
• Quebecor World Inc., the world’s largest commercial
printer;
• Quebecor Media Inc., a company engaged in the Cable
Television, Newspapers, Broadcasting, Leisure and
Entertainment, Business Telecommunications, Web
Integration/Technology, and Internet/Portals business
segments.
In the first quarter of 2002, Quebecor World obtained all
required regulatory approvals for the acquisition of the
European printing facilities of Hachette Filipacchi Médias,
one of the world’s largest publishers.
In October 2000, Quebecor Media acquired all
outstanding shares of Le Groupe Vidéotron ltée. Final
acquisition of control over Groupe Vidéotron’s cable
television and broadcasting subsidiaries was subject to
approval by
the Canadian Radio-television and
Telecommunications Commission (“CRTC”). In May 2001,
the CRTC approved the transfer of control over the cable
television subsidiaries. In September 2001, the conditions
set by the CRTC under the approval granted in July 2001 for
the transfer of control over TVA Group were satisfied.
At the time of the acquisition of Groupe Vidéotron,
management’s intention was to divest itself of subsidiary
Vidéotron Télécom Ltée (“VTL”), which provides high-
speed telecommunications services to other carriers and
large businesses. In view of the uncertain business
environment in the telecommunications industry, the
Company was unable to close the sale of its investment on
favourable terms. It therefore decided to keep VTL and
develop its full potential. VTL’s operating results have
therefore been included in Quebecor Media’s consolidated
financial statements since November 2001.
Quebecor’s share in the earnings of some subsidiaries has
varied over the past three years. Quebecor’s share in the
earnings of Quebecor World, which was 38.05% at January 1,
2000, did not change significantly in 2000 and 2001. As of
December 31, 2001, it stood at 38.32%. In 2002, Quebecor’s
share in Quebecor World was reduced by the sale of
6.8 million subordinate shares and stood at 33.24% at
December 31, 2002. In October 2000, Quebecor transferred
a 45.28%
in Quebecor Media to Capital
Communications CDP and retained a 54.72% interest,
which remained unchanged through December 31, 2002.
With the reduction in Quebecor’s interest in Quebecor
Media, Quebecor’s 57.47% share in Nurun’s results at
January 1, 2000 was reduced to 31.45% at December 31,
2000, 31.30% at December 31, 2001 and 31.33% at
interest
December 31, 2002. Quebecor’s share in Sun Media
Corporation, which was 70.00% at January 1, 2000, had
fallen to 38.30% as of December 31, 2000, increased to
54.72% as of December 31, 2001, following the buyout of
Sun Media Corporation’s minority shareholders, and
remained at that level through December 31, 2002.
Quebecor’s share in the earnings of Netgraphe, which
increased from 21.75% to 41.20% with the swap of
CANOE’s assets for Netgraphe stock on March 6, 2001,
stood at 41.14% at December 31, 2002.
Quebecor exercises direct and indirect controlling
interests in five public companies. At December 31, 2002,
Quebecor held, directly or indirectly, 83.15%, 57.26%,
99.91%, 97.71% and 80.95% of the voting rights of Quebecor
World Inc., Nurun Inc., TVA Group Inc., Netgraphe Inc. and
Mindready Solutions Inc. respectively.
Recent Events
On December 9, 2002, Quebecor closed a secondary offering
of 6.8 million subordinate voting shares of Quebecor World
Inc. at a price of $36.00 per share for a total of $244.8 million,
realizing a gain on disposal of $67.4 million. The purpose was
to repay Quebecor’s 54.72% share of a $429.0 million term
loan contracted by Quebecor Media, which falls due in April
2003.
Immediately after the end of the 2002 financial year,
Quebecor Inc. contributed $216.1 million to the share
capital of Quebecor Media, enabling Quebecor Media to
reduce its debt by the same amount. Quebecor Inc. will
make an additional contribution of $19.0 million prior to
the April 2003 due date.
On February 7, 2003, Sun Media Corporation closed a
private placement of Senior Notes in the net amount of
US$201.5 million and contracted new bank credit facilities
totalling $425.0 million. The proceeds from the sale of Senior
Notes and the new bank credit facilities were used to pay
down in full all Sun Media Corporation loans and to pay a
$260.0 million dividend to Quebecor Media Inc., of which
$150.0 million will be used to reduce the long-term debt of
Vidéotron ltée. This payment on Vidéotron’s debt will be in
addition to debt reductions totalling $168.0 million made
by Vidéotron in 2002.
After the financial operations carried out in 2002 and
the beginning of 2003, the Company has reduced its debt
by more than $1.00 billion, using its cash flow and the
proceeds from the sale of Quebecor World shares. Quebecor
World’s debt has been reduced by $530.9 million, Quebecor
Media’s debt by $429.7 million, and Quebecor Inc.’s debt by
$81.9 million.
Q U E B E C O R I N C .
30
OPERATING RESULTS
In accordance with Canadian generally accepted accounting
principles, the results of the Cable Television segment and of
TVA Group Inc. have been included in the consolidated
results since May 2001 and September 2001 respectively,
which are the dates on which the CRTC approved the
transfer of control over Vidéotron ltée and on which the
CRTC’s conditions for the transfer of control over TVA
Group were satisfied. The investments in these subsidiaries
were accounted for on an equity basis from the date of the
acquisition of Groupe Vidéotron. Quebecor’s consolidated
financial statements for 2001 therefore report the operating
results and cash flows of the Cable Television segment from
May to December 2001 and the operating results and cash
flows of TVA Group from September to December 2001.
Subsidiary TQS’s results were no longer consolidated but
presented on an equity basis from September 2001, the
month in which TQS was placed under the control of a
trustee. The Broadcasting segment’s results for the year 2001
therefore report, in addition to TVA Group’s results, TQS’s
operating results and cash flows for the months of January
through August.
A pro forma column has been added to the income
statement and to the cash flow statement in order to
present the figures as if the transfer of control over the
Cable Television segment and TVA Group had occurred on
January 1, 2001. For 2001, the pro forma column for the
Broadcasting segment presents TQS’s operating results and
cash flows for the eight months of January through August,
and TVA Group’s operating results and cash flows for the
entire financial year.
VTL’s operating results are included in Quebecor Inc.’s
consolidated financial statements from November 2001.
For the purpose of analysis of the operating results, the
Company defines operating income (or loss) as earnings (or
loss) before amortization charges, financial expenses,
reserves for restructuring of operations and other special
charges, write-down of goodwill, gains on sale of businesses,
shares of subsidiary and of a portfolio investment, gains on
dilution from issuance of capital stock by subsidiaries, and
income taxes. Special charges include the mark-to-market
of investments, write-down of a property and non-
monetary compensation charges. Equity income (or loss)
from non-consolidated subsidiaries, dividends on preferred
shares of subsidiaries and non-controlling interest are not
considered in the computation of operating income.
Operating income (or loss) as defined above is not a
measure of results that is consistent with generally accepted
accounting principles. 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. It is not intended to represent funds available for
debt service, dividends, reinvestment or other discretionary
uses, and should not be considered in isolation or as a
substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
Operating income (or loss) is used by the Company because
management believes it is a meaningful measure of
performance. Operating income (or loss) is commonly used
by the investment community to analyze and compare the
performance of companies in the industries in which the
Company is engaged. The Company's definition of
operating income may not be identical to similarly titled
measures reported by other companies.
2002/2001 COMPARISON
Quebecor recorded revenues of $12.01 billion in the 2002
financial year, compared with $11.63 billion in 2001, a
3.3% increase. On a pro forma basis, revenues totalled
$12.07 billion in 2001. The higher revenues mainly reflect
the inclusion of the results of the Cable Television segment
and of TVA Group, following the transfer of control over
those operations in 2001, the inclusion of the results of the
Business Telecommunications segment since November
2001, and higher revenues in the Newspapers segment,
particularly from advertising sales. These factors, combined
with the positive effect of the conversion of sales
denominated in US dollars into Canadian currency, more
than offset the 1.2% decrease in Quebecor World’s
revenues, stated in US dollars, as a result of the difficult
market environment, and lower revenues in the Web
Integration/Technology segment.
In 2002, operating income amounted to $2.02 billion,
compared with $1.89 billion in 2001, a 7.0% increase. On a
pro forma basis, operating income was $2.02 billion in 2001.
The increase was mainly due to the inclusion of the results
of the Cable Television and Business Telecommunications
segments and of TVA Group for the full 12 months of 2002,
combined with significantly improved operating results
in the Newspapers, Web Integration/Technology and
Internet/Portals segments. Lower newsprint prices and
effective cost-containment measures introduced in 2001 and
continued in 2002 contributed to this improvement. These
factors outweighed the 4.7% decrease in the Printing
segment’s operating income, stated in Canadian dollars,
which was due to the above-noted decline in sales and lower
operating margins caused by reduced production capacity
utilization and price pressure.
Net income was $91.9 million in 2002, or $1.42 per
basic share, compared with a net loss of $248.7 million, or
$3.85 per basic share, in 2001. In accordance with new
Q U E B E C O R I N C .
31
>> M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
accounting rules, the Company did not record any
amortization of goodwill
including
amortization of goodwill, net of taxes and non-controlling
interest, the net loss would have been $119.4 million, or
$1.85 per basic share, in 2001.
in 2002. Not
Amortization charges increased by $82.9 million to
$772.9 million in 2002, primarily as a result of the inclusion
of the results of the Cable Television and Business
Telecommunications segments and of TVA Group.
Financial expenses were reduced by $41.3 million,
declining from $665.4 million in 2001 to $624.1 million in
2002 due to lower interest rates, lower debt levels at the
subsidiaries and the unfavourable effect of the exchange rate
on the portion of the debt denominated in foreign currency
in 2001.
Reserves for restructuring of operations and special
charges totalled $68.7 million in 2002, compared with
$552.2 million in 2001.
reserves
recorded
In 2002,
the Company
for
restructuring in the Printing ($29.3 million), Newspapers
($2.2 million), Broadcasting ($3.0 million), Business
Telecommunications ($1.4 million) and Web Integration/
Technology ($4.8 million) segments. The Company also
recorded special charges of $13.3 million and $9.0 million
respectively in 2002 for the mark-to-market of its
investments and a write-down of a property. Finally, the Web
Integration/Technology segment recorded a non-monetary
compensation charge of $5.7 million in connection with
shares subject to escrow agreements with shareholders/
sellers of certain acquired businesses.
In 2001, the Company recorded a charge of $99.8 mil-
lion for the mark-to-market of temporary investments.
Restructuring reserves were recorded in the Printing
($400.1 million), Newspapers ($17.8 million), Web
Integration/Technology ($3.7 million) and Internet/Portals
($5.4 million) segments. The Web Integration/Technology
segment also recorded a non-monetary compensation
charge of $25.4 million.
In 2002, the Company adopted the new recommendations
in Section 3062 of the Canadian Institute of Chartered
Accountants (“CICA”) Handbook concerning goodwill. The
Company recorded a $187.0 million charge for the goodwill
impairment loss in the Cable Television ($68.0 million),
Business Telecommunications
($107.6 million), Web
Integration/Technology ($8.9 million) and Internet/Portals
($2.5 million) segments.
In 2001, in view of the slowdown in the Internet/Portals
and Web Integration/Technology segments, the Company
recorded a write-down of goodwill for those segments in the
amounts of $118.5 million and $28.5 million respectively.
The write-downs were based on an analysis of undiscounted
future cash flow and reflected management’s best estimates
and hypotheses. The amounts were calculated
in
accordance with the accounting standards in effect up to
December 31, 2001.
In 2002, the Company realized a gain of $91.2 million on
the sale of businesses, shares of subsidiaries and portfolio
investments, including $67.4 million from the sale of
6.8 million subordinate shares of Quebecor World for a cash
consideration of $244.8 million and $20.0 million from the
sale of its interest in TQS for a cash consideration of
$62.0 million. During the previous financial year, the
Company entered gains of $44.7 million under this caption,
mainly in respect of the sale of shares of Abitibi-
Consolidated Inc. and Quebecor World.
Printing
Quebecor World is the largest commercial print media
services company in the world. Its strategic acquisitions,
investment in state-of-the-art technology and commitment
to establishing long-term relationships with customers have
made it a leader in most of its main areas of expertise
and geographic markets. Quebecor World has facilities in
17 countries.
Quebecor World’s revenues amounted to US$6.24 billion
in 2002, compared with US$6.32 billion in 2001.
Operating income was US$898.4 million, compared with
US$955.6 million in 2001. Quebecor World reported net
income of US$279.3 million in 2002, compared with
US$83.8 million in 2001, excluding amortization of
goodwill in the amount of US$61.4 million.
Stated in Canadian dollars, Quebecor World’s revenues
were virtually unchanged, increasing from $9.79 billion in
2001 to $9.80 billion in 2002. The strength of the US dollar,
the main currency in which Quebecor World’s sales are
denominated, therefore partially offset the decrease in North
American sales, stated in US currency. Operating income was
$1.41 billion, compared with $1.48 billion in 2001.
After a difficult period for the print media industry in
the latter part of 2001, 2002 saw continuing pressure on
business volume and slumping prices, compared with 2001,
due to excess production capacity in the industry and
growing competition. Quebecor World took advantage of
the business environment in the industry to carry out a
major restructuring of its facilities, which was announced in
2001 and had largely been completed as of December 31,
2002. In the wake of the reorganization, Quebecor World’s
plants are fewer in number but larger and more specialized.
Quebecor World is now able to offer its customers
essentially the same production capacity with approximately
8% less personnel.
In a fiercely competitive marketplace, Quebecor World
recorded strong results in 2002, particularly during the
second half. Quebecor World continued its energetic efforts
Q U E B E C O R I N C .
32
to contain costs, generate cash flow and reduce its debt
ratio, as in the past.
In North America, Quebecor World’s diversified
operations enabled the company to minimize the negative
impact of the business environment and limit the revenue
decrease to 3.6%. Revenues declined in some lines of
business, including magazines and catalogues (-6%),
commercial and direct mail materials (-17%), books (-4%)
and telephone directories (-5%), while revenues from
advertising inserts rose 9%; half of the increase was due to
the acquisition of Retail Printing Corporation in July 2001.
With respect to operations, Quebecor World expanded its
retail offset production platform with the addition of
printing facilities in Riverside, California and Vancouver,
British Columbia in order to enhance the competitiveness
of its North American network serving the retail insert and
mailer market.
In Europe, Quebecor World posted revenue growth of
10% in 2002, primarily as a result of the acquisition of
printing facilities from Hachette Filipacchi Médias, one of
the world’s largest publishers. The transaction strengthened
Quebecor World’s European platform and added a plant in
a new country, Belgium. Quebecor World’s European
operations improved their revenues and profit margins in
relation to 2001, except in France. In the fourth quarter of
2002, Quebecor World approved a restructuring plan for
Europe which calls for cost-cutting, workforce reduction
and the closing of some uncompetitive facilities.
In Latin America, Quebecor World recorded a 13%
increase in revenues in 2002. Operating income improved
despite the negative impact of exchange rate fluctuations in
countries such as Brazil and Argentina.
During 2002, Quebecor World signed new contracts and
extended existing contracts with a number of major
customers, including Brylane Inc., a leading US catalogue
and Internet retailer, RONA group, the largest distributor
and retailer of home hardware, renovation and gardening
supplies in Canada, and L.L.Bean, a major retailer of
outdoor gear and apparel.
The last quarter of 2002 was particularly fruitful.
Quebecor World signed a long-term $240.0 million contract
with Rogers Publishing, the largest publisher of periodicals
in Canada, followed in December 2002 by three major
contracts: a US$230.0 million contract with publishing
house Simon & Shuster, a contract worth US$150.0 million
with food retailer Albertsons, and a $270.0 million contract
to print telephone directories for the Yellow Pages Group Co.
Finally, in early 2003, Quebecor World signed a long-term
Latin American contract estimated at US$40.0 million with
Telefónica de España to print telephone directories in Brazil,
Chile, Argentina and Peru.
Cable Television
Vidéotron ltée, a wholly owned subsidiary of Quebecor
Media, is the largest cable operator in Québec and the third-
largest in Canada. Its state-of-the-art network extends to
2.3 million homes and serves approximately 1.4 million
subscribers, including over 171,000 subscribers to its illico
digital television service. Vidéotron ltée is also engaged in
interactive multimedia development and ISP services;
350,000 customers subscribe to its dial-up and high-speed
cable modem Internet access services.
As noted above, Vidéotron ltée’s results have been
included in the Cable Television segment’s results since
May 2001. In 2002, Vidéotron generated revenues of
$715.6 million and operating income of $262.7 million. On
a pro forma basis, the 2001 figures were $709.6 million and
$271.9 million respectively.
Revenues grew by $6.0 million, or 0.8%, in 2002.
Despite aggressive competition from satellite television
services and the problems caused by the labour conflict
between Vidéotron and its unionized employees, Vidéotron
signed up 57,000 new customers to its illico digital
television service while losing 136,000 subscribers to its
analog cable television service, for a net loss of 79,000
customers. At the same time, Vidéotron gained 77,000 new
customers for its high-speed cable Internet access service,
which now serves 306,000 subscribers. The $35.9 million
increase in revenues from high-speed cable Internet access
services, which generate higher ARPU, more than made up
for the net loss in revenues from cable television services.
The higher revenues also offset the $3.0 million in credits
granted to subscribers during the labour dispute, the
decrease in installation revenues and the decline in
revenues from Videoway, Telemax and pay-per-view.
Operating income decreased by $9.2 million, or 3.4%, in
2002, on a comparable basis. The impact on operating
income of the net loss of cable television customers,
combined with the lower profit margin, due primarily to
the migration of customers from analog to digital services,
was fully offset by the contribution from new customers for
Internet access services, which generate higher profit
margins. At the same time, efficiencies of more than
$20.0 million yielded by the cost-rationalization program
implemented since the acquisition by Quebecor Media and
an $8.3 million refund of property tax paid on the network
in previous years, which was received in 2002, were not
enough to offset additional costs incurred during the
financial year. These included charges of $18.5 million
related to the maintenance of operations during the labour
dispute, the impact of reduced capitalization of certain
operating expenses following the completion of the
network modernization program, and costs for improving
customer service.
Q U E B E C O R I N C .
33
>> M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
The 2002 financial year was marked by the labour dispute
between Vidéotron and its unionized employees, which
began on May 8, 2002. While operating conditions became
more difficult, Vidéotron was able to keep the dispute from
affecting customer service. It also stepped up efforts to
develop its customer base for value-added services and
continued expanding its product line. Vidéotron enhanced
its illico digital television service by launching the new
i Games portal, introduced Extrême, a new ultra-high-speed
Internet package, and made five additional French-language
European channels available to illico subscribers. To make its
illico service still more attractive, Vidéotron added to its
product line a Personal Video Recorder capable of storing up
to 50 hours of programming on its hard disk. Finally, starting
in winter 2003, Vidéotron will gradually introduce Video on
Demand, a technological innovation exclusive to illico that
makes over 400 films available at all times, with the same
viewing options as a VCR or DVD player.
Newspapers
In the Newspapers segment, Sun Media Corporation is Canada’s
largest national chain of tabloids and community newspapers.
It publishes metropolitan dailies in 8 of the country’s 11 largest
markets, 175 weeklies and shopping guides and 18 specialty
publications, across Canada and in Florida.
The Newspapers segment’s revenues amounted to
$853.6 million in 2002, compared with $838.1 million in
2001, an increase of $15.5 million or 1.8%. Increases of 4.0%
and 2.1% in advertising and circulation revenues respectively
were partially offset by decreased printing revenues. Six of the
group’s eight metropolitan dailies increased their revenues.
Operating income grew to $222.3 million in 2002, an
increase of $21.5 million or 10.7%. The Newspapers
segment’s operating margin was 26.0% in 2002, compared
with 24.0% in 2001. The increase in operating income was
mainly due to lower newsprint prices, effective cost-
containment measures introduced in 2001 and continued
in 2002, and higher revenues. These factors were however
partially offset by Quebecor Media management fees in the
amount of $5.1 million, an increase in payroll due to
normal adjustments in hourly rates, higher fringe benefits
and pension costs, and wages related to new publications.
Investments in distribution operations also contributed to
the increase in costs.
The metropolitan dailies made a particularly significant
contribution to the improved profitability, with a 19.6%
increase in operating income, while the community
newspapers posted a 10.2% increase in operating income.
All the metropolitan dailies improved their profitability,
with increases of 8.4% in the Eastern Group, 22.9% at The
Toronto Sun, 23.3% at The London Free Press and 30.1% in the
remains the
Western Group. Le Journal de Montréal
segment’s flagship publication with the highest revenues
and operating margin of all Sun Media Corporation’s
metropolitan dailies. It is noteworthy that, in a fiercely
competitive market, Québec community newspapers
increased their revenues by 11.1% and their profitability by
19.9% in 2002.
In 2002, Sun Media Corporation renegotiated its
newsprint supply contracts with its suppliers in order to
extend their duration and obtain greater volume discounts.
The Newspapers segment plans to carry out a computer-
to-plate project for six of its metropolitan dailies during the
2003 financial year. The $6.3 million investment is
expected to yield annual savings of $2.6 million.
Broadcasting
TVA Group Inc., Québec’s largest television broadcaster with
a market share of more than 35%, owns six of the ten
television stations in the TVA network. It is engaged in
publishing through subsidiary TVA Publishing Inc., which
dominates the French-language newsstand magazine
market in Québec, in merchandising and in infomercials.
TVA also holds interests in analog specialty channels such as
Le Canal Nouvelles (“LCN”).
As noted above, TVA Group’s results have been included
in the Broadcasting segment since September 2001. In 2002,
TVA Group generated revenues of $323.4 million and
operating income of $78.9 million. On a pro forma basis,
the 2001 figures were $322.8 million and $69.5 million
respectively.
Increased broadcasting and publishing revenues almost
entirely offset the decrease in production and international
distribution operations resulting from the reorganization
carried out in 2001.
In broadcasting operations,
the general-interest
channels’ advertising revenues increased by $8.4 million in
2002 and the English-language specialty channels, which
have been on the air since January 2002, recorded revenues
of $2.0 million. The increase in publishing revenues was
primarily due to the acquisition of Publicor by TVA
Publishing in the second quarter of 2002.
The growth in operating income in 2002 stemmed from
the higher revenues, the increased profitability of TVA’s
broadcasting operations as a result of lower operating costs,
among other things, and the addition of Publicor’s results to
the Broadcasting segment’s consolidated figures.
Two important events occurred at TVA Group during the
2002 financial year.
First, as noted above, TVA Group acquired, in May 2002,
Quebecor Media’s magazines division Publicor, the
publisher of popular magazines such as Les idées de ma
maison, Décoration Chez-Soi, Rénovation-Bricolage, Filles
d’aujourd’hui, Clin d’œil, Femmes Plus and a host of special
Q U E B E C O R I N C .
34
editions and seasonal publications. The celebrity news
weekly Échos Vedettes, a Québec institution since 1963, was
also included in the transaction. Folding Publicor into TVA
Publishing has solidified TVA Publishing’s position as the
number 1 magazine publisher in Québec.
Then, in September, a new company formed by TVA
Group (60%) and Radio Nord Communications inc. (40%)
made an agreement to acquire the Radiomédia AM radio
stations and CFOM-FM from Astral Media Inc. The
agreement is conditional upon CRTC approval. For
Quebecor Media and TVA Group, the acquisition is a first
foray into radio. It will add further depth to Quebecor’s
multimedia offering to advertisers and enhance the quality
and strength of Radiomédia’s Québec-wide chain of
information radio stations.
The BBM ratings for fall 2002, released at the beginning
of 2003, again confirmed TVA’s dominant position among
Québec general-interest television networks. The TVA
network’s 36% market share in the Québec market as a
whole was, once again, greater than that of its two main
rivals, SRC (17%) and TQS (14%), combined. Eight of the
top ten shows aired on TVA. Among the specialty channels,
LCN also performed strongly, achieving a substantial
increase in viewing hours.
