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TVA Group: Net Income Attributable to Shareholders for Quarter Ended September 30, 2011 in Accordance With the Many Investments in the Specialty Channels

(November 02, 2011)

MONTREAL, CANADA -- (Marketwire) -- 11/02/11 -- TVA Group Inc. (the "Corporation") (TSX:TVA.B) announces that it recorded a net income attributable to shareholders of $0.00 per share, for the third quarter of 2011, compared with $5.5 million, or $0.23 per share, in the same quarter of 2010.

The Corporation adopted International Financial Reporting Standards ("IFRS") on January 1, 2011. The Corporation's consolidated financial statements for the three-month and nine-month periods ended September 30, 2011 have therefore been prepared in accordance with IFRS and comparative data for 2010 has been restated. For more information, see "Transition to IFRS" below.

Third quarter operating highlights:

-- $10,323,000 (103.1%) decrease in the Television sector's operating income(1) compared with the same quarter of the previous year, mainly because of: -- 49.2% decrease in TVA Network's operating income due to the combined effect of a 3.3% decrease in operating revenues and an 8.5% increase in operating expenses, including a 7.5% rise in content costs; -- the operating loss of the new SUN News specialty service partly due to the free preview period; and -- start-up and operating costs of the new Mlle and TVA Sports specialty services, also during the free preview period. -- 3.1% increase in the Publishing sector's operating income, from $3,157,000 in the third quarter of 2010 to $3,254,000 in the third quarter of 2011. (1)See "Additional IFRS Measures" below.


"The Television sector's third quarter 2011 financial results were affected as expected by the three new specialty services launched since spring 2011: SUN News, Mlle and, most recently, TVA Sports. With the exception of Mlle, these services were being distributed at no charge during the free preview period and none had yet received broad carriage on all of the country's major broadcast distributors. We are aware of the short-term financial impact of the past year's launches but they are part of the Corporation's strategic investment plan and long-term positioning. We are pleased and satisfied with the TVA Sports launch on September 12, 2011 and its preliminary ratings. However, these investments coincide with a 4.2% decrease in TVA Network's advertising revenues, which is in keeping with the current market trend. On the other hand, our other specialty services continued growing: advertising revenues were up 10.9% and subscription revenues up 7.1% from the same quarter of 2010", said Pierre Dion, President and CEO of the Corporation.

"Despite lower operating revenues, the Publishing sector grew its operating income by 3.1% due to operating cost savings. In September 2011, the weekly 7 jours received a makeover, with a new look and a roster of new contributors. We also released an interactive edition of the 'pink' issue of Clin d'oeil for Android and iPad, a first for a Quebec magazine. All these initiatives are part of our action plan to more effectively position our Publishing sector in a magazine publishing landscape that is changing quickly in Quebec and around the world," noted Mr. Dion.

Cash flows provided by operating activities were $11.8 million for the quarter, compared with $3.4 million in the same quarter of 2010. The $8.4 million increase was due primarily to higher cash inflows related to accounts receivable partly because of the dispute at Canada Post during the last month of the second quarter of 2011.

Transition to IFRS

On January 1, 2011, Canadian generally accepted accounting principles ("GAAP"), as used by publicly accountable enterprises, were fully converged to IFRS. Prior to the adoption of IFRS, for all periods up to and including the year ended December 31, 2010, the Corporation's consolidated financial statements were prepared in accordance with Canadian GAAP. IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences related to recognition, measurement and disclosures.

The date of the opening balance sheet under IFRS and date of transition to IFRS is January 1, 2010. The financial data for 2010 has therefore been restated. The Corporation is also required to apply IFRS accounting policies retrospectively to determine its opening balance sheet, subject to certain exemptions. However, the Corporation is not required to restate figures for periods prior to January 1, 2010 that were previously prepared in accordance with Canadian GAAP.

Significant accounting policies under IFRS are disclosed in note 1 to the consolidated financial statements for the three-month period ended March 31, 2011. Note 14 to the condensed consolidated financial statements for the most recent quarter describes adjustments made by the Corporation in restating its previously published Canadian GAAP consolidated financial statements for the three-month and nine-month periods ended September 30, 2010. The changes in critical accounting policies under IFRS and their impact on estimates are explained under "Changes in Critical Accounting Policies and Estimates" in the Corporation's interim Management's Discussion and Analysis.