Leisure and Entertainment
The Company’s operations in the Leisure and Entertainment
segment consist primarily of:
• Distribution of music and retailing of books, magazines
and music (Archambault Group Inc.);
• Rentals and sales of video cassettes and DVDs (Le
SuperClub Vidéotron ltée chain of video stores);
• Book publishing (10 associated publishing houses) and
distribution (Québec-Livres).
In 2002, the segment’s revenues totalled $244.6 million,
compared with $260.1 million in the previous year. The
$15.5 million decrease resulted mainly from the transfer of
Publicor magazines from the Leisure and Entertainment
segment to the Broadcasting segment in the transaction of
May 2002, which is described in greater detail above under
Broadcasting.
Operating income remained virtually unchanged,
increasing from $28.8 million to $29.0 million. The
significant improvement in the profitability of Archambault
Group and the Books segment made up for the loss of
income resulting from the transfer of the magazines. It
should be noted that revenues and operating income for the
previous year included the results of St. Remy Media Inc.,
which was sold at the end of 2001.
In the Music segment, Archambault Group’s revenues
rose by $7.9 million and its operating income by 28.0% in
2002. Its retail sales increased significantly, particularly sales
of CDs, books, musical instruments and pianos, magazines
and sheet music. It also recorded higher distribution
revenues as a result of a number of successful releases
distributed by Distribution Sélect, particularly toward the
end of the year. On the whole, Archambault Group
succeeded in improving its profitability as a result of
increased revenues, stringent control of operating expenses
and the reorganization of its distribution operations. In
October, Archambault opened its 11th superstore in the
Complexe Les Ailes shopping centre in downtown
Montréal. The company also relocated and expanded its
store in Trois-Rivières, Québec.
Sales at Le SuperClub Vidéotron chain increased by
$1.7 million in 2002 and operating income held steady.
Revenues from sales of Vidéotron products, including
broadcasting and Internet access services, almost tripled
during the year. Higher revenues from fees and from sales of
new and pre-viewed videos and DVDs made up for the
decrease in rental revenues.
Not counting St. Remy Media’s 2001 results, the Books
segment increased its revenues by $3.8 million and its
operating income by 74.4% in 2002. Stronger sales of
school books and successful new releases contributed to the
excellent results.
During the year, Éditions Quebecor Média reorganized
its publishers of general literature, bringing them under one
roof and a single management structure. The goal was to
increase the commercial strength of the largest group of
publishing houses in Québec. In November 2002, Quebecor
Media closed the sale of its 80% interest in legal publisher
Wilson & Lafleur to the Wilson family, which founded the
company. Quebecor was a partner in the development of
this major Québec publishing house for 17 years.
Business Telecommunications
35
(“VTL”)
Vidéotron Télécom
is a business
ltée
telecommunications leader with a 10,000-km network that
reaches more than 80% of businesses located in the
metropolitan areas of Québec and Ontario. VTL’s extensive
network supports direct connectivity with networks in
Ontario, eastern Québec, the Maritimes and the United
States. Through partnerships, VTL can serve its customers
around the world.
As noted above, VTL’s operating results have been
included in Quebecor Media’s consolidated results since
November 2001. VTL’s revenues were $91.9 million in
2002, versus $96.7 million in 2001, on a comparable
basis. The decrease in revenues from point-to-point
telecommunications and the impact on revenues of the
discontinuation of certain operations in 2001 were not
entirely offset by the contribution of businesses acquired in
2002 and higher revenues from Internet communications.
Q U E B E C O R I N C .
>> M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Operating income amounted to $27.3 million in 2002,
compared with $23.4 million in the previous year, an
increase of $3.9 million or 16.6%. The improvement in
profitability was mainly due to the considerable reduction
in labour costs and higher profit margins, which
outweighed costs caused by vandalism against VTL’s
network during the labour dispute at Vidéotron.
increased VTL’s penetration
In April 2002, VTL acquired most of the strategic assets
of Toronto-based Stream Intelligent Networks. The
transaction
the
Montréal–Ottawa–Toronto triangle, the country’s largest
business telecommunications market. Then, in December
2002, VTL expanded its coverage by acquiring two fibre-
optic routes stretching a total of 1,200 km across southern
Ontario and to the United States. The two transactions
demonstrate VTL’s commitment to expansion in the
Ontario marketplace.
in
Also in 2002, VTL signed a new 5-year labour contract
with the union representing its technicians.
Web Integration/Technology
The Web Integration/Technology segment
includes
Nurun Inc., which is engaged in Web, intranet, extranet
and B2C e-commerce development, e-marketing and
customer relationship management strategies, and
interactive television concepts and operations, and
Nurun’s subsidiary Mindready Solutions Inc., which is
real-time
in
engaged
communications solutions.
engineering
and
test
The Web Integration/Technology segment posted
revenues of $79.8 million in 2002, compared with
$129.1 million in 2001. The $34.9 million drop in the
revenues of Mindready Solutions Inc. as a result of slumping
demand from telecoms, the source of 90% of Mindready’s
sales in 2001, accounted for the major part of the decrease.
Sales declined by $14.4 million at Nurun’s e-Business
Services segment due to a decrease in business at all offices
and the discontinuation of some operations that no longer
fit into Nurun’s long-term development plans, including
the sale of Flow Systems Corporation and the closing of
Nurun’s office in Chile.
The operating loss was $10.7 million, compared with
$15.4 million in 2001. The lower operating loss in 2002 was
mainly due to the recording under operating expenses of
special charges related to the restructuring of operations in
2001, and lower operating expenses and improved profit
margins in 2002, which more than made up for the decrease
in revenues.
Therefore, despite an exceedingly difficult business
environment for Web agencies around the world, Nurun’s
e-Business Services segment generated operating income in
each of the last three quarters of 2002. It did so by practicing
careful management and concentrating on its core mission
of offering Web services and relational marketing solutions
to major world-wide brands. At the same time, Nurun
continued energetically marketing its services to public and
parapublic organizations. In November 2002, Nurun signed
a contract worth nearly $3.0 million with the Québec
Pension Plan to develop Web-based transactional services for
the major Québec government agency.
Mindready Solutions reduced its staff in Europe and
North America under the restructuring plan developed in
2002. Mindready Solutions made an aggressive effort to
diversify its customer base and its markets. As of the end of
2002, 45% of its revenues derived from sources such as
aerospace (24%), automobiles (11%), industry and medical
services (10%), all expanding markets in which the
engineering solutions provided by Mindready Solutions are
in demand.
Internet/Portals
The Internet/Portals segment operates the CANOE network
of portals – which consists of Canoe.ca and Canoe.qc.ca –
and the FYICalgary.com and FYILondon.com city sites. It
also operates, through Netgraphe Inc., the portal La Toile du
Québec and the specialty sites Megagiciel.com, Webfin.com
and Multimedium.com. In addition, the segment operates
three Web properties offering paid services: the employment
site Jobboom.com, the dating site MatchContact.com, and
the car site Autonet.ca. It includes the largest source for
classified ads in Canada, ClassifiedExtra.com, and a virtual
store, Shop.canoe.ca.
The Internet/Portals segment’s revenues were virtually
unchanged at $26.8 million in 2002, compared with
$27.4 million in 2001. The world-wide decline in revenues
from advertising banners on general-interest portals in 2002
was therefore offset by the significant increase in revenues
from the specialty sites Jobboom.com, MatchContact.com
and Autonet.ca.
However, the most notable event of 2002 in the segment
was the sharp reduction in the operating loss from
$21.5 million in 2001 to $2.6 million in 2002, an
$18.9 million improvement. This performance reflects the
success of the multi-stage restructuring process launched in
2001 and continued during the 2002 financial year. Lower
payroll and advertising/promotion expenses, combined
from the specialty sites,
with
contributed to the dramatic improvement.
increased revenues
The Internet/Portals segment reached the breakeven
point, in terms of operating income, during the last two
quarters of 2002. The turnaround in Netgraphe’s financial
performance was due to the factors noted above.
During the 2002 financial year, Netgraphe carried out a
reorganization of its properties. Its general-interest portals
Q U E B E C O R I N C .
36
Canoe.ca and Canoe.qc.ca were converted into virtual
gateways to Quebecor Media’s properties. The refocusing of
for
Netgraphe’s operations necessitated a
restructuring of $1.5 million and is expected to yield annual
savings of over $7.0 million.
reserve
In July 2002, Netgraphe announced a financing
agreement in the amount of $6.0 million entailing the
issuance by Netgraphe of 8% Convertible Senior
Debentures to Quebecor Media and 9085-3011 Québec inc.
(formerly InfiniT inc.). The purpose of the arrangement was
to improve Netgraphe’s financial condition and enable it to
pursue its development.
In the third quarter of 2002, Netgraphe announced the
sale of its Micanoa.com portal to Grupo Vertice, a Spanish
information and training firm. The move was in line with
Netgraphe’s strategy of concentrating on the development
of its network of sites in Québec and Canada.
Throughout the financial year, Netgraphe continued to
work on maximizing opportunities for convergence with
other Quebecor Media companies, particularly Sun Media
Corporation and TVA Group.
Financial Expenses
Financial expenses were reduced by $41.3 million, from
$665.4 million in 2001 to $624.1 million in 2002, due to
lower interest rates, lower debt levels at the subsidiaries, and
the restatement of 2001 financial expenses as a result of the
retroactive application of the new accounting policy
concerning foreign currency translation.
These factors were however partially offset by the
inclusion of the results of the Cable Television and Business
Telecommunications segments and of TVA Group for the
full year, and the issuance in July 2001 of Senior Notes in
the principal amount of US$850.0 million by Quebecor
Media, the proceeds from which were used to repay loans
bearing lower interest.
2001/2000 COMPARISON
On October 23, 2000, Quebecor and Capital Communications
CDP, a subsidiary of the Caisse de dépôt et placement
du Québec, made a cash injection of $0.9 billion and
$2.8 billion respectively in consideration of shares of
Quebecor Media. This capital, combined with new bank
credit facilities, enabled Quebecor Media to acquire all the
outstanding shares of Le Groupe Vidéotron ltée for a total
consideration of $5.3 billion.
In the wake of this acquisition, the 2001 financial year
saw the incorporation of the new strategic Cable Television
and TVA Group assets into the Company’s operations.
CRTC decisions authorized Quebecor Media to assume
control of Vidéotron in May 2001 and of TVA Group in
September 2001, following the closing of the sale of the
TQS television network.
During the 2001 financial year, Quebecor and its
subsidiaries took a series of initiatives to improve their
financial condition and pay down the bank credits
contracted at the time of the acquisition of Groupe
Vidéotron.
The first stage was completed on June 21, 2001, when
the Company reached agreement with the minority
shareholders in Sun Media Corporation to acquire their
interests. Following the transaction, Sun Media Corporation
became a wholly owned subsidiary of Quebecor Media.
On June 29, 2001, Quebecor Media contracted a
$430.0 million bridge loan with a term of 21 months. On
July 5, 2001, Vidéotron closed a term credit in the amount
of US$264.0 million; a portion of the proceeds was
distributed to Quebecor Media in order to pay down part of
the bridge financing.
Then, on July 6, 2001, the final stage of the refinancing
plan was completed when Quebecor Media closed a private
placement denominated in US dollars, coming due in 2011.
The proceeds of US$850.0 million were applied to the
repayment of Quebecor Media’s debt.
Despite the economic slowdown in some markets,
Quebecor World continued its international expansion in
2001.
It closed the acquisition of Grafica Melhoramentos S.A
in Brazil, Editorial Estrada in Argentina and Grupa Serla in
Mexico, and officially opened its new plant in Recife, Brazil.
Quebecor World also signed a long-term contract to print
telephone directories for Mexico’s largest publisher of
telephone books, ADSA, a subsidiary of Telmex.
In Europe, Quebecor World acquired a majority interest
in Espacio y Punto S.A. It also undertook to acquire the
printing facilities of Hachette Filipacchi Médias; the
transaction closed in 2002.
In North America, Quebecor World acquired Retail
Printing Corporation and its plants in Massachusetts and
Tennessee. Finally, Quebecor World signed a multi-year
contract extension with Time Inc.
increase. Operating
In the 2001 financial year, Quebecor recorded revenues
of $11.63 billion, compared with $10.91 billion in 2000, a
6.6%
income rose 5.6%, from
$1.79 billion in 2000 to $1.89 billion in 2001. The higher
revenues and operating income mainly reflect the inclusion
in the consolidated results of the subsidiaries acquired in
the takeover of Groupe Vidéotron and the conversion of the
printing subsidiary’s sales denominated in US dollars into
Canadian currency.
The Company reported a net loss of $248.7 million, or
$3.85 per share, in 2001, compared with net income of
Q U E B E C O R I N C .
37
>> M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
$1.09 billion, or $16.81 per share, in 2000. The 2001 results
were affected by higher amortization charges ($135.0 mil-
lion), higher financial expenses ($226.1 million), certain
unusual items, such as reserves for restructuring and special
charges totalling $552.2 million, and write-downs of
goodwill in an aggregate amount of $147.0 million, as
described above. In 2000, net income included unusual items
such as a gain on dilution of $816.1 million, primarily from
the issuance of capital stock by subsidiary Quebecor Media,
and income from discontinued operations of $246.1 million
mainly due to a gain on the sale of Donohue Inc. to Abitibi-
Consolidated Inc. Reserves for restructuring and special
charges totalled $106.0 million in 2000.
revenues amounted
The Printing segment’s
to
$9.79 billion in 2001, a 1.1% increase over revenues of
$9.68 billion reported in 2000. The effect of the strong
US dollar on sales made in US currency and the
contribution of newly acquired businesses accounted for
the slight increase. These factors made up for lower sales in
North America. Quebecor World generated operating
income of $1.48 billion
in 2001, compared with
$1.59 billion in 2000. The decrease was mainly due to the
economic slowdown in North America.
38
The Cable Television segment contributed $476.5 mil-
lion to revenues and $183.1 million to operating income
from May to December 2001. On a comparable basis,
Vidéotron’s revenues increased by $50.6 million or 7.7% in
2001 from the 2000 figure of $659.0 million. Operating
income, which was $234.9 million in 2000, rose by
$37.0 million, or 15.8%, mainly as a result of the growing
customer base for the high-speed Internet access service.
The Newspapers segment generated revenues of
$838.1 million in 2001. The 1.4% decrease from the
$850.1 million figure reported in 2000 was mainly due to a
6% decline in circulation revenues. The segment’s operating
income decreased by 2.2% to $200.8 million in 2001,
primarily as a result of higher newsprint prices in the first
three quarters of 2001, which were largely offset by the
positive impact of restructuring programs.
The Broadcasting segment’s revenues were $153.6 million
in 2001, compared with $59.9 million in the 2000 financial
year. The growth mainly reflects the addition of TVA Group’s
results for the months of September through December 2001.
The segment’s operating income amounted to $28.0 million
in 2001 compared with an operating loss of $3.4 million in
2000.
In the Leisure and Entertainment segment, revenues
increased by 15.4% to $260.1 million in 2001. Operating
income grew 61.1% to $28.8 million in 2001, compared
with $17.9 million in 2000. The increases stemmed mainly
from the inclusion of the results of Le SuperClub Vidéotron
as of October 2000, following the acquisition of Groupe
Vidéotron. The increase in operating income was also due
to improved profitability in the Magazines and Music
segments.
VTL’s revenues, which were included in Quebecor’s
consolidated financial statements as of November 2001,
amounted to $14.6 million in 2001, while operating income
was $4.1 million. On a comparable basis, VTL’s revenues
increased 17% to a total of $96.7 million in 2001. Its
operating income quintupled, increasing from $4.5 million
in 2000 to $23.5 million in 2001. The improvement in
operating income was due to stringent control of expenses
and the successful recovery plan adopted by the subsidiary
in 2001.
The Web Integration/Technology segment generated
revenues of $129.1 million in 2001, comparable to the
$127.5 million figure reported in 2000. It recorded an
operating loss of $15.4 million in 2001, compared with a
small operating income of $146,000 in 2000. The results
reflected difficult market conditions in the e-Business
segment and decreased operating income at Mindready
Solutions.
The revenues of the Internet/Portals segment were
$27.4 million in 2001, compared with $11.6 million in
2000. The increase mainly resulted from the inclusion of
the results of Netgraphe, a subsidiary of Groupe Vidéotron,
in the Company’s results for the full year of 2001. The
operating
loss was $21.5 million, compared with
$21.6 million in 2000. On March 6, 2001, Netgraphe and
Quebecor Media announced the closing of a consolidation
agreement under which CANOE’s assets were sold to
Netgraphe in consideration of Netgraphe shares.
The increase in financial expenses in 2001, compared
with 2000, was due to higher debt levels as a result of the
acquisition of Groupe Vidéotron by Quebecor Media on
October 23, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Operations generated cash flow of $1.14 billion in 2002,
compared with $1.10 billion in 2001. The improvement
reflects the inclusion of the cash flows generated by the
Cable Television and Business Telecommunications
segments and TVA Group, which was partially offset by
lower cash flows from Quebecor World’s operations due to
expenses related to the restructuring program and a
decrease in investment in working capital in 2001, whereas
there was no decrease in 2002.
Operating working capital was negative by $599.3 mil-
lion at December 31, 2002, compared with a negative
amount of $244.9 million at the same date in 2001. The
Q U E B E C O R I N C .
decrease in working capital was mainly due to the recording
by Quebecor Media of a $429.0 million term loan maturing
in April 2003 under short-term debt.
Financing Activities
Quebecor’s consolidated long-term debt and consolidated
bank debt decreased by $826.5 million in 2002: Quebecor
World’s debt was reduced by $530.9 million and Quebecor
Media’s debt by $213.7 million, primarily at subsidiaries
Vidéotron and Sun Media Corporation, which posted
reductions of $168.0 million and $39.4 million respectively.
The balance of Quebecor’s debt was reduced mainly by
using the proceeds from the sale of TQS, which closed in
the first quarter of 2002.
In December 2002, Quebecor closed a secondary
offering of 6.8 million subordinate voting shares of
Quebecor World Inc. at a price of $36.00 per share for a
total of $244.8 million. Immediately after the end of
the 2002 financial year, Quebecor Inc. contributed
$216.1 million to the share capital of Quebecor Media,
enabling Quebecor Media to repay the same amount of a
$429.0 million term loan coming due in April 2003.
Counting the reduction in the term loan, Quebecor Media
decreased its debt by a total of nearly $430.0 million.
On February 7, 2003, Sun Media Corporation closed
a private placement of Senior Notes maturing in 2013
and bearing interest at 7 5/8%, in the net amount of
US$201.5 million, and contracted new bank credit facilities
totalling $425.0 million; more than 95% of the principal
does not come due until 2008 or 2009. The proceeds from
the sale of Senior Notes and the new bank credit facilities
were used to pay down in full all of Sun Media
Corporation’s debt, on which substantial amortization
payments would have been due in 2003 and 2005, and
which would have been repayable in full in 2007, and to
pay a $260.0 million dividend to Quebecor Media Inc., of
which $150.0 million will be used to reduce the long-term
debt of Vidéotron ltée.
Quebecor World was able to reduce its debt despite the
acquisition of printing facilities from Hachette Filipacchi
Médias. The cost of the acquisition, including the impact of
the debt assumed as part of the acquisition, totalled
US$78.2 million in the first quarter of 2002.
Under the normal course issuer bids announced in April
2000 and April 2001, Quebecor World repurchased 148,500
subordinate voting shares for a total of $5.2 million during
2002.
In 2001, Quebecor World completed two placements of
preferred shares at 6.75% and 6.90%, in the aggregate
amount of CDN$375.0 million, and a placement of Senior
Notes bearing interest at a rate of 7.2%, in the aggregate
amount of US$250.0 million.
Investing Activities
Acquisitions of capital assets in 2002 consisted primarily of
acquisitions made by Quebecor World. Little capital
investment is required for the Company’s other business
segments, with the exception of Cable Television. The
increase in investment in 2002 caused by the inclusion of
the Cable Television and Business Telecommunications
segments and TVA Group was partially offset by lower
investment expenses in the Printing, Newspapers, Web
Integration/Technology and Internet/Portals segments.
Financial Position
At December 31, 2002, the Company and its subsidiaries had
cash, cash equivalents and liquid investments with remaining
maturities greater than three months totalling $513.5 million,
consisting mainly of short-term investments.
As at December 31, 2002, the consolidated debt,
including the short-term portion of the long-term debt,
totalled $6.33 billion, not including a $979.9 million
liability related to exchangeable debentures, which is now
shown as a separate line item on the Company’s
consolidated balance sheet. Of the total long-term debt,
$2.68 billion is attributable to Quebecor World and
$3.51 billion to Quebecor Media. Quebecor Media’s debt
includes Sun Media Corporation’s $515.1 million debt,
Vidéotron’s $1.12 billion debt, and TVA Group’s
$51.2 million debt, as well as Senior Notes in an aggregate
amount of $1.39 billion and a term loan of $429.0 million.
The $139.4 million balance of the consolidated debt
consists of Quebecor Inc.’s debt, including advances under the
Company’s authorized $201.0 million revolving credit facility.
Quebecor World paid dividends of US$0.49 per share
during the 2002 financial year, compared with US$0.46 in
2001 and US$0.33 in 2000.
Quebecor did not pay dividends on its Class A and
Class B shares in 2002. Dividends totalled $0.39 per share in
2001 and $0.51 per share in 2000. In the third quarter of
2001, the Board of Directors of Quebecor decided to
suspend the payment of dividends on the Company’s
shares in view of Quebecor Media’s need to reinvest its
earnings in its development. The decision was consistent
with the standard media industry practice of reinvesting
income in business development and growth. The
Company also considered it appropriate to preserve its cash
assets and decided to practice prudent management in the
difficult business environment.
Management believes that cash flows from operations
and available sources of financing should be sufficient to
cover cash requirements for capital investment, interest
payments and mandatory debt repayment. In particular,
management believes that the financing activities carried
out after the end of the 2002 financial year and discussed
Q U E B E C O R I N C .
39
>> M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
under “Financing Activities” above have enhanced the
Company’s financial flexibility by reducing its debt ratio,
rescheduling debts on which substantial amortization
payments are due in the coming years, and facilitating the
circulation of liquid assets between the Company and its
subsidiaries.
entered a charge of $1.17 billion against opening retained
earnings, net of non-controlling interest of $989.7 million, in
order to account for the goodwill impairment loss in the
Cable Television segment ($1.936 billion), the Business
Telecommunications segment ($164.9 million), the Web
Integration/Technology segment ($20.4 million) and the
Internet/Portals segment ($41.8 million).
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements made
pursuant to the safe harbour provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are subject to known and unknown risks and
uncertainties that could cause the Company’s actual
results to differ materially from those set forth in the
forward-looking statements. These risks include changes
in customer demand for the Company’s products, changes
in raw material and equipment costs and availability,
seasonal fluctuations in customer orders, pricing actions
by competitors, and general changes in the economic
environment.
40
RISKS AND UNCERTAINTIES
In the normal course of business, Quebecor and its
subsidiaries are exposed to fluctuations in interest rates and
exchange rates. Quebecor and its subsidiaries manage this
exposure through staggered debt maturities and an optimal
balance of fixed and variable rate obligations. Quebecor and
its subsidiaries use derivative financial instruments to
optimize the management of these risks.
As at December 31, 2002, Quebecor Media and its
subsidiaries, Vidéotron ltée and Sun Media Corporation,
were using financial derivatives to reduce their exchange
rate and interest rate exposure. Quebecor World has also
entered into foreign exchange forward contracts to hedge
the settlement of raw materials and equipment purchases,
to set the exchange rate for cross-border sales, and to
manage the foreign exchange exposure on certain liabilities.
While these agreements expose the subsidiary to risk of
non-performance by a third party, the subsidiary believes
that the possibility of incurring such loss is remote due to the
creditworthiness of the parties it deals with. The Company
does not hold nor issue any derivative financial instruments
for trading purposes. A description of the financial derivatives
used by the Company as at December 31, 2002 is included in
Note 25 to the consolidated financial statements.
Concentrations of credit risk with respect to trade
receivables are limited due to the Company’s diverse
operations and large customer base. As of December 31,
2002, the Company had no significant concentrations of
credit risk. Quebecor believes that the product and
geographic diversity of its customer base is instrumental in
reducing its credit risk, as well as the impact of a potential
change in its local market or product-line demand.
ACCOUNTING POLICIES
In 2002, the Company made certain changes to its
accounting policies in order to conform to new CICA
accounting standards. The changes are described in greater
detail in Note 1(a) to the Company’s annual consolidated
financial statements.
The Company completed the goodwill impairment tests
for each of its operating units, in accordance with the new
recommendations in Section 3062 of the CICA Handbook, and
Q U E B E C O R I N C .
>> S E L E C T E D F I N A N C I A L D A T A
Years ended December 31, 2002, 2001, 2000, 1999 and 1998
(in millions of Canadian dollars, except per share data)
Operations
Revenues
Operating income before amortization, financial expenses, reserve for
restructuring of operations and other special charges,
write-down of goodwill, gains on sale of business, of shares
of a subsidiary and of a portfolio investment and gains on dilution
Contribution to net income
Continued operations
Goodwill amortization
Unusual items and write-down of goodwill
Discontinued operation
Net income (loss)
2002
2001
(restated 1)
2000
(restated 1)
1999
1998
$
12,014.0
$
11,633.3
$
10,914.8
$
8,440.3
$
6,173.5
2,021.4
1,889.7
1,790.1
1,309.3
129.4
–
(37.5)
–
91.9
66.0
(105.9)
(208.8)
–
(248.7)
204.5
(66.8)
702.0
246.1
1,085.8
181.9
(41.1)
296.0
40.5
477.3
Cash flows provided by continued operations
1,137.8
1,103.5
1,447.6
1,105.9
Basic per share data
Contribution to net income
Continued operations
Goodwill amortization
Unusual items and write-down of goodwill
Discontinued operation
Net income (loss)
Dividends
Shareholders' equity
Weighted average number of shares outstanding (in millions)
Diluted per share data
Contribution to net income
Continued operations
Goodwill amortization
Unusual items and write-down of goodwill
Discontinued operation
Net income (loss)
Diluted weighted average number of shares (in millions)
Financial position
Working capital
Long-term debt
Shareholders’ equity
Capitalization 2 3
Total assets
$
$
$
2.00
–
(0.58)
–
1.42
–
22.88
64.6
1.97
–
(0.58)
–
1.39
64.6
(599.3)
5,681.8
1,478.8
5,590.6
17,130.4
$
$
$
1.02
(1.64)
(3.23)
–
(3.85)
0.39
39.70
64.6
1.02
(1.64)
(3.23)
–
(3.85)
64.6
(244.9)
7,013.6
2,565.9
7,371.0
19,503.0
$
$
$
3.17
(1.03)
10.86
3.81
16.81
0.51
43.23
64.6
3.15
(1.03)
10.84
3.80
16.76
64.8
(1,785.8)
4,333.5
2,793.6
7,396.0
17,604.7
$
$
$
2.80
(0.63)
4.57
0.63
7.37
0.48
26.57
64.8
2.80
(0.63)
4.56
0.63
7.36
64.9
556.3
5,860.4
1,716.0
5,364.1
15,246.9
$
$
$
1 Please refer to note 1 (a) (ii) to the consolidated financial statements for the year ended December 31, 2002.
2 Included in the capitalization are shareholders' equity and non-controlling interest.
3 The comparative figures for the years 2001, 2000, 1999 and 1998 have been reclassified to conform with the definition adopted for the year ended December 31, 2002.
Q U E B E C O R I N C .
41
852.3
146.5
(18.4)
–
44.2
172.3
647.4
2.24
(0.28)
–
0.68
2.64
0.44
21.99
65.3
2.24
(0.28)
–
0.68
2.64
65.5
612.9
3,003.5
1,423.7
4,031.2
9,889.6
>> S E L E C T E D Q U A R T E R L Y F I N A N C I A L D A T A
Years ended December 31, 2002 and 2001
(in millions of Canadian dollars, except per share data)
Three-month periods ended
Three-month periods ended
2002
2001
March 31
June 30 September 30
December 31
March 31
(restated)
June 30
(restated)
September 30
(restated)
December 31
(restated)
$ 2,868.8
$ 2,853.3
$ 3,050.4
$ 3,241.5
$ 2,718.1
$ 2,758.5
$ 3,012.6
$ 3,144.1
Operations
Revenues
Operating income before amortization, financial
expenses, reserve for restructuring of
operations and other special charges,
write-down of goodwill, gains on sale of
business, of shares of a subsidiary and of
a portfolio investment and gains on dilution
433.2
490.6
524.9
572.7
369.1
458.4
521.6
540.6
Contribution to net income
Continued operations
Goodwill amortization
Unusual items and write-down of goodwill
Net income (loss)
Basic per share data
Contribution to net income
Continued operations
Goodwill amortization
Unusual items and write-down of goodwill
Net income (loss)
42
Weighted average number of shares outsandings
8.5
–
14.9
23.4
31.4
–
(4.3)
27.1
39.8
–
(2.0)
37.8
49.7
–
(46.1)
3.6
(17.5)
(15.8)
5.3
(28.0)
19.3
(25.5)
6.1
(0.1)
16.8
(31.9)
(19.5)
(34.6)
47.4
(32.7)
(200.7)
(186.0)
$
0.13
$
0.49
$
0.62
$
0.77
$
(0.27)
$
0.30
$
0.26
$
0.73
–
0.23
0.36
–
(0.07)
0.42
–
(0.03)
0.59
–
(0.71)
0.06
(0.24)
0.08
(0.43)
(0.39)
0.09
–
(0.50)
(0.30)
(0.54)
(0.51)
(3.10)
(2.88)
(in millions)
64.6
64.6
64.6
64.6
64.6
64.6
64.6
64.6
Diluted per share data
Contribution to net income
Continued operations
Goodwill amortization
Unusual items and write-down of goodwill
Net income (loss)
$
0.13
$
0.49
$
0.60
$
0.76
$
(0.27)
$
–
0.23
0.36
–
(0.07)
0.42
–
(0.03)
0.57
–
(0.71)
0.05
(0.24)
0.08
(0.43)
0.30
(0.39)
0.09
–
$
0.26
(0.50)
(0.30)
(0.54)
$
0.73
(0.51)
(3.10)
(2.88)
Diluted weighted average number of shares (in millions)
64.6
64.6
64.6
64.6
64.6
64.6
64.6
64.6
Q U E B E C O R I N C .
>> M A N A G E M E N T ' S R E S P O N S I B I L I T Y F O R F I N A N C I A L S T A T E M E N T S
The accompanying consolidated financial statements of Quebecor Inc. and its subsidiaries are the responsibility of management and had been approved
by the Board of Directors of Quebecor Inc.
These financial statements have been prepared by management in conformity with Canadian generally accepted accounting principles and include
amounts that are based on best estimates and judgments.
Management of the Company and of its subsidiaries, in furtherance of the integrity and objectivity of the data in the financial statements, has developed
and maintain systems of internal accounting controls and support a program of internal audit. Management believes that these systems of internal
accounting controls provide reasonable assurance that financial records are reliable and form a proper basis for the preparation of the financial
statements and that assets are properly accounted for and safeguarded.
The Board of Directors carries out its responsibility for the financial statements principally through its Audit Committee, consisting solely of outside
directors. The Audit Committee reviews the Company's annual consolidated financial statements and formulates the appropriate recommendations to
the Board of Directors. The auditors appointed by the shareholders have full access to the Audit Committee, with and without management being
present.
These financial statements have been examined by the auditors appointed by the shareholders, KPMG LLP, chartered accountants, and their report is
presented hereafter.
Pierre Karl Péladeau
President and Chief Executive Officer
Claude Hélie
Executive Vice-President and Chief Financial Officer
Montréal, Canada
February 7, 2003
>> A U D I T O R S ’ R E P O R T T O T H E S H A R E H O L D E R S O F Q U E B E C O R I N C .
43
We have audited the consolidated balance sheets of Quebecor Inc. and its subsidiaries as at December 31, 2002 and 2001 and the consolidated
statements of income, retained earnings and cash flows for the years ended December 31, 2002, 2001 and 2000. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31,
2002 and 2001 and the results of its operations and its cash flows for the years ended December 31, 2002, 2001 and 2000 in accordance with
Canadian generally accepted accounting principles.
Chartered Accountants
Montréal, Canada
February 7, 2003
Q U E B E C O R I N C .
>> C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except earnings per share data)
Revenues
$
12,014.0
$
11,633.3
$
12,069.4
$
10,914.8
2002
2001
(restated, note 1(a)(ii))
2001
(restated, note 1(a)(ii))
2000
(restated, note 1(a)(ii))
(pro forma, note 2)
Cost of sales and selling and administrative expenses
Operating income before under-noted items
Amortization
Financial expenses (note 3)
Reserve for restructuring of operations and other special charges (note 4)
Write-down of goodwill (note 4 (h))
Gains on sale of business, of shares of a subsidiary and
of a portfolio investment (notes 5 and 9)
Gains on dilution from issuance of capital stock by subsidiaries
Income (loss) before income taxes
Income taxes (note 6)
Equity (loss) income from non-consolidated subsidiaries (note 2)
Dividends on preferred shares of subsidiaries
Non-controlling interest
Income (loss) before amortization of goodwill
44
Amortization of goodwill, net of income taxes and of non-controlling interest
Income (loss) from continued operations
Income from the discontinued operation (note 8)
Net income (loss)
Earnings per share (note 7)
Basic
Before amortization of goodwill
From continued operations
From the discontinued operation
Net income (loss)
Diluted
Before amortization of goodwill
From continued operations
From the discontinued operation
Net income (loss)
Weighted average number of shares outstanding (in millions)
Diluted weighted average number of shares (in millions)
See accompanying notes to consolidated financial statements.
9,992.6
2,021.4
(772.9)
(624.1)
(68.7)
(187.0)
91.2
–
459.9
156.2
303.7
–
(45.3)
(166.5)
91.9
–
91.9
–
91.9
1.42
1.42
–
1.42
1.39
1.39
–
1.39
64.6
64.6
$
$
$
Q U E B E C O R I N C .
9,743.6
1,889.7
10,050.1
2,019.3
(690.0)
(665.4)
(552.2)
(147.0)
44.7
1.5
(118.7)
76.1
(194.8)
(18.4)
(33.9)
104.3
(142.8)
(105.9)
(248.7)
–
(738.7)
(696.0)
(552.2)
(147.0)
44.7
1.5
(68.4)
97.9
(166.3)
(0.9)
(33.9)
81.7
(119.4)
(129.3)
(248.7)
–
9,124.7
1,790.1
(555.0)
(439.3)
(106.0)
(126.9)
–
816.1
1,379.0
227.9
1,151.1
2.8
(15.0)
(232.4)
906.5
(66.8)
839.7
246.1
$
(248.7)
$
(248.7)
$
1,085.8
$
$
(2.21)
(3.85)
–
(3.85)
(2.21)
(3.85)
–
(3.85)
64.6
64.6
$
$
(1.85)
(3.85)
–
(3.85)
(1.85)
(3.85)
–
(3.85)
64.6
64.6
$
$
14.03
13.00
3.81
16.81
13.99
12.96
3.80
16.76
64.6
64.8
>> C O N S O L I D A T E D S T A T E M E N T S O F R E T A I N E D E A R N I N G S
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars)
Balance at beginning of year
As previously reported
Restatement due to a change in accounting policy regarding foreign currency translation (note 1(a)(ii))
As restated
Reduction due to a change in accounting policy regarding goodwill (note 1(a)(i))
Net income (loss)
Dividends
Premium paid on redemption of shares
Balance at end of year
See accompanying notes to consolidated financial statements.
2002
2001
(restated, note 1(a)(ii))
2000
(restated, note 1(a)(ii))
$
2,161.0
$
2,427.9
$
1,376.9
(5.6)
2,155.4
(1,173.4)
982.0
91.9
1,073.9
–
–
1.4
2,429.3
–
2,429.3
(248.7)
2,180.6
(25.2)
–
–
1,376.9
–
1,376.9
1,085.8
2,462.7
(33.0)
(0.4)
$
1,073.9
$
2,155.4
$
2,429.3
45
Q U E B E C O R I N C .
>> C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
Years ended December 31, 2002, 2001 and 2002
(in millions of Canadian dollars)
Cash flows related to continued operations:
Net income (loss) from continued operations
Adjustments for:
Amortization of property, plant and equipment
Amortization and write-down of goodwill and deferred charges
Amortization of deferred financing costs and long-term debt discount
Reserve for restructuring of operations and other special charges
Non-monetary compensation charges
Write-down of temporary and portfolio investment and of property
Interest on redeemable preferred shares
Loss on foreign currency translation of long term debt
Gains on sale of assets and gains on dilution from issuance
of capital stock by subsidiaries
Future income taxes
Equity income (loss) from non-consolidated subsidiaries
Non-controlling interest
Other
Net change in non-cash balances related to operations (net of the effect
of business acquisitions and disposals)
Cash flows provided by continued operations
46
Cash flows related to financing activities:
Net (decrease) increase in bank indebtedness
Issuance of long-term debt and convertible notes
Repayment of long-term debt
Issuance of capital stock by subsidiaries
Dividends
Dividends paid to non-controlling shareholders
Other
2002
2001
(restated, note 1(a)(ii))
2001
(restated, note 1(a)(ii))
2000
(restated, note 1(a)(ii))
(pro forma, note 2)
$
91.9
$
(248.7)
$
(248.7)
$
839.7
713.8
246.1
57.6
(3.2)
5.7
22.3
21.7
3.1
(90.6)
103.3
–
166.5
(5.7)
1,332.5
(194.7)
1,137.8
(24.6)
231.8
(1,110.4)
50.8
–
(76.0)
–
646.3
421.3
65.6
200.3
25.4
99.8
3.4
20.3
(49.4)
(74.1)
18.4
(229.0)
(11.8)
887.8
215.7
1,103.5
(14.2)
3,643.0
(3,795.5)
581.6
(25.2)
(66.0)
–
693.1
466.1
65.6
200.3
25.4
99.8
3.4
21.1
(49.4)
(65.6)
0.9
(225.9)
(9.7)
976.4
243.9
1,220.3
19.2
3,756.4
(4,000.2)
580.9
(25.2)
(66.0)
–
524.1
298.3
15.7
(10.4)
40.2
54.6
–
–
(845.6)
141.0
(2.8)
158.7
11.6
1,225.1
222.5
1,447.6
(349.5)
3,459.5
(1,661.7)
2,759.1
(33.0)
(46.0)
(0.6)
Cash flows (used) provided by financing activities
$
(928.4)
$
323.7
$
265.1
$
4,127.8
Q U E B E C O R I N C .
>> C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars)
Cash flows related to investing activities:
Business acquisitions, net of cash and cash equivalents acquired (note 9)
$
Proceeds from disposal of businesses (note 9)
Additions to property, plant and equipment
Additions to temporary investments and other assets
Acquisition of cash and cash equivalents and temporary investments
held in trust (net of proceeds from disposal)
Proceeds from disposal of assets
Other
Cash flows used by investing activities
Net (decrease) increase in cash and cash equivalents
Effect of the discontinued operation on cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
denominated in foreign currencies
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Additional information on the consolidated statements of cash flows:
Changes in non-cash balances related to operations (net of the effect
of business acquisitions and disposals):
Accounts receivable
Inventories and investments in televisual products and movies
Accounts payable and accrued charges
Other
Cash interest payments
Cash payments for income taxes
See accompanying notes to consolidated financial statements.
$
$
$
$
2002
2001
(restated, note 1(a)(ii))
2001
(restated, note 1(a)(ii))
2000
(restated, note 1(a)(ii))
(pro forma, note 2)
(20.0)
6.7
(431.8)
(75.4)
(217.8)
357.7
8.9
(371.7)
(162.3)
–
13.1
340.1
190.9
(124.5)
(23.1)
15.1
(62.2)
(194.7)
433.3
85.8
$
(850.8)
$
(850.8)
$
(5,451.4)
–
(556.9)
(24.6)
(13.7)
265.9
(52.7)
–
(603.1)
(24.4)
(13.7)
266.3
(65.3)
82.9
(405.0)
(34.6)
(2.8)
61.6
4.1
(1,232.8)
(1,291.0)
(5,745.2)
194.4
–
23.9
121.8
340.1
318.5
130.5
(122.1)
(111.2)
215.7
572.0
191.2
$
$
$
$
194.4
–
23.9
121.8
340.1
363.9
144.0
(142.9)
(121.1)
243.9
607.5
209.5
$
$
$
$
(169.8)
296.1
(57.3)
52.8
121.8
201.9
25.3
21.7
(26.4)
222.5
447.8
107.1
$
$
$
$
47
Q U E B E C O R I N C .
>> C O N S O L I D A T E D B A L A N C E S H E E T S
December 31, 2002 and 2001
(in millions of Canadian dollars)
Assets
Current assets:
Cash and cash equivalents
Cash and cash equivalents and temporary investments held in trust
Temporary investments (market value of $88.7 million ($34.7 million in 2001))
Accounts receivable (note 10)
Income taxes receivable
Amounts receivable from non-consolidated subsidiaries
Inventories and investments in televisual products and movies (note 11)
Prepaid expenses
Future income taxes (note 6)
Portfolio investments (market value of $561.7 million ($564.2 million in 2001))
Property, plant and equipment (note 13)
Investment in a non-consolidated subsidiary (note 2)
Goodwill (notes 1(a)(i) and 14)
Future income taxes (note 6)
48
Other assets
2002
2001
(restated, note 1(a)(ii))
$
190.9
234.3
88.7
1,067.3
62.8
–
799.5
58.1
75.5
2,577.1
355.5
5,783.2
–
$
340.1
16.5
33.0
928.1
12.8
12.0
766.4
61.6
114.7
2,285.2
376.0
6,012.6
40.6
7,874.4
10,220.0
97.9
442.3
84.9
483.7
$
17,130.4
$
19,503.0
Q U E B E C O R I N C .
2002
2001
(restated, note 1(a)(ii))
$
13.6
2,397.2
121.1
1.0
643.5
3,176.4
5,681.8
979.9
254.2
180.5
415.1
851.9
4,111.8
348.5
1,073.9
56.4
1,478.8
$
38.2
2,322.0
55.3
1.0
113.6
2,530.1
7,013.6
979.9
232.6
180.2
448.6
747.0
4,805.1
348.5
2,155.4
62.0
2,565.9
$
17,130.4
$
19,503.0
49
>> C O N S O L I D A T E D B A L A N C E S H E E T S | c o n t i n u e d
December 31, 2002 and 2001
(in millions of Canadian dollars)
Liabilities and Shareholder’s Equity
Current liabilities:
Bank indebtedness
Accounts payable and accrued charges
Income and other taxes
Future income taxes (note 6)
Current portion of long-term debt (notes 15 and 28)
Long-term debt (notes 15 and 28)
Exchangeable debentures (note 16)
Redeemable preferred shares (note 17)
Convertible notes (note 18)
Other liabilities (note 19)
Future income taxes (note 6)
Non-controlling interest (note 20)
Shareholders’ equity:
Capital stock (note 21)
Retained earnings
Translation adjustment (note 23)
Commitments and contingencies (note 24)
Subsequent events (note 28)
See accompanying notes to consolidated financial statements.
On behalf of the Board of Directors,
Jean Neveu, Director
Pierre Laurin, Director
Q U E B E C O R I N C .
>> S E G M E N T E D I N F O R M A T I O N
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars)
Quebecor Inc. (the “Company”) operates in the following industry segments: Printing, Cable Television, Newspapers, Broadcasting, Leisure and Entertainment, Business Telecommunications, Web
Integration/Technology and Internet/Portals. The Printing segment includes the printing of magazines, inserts, circulars, catalogues, books, specialty printing, direct mail, directories and provide
digital premedia services and logistics. This segment operates in the United States, Canada, Europe, Latin America and India. The Cable Television segment offers services in television distribution
in Canada and also operates in the Internet access provider industry. The Newspapers segment includes the publishing and distribution of daily and weekly newspapers, principally in Canada, and
also in the State of Florida in the United States. The Broadcasting segment operates French-language general-interest television networks, specialized television networks and magazine publishing
in Canada. The Leisure and Entertainment segment, which has operations solely in Canada, combines book publishing, retail sales and the rental of videocassettes, DVD and games, and book and
music distribution. The Business Telecommunications segment operates in Canada and offers to enterprises, through its network, business-to-business connections, Internet connections, website
hosting and telephone services through its network. The Web Integration/Technology segment offers e-commerce solutions through a combination of strategy, technology integration, IP solutions
and creativity on the Internet and is active in Canada, the United States and Europe. The Internet/Portals segment operates Internet sites in Canada, including French-language and English-language
portals and specialized sites.
These segments are managed separately since they all require specific market strategies. The Company assesses the performance of each segment based on operating income before amortization,
financial expenses, reserve for restructuring of operations and other special charges, write-down of goodwill, gains on sale of business and of shares of a subsidiary and of a portfolio investment
and gains on dilution.
The accounting policies of each segment are identical to the accounting policies used for the consolidated financial statements.
Segment income includes income from sales to third parties and intersegment sales. These sales are accounted for at prices similar to those prevailing on the open market.
INDUSTRY SEGMENTS
Revenues
Printing
Cable Television
Newspapers
Broadcasting
50
Leisure and Entertainment
Business Telecommunications
Web Integration/Technology
Internet/Portals
Head Office
Inter-segment:
Printing
Other
2002
2001
2001
(pro forma, note 2)
2000
$
9,799.4
$
9,786.7
$
9,786.7
$
9,683.1
715.6
853.6
323.4
244.6
91.9
79.8
26.8
2.2
(60.3)
(63.0)
476.5
838.1
153.6
260.1
14.6
129.1
27.4
6.5
(29.3)
(30.0)
709.6
838.1
361.7
260.1
14.6
129.1
27.4
6.5
(29.3)
(35.1)
–
850.1
59.9
225.4
–
127.5
11.6
–
(28.2)
(14.6)
$
12,014.0
$
11,633.3
$
12,069.4
$
10,914.8
Q U E B E C O R I N C .
>> S E G M E N T E D I N F O R M A T I O N | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars)
INDUSTRY SEGMENTS (continued)
Operating income before amortization, financial expenses, reserve for
restructuring of operations and other special charges, write-down of goodwill,
gains on sale of business, of shares of a subsidiary and of a portfolio
2002
2001
2001
(pro forma, note 2)
2000
investment and gains on dilution
Printing
Cable Television
Newspapers
Broadcasting
Leisure and Entertainment
Business Telecommunications
Web Integration/Technology
Internet/Portals
$
1,410.4
$
1,479.7
$
1,479.7
$
1,588.7
262.7
222.3
78.9
29.0
27.3
(10.7)
(2.6)
183.1
200.8
28.0
28.8
4.1
(15.4)
(21.5)
271.9
200.8
68.8
28.8
4.1
(15.4)
(21.5)
–
205.3
(3.4)
17.9
–
0.1
(21.6)
2,017.3
1,887.6
2,017.2
1,787.0
General corporate income
4.1
2.1
2.1
3.1
$
2,021.4
$
1,889.7
$
2,019.3
$
1,790.1
Amortization
Printing
Cable Television
Newspapers
Broadcasting
Leisure and Entertainment
Business Telecommunications
Web Integration/Technology
Internet/Portals
Head Office
2002
2001
2001
(pro forma, note 2)
$
526.8
151.3
27.0
10.8
10.6
35.1
4.7
3.8
2.8
$
523.1
100.2
25.7
5.8
13.6
5.9
5.4
6.7
3.6
$
523.1
139.2
25.7
15.5
13.6
5.9
5.4
6.7
3.6
$
2000
512.4
–
25.7
2.9
4.9
–
4.1
4.4
0.6
$
772.9
$
690.0
$
738.7
$
555.0
51
Q U E B E C O R I N C .