Additional IFRS Measures

In its analysis of operating results, the Corporation uses operating income, as presented in its consolidated statement of income, to assess its financial performance. This measure is used by management and the Board of Directors to evaluate the Corporation's consolidated results and the results of its business sectors. This measure is unaffected by the capital structure or investment activities of the Corporation and its sectors. Operating income is also relevant because it is a significant component of the Corporation's annual incentive compensation programs. Operating income is defined as an additional IFRS measure.

Previously, under Canadian GAAP, operating income was classified as a non-GAAP measure. The Corporation defined operating income as net income under Canadian GAAP before amortization of property, plant and equipment and intangible assets, financial expenses, restructuring costs of operations, impairment of assets and other, income taxes, share of income of associated corporation and net loss attributable to non-controlling interest.

The Corporation's definition of operating income may not be the same as similarly titled measures reported by other companies.

The Corporation

TVA Group Inc., a subsidiary of Quebecor Media Inc., is an integrated communications company involved in the creation, production, broadcast and distribution of audiovisual products, and in magazine publishing. TVA Group Inc. is the largest broadcaster of French-language entertainment, information and public affairs programming and publisher of French-language magazines in North America, and one of the largest private-sector producers of French-language content in North America. The Corporation also operates SUN News, a Canada-wide English-language news and opinion specialty service. The Corporation's Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B.

The unaudited consolidated financial statements for the three-month and nine-month periods ending September 30, 2011, with notes, and the interim Management's Discussion and Analysis, can be consulted on TVA Group Inc.'s website at www.tva.canoe.ca.

Forward-looking Information Disclaimer

The statements in this news release that are not historical facts may be forward-looking statements and are subject to important known and unknown risks, uncertainties and assumptions which could cause the Corporation's actual results for future periods to differ materially from those set forth in the forward-looking statements. Forward-looking statements generally can be identified by the use of the conditional, the use of forward-looking terminology such as "propose," "will," "expect," "may," "anticipate," "intend," "estimate," "plan," "foresee," "believe" or the negative of these terms or variations of them or similar terminology. Certain factors that may cause actual results to differ from current expectations include seasonality, operational risks (including pricing actions by competitors), programming content and production costs risks, credit risk, government regulation risks, governmental assistance risks, changes in economic conditions, fragmentation of the media landscape and labour relations risks. Investors and others are cautioned that the foregoing list of factors that may affect future results is not exhaustive and that undue reliance should not be placed on any forward-looking statements. For more information on the risks, uncertainties and assumptions that could cause the Corporation's actual results to differ from current expectations, please refer to the Corporation's public filings available at www.sedar.com and www.tva.canoe.ca including, in particular, the "Risks and Uncertainties" section of the Corporation's Management's Discussion and Analysis for the year ended December 31, 2010.

The forward-looking statements in this news release reflect the Corporation's expectations as of November 2, 2011, and are subject to change after this date. The Corporation expressly disclaims any obligation or intention to update or revise any forward- looking statements, whether as a result of new information, future events or otherwise, unless required by the applicable securities laws.

TVA GROUP INC. Consolidated Statements of Income (unaudited) (in thousand of dollars, except per share amounts) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three-month periods Nine-month periods ended Serptember 30 ended September 30 ---------------------------------------------------------------------------- Note 2011 2010 2011 2010 ---------------------------------------------------------------------------- Revenues 3 $89,214 $94,277 $313,859 $314,805 Operating, selling and administrative expenses 4 86,271 81,108 283,992 269,060 ---------------------------------------------------------------------------- Operating income 5 2,943 13,169 29,867 45,745 Amortization of property, plant and equipment and intangible assets 4,280 3,740 12,528 10,914 Financial expenses 6 1,469 1,460 4,377 4,202 Restructuring costs of operations, impairment of assets and other 7 312 2,654 633 8,346 ---------------------------------------------------------------------------- (Loss) income before income taxes and share of income of associated corporation (3,118) 5,315 12,329 22,283 (Recovery) income taxes 8 (448) 74 5,349 5,260 Share of loss (income) of associated corporation 186 (85) (285) (710) ---------------------------------------------------------------------------- Net (loss) income $(2,856) $5,326 $7,265 $17,733 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net income (loss) attributable to: Shareholders $8 $5,530 $14,135 $17,937 Non-controlling interest (2,864) (204) (6,870) (204) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Basic and diluted earnings per share attributable to shareholders 9 (d) $- $0.23 $0.59 $0.75 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. TVA GROUP INC. Consolidated Statements of Comprehensive Income (unaudited) (in thousands of dollars) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three-month periods Nine-month periods ended September 30 ended September 30 ---------------------------------------------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Net (loss) income $(2,856) $5,326 $7,265 $17,733 Other comprehensive loss: Defined benefit plans: Net change in asset limit or in minimum funding liability (141) (1,239) (423) (3,718) Deferred income taxes 38 333 114 1,000 ---------------------------------------------------------------------------- (103) (906) (309) (2,718) ---------------------------------------------------------------------------- Comprehensive income $(2,959) $4,420 $6,956 $15,015 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Comprehensive (loss) income attributable to: Shareholders $(95) $4,624 $13,826 $15,219 Non-controlling interest (2,864) (204) (6,870) (204) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. TVA GROUP INC. Consolidated Statements of Changes in Equity (unaudited) (in thousands of dollars) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Equity attributable to shareholders ------------------------------------ Accumu- lated other Equity compre- attri- hensive butable loss - to non- Capital Contri- Defined control- stock buted Retained benefit ling Total (note 8) surplus earnings plans interest equity ---------------------------------------------------------------------------- Balance as of December 31, 2009 as reported under Canadian GAAP $98,647 $4,145 $134,303 $- $- $237,095 IFRS adjustments (note 14) - (4,145) 11,182 - - 7,037 ---------------------------------------------------------------------------- Balance as of January 1, 2010 under IFRS 98,647 - 145,485 - - 244,132 Net income (loss) - - 17,937 - (204) 17,733 Other comprehensive loss - - - (2,718) - (2,718) Dividends - - (3,566) - - (3,566) Contributions related to non-controlling interest (note 11) - - - - 245 245 ---------------------------------------------------------------------------- Balance as of September 30, 2010 98,647 - 159,856 (2,718) 41 255,826 Net income (loss) - - 19,305 - (449) 18,856 Related party transactions - - (2,000) - - (2,000) Other comprehensive loss - - - (2,471) - (2,471) Dividends - - (1,188) - - (1,188) Contributions related to non-controlling interest (note 11) - - - - 4,919 4,919 ---------------------------------------------------------------------------- Balance as of December 31, 2010 98,647 - 175,973 (5,189) 4,511 273,942 Net income (loss) - - 14,135 - (6,870) 7,265 Other comprehensive loss - - - (309) - (309) Dividends - - (2,377) - - (2,377) Contributions related to non-controlling interest (note 11) - - - - 7,840 7,840 ---------------------------------------------------------------------------- Balance as of September 30, 2011 $98,647 $- $187,731 $(5,498) $5,481 $286,361 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. TVA GROUP INC. Consolidated Balance Sheets (unaudited) (in thousands of dollars) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- September 30, December 31, Note 2011 2010 ---------------------------------------------------------------------------- Assets Current assets Cash $4,614 $5,605 Accounts receivable 105,364 126,057 Current income tax assets 5,211 7,104 Programs, broadcast and distribution rights and inventories 68,934 60,122 Prepaid expenses 2,327 2,240 ---------------------------------------------------------------------------- 186,450 201,128 Non-current assets Broadcast and distribution rights 36,240 34,058 Investments 12,576 12,527 Property, plant and equipment 97,170 86,208 Licences and other intangible assets 112,888 112,475 Goodwill 71,981 71,981 Deferred income taxes 1,141 694 ---------------------------------------------------------------------------- 331,996 317,943 ---------------------------------------------------------------------------- Total assets $518,446 $519,071 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Liabilities and equity Current liabilities Bank overdraft $3,535 $3,557 Accounts payable and accrued liabilities 81,754 81,231 Current income tax liabilities 320 171 Broadcast and distribution rights payable 18,302 25,879 Provisions 1,326 2,001 Deferred revenues 6,678 7,122 ---------------------------------------------------------------------------- 111,915 119,961 Non-current liabilities Long-term debt 87,307 90,338 Other liabilities 20,080 25,069 Deferred income taxes 8 12,783 9,761 ---------------------------------------------------------------------------- 120,170 125,168 Equity Capital stock 9 98,647 98,647 Retained earnings 187,731 175,973 Accumulated other comprehensive loss (5,498) (5,189) ---------------------------------------------------------------------------- Equity attributable to shareholders 280,880 269,431 Non-controlling interest 5,481 4,511 ---------------------------------------------------------------------------- 286,361 273,942 ---------------------------------------------------------------------------- Total liabilities and equity $518,446 $519,071 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements.