>> S E G M E N T E D I N F O R M A T I O N | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars)
INDUSTRY SEGMENTS (continued)
Additions to property, plant and equipment
Printing
Cable Television
Newspapers
Broadcasting
Leisure and Entertainment
Business Telecommunications
Web Integration/Technology
Internet/Portals
Head Office
Assets
Printing
Cable Television
Newspapers
Broadcasting
52
Leisure and Entertainment
Business Telecommunications
Web Integration/Technology
Internet/Portals
Investments in non-consolidated subsidiaries (note 2)
Head Office
GEOGRAPHIC SEGMENTS
Revenues generated by:
Canadian operations
United States operations
European operations
Latin American operations
Other
2002
2001
2001
(pro forma, note 2)
$
290.3
$
430.9
$
93.1
10.3
6.3
9.5
20.9
1.3
0.1
–
84.0
19.2
3.7
10.1
4.2
3.6
0.9
0.3
430.9
126.4
19.2
7.5
10.1
4.2
3.6
0.9
0.3
$
2000
359.6
–
19.8
3.8
6.0
–
9.0
6.4
0.4
$
431.8
$
556.9
$
603.1
$
405.0
2002
2001
(restated, note 1(a)(ii))
$
9,761.0
3,918.3
1,539.5
507.4
191.8
325.3
89.7
33.2
–
764.2
$
9,845.4
6,057.7
1,485.4
501.5
181.4
589.3
150.3
92.3
40.6
559.1
$
17,130.4
$
19,503.0
2002
2001
$
3,530.3
6,630.3
1,566.1
287.3
–
$
3,460.6
6,491.4
1,430.7
249.9
0.7
2001
(pro forma, note 2)
$
3,896.6
6,491.4
1,430.7
249.9
0.8
$
2000
2,710.4
6,676.5
1,361.2
166.3
0.4
$
12,014.0
$
11,633.3
$
12,069.4
$
10,914.8
Q U E B E C O R I N C .
>> S E G M E N T E D I N F O R M A T I O N | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars)
GEOGRAPHIC SEGMENTS (continued)
Operating income before amortization, financial expenses, reserve for
restructuring of operations and other special charges, write-down of goodwill,
gains on sale of business, of shares of a subsidiary and of a portfolio
investment and gains on dilution:
2002
2001
2001
(pro forma, note 2)
2000
Canada
United States
Europe
Latin America
Other
General corporate income
Property, plant and equipment
Canada
United States
Europe
Latin America
Other
Goodwill
Canada
United States
Europe
Latin America
Other
Other assets
Canada
United States
Europe
Latin America
Other
$
779.3
1,082.6
148.2
34.1
(26.9)
2,017.3
4.1
$
662.2
1,049.9
162.0
28.8
(15.3)
1,887.6
2.1
$
791.8
1,049.9
162.0
28.8
(15.3)
2,017.2
2.1
$
426.6
1,127.6
169.6
18.0
45.2
1,787.0
3.1
$
2,021.4
$
1,889.7
$
2,019.3
$
1,790.1
2002
2001
(restated, note 1(a)(ii))
$
2,077.2
2,784.3
769.9
148.2
3.6
5,783.2
3,976.1
3,373.3
513.7
11.3
–
7,874.4
1,845.7
878.4
554.5
178.5
15.7
3,472.8
$
2,340.4
2,884.6
618.7
175.7
(6.8)
6,012.6
6,342.0
3,433.9
430.6
29.3
(15.8)
10,220.0
1,830.9
857.5
229.0
190.8
162.2
3,270.4
$
17,130.4
$
19,503.0
Q U E B E C O R I N C .
53
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
Quebecor Inc. is incorporated under the laws of Québec.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in conformity with Canadian generally accepted accounting principles.
(a) Changes in accounting policies
The Company has changed certain accounting policies to comply with the new standards of the Canadian Institute of Chartered Accountants ("CICA").
(i) Business combinations, goodwill and other intangible assets:
In August 2001, the CICA issued Handbook Section 3062, Goodwill and Other Intangible Assets. For business combinations consummated on or before June 30, 2001, the Company
adopted in 2002 the new recommendations of the CICA Handbook. Under those new recommendations, goodwill and intangible assets with indefinite useful lives are not amortized
and other identified intangible assets are amortized. In accordance with the requirements of Section 3062, this change in accounting policy is not applied retroactively and the amounts
presented for prior periods have not been restated for this change.
As at December 31, 2001, the Company had unamortized goodwill of $10.2 billion. For the year ended December 31, 2002, this change in accounting policy resulted in a reduction
of $123.3 million in amortization expense related to goodwill, net of income taxes and non-controlling interest. The following summarizes the effect of the accounting change if it was
applied retroactively:
Net income (loss), as reported
Goodwill amortization, net of income taxes and non-controlling interest
Net income (loss), adjusted
Adjusted earnings per share:
Basic
Diluted
54
2002
2001
(restated, note 1(a)(ii))
2000
(restated, note 1(a)(ii))
$
$
$
$
91.9
–
91.9
1.42
1.39
$
$
$
$
(248.7)
129.3
(119.4)
(1.85)
(1.85)
$
$
$
$
1,085.8
80.1
1,165.9
18.05
17.99
Under Section 3062, 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 with its fair value. When the fair value of a reporting unit exceeds its carrying
amount, goodwill of the reporting unit is considered not to be impaired and the second step of the impairment test is not required. The second step 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 with 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 and is presented as a separate line item in the income statement before extraordinary items and discontinued operations.
Intangible assets acquired in business combinations and intangible assets acquired individually or with a group of other assets, which have indefinite lives, 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 with its fair value, and an impairment loss is recognized in statement of income for the excess, if any. Intangible assets with definite useful lives are amortized over
their useful life.
In accordance with the transitional provision of Section 3062, an impairment loss resulting from the first application of the recommendations, is recognized as the effect of a change
in accounting policy and charged to opening retained earnings, without restatement of prior periods. During the year ended December 31, 2002, the Company recorded a goodwill
impairment loss for each of its reporting units having a carrying amount exceeding its fair value. Accordingly, the opening balance of goodwill was reduced by $2,163.1 million and
opening retained earnings were reduced by $1,173.4 million, net of non-controlling interest of $989.7 million.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) Changes in accounting policies (continued)
(i) Business combinations, goodwill and other intangible assets (continued):
The opening balance of goodwill for each industry segments is reduced as follows:
Printing
Cable Television
Newspapers
Broadcasting
Leisure and Entertainment
Business Telecommunications
Web Integration/Technology
Internet/Portals
Total
(ii) Foreign currency translation
Balance as at
Restatement due
Balance as at
January 1, 2002,
to a change in
January 1, 2002,
as previously reported
accounting policy
as restated
$
3,978.2
4,604.2
1,001.8
164.3
98.4
273.4
29.2
70.5
$
–
$
(1,936.0)
–
–
–
(164.9)
(20.4)
(41.8)
3,978.2
2,668.2
1,001.8
164.3
98.4
108.5
8.8
28.7
$
10,220.0
$
(2,163.1)
$
8,056.9
In November 2001, the CICA approved changes to Section 1650 of the CICA Handbook, Foreign Currency Translation, to eliminate the deferral and amortization of foreign currency
translation gains and losses on long-lived monetary items. These changes harmonize Canadian and United States generally accepted accounting principles concerning translation
gains and losses on long-lived monetary items. During the year ended December 31, 2002, the Company adopted the new recommendations retroactively and the comparative figures
have been restated. The effect of adopting the new recommendation resulted, as at December 31, 2001, in a decrease in other assets of $10.2 million and a decrease in retained
earnings at this date of $5.6 million (net of the non-controlling interest of $4.6 million). Opening retained earnings in 2001 increased by $1.4 million (net of the non-controlling interest
of $1.1 million) and the net loss for the year ended December 31, 2001 increased by $7.0 million (net of the non-controlling interest of $5.8 million). Net loss for the year ended
December 31, 2000 increased by $1.4 million (net of the non-controlling interest of $1.1 million). The net income for the year ended December 31, 2002 decreased by $0.7 million
55
(net of the non-controlling interest of $2.4 million) with the adoption of this change in accounting policy.
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 deferred and recorded in translation adjustment and are included 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 income.
(iii) Stock-based compensation
Effective January 1, 2002, the Company adopted the new recommendations of Section 3870 of the CICA Handbook, Stock-based Compensation and Other Stock-based Payments,
with respect to the accounting for stock-based compensation. The new recommendations are applied prospectively to all stock-based payments to employee awards that are direct
awards of stock or call for settlement in cash or other assets, at the option of the employee, including stock appreciation rights, granted on or after January 1, 2002. In the case of grants
outstanding at January 1, 2002, the new recommendations are applied retroactively, without restatement. This modification had no impact on retained earnings as at January 1, 2002.
In conformity with the new recommendations, the Company accounts for all stock-based payments to employee awards that are direct awards of stock or call for settlement in cash
or other assets, including stock appreciation rights, by the fair value method. No compensation cost is recorded for all other stock-based employee compensation awards and in this
case, consideration paid by employees on the exercise of stock options is recorded as capital stock. Under the fair-value based method, compensation cost attributable to awards
to employees that call for settlement in cash or other assets is recognized over the vesting period in each year as operating expenses. Changes in the fair value between the grant
date and the measurement date result in a change in the measure of compensation cost. For the employees share purchase plans of subsidiaries of the Company, the contribution
paid by these subsidiaries on behalf of employees is considered as a compensation expenses. The contribution paid by employees for the purchase of shares is credited to capital
stock.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Consolidation and long-term investments
The consolidated financial statements include the accounts of Quebecor Inc. and all its subsidiaries. On December 31, 2001, the investment in the non-consolidated subsidiary TQS Inc., whose
broadcasting activities were controlled by a trustee, is accounted for by the equity method. On December 31, 2000, the investments in the non-consolidated subsidiaries, Vidéotron ltée
and TVA Group Inc., which operate cable television and broadcasting regulated businesses, respectively, and which were under the control of trustees until the Canadian Radio-television
and Telecommunications Commission ("CRTC") approved the acquisition of control of those businesses by the Company in 2001, were accounted for by the equity method. The investments
held for resale were recorded at cost.
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. Investments in other affiliated companies are accounted for by the cost method.
(c) Use of estimates
The preparation of consolidated financial statements in accordance with Canadian generally accepted accounting principles 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 other employee benefits, reserves for environmental matters and for the restructuring of operations, the useful life
of assets for amortization and evaluation of net recoverable amount, the determination of fair value of assets acquired and liabilities assumed in business combinations, implied fair value
of goodwill, provisions for income taxes and the determination of the fair value of financial instruments. Actual results could differ from these estimates.
(d) Revenue recognition
Revenues are recognized when services are provided. At time of billing, the portion of unearned revenues is recorded under "Deferred revenue". Amounts received for services, not yet
provided, are recorded under "Prepaid services."
The Printing segment provides a wide variety of print and print-related services and products to its customers, which usually require that the specifics be agreed upon prior to the printing
process. Sales are recognized by Quebecor World Inc., either when the production process is completed or services are performed, or on the basis of production and service activity at the
pro rata billing value of work completed.
56
Initial hook-up revenues of the Cable Television segment are recognized as revenues to the extent of direct selling costs incurred. The remainder, if any, is deferred and amortized to income
over the estimated period that subscribers are expected to remain connected to the network. Direct selling costs include commissions, the portion of the sale-person's compensation for
obtaining new subscribers, local advertising targeted for the acquisition of new subscribers and the cost of processing documents related to new subscribers acquired.
Revenues of the Broadcasting segment derived from the sale of advertising airtime are recognized once the broadcasting of the advertisement has occurred. Revenues generated by the
sale of distribution rights, shares in productions and the broadcast of televisual products are recognized when a contract has been signed under which the distribution rights are irrevocably
transferred to the licensee and when there is reasonable certainty that the revenue will be recovered. In the case of a televisual product, the revenues are recognized according to the
percentage of completion. Under this method, production income and profits are recognized proportionally to the percentage of completion of work. The non-cash portion of those revenues
is presented under the “Productions in progress” heading.
Operating revenues from contract services of the Business Telecommunications segment are recognized over the duration of the contract, using the straight-line method.
The Web Integration/Technology segment generates revenues primarily under long-term contracts related to the development of web integration, e-commerce, automated publishing
solutions and from engineering projects. Revenue from fixed-cost solutions or projects is recognized using the percentage-of-completion method, whereby revenue is recorded at the
estimated realizable value of work completed to date. Estimated losses on contracts are recognized when they become known. Revenue from consulting and outsourcing services are
generally billed based on time incurred to perform the service. Work in process is established for services rendered which have not yet been billed.
(e) Cash and cash equivalents
Cash and cash equivalents include highly liquid investments purchased three months or less from maturity and are stated at cost, which approximates market value.
(f) Temporary investments
Temporary investments are recorded at the lower of cost and market value. Temporary investments consist of commercials papers bearing interest from 2.61% to 2.87% and matures in
April and May 2003.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Trade receivables
Any gains or losses on the sale of trade receivables are calculated by comparing the carrying amount of the trade receivables sold with the total of the cash proceeds on the sale and the
fair value of the retained interest in such receivables on the date of transfer. Fair values are determined on a discounted cash flow basis. Costs, including loss on sale related to the sale of
accounts receivable are recognized in earnings in the period incurred and included in financial expenses.
(h) Inventories
Inventories are valued at the lower of cost or market value. Cost is determined using the first-in, first-out method. Market value is net realizable value for all inventories, except for raw
materials and supplies, for which the market value is the replacement cost. The work in process is valued at the pro rata billing value of the work completed.
(i)
Investment in televisual products and movies
(i) Programs produced and productions in progress
Programs produced and productions in progress relate to broadcast activities. Programs produced and productions in progress 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 operating
expenses when the program is broadcast or when a loss can be estimated.
(ii) Broadcast rights
Broadcast rights are essentially contractual rights allowing limited or unlimited broadcast of televisual products or movies. These broadcast rights, along with the corresponding
liability, are recorded at the time the license contract comes into effect and the product is ready for broadcast. These rights are amortized on the broadcast of televisual products and
movies using a depreciation method based on estimated potential revenues and the estimated number of screenings. The value of broadcasting rights is reduced when a permanent
impairment in value is recognized.
(iii) Productions and distribution rights
Productions and distribution rights refer to the production and distribution of televisual products and movies. Productions and distribution rights are valued at the lower of amortized
cost and net realizable value. The cost includes production cost and costs attributable to editing and other activities that provide a future economic benefit. The net realizable value
of production and distribution rights represents the subsidiary’s share of future estimated revenues to be derived thereof, net of future costs. Production and distribution rights are
amortized according to the proportion of gross revenue earned to total forecasted gross revenue. Estimates of revenues are examined periodically by management and revised, as
necessary, based on management’s assessment of current market conditions. The value of amortized costs is reduced to net realizable value, as necessary, based on the assessment.
57
The amortization of production and distribution rights is included in operating expenses.
(j)
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 on
future income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment or substantively enactment date. Future income tax
assets are recognized and, if realization is not considered "more likely than not," a valuation allowance is provided.
(k) Property, plant and equipment
Property, plant and equipment are stated at cost, net of government grants and investment tax credits which are accounted for when qualified expenditures are incurred. Cost represents
acquisition or construction costs including preparation, installation and testing charges and interest incurred with respect to the property, plant and equipment until they are ready for
commercial production. In the case of construction and connecting programs for the receiving and distribution networks of cable television, cost includes equipment, direct labour,
administrative overhead and financial expenses relating to projects to construct and connect receiving and distribution networks. Expenditures for additions, improvements and
replacements are capitalized, whereas maintenance and repair expenditures are charged to operating expenses.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(k) Property, plant and equipment (continued)
Amortization is principally calculated on a straight-line basis over the following estimated useful lives:
Assets
Buildings
Machinery and equipment
Receiving, distribution and telecommunications networks
Estimated useful life
15 to 40 years
3 to 20 years
3 to 20 years
Leasehold improvements are amortized over the terms of the leases.
(l) Deferred charges, financing fees, subsidies on equipment and non-monetary compensation charges
Deferred charges are recorded at cost and include development costs related to new specialty services and pre-operating expenditures that are amortized when commercial operations
begin using the straight-line method over periods of three to five years. Management reviews periodically the value and amortization period of deferred charges. A permanent decline, if
such be the case, will be determined based on future undiscounted cash flows.
The financing fees related to long-term financing are amortized using the straight-line method over the term of the related long-term debt. Subsidies on equipment obtained after deducting
from the equipment cost the selling price sold to customers are deferred and amortized on a straight-line basis over a three-year period. The deferred non-monetary compensation charges,
representing a part of the purchase price of a company payable in shares, which are escrowed and are transferred when the minimum period of employment from selling shareholders
ends, is amortized proportionally over the minimum period of employment from selling shareholders.
(m) Broadcasting licenses
Licenses represent the acquisition cost of acquiring rights to operate broadcasting stations. Management reviews periodically the unamortized amount of its licenses to determine whether
it will be able to recover them in the long-term, by comparing them with future discounted cash flows.
(n) Exchangeable debentures
58
The carrying amount of the exchangeable debentures is based on the market price, at the balance sheet date, of the underlying 12.5 million subordinate shares of Quebecor World Inc.
and of the 44.8 million common shares of Abitibi-Consolidated Inc. (the “underlying shares”) that would have satisfied the debentures’ liability if the Company had elected to settle the
debentures with the underlying shares as at December 31, 2002.
At maturity, each exchangeable debenture is exchangeable for the underlying shares based on a fixed conversion factor determined at the date the debentures were issued. The Company
has the option to deliver cash equivalents based on the market price of the underlying shares at the time of exchange, or a combination of cash and shares.
As it is contemplated that the underlying shares will be transferred by the Company to the exchangeable debenture holders to satisfy the liability, hedge accounting is used. Accordingly,
the difference between the carrying amount of the debentures at the balance sheet date and the original amount of the exchangeable debentures is recorded as a deferred amount until
there is a redemption or at maturity of the exchangeable debentures, when a realized gain or loss on the underlying shares will be recorded. The deferred amount is recorded against the
amount of the exchangeable debentures.
(o) Derivative financial and commodity instruments
The Company uses various derivative financial instruments to manage its exposure to fluctuations in foreign currency exchange rates, interest rates and commodity pricing. The Company
does not hold or use any derivative instruments for speculative trading purposes.
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge
transactions. This process includes linking all derivatives to specific assets and liabilities or to specific firm commitments or forecasted transactions. The Company also formally assesses,
both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows
of hedged items.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(o) Derivative financial and commodity instruments (continued)
The Company enters into foreign exchange forward contracts to hedge anticipated foreign denominated sales and raw material and equipment purchases. Foreign exchange translation
gains and losses are recognized as an adjustment of the revenues, of the cost of sales and of the fixed assets respectively when the transaction is recorded. The portion of the forward
premium or discount on the contract relating to the period prior to consummation of the transaction is also recognized as an adjustment of the revenues, the cost of sales and of the fixed
assets respectively when the transaction is recorded.
The Company also enters into foreign exchange forward contracts and cross-currency swaps to hedge its net investments in foreign subsidiaries. Foreign exchange translation gains and
losses are deferred and recorded under translation adjustment. The forward premium or discount on forward foreign exchange contracts and the interest component of the cross currency
swap is amortized as an adjustment of interest expenses over the term of the forward contract.
The Company also enters into interest rate swaps in order to manage the impact of fluctuating interest rates on its short-term and long-term debt. These swap agreements require the
periodic exchange of payments without the exchange of the notional principal amount on which the payments are based. The Company designates its interest rate hedge agreements as
hedges of the underlying debt. Interest expense on the debt is adjusted to include the payments made or received under the interest rate swaps.
The Company also entered into a commodity swap to manage a portion of its Canadian natural gas exposure. The Company is committed to exchange, on a monthly basis, the difference
between a fixed price and a floating Canadian natural gas price index. The Company designated its commodity hedge agreements as a hedge of the natural gas cost. Natural gas cost is
adjusted to include the payments made or received under the commodity hedge agreements.
Realized and unrealized gains or losses associated with derivative instruments, which have been terminated or cease to be effective prior to maturity, are 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 is recognized. In the event a designated hedged
item is sold, extinguished or matures prior to the termination of the related derivative instrument, any realized or unrealized gain or loss on such derivative instrument is recognized in
income.
(p) Pension plans and postretirement benefits
(i) Pension plans
The Company offer to certain of its employees, defined benefit pension plans and defined contribution pension plan. 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. Pension plan expense is charged to operations and includes:
– The cost of pension plan benefits provided in exchange for employees' services rendered during the year;
59
– The amortization of the initial net transition asset on a straight-line basis over the expected average remaining service life of the employee group covered by the plans;
– The amortization of prior service costs over the expected average remaining service life of the employee group covered by the plans; and
– The interest cost of pension plan obligations, the return on pension fund assets, and the amortization of cumulative unrecognized net actuarial gains and losses in excess of 10%
of the greater of the benefit obligation or fair value of plan assets over the expected average remaining service life of the employee group covered by the plans.
(ii) Postretirement benefits
The Company offer, to certain of its retired employees, health, life and dental insurance plans. The Company accrues the cost of postretirement benefits other than pensions. These
benefits, which are funded by the Company as they become due, include life insurance programs and medical benefits. The Company amortizes the cumulative unrecognized net
actuarial gains and losses in excess of 10% of the projected benefit obligation over the expected average remaining service life of the employee group covered by the plans.
(q) Environmental expenditures
Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and
which are not expected to contribute to current or future operations are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are likely, and when
the costs, based on a specific plan of action in terms of the technology to be used and the extent of the corrective action required, can be reasonably estimated.
(r) Comparative figures
Certain comparative figures for the years 2001 and 2000 have been reclassified to conform with the presentation adopted for the year ended December 31, 2002.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
2.
INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES
On October 23, 2000, Quebecor Media Inc., a subsidiary of Quebecor Inc., purchased all the shares of Le Groupe Vidéotron ltée. The change in control of the Cable Television segment and of
TVA Group Inc. was subject to the approval of the CRTC and, accordingly, the investments in these subsidiaries were accounted for using the equity method. Since May and September 2001,
respectively, Quebecor Media Inc. has consolidated the assets, liabilities and results of operations of its Cable Television segment and TVA Group Inc., as the approval for the transfer of the
control of these businesses has been obtained from the CRTC.
Investments in previously non-consolidated subsidiaries were replaced by the following assets and liabilities at the moment of transfer of control of the Cable Television segment and
TVA Group Inc. The following table presents these assets and liabilities at the date of transfer of control in 2001:
Assets:
Current assets
Property, plant and equipment
Goodwill
Other assets
Liabilities:
Current liabilities
Long-term debt
Future income taxes
Non-controlling interest
Net assets
$
$
274.7
1,303.9
4,840.0
207.5
6,626.1
386.4
1,017.2
264.5
103.6
1,771.7
4,854.4
60
In September 2001, at the moment of acquisition of control of TVA Group Inc., the Company transferred the control of its subsidiary TQS Inc., held at 86.02%, to a trustee within the context
of the eventual disposal of TQS Inc. Accordingly, the investment in this subsidiary has been accounted for by the equity method. At the time of transfer, the assets and the liabilities of
TQS Inc. were $80.9 million and $39.4 million, respectively.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
2.
INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES (continued)
Operating results of non-consolidated subsidiaries for the years ended December 31, 2001 and 2000 are presented below. These results include results of periods for which the Company did
not have the right to exercise control on non-consolidated subsidiaries.
Revenues
Operating expenses
Amortization
Financial expenses
Income before income taxes
Income taxes (credit) 1
Non-controlling interest
Income before amortization of goodwill
Amortization of goodwill, net of non-controlling interest
2001
(restated, note 1(a)(ii))
2000
(restated, note 1(a)(ii))
$
463.1
$
211.1
333.3
49.8
30.7
49.3
21.8
27.5
(4.4)
23.1
(41.5)
(18.4)
151.2
24.7
11.6
23.6
(7.5)
31.1
(4.0)
27.1
(24.3)
2.8
$
Net (loss) income and equity (loss) income from non-consolidated subsidiaries
$
1 Includes an adjustment in 2000 to reflect the reduction in income tax rates.
The statements of operations and cash flows and also the financial statements segmented information for the period ended December 31, 2001 include “Pro forma” columns that give effect
to the approvals by the CRTC as if they had occurred on January 1, 2001 and, accordingly, to the consolidation of the Cable Television segment and TVA Group Inc. into Quebecor Media Inc.
from January 1, 2001.