On November 2, 2011, the Board of Directors approved the consolidated financial statements for the three-month and nine-month periods ended September 30, 2011 and 2010, which were presented to the Audit Committee on October 31, 2011.

TVA GROUP INC. Consolidated Statements of Cash Flows (unaudited) (in thousands of dollars) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three-month periods Nine-month periods ended September 30 ended September 30 ---------------------------------------------------------------------------- Note 2011 2010 2011 2010 ---------------------------------------------------------------------------- Cash flows related to operating activities Net (loss) income $(2,856) $5,326 $7,265 $17,733 Non-cash items: Amortization 4,370 3,832 12,797 11,191 Restructuring costs of operations, impairment of assets and other 7 253 1,998 583 7,158 Share of loss (income) of associated corporation 186 (85) (285) (710) Deferred income taxes 846 2,279 2,651 426 ---------------------------------------------------------------------------- Cash flows from current operations 2,799 13,350 23,011 35,798 Net change in non-cash items 9,017 (9,998) (917) (23,781) ---------------------------------------------------------------------------- Cash flows provided by operating activities 11,816 3,352 22,094 12,017 ---------------------------------------------------------------------------- Cash flows related to investing activities Additions to property, plant and equipment (7,034) (3,320) (22,024) (11,828) Additions to intangible assets (1,490) (1,334) (3,438) (4,111) Disposal of an item of property, plant and equipment 7 - - - 760 Net change in investments 226 226 236 226 ---------------------------------------------------------------------------- Cash flows used in investing activities (8,298) (4,428) (25,226) (14,953) ---------------------------------------------------------------------------- Cash flows related to financing activities Net change in bank overdraft 2,178 (957) (22) 987 Net change in revolving term loan (7,394) 3,927 (3,300) 5,935 Non-controlling interest 11 4,900 245 7,840 245 Dividends paid - (1,189) (2,377) (3,566) ---------------------------------------------------------------------------- Cash flows (used in) provided by financing activities (316) 2,026 2,141 3,601 ---------------------------------------------------------------------------- Net change in cash 3,202 950 (991) 665 Cash at beginning of period 1,412 1,639 5,605 1,924 ---------------------------------------------------------------------------- Cash at end of period $4,614 $2,589 $4,614 $2,589 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Non-cash transactions Net change in additions to property, plant and equipment and intangible assets financed with accounts payable and accrued liabilities $521 $484 $(1,559) $(1,444) Net change in government assistance credited to property, plant and equipment - - - 434 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Interest and income taxes reflected as operating activities Interest paid $312 $352 $3,002 $2,996 Interest received - - (20) (138) Income taxes paid 17 2,922 656 20,674 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. TVA GROUP INC. Notes to Condensed Consolidated Financial Statements Three-month and nine-month periods ended September 30, 2011 and 2010 (unaudited) (Tabular amounts are expressed in thousands of dollars, except per share and per option amounts)

TVA Group Inc. ("TVA Group" or the "Corporation") was incorporated under Part 1A of the Companies Act (Quebec) by certificate and articles of continuance dated December 17, 1981. The Corporation has been governed by the Quebec Business Corporations Act since it came into effect on February 14, 2011. TVA Group is an integrated communications company with two operating segments: Television and Publishing (note 13). The Corporation is a subsidiary of Quebecor Media Inc. ("Quebecor Media" or the "parent corporation") and the ultimate parent corporation is Quebecor Inc. ("Quebecor"). The Corporation's head office is located at 1600 De Maisonneuve Blvd. East, Montreal, Quebec, Canada.