3.
FINANCIAL EXPENSES
Interest on long-term debt and convertible notes
Interest on redeemable preferred shares
Interest on bank indebtedness
Securitization fees and others
Investment income
Amortization of deferred financing costs and long-term debt discount
Exchange rate losses on long-term debt
Other
Interest capitalized to the cost of property, plant and equipment and to investments
61
2002
2001
(restated, note 1(a)(ii))
2000
$
527.4
$
603.3
$
398.7
21.7
17.5
24.5
(25.6)
57.6
3.1
4.2
630.4
(6.3)
624.1
$
3.4
12.1
44.8
(44.4)
65.6
20.3
(7.9)
697.2
(31.8)
665.4
$
–
10.7
49.2
(20.0)
15.7
–
(1.7)
452.6
(13.3)
439.3
$
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
4. RESERVE FOR RESTRUCTURING OF OPERATIONS AND OTHER SPECIAL CHARGES
(a) Printing segment
In 2002, Quebecor World Inc. reported restructuring and other charges of US$18.6 million. The charges are detailed as follows and discussed below:
• 2002 initiatives amount to US$46.4 million, while overspending on 2001 initiatives stands at US$13.3 million for total costs of US$59.7 million.
• The reversal of unused reserves for restructuring from 2001 amounts to US$40.1 million and was applied against the 2002 charges.
2002 restructuring initiatives
In 2002, Quebecor World Inc. initiated new restructuring initiatives in France due to difficult market conditions, severe price competition and a decrease in sales volume. In addition,
work-force reduction programs were initiated in North America and will be completed in 2003. This initiative to reduce the work-force was the result of volume declines in certain business
segments and overlapping activities across the platform.
The charges of US$46.4 million consist of US$6.5 million totally utilized in 2002 relating to impaired property, plant and equipment, US$30.0 million in work-force reduction costs and
other restructuring charges (of which US$5.9 million was utilized in 2002), and US$9.9 million mostly for the write-down of the investment in Q-Media Services Corporation, which went
into receivership at the end of 2002. The US$30.0 million in work-force reduction costs and other restructuring charges includes US$18.6 million for France and US$8.6 million for North
America.
As at December 31, 2002, 545 employees had been terminated under these new restructuring initiatives and 364 are expected to be terminated in 2003.
2001 and 2000 restructuring initiatives
As at December 31, 2002, the restructuring initiatives announced in 2001 were substantially completed. Nearly 3,000 employee positions were eliminated, 10 facilities closed, and more
than 30 pieces of equipment successfully relocated.
In 2002, Quebecor World Inc. utilized US$73.3 million from restructuring reserves set up for 2001 initiatives; a cash portion of US$66.0 million for severance payments for employee
terminations and other restructuring charges, US$5.9 million for other special charges and a non-cash portion of US$1.4 million for additional plant and equipment write-downs. These
costs do not reflect the progress of the restructuring due to trailing severance payments, future lease payments and other delayed exit costs.
The continuation of a contract with a customer, previously expected to be terminated, is providing sufficient work to utilize equipment originally targeted for shutdown. As a result, Quebecor
World Inc. decided to halt one plant shutdown which mainly explains the balance of the 2001 restructuring reserve of US$40.1 million reversed in 2002 consisting of US$18.4 million in
asset impairment and US$21.7 million for related restructuring charges. In addition, the execution of the 2001 initiatives resulted in an overspending of US$13.3 million recorded in the
2002 restructuring and other charges.
In 2001, in response to difficult market conditions, Quebecor World Inc. embarked on restructuring initiatives aimed at eliminating non-competitive assets and consolidating its platform
into fewer facilities. These initiatives focused Quebecor World Inc.’s efforts on reducing operating expenses and maximizing capacity utilization in larger and more specialized facilities.
Quebecor World Inc. therefore recorded restructuring and other charges of US$273.2 million. The restructuring plan consisted of US$114.0 million relating primarily to impaired property,
plant and equipment as a result of planned facility closures, together with other associated closure costs, US$115.5 million in work-force reduction costs resulting from planned closures
and other headcount reductions and restructuring charges, and US$43.7 million in other related restructuring and exit costs.
The other special charges of US$43.7 million included an additional charge of US$13.1 million relating to an increase in costs associated with implementing the 1999 restructuring plan
and to the costs of exiting unfavourable contracts.
In 2001, Quebecor World Inc. utilized US$179.7 million of the restructuring and other charges, which consisted of US$31.0 million for employees terminated during 2001 and other
restructuring charges, US$114.0 million for facility closings and US$34.7 million for other special charges.
In 2000, as a result of changing market conditions, and particularly strong growth in North American volumes, Quebecor World Inc. decided not to implement some planned facility closures,
but concluded that other restructuring initiatives relating to Europe, and to its digital strategy should be recorded. These initiatives included US$10.1 million in asset write-downs, utilized
in 2000, and US$17.9 million in severance costs, of which US$3.4 million was utilized in 2000, with the balance being utilized in 2001.
62
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
4. RESERVE FOR RESTRUCTURING OF OPERATIONS AND OTHER SPECIAL CHARGES (continued)
(a) Printing segment (continued)
The following table sets forth the Quebecor World Inc. 2002 restructuring reserve and activities against the reserves carried forward from 2001:
Balance as at December 31, 2001
Additional reserve
Utilized in 2002
Cash
Non-cash
Reversal
Cash
Non-cash
Translation adjustment
Balance as at December 31, 2002
(b) Web Integration/Technology segment
Write-down
of assets
Restructuring
charges
Other special
charges
$
$
26.4
12.4
–
(12.4)
–
(26.1)
(0.3)
–
$
156.6
$
63.7
(112.9)
–
(29.0)
–
0.1
78.5
$
$
17.2
16.1
(9.3)
(14.0)
(5.0)
(2.8)
(0.3)
1.9
Total
200.2
92.2
(122.2)
(26.4)
(34.0)
(28.9)
(0.5)
80.4
$
$
During the year ended December 31, 2002, the Web Integration/Technology segment recorded reserves for the restructuring of its operations in response to the continued adverse market
conditions existing within the telecommunications industry. The reserve for the restructuring amounts to $5.6 million ($3.7 million and $3.1 million respectively for the years ended
December 31, 2001 and 2000) and includes severance costs, asset write-downs, and other restructuring charges. Also, during the course of 2002, the Web Integration/Technology segment
reversed an amount of $0.8 million, part of the 2001 reserve for restructuring, since the 2001 program was nearly completed. Accordingly, during the year ended December 31, 2002, the
Web Integration/Technology segment utilized $5.7 million of the reserve for restructuring of its operations. ($5.3 million for the year ended December 31, 2001). Amounts of $0.5 million
and $1.4 million, respectively were still included in accounts payable and accrued charges regarding this reserve for restructuring of operations as at December 31, 2002 and 2001. The
63
remaining balance is expected to be paid within one year.
During the year ended December 31, 2002, the Web Integration/Technology segment also recorded a non-monetary compensation charge of $5.7 million ($25.4 million and $40.2 million
for the years ended December 31, 2001 and 2000, respectively) relative to escrowed shares to be remitted to selling shareholders of acquired companies. The escrowed shares are
transferred when the minimum period of employment from selling shareholders comes to an end.
(c) Internet/Portals segment
During the year ended December 31, 2002, the Internet/Portals segment recorded a reserve for the restructuring of operations of $1.5 million ($5.4 million and $8.2 million respectively
for the years ended December 31, 2001 and 2000). The reserve is in connection with the reorganization of the business segment. This reserve include severance costs, asset write-downs
and other restructuring charges. As at December 31, 2002, $0.3 million ($1.4 million as at December 31, 2001) is still included in accounts payable and accrued charges regarding this
reserve for the restructuring of operations.
Also, during the year ended December 31, 2002, the Internet/Portals segment reversed a portion of the reserve for the restructuring of its operations, amounting to $0.7 million related to
the 2001 and 2000 restructuring programs, since these programs were nearly completed.
In addition, during the course of 2002, the Internet/Portals segment concluded an agreement with the Société de Développement de Montréal regarding the legal soundness of its Cité du
Multimédia lease. Accordingly, the Internet/Portals segment reversed a reserve amounting to $0.8 million regarding this litigation.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
4. RESERVE FOR RESTRUCTURING OF OPERATIONS AND OTHER SPECIAL CHARGES (continued)
(d) Broadcasting segment
During the year ended December 31, 2002, the Broadcasting segment recorded a reserve for the restructuring of its operations of $3.0 million in connection with the reorganization of its
operations. This reserve included costs related to severance payments to employees. As at December 31, 2002, the entire reserve for the restructuring of operations had been used.
(e) Newspapers segment
During the year ended December 31, 2002, the Newspapers segment implemented restructuring initiatives, which resulted in the termination of approximately 60 employees throughout
several divisions. As at result, the Newspapers segment recorded a restructuring charge of $2.2 million for the year ended December 31, 2002, related to severance and other personnel-
related costs. As at December 31, 2002, a restructuring accrual of $1.2 million was included in accounts payable and accrued charges, for the 2002 restructuring program.
During the year ended December 31, 2001, the Newspapers segment also recorded, a reserve for the restructuring of operations due to market conditions prevailing in this business
segment. This reserve has been created as a result of a work-force reduction and amounts to $17.8 million. The work-force reduction affects all geographic areas and all departments of
the segment, as well as employees at all levels. This reserve includes primarily amounts paid in severance payments, related employee benefits, and other amounts payable to these
employees. As at December 31, 2002, an amount of $7.2 million still remains recorded in accounts payable and accrued charges regarding this reserve for the restructuring of operations
related to the 1994, 1996 and 1997 restructuring programs.
(f) Business Telecommunications segment
During the year ended December 31, 2002, the Business Telecommunications segment recorded a reserve for litigations amounting to $1.4 million. This reserve is related to litigations
following the implementation of the 2001 restructuring of operations program, and includes an accrual for legal fees and an accrual for settlements. As at December 31, 2002, this reserve
is included in the accounts payable and accrued charges, and is expected to be paid out within one year.
(g) Head office and others
During the year ended December 31, 2002, a write-down of temporary investments of $12.9 million ($99.8 million and $58.6 million for the years ended December 31, 2001 and 2000,
respectively) and of a portfolio investments of $0.4 million were recognized in order to record these assets at the lower of cost and fair market value.
Also, during the year ended December 31, 2002, the Company recorded a write-down of $9.0 million on one of its properties, in order to record this property at the lower of amortized cost
and net realizable value.
(h) Write-down of goodwill
64
During the year ended December 31, 2002, management wrote off a portion of the goodwill related to Mindready Solutions Inc., Web Integration/Technology segment, in an amount of
$8.9 million, following the restructuring program for this subsidiary.
As at October 31, 2002, the Company completed its annual goodwill test for impairment and recorded an impairment loss for each of its reporting units having a carrying amount exceeding
its fair value. This impairment loss amounted to $68.0 million, $107.6 million and $2.5 million, respectively, for its Cable Television segment, Business Telecommunications segment and
its Internet/Portals segment.
During the year ended December 31, 2001, management decided, given the economic slowdown affecting its Internet/Portals segment, that a portion of the goodwill related to this segment
had to be written down. A total amount of $118.5 million ($54.0 million in 2000), before the non-controlling interest of $57.4 million ($23.3 million in 2000), was recorded.
During 2001, management determined, given the economic slowdown, that a portion of the goodwill related to different business units of the Web Integration/Technology segment had to
be written down. In 2000, a write-down was also taken, following the decision to close some business units in this segment. A total amount of $28.5 million ($72.9 million in 2000), before
the non-controlling interest of $21.1 million ($42.5 million in 2000), was recorded.
5. GAINS ON SALE OF SHARES OF A SUBSIDIARY AND OF A PORTFOLIO INVESTMENT
During the year ended December 31, 2002, the Company sold 6.8 million shares of Quebecor World Inc. for a cash consideration of $235.0 million, net of transaction fees of $9.8 million, or
$34.56 net per share, resulting in a gain on disposal of $67.4 million. As at December 31, 2002, cash and cash equivalents and temporary investments held in trust include an amount of
$216.1 million related to this transaction that the Company injected into its subsidiary, Quebecor Media Inc. immediately after year end.
During the year ended December 31, 2001, the Company sold 4.0 million common shares of Abitibi-Consolidated Inc. for a cash consideration of $49.5 million or $12.38 a share. The gain on
disposal amounted to $20.8 million. The cash proceeds have been used to reduce a portion of the non-revolving bank credit facility of Quebecor Inc.
During the year ended December 31, 2001, the Company sold 2.5 million shares of Quebecor World Inc. for a cash consideration of $85.0 million, or $34.00 a share. The gain on disposal
amounted to $23.9 million. The cash proceeds have been used to reduce a portion of the non-revolving bank credit facility of Quebecor Inc.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
6.
INCOME TAXES
The domestic and foreign components of income before income taxes are as follows:
Domestic
Foreign
Total income tax expense was allocated as follows:
Income taxes
Goodwill amortization
Discontinued operation
Income tax expense (recovery) attributable to (loss) income consists of:
Current
Domestic
Foreign
Future
Domestic
Foreign
2002
(111.5)
571.4
459.9
2002
156.2
–
–
156.2
2002
3.7
49.2
52.9
(12.7)
116.0
103.3
156.2
$
$
$
$
$
$
2001
(317.8)
199.1
(118.7)
2001
76.1
(8.1)
–
68.0
2001
82.1
68.1
150.2
(18.8)
(55.3)
(74.1)
76.1
$
$
$
$
$
$
2000
671.6
707.4
1,379.0
2000
227.9
(5.5)
121.9
344.3
2000
32.5
54.4
86.9
5.7
135.3
141.0
227.9
$
$
$
$
$
$
65
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
6.
INCOME TAXES (continued)
The following table reconciles the difference between the domestic statutory tax rate and the effective tax rate used by the Company and its subsidiaries in the determination of the consolidated
net (loss) income:
Domestic statutory tax rate
Effect of provinces and foreign tax rates difference
Increase (reduction) resulting from:
Effect of non-deductible charges and/or resulting from tax rate reduction
Effect of non-taxable revenue
Change in valuation allowance
Large corporation and state taxes
Other
Effective tax rate before the following item
Effect of the non-taxable gains on dilution
Effective tax rate
The tax effects of significant items comprising the Company's net future tax liabilities are as follows:
2002
2001
2000
35.2 %
(15.5)
19.7
10.3
(4.2)
5.0
2.5
0.7
34.0
–
34.0 %
37.2 %
2.7
39.9
(40.1)
11.1
(54.4)
(12.8)
(8.3)
(64.6)
0.5
(64.1) %
38.2 %
(6.0)
32.2
5.3
–
1.2
1.2
(0.8)
39.1
(22.6)
16.5 %
2002
2001
66
Future tax assets:
Loss carryforwards
Tax credit carryforwards
Acquisition and reserve for the restructuring of operations
Pension expenses and postretirement benefits
Accrued compensation
Goodwill and intangible assets
Differences between book and tax bases of investments
Other
Valuation allowance
Future tax liabilities:
Differences between book and tax bases of property, plant and equipment
Differences between book and tax bases of investments
Goodwill and intangible assets
Other
$
390.3
$
17.0
47.1
91.5
19.9
–
4.0
187.4
757.2
(257.0)
500.2
(891.4)
(99.2)
(26.0)
(163.1)
(1,179.7)
361.6
67.4
85.7
117.8
31.6
1.6
–
120.2
785.9
(240.1)
545.8
(813.1)
(94.6)
–
(186.5)
(1,094.2)
Net future tax liabilities
$
(679.5)
$
(548.4)
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
6.
INCOME TAXES (continued)
The current and long-term future tax assets and liabilities are as follows:
Future tax assets:
Current
Long-term
Future tax liabilities:
Current
Long-term
Net future tax liabilities
2002
2001
$
$
75.5
97.9
173.4
(1.0)
(851.9)
(852.9)
(679.5)
$
$
114.7
84.9
199.6
(1.0)
(747.0)
(748.0)
(548.4)
The 2002, 2001 and 2000 amounts above include a valuation allowance of $257.0 million, $240.1 million and $72.3 million respectively, relating to loss carryforwards and other tax
benefits available. The net change in the total valuation allowance for the year ended December 31, 2002 is the result, among other things, of an amount of $23.0 million allocated to
income. The net change in the total valuation allowance for the year ended December 31, 2001 is the result, among other things, of an amount of $64.5 million allocated to income and
$72.7 million from the consolidation of previously non-consolidated subsidiaries and $27.0 million from tax reorganization. In 2000, the net change in the valuation allowance is the result
of $16.1 million allocated to income from operations.
Subsequent recognition of tax benefits relating to the valuation allowance for future tax assets as at December 31, 2002 will be allocated as follows:
Income tax benefit that would be reported in the consolidated statement of income
Goodwill
$
$
170.2
86.8
257.0
67
As at December 31, 2002, the Company had loss carryforwards for income tax purposes available to reduce future taxable income of $859.9 million, expiring from 2003 to 2017, and
$437.0 million which can be carried forward indefinitely. The Company also has state net operating losses and tax credits of $396.1 million in the United States and in Europe, which
expire from 2004 to 2020.
The Company has not recognized a future tax liability for the undistributed earnings of its subsidiaries in the current and prior years, because the Company does not expect to sell those
investments and that those undistributed earnings would become taxable. Such liability cannot reasonably be determined at the present time.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
7. EARNINGS PER SHARE
Earnings per share are calculated by dividing net income (loss) by the weighted daily average number of shares outstanding during the year.
Diluted earnings per share are calculated by using the net income (loss) adjusted to include the potentially dilutive effect of convertible notes and stock options by the weighted average number
of shares outstanding adjusted to include the potentially dilutive effect of convertible notes and stock options.
The following table sets forth the computation of basic and diluted earnings per share:
Net income (loss)
Income (loss) impact on assumed conversion of convertible notes
and stock option net of applicable income taxes
Net income (loss), adjusted for dilution effect
Weighted average number of shares outstanding (in millions)
Effect of dilutive stock options (in millions)
Weighted average number of diluted shares outstanding (in millions)
Earning per share
Basic
Diluted
68
8. DISCONTINUED OPERATION
2002
2001
(restated, note 1(a)(ii))
2001
(restated, note 1(a)(ii))
2000
(restated, note 1(a)(ii))
(pro forma, note 2)
$
$
$
$
91.9
(2.3)
89.6
64.6
–
64.6
1.42
1.39
$
$
$
$
(248.7)
–
(248.7)
64.6
–
64.6
(3.85)
(3.85)
$
$
$
$
(248.7)
–
(248.7)
64.6
–
64.6
(3.85)
(3.85)
$
$
$
$
1,085.8
–
1,085.8
64.6
0.2
64.8
16.81
16.76
Donohue Inc. ("Donohue") operates an integrated forest products business which has mills in Canada and the United States. On April 18, 2000, Quebecor Inc. held a 19.5% equity interest
and a 63.1% voting interest in Donohue. Consequently, the financial statements of Donohue were consolidated with those of Quebecor Inc. Donohue was the only interest Quebecor Inc. had
in the Forest Products segment.
On that date, pursuant to an agreement between Abitibi-Consolidated Inc. ("Abitibi-Consolidated"), Donohue and Quebecor Inc., Abitibi-Consolidated purchased all the outstanding shares of
Donohue, in cash and shares of Abitibi-Consolidated. Quebecor Inc. received $12.00 in cash and 1.8462 share of Abitibi-Consolidated for each share tendered. The transaction was recorded
as a reverse take-over of Abitibi-Consolidated by Donohue, as the latter's shareholders received a sufficient number of Abitibi-Consolidated shares to enable them to acquire control of Abitibi-
Consolidated. Quebecor Inc. holds an interest of approximately 11% in Abitibi-Consolidated, both in terms of the number of shares and voting rights held. Since Quebecor Inc. does not control
nor exercise a significant influence over Abitibi-Consolidated, this interest is accounted for as a portfolio investment. Consequently, the Forest Products segment was considered a discontinued
operation as of the first quarter of 2000. Donohue's operating results were then presented separately from the first quarter of 2000 until April 18, 2000, the disposal date. The gain on disposal
amounts to $235.0 million, net of income taxes of $94.2 million.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
8. DISCONTINUED OPERATION (continued)
The following table provides additional financial information related to the discontinued operation for the year ended December 31, 2000.
Condensed Consolidated Statements of Operations
Revenues
Income before income taxes
Income taxes
Non-controlling interest
Contribution of the discontinued operation
Gain on disposal
Net income from the discontinued operation
9. BUSINESS AND ASSET ACQUISITIONS AND DISPOSALS
Business and asset acquisitions
2000
760.2
89.5
(27.7)
(50.7)
11.1
235.0
246.1
$
$
$
During the years ended December 31, 2002, 2001 and 2000, the Company acquired businesses, which have been accounted for by the purchase method. Results of these businesses are
included from the date of acquisition in the financial statement of the Company.
2002 acquisitions
The Printing segment made the following acquisitions:
• In March 2002, Quebecor World Inc. purchased all of the issued and outstanding shares of European Graphic Group S.A. ("E2G"), a subsidiary of Hachette Filipacchi Médias in France, for
a cash consideration of US$3.3 million. The purchase price will be adjusted by contingent consideration of a maximum of 6.1 million Euro, based on achieving a specific performance
level, and will be payable in 2004 and 2007. The contingent considerations, if any, will be recorded as an increase in the fixed assets. E2G owns printing and bindery facilities in France
and Belgium, and a 50% ownership of Bayard Hachette Routage in France. No goodwill resulted from the acquisition. The purchase price allocation process was not completed as at
December 31, 2002, and the amounts assigned to the assets and liabilities may be adjusted at a later date.
• During the year ended December 31, 2002, Quebecor World Inc. repurchased for cancellation under the Normal Course Issuer Bid Program initiated in 2001 a total of 148.500 of its own
Subordinate Voting Shares for a net cash consideration of $5.2 million, resulting in additional goodwill in the amount of 0.7 million.
• During the year, Quebecor World Inc. also acquired minority interests in North America and Europe for a cash consideration of US$4.5 million, of which US$1.3 million has been recorded
69
as goodwill.
Other segments made the following acquisitions:
• On January 27, 2002, Mindready Solutions Inc., Web Integration/Technology segment, acquired some of the assets of Nortel Networks Limited for a cash consideration of $0.3 million. No
goodwill resulted from the acquisition.
• In 2002, Vidéotron Télécom ltée, Business Telecommunications segment, acquired some operating assets from 360networks Inc. and Stream Intelligent Networks Corporation for a total
cash consideration of $4.1 million. No goodwill resulted from these acquisitions.
• During the year ended December 31, 2002, the Company increased its interest in TVA Group Inc., Broadcasting segment, through the subsidiary’s Share Repurchase and Cancellation
Program. A total of 557,100 Class B Non-Voting Common shares were repurchased and cancelled, for a cash consideration of $7.9 million, resulting in additional goodwill of $1.6 million.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
9. BUSINESS AND ASSET ACQUISITIONS AND DISPOSALS (continued)
2002 acquisitions (continued)
Other segments made the following acquisitions (continued)
• In December 2002, Vidéotron ltée, Cable Television segment, increased its ownership in Télécable Charlevoix (1977) inc. for a cash consideration of $2.0 million. No goodwill resulted from
this transaction.
• Also, during the year ended December 31, 2002, Quebecor Media Inc. increased its ownership in some of its subsidiaries part of its Leisure and Entertainment segment, for a cash
consideration of $0.1 million, resulting in additional goodwill of $0.5 million.
2001 acquisitions
• In February 2001, Quebecor World Inc., Printing segment, acquired a 70% controlling interest in Espacio y Punto S.A., in Spain, for a cash consideration of US$8.2 million.
• In March 2001, Quebecor World Inc. acquired a 75% controlling interest in Grafica Melhoramentos S.A., in Brazil, for a cash consideration of US$3.3 million.