The Corporation's businesses experience significant seasonality due, among other factors, to seasonal advertising patterns and influences on people's viewing, reading and listening habits. Because the Corporation depends on the sale of advertising for a significant portion of its revenue, operating results are also sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising expenditures. Furthermore, the Corporation is investing in the launch of new specialty services in the Television sector. During the period immediately following the launch of a new specialty service, subscription revenues are always relatively modest, while initial operating expenses may prove more substantial. Accordingly, the results of operations for interim periods should not necessarily be considered indicative of full-year results.

1. Basis of presentation

These consolidated financial statements were prepared in accordance with the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board, which replaced Canadian Generally Accepted Accounting Principles ("GAAP") as of January 1, 2011. In particular, these consolidated financial statements were prepared in accordance with IAS 34, Interim Financial Reporting, and with IFRS 1, First-time Adoption of IFRS, and accordingly, they are condensed consolidated financial statements because they do not include all disclosures required under IFRS for annual consolidated financial statements. These consolidated financial statements should be read in conjunction with the Corporation's 2010 annual consolidated financial statements and the Corporation's consolidated financial statements for the three-month period ended March 31, 2011.

Significant accounting policies applied by the Corporation under IFRS are described in note 1 to the consolidated financial statements for the three-month period ended March 31, 2011. Additional information on the transition to IFRS is also provided in note 14 below.

Comparative figures for the three-month and nine-month periods ended September 30, 2010, and the year ended December 31, 2010, have been restated to conform to the presentation adopted for the nine-month period ended September 30, 2011.

2. Future accounting developments in Canada

The Corporation has not early adopted the following new standards and adoption impacts on the consolidated financial statements have not yet been determined:

---------------------------------------------------------------------------- New standards Expected changes to existing standards ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- IFRS 9 - Financial IFRS 9 simplifies the measurement and instruments classification for financial assets by reducing the number of measurement categories and removing (Effective from periods complex rule-driven embedded derivative guidance beginning January 1, 2013 in IAS 39, Financial Instruments: Recognition and with early adoption Measurement. The new standard also provides for a permitted) fair value option in the designation of a non- derivative financial liability and its related classification and measurement. ---------------------------------------------------------------------------- IFRS 10 - Consolidated IFRS 10 replaces SIC-12, Consolidation-Special Financial Statements Purpose Entities and parts of IAS 27, Consolidated and Separate Financial Statements and provides (Effective from periods additional guidance regarding the concept of beginning January 1, 2013 control as the determining factor in whether an with early adoption entity should be included within the consolidated permitted) financial statements of the parent company. ---------------------------------------------------------------------------- IFRS 11 - Joint IFRS 11 replaces IAS 31, Interests in Joint Arrangements Ventures, with guidance that focuses on the rights and obligations of the arrangement, rather than (Effective from periods its legal form. It also withdraws the option to beginning January 1, 2013 proportionately consolidate an entity's interests with early adoption in joint ventures. The new standard requires that permitted) such interests be recognized using the equity method. ---------------------------------------------------------------------------- IFRS 12 - Disclosure of IFRS 12 is a new and comprehensive standard on Interests in Other disclosure requirements for all forms of interests Entities in other entities, including joint arrangements, associates, special purpose entities and other off (Effective from periods balance sheet vehicles. beginning January 1, 2013 with early adoption permitted) ---------------------------------------------------------------------------- IAS 19 - Post-employment Amendments to IAS 19 involve, among other changes, Benefits (including recognition of the re-measurement component in pensions) (Amended) other comprehensive income, thereby removing the accounting option previously available in IAS 19 (Effective from periods to recognize or defer changes in defined benefit beginning January 1, 2013 obligations and in the fair value of plan assets with retrospective directly in the statement of income. IAS 19 also application) introduces a net interest approach that replaces the expected return on assets and interest costs on the defined benefit obligation with a single net interest component determined by multiplying the net defined benefit liability or asset by the discount rate used to determine the defined benefit obligation. In addition, all past service costs are required to be recognized in profit or loss when the employee benefit plan is amended and no longer spread over any future service period. ----------------------------------------------------------------------------

3. Revenues

The breakdown of revenues between services rendered and product sales is as follows:

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three-month periods Nine-month periods ended September 30 ended September 30 ---------------------------------------------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Services rendered $64,331 $67,646 $237,548 $236,148 Product sales 24,883 26,631 76,311 78,657 ---------------------------------------------------------------------------- $89,214 $94,277 $313,859 $314,805 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