• In March 2001, Quebecor World Inc. also acquired minority interests in its Latin American operations for a cash consideration of US$15.0 million, a convertible subordinated debenture
of US$6.0 million and a promissory note of US$2.0 million.
• In July 2001, Quebecor World Inc. acquired Retail Printing Corporation of Massachusetts in the United States, to expand its North American retail network, for a cash consideration of
US$97.6 million.
• In August 2001, Quebecor World Inc. purchased the manufacturing assets of Grupo Serla, in Mexico, for a total cash consideration of US$13.0 million.
• During the year ended December 31, 2001, Quebecor World Inc. also completed other business acquisitions for a total cash consideration of US$1.8 million.
• During the year ended December 31, 2001, the Company has increased its interest in Quebecor World Inc. through the subsidiary’s Share Repurchase and Cancellation Program, which
amounted to $258.9 million. This increase has resulted in additional goodwill in the amount of $36.4 million.
• On June 21, 2001, Quebecor Communications Inc., a wholly-owned subsidiary of Quebecor Media Inc., acquired the remaining 30% interest in 3535991 Canada Inc., the parent company
of Sun Media Corporation, Newspaper segment, for a cash consideration of $375.0 million. The acquisition of these non-controlling interests has resulted in additional goodwill
of $252.1 million.
• In July 2001, Nurun Inc., Web Integration/Technology segment, acquired Velocity Test Systems Inc., in the United States, for a cash consideration of $3.2 million and a purchase price
70
balance payable of $1.5 million, resulting in additional goodwill of $0.3 million.
• The Company also increased its interest in certain subsidiaries of the Leisure and Entertainment segment for a cash consideration of $1.1 million, resulting in additional goodwill of
$0.8 million.
2000 acquisitions
• During the year ended December 31, 2000, the Company acquired some businesses, including Le Groupe Vidéotron ltée and TVA Group Inc., for a total consideration of $5,274.7 million.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
9. BUSINESS AND ASSET ACQUISITIONS AND DISPOSALS (continued)
Business and asset acquisitions (continued)
Business acquisitions are summarized as follows:
Assets acquired
Cash and cash equivalents
Temporary investments
Non-cash current operating assets
Investments in subsidiaries held for resale
Property, plant and equipment
Investments in non-consolidated subsidiaries
Goodwill
Future income taxes
Non-controlling interest
Other
Liabilities assumed
Bank indebtedness
Non-cash current operating liabilities
Amounts payable to non-consolidated subsidiaries
Long-term debt
Convertible notes
Future income taxes
Non-controlling interest
Other
Net assets acquired at fair value
Consideration
Cash
Notes payable
Balance of purchase price payable
2002
2001
2000
$
$
$
$
11.8
–
43.9
–
104.0
–
5.1
–
3.8
0.5
–
(41.2)
–
(88.4)
–
(0.1)
–
(7.6)
31.8
31.8
–
–
31.8
$
$
$
$
11.7
–
50.6
–
114.0
–
440.8
–
356.0
1.2
(3.5)
(41.4)
–
(47.8)
(4.0)
(4.8)
–
(0.8)
872.0
862.5
8.0
1.5
872.0
$
$
$
$
10.8
222.1
51.1
389.0
66.7
5,007.8
327.0
22.7
37.7
85.6
(346.6)
(164.6)
(91.0)
(9.3)
–
(0.7)
(140.7)
(0.1)
5,467.5
5,462.2
–
5.3
5,467.5
71
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
9. BUSINESS AND ASSET ACQUISITIONS AND DISPOSALS (continued)
Business and asset disposals
2002 disposals
• In January 2002, nurun Inc., Web Integration/Technology segment, closed the sale of Flow Systems Corporation for a cash consideration of $1.1 million, resulting in a gain on disposal of
$0.8 million.
• In February 2002, the Company closed the sale of 86.02% of TQS Inc. for a cash consideration of $60.7 million, net of transaction fees of $1.3 million, resulting in a gain on disposal of
$20.0 million.
• In September 2002, Netgraphe Inc., Internal/Portals segment, closed the sale of its interest in Canoa S.A., for a cash consideration of 1 dollar, resulting in a loss on disposal of $0.7 million.
• In September 2002, TVA Group Inc., Broadcasting segment, closed the sale of its 49% interest in Global Television Network Québec L.P. for a cash consideration of $1.0 million, resulting
in a gain on disposal of $0.8 million.
• In November 2002, Quebecor Media Inc., closed the sale of its 80% interest in 3064743 Canada Inc. (parent company of Wilson & Lafleur Ltée and Les Éditions Wilson & Lafleur inc.,
Leisure and Entertainment segment) for a cash consideration of $4.4 million, resulting in a gain on disposal of $2.6 million.
• Also, during the year ended December 31, 2002, Quebecor Media Inc. closed the sale of its interests in some of its subsidiaries, part of the Leisure and Entertainment segment, for a cash
considerations totalling $0.1 million, resulting in a gain on disposal of $0.1 million.
2000 disposals
• In August 2000, Quebecor World Inc., Printing segment, sold the operating assets of its North American CD-Rom replication business for a total consideration of US$68.0 million. The sale
price was comprised of US$47.0 million in cash and US$21.0 million in special warrants and promissory notes convertible into Q-Media Services Corporation shares. Quebecor World Inc.
realized a gain amounting to US$13.4 million, which was recorded as a reduction in selling and administrative expenses.
10. ACCOUNTS RECEIVABLE
72
Trade
Other
2002
951.7
115.6
1,067.3
$
$
2001
914.9
13.2
928.1
$
$
During 2002, Quebecor World Inc., Printing segment, sold, with limited recourse, a portion of its Canadian trade receivables on a revolving basis under the terms of a Canadian securitization
agreement dated March 1998 (the "Canadian Program"). The Canadian Program limit is $125.0 million. As at December 31, 2002, the amount outstanding under the Canadian program was
$125.0 million ($116.0 million as at December 31, 2001).
During 2002, Quebecor World Inc. also sold, with limited recourse, a portion of its US trade receivables on a revolving basis under the terms of a US securitization agreement dated December
1999 (the "US Program"). The US Program limit is US$510.0 million. As at December 31, 2002, the amount outstanding under the US Program was US$435.0 million (US$500.0 million as at
December 31, 2001).
During 2002, Quebecor World Inc. also sold, with limited recourse, a portion of its French and Spanish trade receivables on a revolving basis under the terms of an European securitization
agreement dated June 2001 (the "European Program"). The European Program limit is 153.0 million euro. As at December 31, 2002, the amount outstanding under the European Program was
129.5 million euro (140.4 million euro as at December 31, 2001).
Quebecor World Inc. has retained responsibility for servicing, administering and collecting trade receivables sold. No servicing asset and liability has been recorded, since the fees Quebecor
World Inc. receives for servicing the receivables approximate the related costs.
At December 31, 2002, an aggregate of US$747.2 million (US$802.0 million as at December 31, 2001) accounts receivable has been sold under the three programs, of which US$97.5 million
(US$105.0 million as at December 31, 2001) were kept by Quebecor World Inc. as retained interest, resulting in a net aggregate consideration of US$649.7 million (US$697.0 million as at
December 31, 2001) on the sale. The retained interest is recorded in Quebecor World Inc.’s accounts receivable, and its fair market value approximates its cost, given the short nature of the
collection period of the accounts receivable sold. The rights of Quebecor World Inc. on the retained interest are subordinated to the rights of the investors under the programs. There is no
recourse under the programs on Quebecor World Inc.’s other assets for failure of debtors to pay when due, other than Quebecor World Inc. remaining interest.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
10. ACCOUNTS RECEIVABLE (continued)
Securitization fees vary based on commercial paper rates in Canada, the United States and Europe and, generally, provide a lower effective funding cost than that available under Quebecor
World Inc.’s bank facilities.
Proceeds from revolving sales between the securization trusts and Quebecor World Inc. in 2002 totalled US$4.5 billion (US$4.5 billion in 2001).
11. INVENTORIES AND INVESTMENTS IN TELEVISUAL PRODUCTS AND MOVIES
Raw materials and supplies
Work in process
Finished goods
Investments in televisual products and movies
2002
403.5
283.3
51.0
61.7
799.5
$
$
2001
369.1
284.8
53.1
59.4
766.4
$
$
12. INVESTMENTS IN SUBSIDIARIES HELD FOR RESALE
As part of the acquisition of Le Groupe Vidéotron ltée, Quebecor Media Inc. acquired Vidéotron Télécom ltée, which operates in the Business Telecommunications segment. At the time of the
acquisition, management's intention was to sell this investment therefore, the operations of this subsidiary were not consolidated. The investment was accounted for by the cost method,
representing an estimate of the net realizable value at the acquisition date.
Given the uncertainty in the telecommunications industry, Quebecor Media Inc. has not been able to conclude the sale of its investment under favorable terms. The subsidiary, has therefore,
decided to keep its investment and to develop it to its maximum potential. As a result of this decision, the investment in Vidéotron Télécom ltée has been consolidated since October 31, 2001.
The financial position of this subsidiary, given the comprehensive revaluation of assets and liabilities done following the purchase price allocation, when management decided to keep its
investment, in October 2001, and the results for the period from January 1 to October 31, 2001 are presented below :
Condensed Statement of Income
Period from January 1 to October 31, 2001
Revenues
Operating expenses
Amortization
Financial revenues
Operating loss before other expenses
Other expenses
Loss before income taxes
Income taxes (credit)
Loss before amortization of goodwill
Amortization of goodwill
Net loss
Q U E B E C O R I N C .
73
$
82.1
63.2
29.0
(1.1)
(9.0)
(17.2)
(26.2)
5.8
(20.4)
(0.9)
(21.3)
$
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
12. INVESTMENTS IN SUBSIDIARIES HELD FOR RESALE (continued)
Condensed Balance Sheet
October 31, 2001
Assets
Current assets
Other assets
Property, plant and equipment
Goodwill
Liabilities
Current liabilities
Long-term debt
Future income taxes
Redeemable preferred shares
Net assets
13. PROPERTY, PLANT AND EQUIPMENT
74
Land
Buildings and leasehold improvements
Machinery and equipment
Receiving, distribution and telecommunication networks
Projects under development
$
Cost
171.8
1,428.1
6,074.7
1,225.5
142.5
Accumulated
amortization
$
–
312.3
2,785.5
161.6
–
$
$
$
68.1
45.1
242.8
267.6
623.6
28.0
0.3
4.5
229.2
262.0
361.6
2002
Net amount
171.8
1,115.8
3,289.2
1,063.9
142.5
Land
Buildings and leasehold improvements
Machinery and equipment
Receiving, distribution and telecommunication networks
Projects under development
$
9,042.6
$
3,259.4
$
5,783.2
Cost
171.8
1,366.6
5,738.4
1,152.5
238.2
8,667.5
$
$
Accumulated
amortization
$
–
261.3
2,337.1
56.5
–
$
2,654.9
2001
Net amount
$
$
171.8
1,105.3
3,401.3
1,096.0
238.2
6,012.6
As at December 31, 2002, the cost of property, plant and equipment and the corresponding accumulated amortization balance included amounts of $557.3 million ($465.1 million as at
December 31, 2001) and $297.1 million ($236.6 million as at December 31, 2001), respectively, for assets held under capital leases. Depreciation expense for property, plant and equipment
held under capital leases amounted to $30.5 million in 2002 ($27.0 million in 2001 and $23.8 million in 2000).
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
14. GOODWILL
For the year ended December 31, 2002, the changes in the carrying amounts of goodwill are as follows:
Balance as at
January 1, 2002 as
restated (note 1(a)(i))
Purchases
(disposal)
of business/
shares of a
subsidiary
Transfer
between
segments/
Adjustment
to purchase
price allocation 1
Write-down
Translation
adjustments
Balance as at
December 31,
2002
Printing
Cable Television
Newspapers
Broadcasting
Leisure and Entertainment
Business Telecommunications
Web Integration/Technology
Internet/Portals
Total
$
–
$
15.1
$
$
$
3,978.2
2,668.2
1,001.8
164.3
98.4
108.5
8.8
28.7
$
(3.8)
–
(0.4)
1.6
(0.5)
–
–
–
–
(0.2)
–
(7.3)
(0.1)
–
–
–
(68.0)
–
–
–
(107.6)
(8.9)
(2.5)
3,989.5
2,600.0
1,001.4
158.6
97.8
0.9
–
26.2
–
–
–
–
–
0.1
–
15.2
$
8,056.9
$
(3.1)
$
(7.6)
$
(187.0)
$
$
7,874.4
1 Recognition of a future income tax asset subsequent to the date of acquisition, applied to reduce goodwill.
15. LONG-TERM DEBT
Quebecor Inc.
Revolving bank credit facility (i)
Other debt
Quebecor World Inc. and its subsidiaries (ii)
Revolving bank credit facility (iii)
Commercial paper (iv)
Senior Subordinated Notes (v)
Senior Subordinated Notes (vi)
Senior Debentures (vii)
Senior Debentures (viii)
Senior Notes (ix)
Senior Notes (x)
Senior Notes (xi)
Obligations under capital leases and other debt (xii)
Effective interest rate as
at December 31, 2002
Years of
maturity
2002
2001
75
5.32 to 5.42 %
4.69 %
2004
2003
$
2.17 %
1.86 to 3.30 %
2005-2007
2005-2007
8.38 %
7.75 %
7.25 %
6.50 %
8.42 and 8.52 %
8.54 and 8.69 %
7.20 %
0 to 10.26 %
2008
2009
2007
2027
2010-2012
2015-2020
2006
2003-2016
131.9
7.5
139.4
54.6
160.0
405.7
459.5
235.4
235.4
392.4
189.9
392.4
154.0
$
213.4
7.9
221.3
426.0
233.8
411.2
463.9
238.5
238.5
397.6
192.4
397.6
211.0
2,679.3
3,210.5
Sub-total long-term debt, balance carried forward
$
2,818.7
$
3,431.8
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
15. LONG-TERM DEBT (continued)
Sub-total long-term debt, balance brought forward
$
2,818.7
$
3,431.8
Effective interest rate as
at December 31, 2002
Years of
maturity
2002
2001
Quebecor Media Inc. (ii)
Credit facility (xiii)
Senior Notes (xiv)
Senior Discount Notes (xv)
Vidéotron ltée and its subsidiaries (ii)
Credit facility (xvi)
Senior Secured First Priority Notes (xvii)
Sun Media Corporation and its subsidiaries (ii)
Senior Bank Credit Facility (xviii)
Senior Subordinated Notes (xix)
TVA Group Inc. and its subsidiaries (ii)
Revolving-term bank loan (xx)
76
Other subsidiaries of Quebecor Media Inc. (ii)
Miscellaneous debt
Total long-term debt
Less current portion
Quebecor Inc.
Quebecor World Inc. and its subsidiaries
Quebecor Media Inc.
Vidéotron ltée and its subsidiaries
Sun Media Corporation and its subsidiaries
TVA Group Inc. and its subsidiaries
Other subsidiaries of Quebecor Media Inc.
4.83 to 5.50 %
11.50 %
13.75 %
2003
2011
2011
4.28 to 5.00 %
7.59 %
2005-2009
2007
3.80 %
8.60 %
2004-2005
2007
2.81 to 4.50 %
2005
6.80 to 9.70 %
2003-2005
429.0
1,099.5
291.6
1,820.1
995.8
123.8
1,119.6
300.5
214.6
515.1
51.2
0.6
429.0
1,112.5
256.6
1,798.1
1,157.3
130.3
1,287.6
337.8
216.7
554.5
43.6
11.6
6,325.3
7,127.2
7.5
60.4
429.0
86.1
60.0
–
0.5
643.5
7.9
90.6
–
4.3
5.0
–
5.8
113.6
$
5,681.8
$
7,013.6
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
15. LONG-TERM DEBT (continued)
(i)
As at December 31, 2002, these borrowings were drawn on a bank credit facility of $201.0 million ($300.0 million as at December 31, 2001). The bank credit facility is a one-year
revolving facility that can be extended on a yearly basis. In the event it would not be extended, the outstanding borrowed amounts would convert into a one-year term loan. The credit
agreement governing this bank credit facility contains certain covenants, including the obligation to maintain investments in publicly traded companies having a market value of at least
200% of the borrowed amounts (including the drawn portion of the Quebecor Media Inc.’s credit facility guaranteed by the Company). The borrowed amounts bear interest at floating
rates based on Bankers’ Acceptance rate or bank prime rate. The bank credit facility is secured by shares owned in certain Company subsidiaries.
(ii)
The debts of these subsidiaries are non-recourse to the parent company, Quebecor Inc., except for the credit facility of Quebecor Media Inc.
(iii)
In April 2002, Quebecor World Inc. restructured its existing revolving bank facility of US$1.0 billion composed of three tranches. The first and second tranches of US$250.0 million each
mature in 2005, while the third tranche of US$500.0 million matures in 2007. All tranches are fully revolving until their maturity dates. Quebecor World Inc. paid fees on the unused
portion of US$1.0 million in 2002 (US$0.9 million in 2001). The credit agreement contains certain restrictions, including the obligation to maintain certain financial ratios. The facility
can be used for general corporate purposes and as liquidity back-up for Quebecor World Inc.’s commercial paper program.
The revolving bank credit facility bears interest at variable rates based on the London Interbanking Offered Rate (“LIBOR”) or Bankers' Acceptance rates. As at December 31, 2002, the
drawings under this facility are denominated in US dollars only.
(iv) As at December 31, 2002, $156.4 million ($226.3 million as at December 31, 2001) and US$2.3 million (US$4.7 million as at December 31, 2001) of notes are outstanding under the
commercial paper program, bearing interest between 2.85% to 3.30% for the tranche in Canadian dollars and 1.86% for the tranche in US dollars. The program limit is US$350.0 million.
As at December 31, 2002, the commercial paper program was classified as long-term, since Quebecor World Inc. has the ability and intent to maintain such debt on a long-term basis,
and has long-term bank facilities available (see 15(iii)) to replace such debt, if necessary. Included in the outstanding balance is an amount of $10.0 million held by Quebecor Media
Inc. and is presented in the balance sheet as a temporary investment.
(v)
The Senior Notes mature on November 15, 2008, and are redeemable at the option of Quebecor World Inc. at a decreasing premium between November 2003 and November 2006, and
thereafter, at par value until their final maturity. The notes were issued by World Color Press, Inc. (“WCP”) for an original aggregate principal of US$300.0 million. They were subsequently
revalued in order to reflect their fair value at the time WCP was acquired, based on Quebecor World Inc.'s borrowing rate for similar financial instruments. During 2000, Quebecor World Inc.
repurchased US$42.4 million at face value thereof on the open market. The aggregate principal amount of the notes, as at December 31, 2002, is US$257.6 million (US$257.6 million as at
December 31, 2001). In August 2001, Quebecor World Inc. obtained the consent of the noteholders to have the restrictions on the Notes generally conform with the Quebecor World Inc.'s
other Senior Debentures. At the same time, the Notes, which were Senior Subordinate Notes, became Senior Notes.
(vi) The Senior Notes mature on February 15, 2009. The aggregate principal amount of the notes is US$300.0 million as at December 31, 2002 ($300.0 million as at December 31, 2001)
and the notes are redeemable at the option of Quebecor World Inc. at a decreasing premium between February 2004 and February 2007, and thereafter, at par value until their final
maturity. The notes were issued by WCP and revalued in order to reflect their fair value at the time WCP was acquired based on Quebecor World Inc.'s borrowing rate for similar financial
instruments. In August 2001, Quebecor World Inc. obtained the consent of the noteholders to have the restrictions on the Notes generally conform with Quebecor World Inc.'s other Senior
77
Debentures. At the same time, the Notes, which were Senior Subordinate Notes, became Senior Notes.
(vii) These debentures are repayable in US dollars and mature on January 15, 2007.
(viii) These debentures mature on August 1, 2027 and are redeemable in US dollar at the option of the holder at their par value on August 1, 2004.
(ix)
In July 2000, Quebecor World Inc. issued Senior Notes for a principal amount of US$250.0 million. The first tranche of US$175.0 million matures on July 15, 2010, while the second
tranche of US$75.0 million matures on July 15, 2012. These notes contain certain restrictions which are generally less restrictive than those on the revolving bank credit facility.
(x)
In September 2000, Quebecor World Inc. issued Senior Notes for a principal amount of US$121.0 million comprised of two tranches. The first tranche of US$91.0 million matures on
September 15, 2015, and the second tranche of US$30.0 million matures on September 15, 2020. These notes contain certain restrictions which are generally less restrictive than those
of the revolving bank credit bank facility.
(xi)
In March 2001, Quebecor World Inc. issued Senior Notes for a principal amount of US$250.0 million maturing in March 2006. A US$33.0 million portion of the Notes bears a floating
interest rate, but this has been swapped to fixe it at the same rate as the coupon on the fixed-rate portion (see note 25 (a) (ii)). These Notes contain certain restrictions which are
generally less restrictive than those on the revolving bank facility.
(xii) Other debts and capital leases are partially secured by assets. In addition, a $59.0 million portion ($61.4 million in 2001) is repayable in euro, a $29.5 million portion ($29.9 million as
at December 31, 2001) is repayable in British pounds and a $7.7 million portion ($8.1 million in 2001) is repayable in Swedish krona.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
15. LONG-TERM DEBT (continued)
(xiii) The credit facility of $579.0 million is composed of three tranches: (a) a credit facility of $100.0 million to support cross-currency swap arrangements; (b) a credit facility of $50.0 million
for general liquidity purposes; (c) a $429.0 million term loan. Credits facilities (a) and (b) are secured by a first ranking moveable hypothec on all tangible and intangible assets, current
and future, of Quebecor Media Inc., and are one-year revolving facilities. Should they not be extended, the outstanding borrowed amounts would be converted into a one-year term loan.
Credit (c) is secured by Vidéotron Télécom ltée’s shares, Business Telecommunications segment, and by temporary investments for a value of $0.4 million. The credit facility in aggregate
is secured by Quebecor Media Inc.’s shareholders. The borrowed amounts bear interest at floating rates based on Bankers’ Acceptance rate or bank prime rate.
(xiv) The Senior Notes with a principal amount of US$715.0 million were issued at a discount rate of 97.8% for net proceeds of US$699.2 million. These Notes bear interest at a rate of
11.125%, payable semi-annually, since January 15, 2002. These Notes contain certain restrictions for Quebecor Media Inc., including limitations on its ability to incur additional
indebtedness and are not secured. The Notes are redeemable at the option of Quebecor Media Inc. at a decreasing premium commencing July 15, 2006. Quebecor Media Inc. has fully
hedged the foreign currency risk associated with the Senior Notes by using a cross-currency swap arrangement under which Quebecor Media Inc. has set all payments in Canadian
dollars.
(xv)
The Senior Discount Notes with a principal amount of US$295.0 million were issued at a discount rate of 51.3% for net proceeds of US$151.2 million. These Notes bear interest at a
rate of 13.75%, payable semi-annually, commencing January 15, 2007. The Notes contain certain restrictions for Quebecor Media Inc., including limitations on its ability to incur
additional indebtedness and are not secured. The Notes are redeemable at the option of Quebecor Media Inc. at a decreasing premium commencing July 15, 2006. Quebecor Media Inc.
has fully hedged the foreign currency risk associated with the Senior Discount Notes by using a cross-currency swap arrangement under which Quebecor Media Inc. has set all payments
in Canadian dollars.
(xvi) The credit facility, bearing interest at Bankers’ Acceptance rates plus a premium based on certain financial ratios, is secured by a first ranking hypothec on the universality of all tangible
and intangible assets, current and future, of Vidéotron ltée and its subsidiaries (with some restrictions regarding CF Cable TV Inc. and its subsidiaries’ assets) and of Le SuperClub
Vidéotron ltée. The credit facility is composed of the following credits:
(a) Revolving facility of a maximum amount of $150.0 million, maturing November 28, 2005;
(b) Term Facility A, for a maximum amount of $737.0 million, decreasing quarterly starting on March 1, 2003, until maturity on December 1, 2008;
(c) Term Facility B, for a maximum amount of US$263.7 million, decreasing quarterly starting on March 1, 2003, maturing on December 1, 2009. Vidéotron ltée has hedged the foreign
currency risk associated with the facility by using a cross-currency swap arrangement under which Vidéotron ltée has set the exchange rate of all the payments in Canadian dollars.
As at December 31, 2002, the outstanding balances include Bankers' Acceptance based-advances of $629.4 million ($734.9 million as at December 31, 2001), prime rate based
78
advances of $1.4 million ($1.1 million as at December 31, 2001) and LIBOR-based advances of US$231.4 million (US$263.7 million as at December 31, 2001).
The credit facility requires Vidéotron ltée to make mandatory repayments based, on an excess cash flow formula whereby 50% of this excess, calculated on a quarterly basis, has to
be remitted until December 31, 2002. The estimated last repayment of the excess cash flow for the last quarter of 2002 is estimated at $8.5 million. In 2003, and thereafter, the portion
of the excess cash flow that has to be remitted with be based on Vidéotron ltée leverage ratio.
The credit facility contains the usual covenants such as maintaining certain financial ratios and certain restrictions on the payment of dividends.
(xvii) The Senior Secured First Priority Notes are recorded at their fair value of US$75.6 million (US$77.8 million as at December 31, 2001), calculated on the effective interest rate at the
acquisition date. The Notes are redeemable at the option of Vidéotron ltée on or after July 15, 2005 at 100% of the principal amount. In May 2002, Vidéotron ltée repurchased
US$2.2 million of these notes for cancellation. These Notes, together with Vidéotron ltée credit facility, to the extend permited under the Notes Trust Indenture, are secured by first ranking
hypothecs on substantially all of the assets of CF Cable TV Inc. and certain of its subsidiaries.
(xviii) The Senior Bank Credit Facility ("credit facility") is comprised of a revolving credit facility of $75.0 million maturing in March 2003, and a term reducing loan maturing in 2005. The
revolving credit facility was used for an amount of $0.3 million as at December 31, 2002 ($1.1 million as at December 31, 2001) while the term reducing loan was used for an amount
of $300.2 million as at December 31, 2002 ($336.7 million as at December 31, 2001). The revolving credit facility may be extended for an additional 364-day period. If is not extended,
any amount borrowed under the credit facility would be converted into a one-year term credit maturing in March 2004. Sun Media Corporation may borrow at interest rates based on
Banker's Acceptance and/or bank prime plus an applicable margin (the "margin"), with the margin tied to financial ratios. The credit facility is collateralized by liens on all of the property
and assets of Sun Media Corporation and its operating subsidiaries, now owned or hereafter acquired. The credit facility contains certain restrictions, including the obligation to maintain
certain financial ratios.
(xix) The Senior Subordinated Notes are comprised of two series bearing interest of 9.5% and due February 2007 and May 2007, respectively (the "Notes"). Interest is payable semi-annually.
The Notes are general unsecured obligations of Sun Media Corporation, subordinate in right of payment to all existing and future senior indebtedness of Sun Media Corporation, and
senior in right of payment to any subordinated indebtedness of Sun Media Corporation.
As at December 31, 2002, the outstanding principal amount was US$97.5 million and US$53.5 million, respectively (US$97.5 million and US$53.5 million, respectively as at December 31,
2001). The Notes were recorded at their fair market value on January 7, 1999, which was determined based on quoted market prices and the fair value of the Sun Media Corporation's related
financial instruments. The difference between the fair market value and the principal amount in Canadian dollars is being amortized over the term of the Notes. As at December 31, 2002,
the unamortized balance of the premium was $8.9 million ($11.1 million as at December 31, 2001).
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
15. LONG-TERM DEBT (continued)
(xx) The credit agreement consists of a revolving-term bank loan of a maximum of $135.0 million ($90.0 million as at December 31, 2001), which bears interest at the prime rate of a Canadian
chartered bank and Bankers’ acceptances rate plus a variable margin depending on the ratio of total debt to cash flow. As at December 31, 2002, the outstanding balances include
$44.8 million of Bankers’ Acceptance bearing interest at 2.81% and $6.4 million of credit line bearing interest at 4.0%. The revolving-term bank loan is secured by a hypothec of
$230.0 million ($120.0 million as at December 31, 2001) on the universality of TVA Group Inc.’s moveable and immovable, tangible and intangible, current and future property. The credit
facility contains certain restriction, including the obligation to maintain certain financial ratios. In addition, TVA Group Inc. is limited with regard to amounts for the acquisition of fixed
assets, investments, dividends and other payments to shareholders. This credit agreement matures on February 11, 2005.
On December 31, 2002, the Company and its subsidiaries were not in default on any debt covenants.
Principal repayments on long-term debt over the next years are as follows:
2003
2004
2005
2006
2007
2008 and thereafter
16. EXCHANGEABLE DEBENTURES
Series 2001 (i)
Abitibi (ii)
$
$
$
643.5
355.9
343.0
556.6
945.5
3,480.8
2001
425.0
554.9
979.9
79
Effective interest rate as
at December 31, 2002
3.75 %
4.73 %
Years of
maturity
2026
2026
2002
425.0
554.9
979.9
$
$
(i) Each floating rate debenture, Series 2001, with a principal amount of $1,000, is exchangeable for 29.41 Subordinate Voting Shares of Quebecor World Inc. presently held by the Company,
or 12.5 million Subordinate Shares in total (the “underlying shares”). The debentures are secured by the underlying shares and may be exchanged at the option of the holder, at any time,
for the underlying shares at the fixed conversion ratio. The Company may, at its option, satisfy its obligation by payment of a cash amount equal to the fair value of the underlying shares
at the time of the request. As at December 31, 2002, the market value of the underlying shares was $35.00 per share ($35.16 per share as at December 31, 2001). Redemption of the
debentures before 10 years from the date of issuance may trigger a penalty for the initiator. These debentures bear interest, payable semi-annualy, at a rate of 1.5% plus a floating
percentage based on the rate of dividends on the underlying shares. Had the debentures been reimbursed by the underlying shares as at December 31, 2002, Quebecor Inc.’s interest in
Quebecor World Inc. would have decreased from 33.24% to 24.38% (38.32% to 29.40% as at December 31, 2001). Cash and cash equivalents held in trust as at December 31, 2002,
include an amount of $8.0 million related to the interest payment on this debenture.
(ii) Each floating rate debenture, the Abitibi Debentures, with a principal amount of $1,000 is exchangeable for 80.8 common shares of Abitibi-Consolidated Inc. presently held by the
Company, or 44,821,024 common shares in total (the “underlying shares”). The debentures are secured by the underlying shares and may be exchanged at the option of the holder, at
any time, for the underlying shares at the fixed conversion ratio. The Company may, at its option, satisfy its obligation by payment of a cash amount equal to the fair value of the underlying
shares at time of the request. As at December 31, 2002, the market value of the underlying shares was $12.10 per share ($11.40 per share as at December 31, 2001). Redemption of
the debentures before 10 years from the date of issuance may trigger a penalty for the initiator. These debentures bear interest, payable quarterly, at a rate of 1.5%, plus a floating
percentage based on the rate of dividends on the underlying shares. Cash and cash equivalents held in trust, as at December 31, 2002, include an amount of $6.8 million related to the
interest payment on this debenture.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
17. REDEEMABLE PREFERRED SHARES
The Preferred Shares issued by Vidéotron Telecom ltée, Business Telecommunications segment., convertible at the option of the holder, are redeemable, partially or totally, at the option of the
issuer at any time and at the option of the holder from December 31, 2004. The redemption price is the higher of the amount paid, plus a 9% annual return, and the fair value of the shares.
18. CONVERTIBLE NOTES
Convertible Senior Subordinated Notes of a subsidiary, 6.0% (a)
Convertible Subordinated Debentures 7.0% (b)
Maturity
2007
2004
2002
171.1
9.4
180.5
$
$
2001
170.6
9.6
180.2
$
$
(a) The Convertible Senior Subordinated notes mature on October 1, 2007. The notes were issued by WCP and revalued in order to reflect their fair value at the time WCP was acquired, based
on Quebecor World Inc.’s borrowing rate for similar financial instruments. The equity component of the notes, which corresponds to the option of the holder to convert the notes into equity
shares of Quebecor World Inc., was valued at the date of acquisition and classified as a non-controlling interest. Since the acquisition of WCP by Quebecor World Inc., each US$1,000
tranche is convertible into 30.5884 Subordinate Voting Shares of Quebecor World Inc., which corresponds to a price of US$26.24 per share and US$197.25 in cash. The notes are
convertible at the option of the holder at any time, and redeemable at the option of Quebecor World Inc. at a decreasing premium from October 2000 to final maturity. Certain conditions
apply to a redemption between October 2000 and October 2002. Pursuant to the terms of the convertible notes, Quebecor World Inc. repurchased US$7.6 million of the notes in 1999
following a tender offer at par for 100% of the face value of US$151.8 million. Quebecor World Inc. subsequently repurchased notes for the principal amount of US$24.7 million on the
open market in 2000. The aggregate principal amount of the notes, as at December 31, 2002, is US$119.5 million (US$119.5 million as at December 31, 2001). The number of equity
shares of Quebecor World Inc. to be issued upon conversion of the convertible notes would be 3,656,201, and Quebecor Inc.'s interest would decrease from 33.24% to 32.40% (38.32%
to 37.34% as at December 31, 2001).
(b) In March 2001, a subsidiary of Quebecor World Inc. issued Convertible Subordinated Debentures maturing in May 2004. These debentures are convertible in Subordinate Voting Shares of
Quebecor World Inc. at a conversion price of US$25.00. The debentures are not redeemable prior to maturity. The aggregate principal of the debentures as at December 31, 2002 and
2001 is US$6.0 million. The number of equity shares to be issued upon conversion of the debentures would be 240,000 shares of Quebecor World Inc.
80
19. OTHER LIABILITIES
Pension plan liability
Postretirement benefits
Reserve for unfavourable leases acquired
Workers' compensation accrual
Reserve for environmental matters
Other
$
2002
103.0
135.7
55.9
25.6
28.7
66.2
$
2001
115.6
142.8
67.3
38.2
26.7
58.0
$
415.1
$
448.6
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
20. NON-CONTROLLING INTEREST
Non-controlling interest includes the interest of non-controlling shareholders in the participating shares of Quebecor Inc.’s subsidiaries. As at December 31, 2002, the most significant
non-controlling interests were as follows:
Subsidiary
Quebecor World Inc.
Quebecor Media Inc.
TVA Group Inc. 1
Nurun Inc. 1
Netgraphe Inc. 1
Segment
Printing
Cable Television, Newspapers, Broadcasting, Leisure and Entertainment,
Business Telecommunications, Web Integration/Technology and Internet/Portals
Broadcasting
Web Integration/Technology
Internet/Portals
Non-controlling interest
66.76 %
45.28 %
63.90 %
41.24 %
24.82 %
1 Nurun Inc., Netgraphe Inc., and TVA Group Inc. are subsidiaries of Quebecor Media Inc.
21. CAPITAL STOCK
(a) Authorized capital stock
An unlimited number of Class A Multiple Voting Shares with voting rights of ten votes per share (herein after referred to as "A shares"), convertible at any time into Class B Subordinate
Voting Shares (herein after referred to as "B shares") on a one-for-one basis.
An unlimited number of B shares, convertible into A shares on a one-for-one basis only if a takeover bid regarding A shares is made to holders of A shares without being made concurrently
and under the same terms to holders of B shares.
Holders of B shares are entitled to elect 25% of the Board of Directors of Quebecor Inc. Holders of A shares may elect the other members of the Board of Directors.
(b) Issued capital stock
A shares
B shares
Number
Amount
Number
Amount
81
Balance as at December 31, 2000
24,052,683
$
10.7
40,573,439
$
337.8
A shares converted into B shares
Balance as at December 31, 2001
A shares converted into B shares
Balance as at December 31, 2002
(548,014)
23,504,669
(380,799)
23,123,870
$
(0.2)
10.5
(0.2)
10.3
548,014
41,121,453
380,799
41,502,252
0.2
338.0
0.2
338.2
$
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
22. SHARE PURCHASE PLANS
(a) Quebecor Inc.’s stock option plan
Under a stock option plan established by Quebecor Inc., 6,202,612 B shares have been set aside for officers, senior employees and other key employees of the Company. The exercise
price of each option is equal to the weighted average transaction price of B shares on the Toronto Stock Exchange in the five days preceding the grant. Each option may be exercised during
a period not exceeding ten years from the date granted. Options usually vest as follows: 1/3 after one year, 2/3 after two years and 100% three years after the original grant. The Board
of Directors may, at its discretion, affix different vesting periods at the time of each grant.
The following table gives details on changes to outstanding options for the years ended December 31, 2002 and 2001:
Balance at beginning of year
Granted
Exercised
Cancelled
Balance at end of year
Vested options at end of year
2002
Weighted average
Options
exercise price
Options
1,588,849
205,000
–
(43,000)
1,750,849
1,270,182
$
$
$
32.43
20.51
–
35.10
30.97
33.02
1,442,849
246,000
(15,000)
(85,000)
1,588,849
780,732
2001
Weighted average
exercise price
$
$
$
33.38
26.05
17.85
32.71
32.43
33.35
The following table gives summary information on outstanding options as at December 31, 2002:
82
Range of
exercise price
$ 15 to 20
20 to 25
25 to 30
30 to 35
35 to 40
40 to 45
$ 15 to 45
Outstanding options
Weighted average
Weighted average
Vested options
Weighted average
Number
years to maturity
exercise price
Number
exercise price
27,500
205,000
211,000
987,349
300,000
20,000
1,750,849
1.6 year
9.1 years
8.2 years
6.9 years
6.7 years
7.3 years
7.1 years
$
$
17.85
20.51
26.01
32.52
36.97
41.89
30.97
27,500
–
78,667
850,682
300,000
13,333
1,270,182
$
$
17.85
–
26.01
32.63
36.97
41.89
33.02
For the year ended December 31, 2002, a charge reversal of $0.1 million (charge reversals of $0.3 million and $1.8 million, respectively as at December 31, 2001 and 2000) relative to
the plan was included under “Selling and administrative expenses” in the consolidated statement of income.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
22. SHARE PURCHASE PLANS (continued)
(b) Quebecor World Inc.’s plans
(i) Employee share plans
The Employee Stock Purchase Plan gives eligible Quebecor World Inc. employees in the United States the opportunity to acquire shares of Quebecor World Inc.’s capital stock for up
to 4% of their gross salary and to have Quebecor World Inc. contribute, on the employees’ behalf, a further amount equal to 17.5% of the total amount invested by the employee.
The number of Quebecor World Inc. shares that may be issued and sold under this plan is limited to 2,000,000 Subordinate Voting Shares of Quebecor World Inc., subject to
adjustments in the event of stock dividends, stock splits or similar events. At December 31, 2002, 6,199 employees (6,372 as at December 31, 2001) were participating in this plan.
The total number of plan shares issued on behalf of employees, including Quebecor World Inc.’s contribution, was 468,267 in 2002, (270,843 in 2001), which represents compensation
expenses amounting to US$1.6 million in 2002 (US$1.0 million in 2001 and US$1.0 million in 2000).
The Employee Share Investment Plan gives eligible Quebecor World Inc. employees in Canada the opportunity to subscribe for up to 4% of their gross salary to purchase shares of
Quebecor World Inc.’s capital stock and to have Quebecor World Inc. invest, on the employee’s behalf, a further 20% of the amount invested by the employee. The number of Quebecor
World Inc. shares that may be issued and sold under this plan is limited to 3,000,000 Subordinate Voting Shares of Quebecor World Inc., subject to adjustments in the event of stock
dividends, stock splits or similar events. At December 31, 2002, 2,249 employees (2,072 as at December 31, 2001) were participating in this plan. The total number of shares issued
on behalf of employees under this plan, including Quebecor World Inc.’s contribution, was 117,162 in 2002, (120,494 in 2001 and 121,975 in 2000), which represents compensation
expenses amounting to US$0.4 million in 2002 (US$0.4 million in 2001 and US$0.3 million in 2000).
(ii) Stock option plans
A total of 7,602,049 Subordinate Voting Shares of Quebecor World Inc. has been reserved for participants in the stock option plans. As at December 31, 2002, the number of
Subordinate Voting Shares of Quebecor World Inc. related to stock options outstanding was 3,525,376. The subscription price is equal to the share market price at the date the options
are granted. The options may be exercised during a period not exceeding ten years from the date granted.
The number of stock options outstanding has fluctuated as follows:
Balance, beginning of year
Issued
Exercised
Cancelled
Balance, end of year
2002
Weighted average
exercise price
US$
US$
20.07
22.51
16.77
22.33
20.42
Options
4,563,330
474,321
(525,069)
(987,206)
3,525,376
2001
Weighted average
exercise price
83
US$
Options
4,297,478
651,276
(385,424)
–
4,563,330
US$
19.73
22.01
12.91
–
20.07
Options exercisable, end of year
1,271,529
US$
19.54
2,444,969
US$
19.05
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except earnings per share data)
22. SHARE PURCHASE PLANS (continued)
(b) Quebecor World Inc.’s plans (continued)
The following table summarizes information on stock options outstanding and exercisable at December 31, 2002:
Range of
exercise price
US$ 9 to 12
12 to 15
15 to 18
18 to 21
21 to 24
US$ 9 to 24
Outstanding options
Weighted average
Weighted average
Vested options
Weighted average
Number
years to maturity
exercise price
Number
exercise price
60,004
31,992
752,707
647,760
2,032,913
3,525,376
1.77 year
1.15 year
5.15 years
6.17 years
7.72 years
6.89 years
US$
US$
10.50
13.21
16.71
20.49
22.17
20.42
US$
60,004
31,992
326,753
249,521
603,259
1,271,529
US$
10.50
13.21
16.36
20.52
22.09
19.54
Had the exercisable options been exercised as at December 31, 2002, Quebecor Inc.’s interest in Quebecor World Inc. would have decreased from 33.24% to 32.94%.
(c) Quebecor Media Inc.’s stock option plan
Under a stock option plan initiated by Quebecor Media Inc., 433,000,000 common shares of Quebecor Media Inc. were set aside for officers, senior employees and other key employees
of Quebecor Media Inc. and its subsidiaries. Each option may be exercised within a maximum period of ten years following the date of grant at an exercise price not lower than, as the
case may be, the fair market value, at the date of grant, of the Common Shares of Quebecor Media Inc., as determined by the Board of Directors of Quebecor Media Inc. (if the Common
Shares of Quebecor Media Inc. are not listed on a stock exchange at the time of the grant) or the trading price of the Common Shares of Quebecor Media Inc. on the stock exchanges where
such shares are listed at the time of the grant. Unless authorized by the Compensation Committee of Quebecor Media Inc. for a change in control transaction, no options may be exercised
by an optionee if the shares of Quebecor Media Inc. have not been listed on a recognized stock exchange. At December 31, 2007, if the shares of Quebecor Media Inc. have not been so
listed, optionees will have until January 31, 2008 to exercise their right to receive the difference between the fair market value and the exercise price of the options in cash. Except under
specific circumstances and unless the Compensation Committee of Quebecor Media Inc. decides otherwise, options vest over a five-year period in accordance with one of the following
vesting schedules as determined by the Compensation Committee of Quebecor Media Inc. 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 the grant, and (iii) equally over three years with the first 33%
vesting on the third anniversary of the date of the grant. All options outstanding as of December 31, 2002, were granted to senior executive officers of Quebecor Media Inc. and its
subsidiaries during the year ended December 31, 2002. No options were vested at the end of the period. During the year ended December 31, 2002, 584,400 options, at an exercised
84
price of $0.231 were cancelled.
The following table gives summary information on outstanding options granted as at December 31, 2002:
Exercise price
$ 0.231
0.238
0.311
$ 0.234
Outstanding options
Weighted average
Number
years to maturity
143,598,300
987,400
5,096,400
149,682,100
9.27 years
9.32 years
9.23 years
9.27 years
For the year ended December 31, 2002, no charge related to the plan was included in net income, since the exercise price of the options was higher than the fair market value of Quebecor
Media Inc.’s shares, as determined by the Board of Directors of Quebecor Media Inc.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
22. SHARE PURCHASE PLANS (continued)
(d) TVA Group Inc.’s plans
(i) Executive Class B stock option plan
In October 1999, TVA Group Inc. introduced a new stock option plan for the benefit of certain designated executives of TVA Group Inc. and its subsidiaries. Under the terms of the
plan, the granting, terms and conditions of options granted are determined by TVA Group Inc.’s Corporate Governance and Human Resources Committee. However, the subscription
price of each Class B share under an option cannot be less than the closing price on the stock market the day before the option is granted. Moreover, the duration of the option cannot
exceed 10 years. A maximum of 1,400,000 shares of TVA Group Inc. will be reserved for purposes of the plan. During the year ended December 31, 2002, TVA Group Inc. did not grant
any Class B stock options (none in 2001) whose exercise depends on the performance of the Class B share price on the stock market over periods running until 2010 (“performance
options”). In addition, TVA Group Inc. granted 60,000 stock options (110,000 stock options in 2001) exercisable on the basis of 25% of the shares involved annually (“conventional
options”), as of the second anniversary of their granting date.
As at December 31, 2002, they were 347,050 conventional options and 50,000 performance options outstanding. Of these outstanding options, 219,550 conventional options and
50,000 performance options were exercisable at December 31, 2002. The weighted average exercise price of these options was $15.69 and $18.85 respectively as at December 31,
2002. Moreover, when the conditions are met, a maximum of 200,000 additional TVA Group Inc. Class B stock options will be granted on different dates until 2010 at exercise prices
set at the time of granting.
(ii) Class B stock option plan for executives and employees
In 1998, TVA Group Inc. introduced a stock option plan setting aside 750,000 TVA Group Inc. Class B shares for its executives and employees. Under the plan, 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 at no interest. During the year ended December 31, 2002, no Class B shares (none in 2001) were issued under the plan. The remaining balance that
may be granted is 562,396 TVA Group Inc. Class B shares as at December 31, 2002 and 2001.
(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. The deferred share units are redeemable (in cash or
in shares of TVA Group Inc. or in a combination of cash and shares) only on discontinuance of a participant’s job. Under this plan, the maximum number of TVA Group Inc. shares
that can be issued is 25,000. During the year ended December 31, 2002, TVA Group Inc. did not issue any units (none in 2001).
Had the exercisable options been exercised as at December 31, 2002, Quebecor Media Inc.’s interest in TVA Group Inc. would have decreased from 36.10% to 35.81%.
(e) Nurun Inc.’s stock based compensation plan
Under a stock option plan, 3,237,992 Common Shares of Nurun inc. have been set aside for senior management, senior executives and other key employees of Nurun inc. The term of each
option, the number of shares included, as well as the authorized frequency at which options may be exercised, will be determined by the Compensation Committee of the Board of Directors
of Nurun inc. These options expire no later than 10 years after their date of grant. These options can generally be exercised on a basis of 25% per year over a period of four years.
As at December 31, 2002 and 2001, there were, respectively 634,950 and 556,616 options outstanding. Of the outstanding options, 186,050 and 136,653 options were exercisable at
December 31, 2002 and 2001, respectively. The weighted average exercise price of these options was of $13.78 and $22.42, respectively as at December 31, 2002 and 2001.
Had the exercisable options been exercised as at December 31, 2002, Quebecor Media Inc.’s interest in Nurun Inc. would have decreased from 58.76% to 58.44%.
(f) Mindready Solutions Inc.’s stock-based compensation plan
Under a stock option plan approved on June 30, 2000, Mindready Solutions Inc. can grant stock options to its senior managers, senior executives, directors, other key employees and
consulting services firm. The term of each option, the number of shares included, as well as the authorized frequency at which options may be exercised, will be determined by the
Compensation Committee of the Board of Directors of Mindready Solutions Inc. According to the terms of the plan, a total of 1,000,000 Subordinated Shares can be granted.
These options expire no later than 10 years after their date of grant. These options can generally be exercised on a basis of 25% per year over a period of four years. All these options are
non-seizable.