4. Operating, selling and administrative expenses

The main components are as follows:

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three-month periods Nine-month periods ended September 30 ended September 30 ---------------------------------------------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Employee and sales commission costs $36,512 $32,819 $110,155 $100,778 Royalties, rights and production costs 27,002 26,446 103,457 101,982 Printing and distribution 4,718 5,498 15,360 15,983 Marketing, advertising and promotion 2,617 2,780 10,640 10,331 Transmission and microwave expenses 1,758 1,064 4,330 3,188 Other 13,664 12,501 40,050 36,798 ---------------------------------------------------------------------------- $86,271 $81,108 $283,992 $269,060 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

5. Operating income

In its analysis of operating results, the Corporation uses operating income, as presented in its consolidated statement of income, to assess its financial performance. The Corporation's management and Board of Directors use this measure in evaluating the Corporation's consolidated results as well as the results of its business segments. As such, this measure is unaffected by the capital structure or investment activities of the Corporation and its segments. Operating income is also a significant component of the Corporation's annual incentive compensation programs. Operating income is referred to as an additional IFRS measure.

6. Financial expenses

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three-month periods Nine-month periods ended September 30 ended September 30 ---------------------------------------------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Interest on long-term debt $1,356 $1,353 $4,072 $4,040 Amortization of deferred financing costs 90 92 269 277 Foreign exchange loss (gain) 32 14 76 (14) Net interest (revenues) expenses (9) 1 (40) (101) ---------------------------------------------------------------------------- $1,469 $1,460 $4,377 $4,202 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

7. Restructuring costs, impairment of assets and other

During the second quarter of 2010, the Corporation and Sun Media Corporation, subsidiaries of Quebecor Media, announced the creation of a partnership (51% TVA Group and 49% Sun Media Corporation) for the purpose of setting up and launching a new news and opinion specialty service called "SUN News." The Corporation also announced its intention to terminate the operation of its conventional station "SUN TV" when the new specialty service began broadcasting. As a result of this repositioning, the Corporation recorded a $2,235,000 impairment expense for certain equipment in the second quarter of 2010 ($2,235,000 for the nine-month period ended September 30, 2010), a $1,998,000 impairment expense on broadcast rights inventories in the third quarter of 2010 ($5,428,000 for the nine-month period ended September 30, 2010), and a $225,000 provision for restructuring costs in the third quarter of 2010 ($225,000 for the nine-month period ended September 30, 2010).

During the three-month period ended September 30, 2011, due to developments in the situation noted above and new information available, the Corporation recorded an additional impairment expense on its broadcast rights inventories in the amount of $253,000 ($583,000 for the nine-month period ended September 30, 2011) and a $59,000 provision for restructuring costs ($50,000 for the nine-month period ended September 30, 2011).

In the third quarter of 2010, the Corporation also recorded a $431,000 provision for restructuring costs, including $316,000 in the Publishing sector following the elimination of several positions ($963,000 for the nine-month period ended September 30, 2010).

Finally, during the second quarter of 2010, the Corporation received $760,000 following the settlement of an insurance claim on an item of property, plant and equipment. In the first quarter of 2010, the Corporation recorded a $505,000 gain in connection with that event.

8. Income taxes

In light of the evolution of tax auditing, jurisprudence and tax legislation, the Corporation reduced its deferred tax liabilities by $372,000 in the third quarter of 2011 ($1,254,000 in the third quarter of 2010).

9. Capital stock

(a) Authorized capital stock

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

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

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

(b) Issued and outstanding capital stock

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- September 30, December 31, 2011 2010 ---------------------------------------------------------------------------- 4,320,000 class A common shares $72 $72 19,450,906 class B shares 98,575 98,575 ---------------------------------------------------------------------------- $98,647 $98,647 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

(c) Share redemption

Normal course issuer bid

On March 17, 2011, the Corporation filed a normal course issuer bid to redeem a maximum of 5% of the number of Class B shares of the Corporation at the offer date for cancellation between March 21, 2011 and March 20, 2012. The Corporation redeems its Class B shares at the market price at the time of redemption, plus brokerage fees. No Class B shares were repurchased in the first nine months of 2011.