As at December 31, 2002 and 2001, there were respectively, 316,341 and 624,650 options outstanding. Of the outstanding options, 120,739 and 90,992 options were exercisable at
December 31, 2002 and 2001 respectively. The weighted average exercise price of these options was $8.12 and $8.73 respectively, as at December 31, 2002 and 2001.
Had the exercisable options been exercised as at December 31, 2002, Nurun’s interest in Mindready Solutions Inc. would have decreased from 66.67% to 66.01%.
85
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
22. SHARE PURCHASE PLANS (continued)
(g) Netgraphe Inc.’s stock option plan
Netgraphe Inc.’s stock option plan was created for the benefit of Netgraphe Inc. directors, managers, employees and persons or companies hired to provide ongoing management or
consulting services to Netgraphe Inc. and its subsidiaries. According to this plan, Netgraphe Inc. can grant stock options for up to 9,193,267 Netgraphe Inc. Subordinated Voting Shares.
The purchase price of shares acquired through options granted under the plan cannot be less than the highest closing price of Netgraphe’s shares the day prior to the grant date on any
stock exchange where Netgraphe Inc. shares are traded. The options cannot be exercised more than six years after the grant date. Options can be exercised within a range of 10% to 40%
per year. The Board of Directors of Netgraphe Inc. may, at its discretion, determine other exercise terms and conditions at the time of granting the options.
The Board of Directors of Netgraphe Inc. may, at its sole discretion, determine the number of options granted to each holder. However, a holder may not have options for more than 5% of
Netgraphe Inc.’s issued shares. Moreover, the maximum number of shares that can be issued under the plan to Netgraphe Inc.’s insiders within a one-year period is 10% of Netgraphe Inc.’s
issued shares.
As at December 31, 2002 and 2001, there were respectively, 278,109 and 682,829 options outstanding. Of the outstanding options, 200,939 and 311,914 options were exercisable as
at December 31, 2002 and 2001, respectively. The weighted average exercise price of these options was of $9.90 and $5.49, respectively, as at December 31, 2002 and 2001.
Had the exercisable options been exercised as at December 31, 2002, Quebecor Media Inc.’s interest in Netgraphe Inc. would have decreased from 75.18% to 75.11%.
(h) Pro forma net income
Had compensation costs for stock option plans been determined based on the fair value at the grant date for 2002 awards under the terms of all plans, the Company’s net income would
had been adjusted to the pro forma amounts indicated below for the year ended December 31, 2002.
Pro forma net income
Pro forma earnings per share
Basic
Diluted
86
The pro forma disclosure omits the effect of awards granted before January 1, 2002.
23. TRANSLATION ADJUSTMENT
Balance at beginning of year
Effect of exchange rate variation on translation of net assets of self-sustaining foreign operations
Portion included in income as a result of reductions in net investments in self-sustaining foreign operations
Balance at end of year
2002
91.5
1.42
1.38
2002
62.0
2.2
(7.8)
56.4
$
$
$
$
$
2001
15.8
48.0
(1.8)
62.0
$
$
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
24. COMMITMENTS AND CONTINGENCIES
(a) Leases
The Company rents premises and equipment under operating leases which expire at various dates up to 2027 and for which minimum lease payments totaled $934.2 million. Minimum
payments under these leases for the next years are as follows:
2003
2004
2005
2006
2007
2008 and thereafter
$
195.2
161.0
139.3
115.1
89.5
234.1
Operating leases rentals amounted to $235.1 million, $175.7 million and $189.7 million for the years ended December 31, 2002, 2001 and 2000, respectively.
(b) Long-term agreement
Newsprint represents a significant input and component of operating costs for the Newspapers segment. The Company uses several newsprint manufacturers to supply its requirements,
and has entered into a long-term agreement with one company to supply the majority of its newsprint purchases up to December 2005. The Company’s annual minimum purchase
requirement under the agreement is approximately 125,400 tonnes of newsprint.
(c) Other commitments
The Broadcasting segment made a commitment to invest $48.9 million over an eight-year period in the Canadian TV industry and in the Canadian communications industry to promote TV
content and the development of communications. As at December 31, 2002, the balance to be invested amounted to $45.6 million.
(d) Equipment
As at December 31, 2002, Quebecor World Inc. had commitments to purchase equipment valued at approximately US$11.9 million representing the Canadian equivalent of $18.7 million.
(e) Environment
The Company is subject to various laws, regulations and government policies, principally in North America and Europe, relating to health and safety, to the production, storage,
transportation, disposal and environment emissions of various substances, and to the protection of the environment in general. The Company believes it is in compliance with such laws,
regulations and government policies, in all material respects. Furthermore, the Company does not anticipate that compliance with such environmental statutes will have a material adverse
87
effect upon its competitive or consolidated financial position.
(f) Business acquisitions
In September 2002, TVA Group Inc.’s, Broadcasting segment, and one of its partners signed a 60%/40% agreement to purchase, subject to CRTC approval, some radio broadcasting
stations from Astral Media Inc. The transaction, which amounts to $12.8 million, is subject to the approval of the CRTC.
Also, in September 2002, Quebecor World Inc.’s Printing segment signed a binding agreement to purchase, in September 2004, the remaining 50% of Hélio Charleroi of Belgium, a
subsidiary of European Graphic Group S.A. The transaction should amount to 24.9 million euro, adjusted by a contingent consideration based on achieving a specific performance level
over the period ending September 2004.
(g) Contingencies
On March 13, 2002, legal action proceeding were initiated by Investissement Novacap inc., Telus Québec inc. and Paul Girard against Vidéotron ltée. The suit contends that Vidéotron ltée
did not respect its commitment related to a stock purchase agreement signed in August 2000. The plaintiffs are requesting compensation totaling $26.0 million. Vidéotron ltée management
claims the suit is not justified and intends to defend its case before the Court.
A number of legal proceedings against subsidiaries of the Company are still outstanding. In the opinion of the management of the Company and its subsidiaries, the outcome of these
proceeding will not have a materially adverse effect on the Company’s results or its financial position.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
25. FINANCIAL INSTRUMENTS
The Company has operations in, and exports its products to several countries and is therefore exposed to risks related to foreign exchange fluctuation and also subject to risks related to
interest rate fluctuations. To reduce these risks, Quebecor Inc. and its subsidiaries make a portion of their borrowings in foreign currencies and use derivative financial instruments. None of
these instruments are held or issued for speculative purposes.
(a) Description of derivative financial instruments
(i) Management of foreign exchange risk
Quebecor World Inc. and its subsidiaries
Foreign exchange forward contracts:
Currencies (sold/bought)
Average rate
US$ / $
Less than 1 year
Between 1 and 3 years
Between 3 and 5 years
Euro / US$
Less than 1 year
SEK / US$
Less than 1 year
GBP / Euro
Less than 1 year
Other
Less than 1 year
Cross-currency interest rate swaps:
88
0.6528
0.6269
0.6213
1.0056
8.9200
0.6370
–
2002
Notional
amount 1
$
182.4
222.7
391.3
48.0
20.2
10.0
50.0
2001
Notional
amount 1
$
197.3
183.8
–
37.1
31.2
21.1
63.3
Average rate
0.6981
0.6526
–
0.9155
10.5615
0.6238
–
Currencies (sold/bought)
Average rate
2002
Notional
amount 1
Average rate
2001
Notional
amount 1
Euro / US$
Less than 1 year
Between 1 and 3 years
SEK / US$
Less than 1 year
Between 1 and 2 years
1.0760
1.0961
$
110.6
188.0
1.1151
1.1144
$
81.3
129.9
10.5600
9.2400
22.3
25.4
9.8450
10.5600
24.2
22.6
1 Exchange rates as at December 31, 2002 and 2001 were used to translate amounts in foreign currencies.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
25. FINANCIAL INSTRUMENTS (continued)
(a) Description of derivative financial instruments (continued)
(i) Management of foreign exchange risk (continued)
Quebecor Media Inc. and its subsidiaries
Quebecor Media Inc. and its subsidiaries have concluded currency swaps to hedge the foreign exchange fluctuations related to various long-term debts denominated in foreign
currencies. The currency swaps represent an exchange obligation of amounts of capital and interest that have the effect of modifying these debts as follows:
Annual effective
Annual nominal
Exchange rate
of interest and
capital payments
per CDN dollar
interest rate
interest rate
for one US dollar
Notional
amount
US$
US$
715.0
295.0
12.3 %
14.6 %
11.9 %
14.6 %
US$
231.4
Banker's
acceptance
3 months plus
3.11%
Banker's
acceptance
3 months plus
3.11%
1.5255
1.5822 1
1.5389
US$
US$
118.5
32.5
9.51 %
Banker's
acceptance
plus 2.94%
9.50 %
9.50 %
1.3622
1.3622
89
Quebecor Media Inc.
Senior Notes
Senior Discounted Notes
Vidéotron ltée and its subsidiaries
Term Credit B
Sun Media Corporation and its subsidiaries
Subordinated Notes
Subordinated Notes
1 As per the agreement, the exchange rate includes an exchange fee.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
25. FINANCIAL INSTRUMENTS (continued)
(a) Description of derivative financial instruments (continued)
(ii) Management of interest rate risk
The Company’s subsidiaries have entered into interest rate swaps to manage their interest rate exposure. They are committed to exchange, at specific intervals, the difference between
the fixed and floating interest rates calculated by reference to the notional amounts.
The amounts of outstanding contracts at year-end, by subsidiary and by currency, are shown in the table below:
Maturity
Notional amount
Pay/receive
Fixed rate
Floating rate
Quebecor World Inc. and its subsidiaries
Less than 1 year
US$
550.0
Pay fixed/
1.67 to 5.30 %
Between 1 and 4 years
US$
33.0
receive floating
Pay fixed/
receive floating
LIBOR 1 month/
LIBOR 3 months
7.20 %
LIBOR 3 months
plus 1.36 %
Quebecor Media Inc.
February 2003
Vidéotron ltée and its subsidiaries
March 2005
90
May 2004
May 2006
$
$
$
$
100.0
Pay fixed/
receive floating
2.65 %
Banker’s acceptance
3 months
135.0
Pay fixed/
4.01 to 5.05 %
Banker’s acceptance
90.0
90.0
receive floating
Pay fixed/
receive floating
Pay fixed/
receive floating
3 months
5.49 %
Banker’s acceptance
3 months
5.41 %
Banker’s acceptance
3 months
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
25. FINANCIAL INSTRUMENTS (continued)
(b) Fair value of financial instruments
The carrying amount of cash and cash equivalents, accounts receivable and accounts payable and accrued charges approximate their fair values as these items will be realized or paid
within one year.
Financial instruments with a fair value different than their carrying amount as at December 31, 2002 and 2001 are as follows:
Quebecor Inc.
Long-term debt 1
Exchangeable debentures
Quebecor World Inc. and its subsidiaries
Long-term debt 1
Convertible notes 1
Interest rate swap agreements
Foreign forward exchange contracts
Cross-currency interest rate swap agreements
Commodity swaps
Quebecor Inc.
Long-term debt 1
Cross-currency interest rate swap agreements
Interest rate swap agreements
Vidéotron ltée and its subsidiaries
Long-term debt 1
Cross-currency swap agreement
Interest rate swap agreement
Sun Media Corporation and its subsidiaries
Long-term debt 1
Interest rate swap agreements
Interest rate cap agreements
Cross-currency interest rate swap agreement
1 Including current portion
Carrying value
Fair value
Carrying value
2002
2001
Fair value
$
(139.4)
(979.9)
$
(139.4)
(979.8)
$
(221.3)
(979.9)
$
(221.3)
(950.5)
(2,679.3)
(180.5)
–
–
–
–
(1,820.1)
39.0
–
(1,119.6)
8.9
–
(515.1)
–
–
–
(2,921.6)
(194.3)
(12.9)
(14.0)
(46.6)
–
(1,706.8)
103.4
0.1
(1,121.7)
8.3
(13.4)
(543.4)
–
–
55.4
(3,210.5)
(180.2)
–
–
–
–
(1,798.1)
55.0
–
(1,287.6)
15.3
–
(554.5)
–
0.2
–
(3,297.9)
(190.0)
(18.6)
(27.8)
4.8
(2.7)
(1,915.6)
(20.6)
–
(1,291.5)
11.2
(13.2)
(582.8)
(1.2)
–
43.4
91
The fair values of the financial liabilities are estimated based on discounted cash flows using year-end market yields or market value of similar instruments having the same maturity.
The fair values of the derivative financial instruments are estimated using year-end market rates, and reflect the amount the Company would receive or pay if the instruments were closed
out at those dates.
(c) Commodity risk management
Quebecor World Inc.’s, Printing segment, has entered into a commodity swap to manage a portion of its Canadian natural gas exposure. Quebecor World Inc. is committed to exchange,
on a monthly basis, the difference between a fixed price and a floating Canadian natural gas price index on a notional quantity of 323,000 gigajoules in total for 2003.
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
25. FINANCIAL INSTRUMENTS (continued)
(d) 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 financial instruments, the counterparties are international and Canadian banks with a minimum credit rating of A- by Standard & Poor’s or of
A3 by Moody’s and are subject to concentration limits. The Company does not foresee any failure by counterparties in meeting their obligations.
The Company, in the normal course of business, continuously monitors the financial condition of its customers and reviews the credit history of each new customer. As at December 31,
2002, no customer balance represents a significant portion of the Company’s consolidated trade receivables. The Company establishes an allowance for doubtful accounts that
corresponds to the specific credit risk of its customers, historical trends and other information on the state of the economy.
The Company believes that the product and geographic diversity of its customer base is instrumental in reducing its credit risk, as well as the impact on the Company of fluctuations in
local market or product-line demand. The Company has long-term contracts with most of its largest customers. These contracts usually include price adjustment clauses based on the
cost of paper, ink and labor. The Company does not believe that it is exposed to an unusual level of customer credit risk.
26. RELATED PARTY TRANSACTIONS
During the course of 2000, the Company purchased raw materials from Donohue Inc. up to the date of control over Donohue Inc. ceased. The purchases amounted to $29.5 million. Those
transactions were concluded at prices and conditions similar to those prevailing on the open market and recorded at the exchanged amount.
27. PENSION PLANS AND POSTRETIREMENT BENEFITS
The Company maintains defined benefit pension plans for its employees. The Company’s policy is to maintain its contribution at a level sufficient to cover benefits. Actuarial valuations of the
Company’s various pension plans were performed in the last 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 employees’ active service period.
The following tables give a reconciliation of the changes in the plans’ benefit obligations and fair value of plan assets for the years ended December 31, 2002 and 2001, and a statement of
the funded status as at those dates, except for the Printing segment for which the measurement dates were September 30, 2002 and 2001:
92
Change in benefit obligations
Benefit obligations at beginning of year
Change in measurement date
Service costs
Interest costs
Plan participants’ contributions
Plan amendments
Acquisition (disposals)
Curtailment loss (gain)
Settlement loss
Actuarial loss
Change in assumptions
Benefits and settlements paid
Transfer to another plan
Foreign currency changes
Others
Pension benefits
Postretirement benefits
2002
2001
2002
2001
$
1,509.2
$
1,118.6
$
142.6
$
116.9
–
58.7
106.2
12.7
17.8
2.5
0.1
–
53.3
(6.5)
(115.5)
–
(5.1)
(1.4)
(40.9)
46.3
92.8
11.0
14.1
149.3
1.6
–
114.2
8.2
(79.8)
(1.4)
75.2
–
–
2.6
9.7
3.4
(1.0)
–
–
–
30.0
1.0
(15.2)
–
(1.4)
–
1.7
2.6
9.7
3.1
2.6
3.2
(4.2 )
–
13.4
0.4
(13.3 )
–
6.5
–
Benefit obligations at end of year
$
1,632.0
$
1,509.2
$
171.7
$
142.6
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
27. PENSION PLANS AND POSTRETIREMENT BENEFITS (continued)
Pension benefits
Postretirement benefits
2002
2001
2002
2001
Changes in plan assets
Fair value of plan assets at beginning of year
$
1,104.6
$
1,032.2
$
Change in measurement date
Actual return on plan assets
Employer contributions
Plan participants’ contributions
Curtailment loss
Acquisition
Benefits and settlements paid
Foreign currency changes
Fair value of plan assets at end of year
$
–
(94.8)
49.0
12.7
1.1
–
(115.5)
(3.4)
953.7
73.9
(185.8)
34.0
11.0
–
154.4
(79.8)
64.7
$
1,104.6
$
–
–
–
11.6
3.6
–
–
(15.2)
–
–
$
$
–
–
–
10.2
3.1
–
–
(13.3 )
–
–
Pension benefits
Postretirement benefits
2002
2001
2002
2001
Reconciliation of funded status
Excess of benefit obligations over fair value of plan assets at end of year
$
Unrecognized actuarial loss (gain)
Unrecognized net transition (asset) obligation
Unrecognized prior service cost
Adjustment for fourth quarter contributions
Valuation allowance
Foreign currency changes
Net amount recognized
$
(678.3)
551.8
(8.0)
35.3
–
12.3
–
$
(86.9)
$
(404.6)
310.3
(16.2)
21.4
6.5
(11.5)
8.4
(85.7)
$
(171.7)
$
(142.6)
42.7
–
(3.1)
–
2.7
–
93
12.1
0.9
(2.6 )
2.2
–
0.4
$
(129.4)
$
(129.6 )
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:
Benefit obligation
Fair value of plan assets
Funded status – Plan deficit
Pension benefits
Postretirement benefits
2002
2001
$
$
(1,491.3)
805.8
(685.5)
$
$
(1,228.1)
796.1
(432.0)
$
$
2002
(171.7)
–
(171.7)
2001
(142.6 )
–
(142.6 )
$
$
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
27. PENSION PLANS AND POSTRETIREMENT BENEFITS (continued)
Amounts recognized in the consolidated balance sheets are as follows:
Accrued benefit liability
Prepaid benefit costs
Net amount recognized
Components of the net periodic benefit costs are as follows:
2002
2001
Service costs
Interest costs
Expected return on plan assets
Amortization of prior service costs
Amortization of transitional obligations
Curtailment loss (gain)
Valuation allowance
Amortization of actuarial loss (gain)
$
$
58.7
106.2
(106.0)
3.8
(0.9)
–
0.2
3.9
Net periodic costs
$
65.9
$
94
46.3
92.8
(110.0)
1.1
(1.1)
1.8
–
(2.1)
28.8
Pension benefits
Postretirement benefits
2002
2001
2002
2001
$
$
$
$
$
(146.1)
59.2
(86.9)
Pension benefits
$
2000
36.5
79.3
(92.8)
0.3
(0.7)
–
(3.5)
(2.8)
$
16.3
$
(134.0)
48.3
(85.7)
2002
2.6
9.7
–
(1.2)
–
–
–
0.3
11.4
$
$
$
$
(129.4)
–
(129.4)
$
$
(129.6)
–
(129.6)
Postretirement benefits
2001
2000
2.6
9.7
–
(1.7)
–
(1.1)
–
–
9.5
$
2.5
8.9
–
–
–
(0.7)
–
–
$
10.7
The expense related to defined contribution pension plans amounts to $5.3 million in 2002 ($5.3 million in 2001 and $2.3 million in 2000).
The weighted average rates used in the measurement of the Company’s benefit obligations are as follows:
2002
2001
2000
2002
2001
2000
Pension benefits
Postretirement benefits
Discount rate
Expected return on plan assets
Rate of compensation increase
6.7 %
8.1
3.4
7.0 %
9.3
3.4
7.7 %
9.7
3.7
6.8 %
–
7.1 %
–
7.7 %
–
0 to 3.3
0 to 4.0
0 to 4.5
Q U E B E C O R I N C .
>> N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S | c o n t i n u e d
Years ended December 31, 2002, 2001 and 2000
(in millions of Canadian dollars, except per share data)
27. PENSION PLANS AND POSTRETIREMENT BENEFITS (continued)
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligations was 8.8% at the end of 2002. The cost, as per an estimate, is expected to
decrease gradually for the next 8 years to 5.8% and remain at that level thereafter. A one-percentage point change in the assumed health care cost trend would have the following effects:
Sensitivity analysis
Effect on service and interest costs
Effect on benefit obligation
28. SUBSEQUENT EVENTS
(a) Reimbursement of Quebecor Media Inc.’s credit facility
Postretirements benefits
1 % increase
1 % decrease
$
4.5
10.9
$
(3.5)
(9.2)
Immediately after year end, using part of the cash and cash equivalents held in trust by the Company, Quebecor Media Inc. reimbursed a $216.1 million portion of its credit facility maturing
in April 2003 (see note 15(xiii)).
(b) Refinancing of Sun Media Corporation
On February 7, 2003, Sun Media Corporation completed the private placement of Senior Notes amounting to US$205.0 million and the conclusion of new bank credit facilities amounting
to US$ 230.0 million and $75.0 million.
The Senior Notes have been issued at a discount rate of 98.3% for net proceeds of US$201.5 million, excluding issuance fees of US$4.1 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 are not secured.
The new bank credit facility is composed of a renewable credit facility amounting to $75.0 million maturing in 2008 and a term-loan credit amounting to US$230.0 million maturing in
2009. The renewable credit facility bears interest at a rate based on Sun Media Corporation level of indebtedness. The term-loan credit bears interest at LIBOR plus 2.50%. The credit
facility requires Sun Media Corporation to make mandatory annual repayments representing 1% of the borrowed sums. The credit facility is secured by a first ranking hypothec on the
universality of all tangible and intangible assets, current and future, of Sun Media Corporation and its subsidiaries. The credit facility contains certain covenants such as maintaining
certain financial ratios. Also, Sun Media Corporation will be limited with regard to amounts for the acquisition of fixed assets, investments, dividends and other payments to shareholders.
Net proceeds from the Senior Notes and the new credit facility will be used in order to reimburse, in its entirety, the Senior Bank Credit Facility of Sun Media Corporation within the credit
facility in place at December 31, 2002, as described in note 15(xviii), to reimburse the two series of Senior Subordinated Notes in place at December 31, 2002, as described in note 15(xix)
and to pay a dividend of $260.0 million to Quebecor Media Inc. Of this dividend, $150.0 million will be used to reduce the long-term debt of Vidéotron ltée.
95
Q U E B E C O R I N C .
>> L I S T O F D I R E C T O R S A N D O F F I C E R S O F Q U E B E C O R I N C . *
Board of Directors
Officers
Jean Neveu
Chairman of the Board
Érik Péladeau
Vice Chairman of the Board
Pierre Karl Péladeau
President and Chief Executive Officer
Jacques Mallette
Executive Vice President and
Chief Financial Officer
Luc Lavoie
Executive Vice President, Corporate Affairs
Mark D’Souza
Vice President and Treasurer
Louis Saint-Arnaud
Vice President, Legal Affairs and Secretary
Julie Tremblay
Vice President, Human Resources
Denis Sabourin
Senior Manager, Control
Claudine Tremblay
Manager, Corporate Services and
Assistant Corporate Secretary
Alain Bouchard (1) (2)
Chairman of the Board,
President and Chief Executive Officer,
Alimentation Couche-Tard Inc.
Charles G. Cavell
Deputy Chairman of the Board,
Quebecor World Inc.
Robert Dutton (2)
President and Chief Executive Officer,
RONA Inc.
Pierre Laurin (1)
Executive in Residence,
HEC Montréal
Raymond Lemay (1) (2)
Corporate Director
The Right Honourable Brian Mulroney, P.C., C.C., LL.D
Senior Partner,
Ogilvy Renault and
Chairman of the Board,
Quebecor World Inc.
96
Jean Neveu
Chairman of the Board,
Quebecor Inc. and TVA Group Inc. and
President and Chief Executive Officer (interim),
Quebecor World Inc.
Érik Péladeau
Vice Chairman of the Board,
Quebecor Inc. and Quebecor Media Inc. and
Vice Chairman of the Board and
Senior Executive Vice President,
Quebecor World Inc.
Pierre Karl Péladeau
President and Chief Executive Officer,
Quebecor Inc. and Quebecor Media Inc. and
Chairman of the Board, Nurun Inc.
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
* As of March 31, 2003
Q U E B E C O R I N C .
A N N UA L R E P O R T
2 0 0 2
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E
P
O
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T
2
0
0
2
Q
U
E
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.