(d) Earnings per share attributable to shareholders

The following table sets forth the computation of basic and diluted earnings per share attributable to shareholders:

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three-month periods Nine-month periods ended September 30 ended September 30 ---------------------------------------------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Net income attributable to shareholders $8 $5,530 $14,135 $17,937 ---------------------------------------------------------------------------- Weighted average number of basic and diluted shares outstanding 23,770,906 23,770,906 23,770,906 23,770,906 ---------------------------------------------------------------------------- Basic and diluted earnings per share attributable to shareholders $- $0.23 $0.59 $0.75 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

The diluted earnings per share calculation does not take into consideration the potential dilutive effect of the Corporation's stock option plan since their impact is anti-dilutive. During the three-month and nine-month periods ended September 30, 2011 and 2010, 833,610 stock options of the Corporation's plan were excluded from the diluted earnings per share calculation.

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

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Nine-month period ended September 30, 2011 ---------------------------------------------------------------------------- Class B Quebecor Media stock options stock options ---------------------------------------------------------------------------- Weighted Weighted average average exercise exercise Number price Number price ---------------------------------------------------------------------------- Balance as of December 31, 2010 833,610 $16.35 387,482 $46.33 Granted - - 21,000 50.23 Exercised - - (15,230) 43.32 ---------------------------------------------------------------------------- Balance as of September 30, 2011 833,610 $16.35 393,252 $46.66 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

Of the number of options outstanding as of September 30, 2011, 603,866 Class B stock options at an average exercise price of $16.95 and 82,131 Quebecor Media stock options at an average price of $45.56 could be exercised.

During the three-month period ended September 30, 2011, none of Quebecor Media stock options were exercised (2,820 stock options were exercised for a cash consideration of $23,000 in 2010). During the nine-month period ended September 30, 2011, 15,230 Quebecor Media stock options were exercised for a cash consideration of $108,000 (7,866 stock options for $89,000 in 2010).

During the three-month and nine-month periods ended September 30, 2011, the Corporation recorded compensation expense reversals of $573,000 and $1,314,000 respectively (compared with reversals of $19,000 and $562,000 respectively in the same periods of 2010) in relation to the Corporation's Class B stock options, as well as compensation expenses of $500,000 and $239,000 respectively (compared with expenses of $369,000 and $798,000 respectively for the same periods of 2010) in relation to the Quebecor Media stock options.

11. Related party transactions

During the third quarter of 2010, the Corporation and Sun Media Corporation, a subsidiary of Quebecor Media, established a new general partnership, SUN News. The Corporation holds a 51% interest, while Sun Media Corporation owns 49%. The results of this partnership are fully consolidated in the Corporation's results and Sun Media Corporation's interest is recorded under "Non-controlling interest" in the consolidated statement of income. During the third quarter of 2011, the partners made a total capital contribution of $10,000,000 ($500,000 in 2010), including $4,900,000 from Sun Media Corporation ($245,000 in 2010). During the nine-month period ended September 30, 2011, the partners made a total capital contribution of $16,000,000 ($500,000 in 2010), including $7,840,000 from Sun Media Corporation ($245,000 in 2010).

12. Uncertainty

In 2011, the government passed Bill 88 amending the Environment Quality Act and the Regulation respecting compensation for municipal services. The Bill changed the regulations governing business contributions to the waste recovery costs borne by Quebec municipalities. While the Bill was passed in 2011, the new fee schedules for businesses are still being discussed and are not expected to be adopted before 2012. It is possible that the expenses of the Corporation's Publishing sector will be adversely affected.

13. Segmented information

The Corporation's operations consist of the following segments:

-- The Television sector includes the operations of TVA Network, the specialty channels (including the national English-language "SUN News" service) and "SUN TV," marketing of the websites of the different televisual brands, the operations of the various television production companies including TVA Productions Inc., commercial production operations including the TVA Acces division, the home and online shopping services of the TVA Boutiques division, and the audiovisual production and distribution operations of the TVA Films division; -- The Publishing sector includes the operations of TVA Publications Inc., publisher of various French-language magazines specializing in arts, entertainment, television, fashion, decorating and other fields; marketing of the websites of the different magazine brands, and the operations of the TVA Studio division, which specializes in customized publishing, commercial printed productions and premedia services.

The intersegment items represent the elimination of normal course business transactions between the Corporation's business segments regarding revenues and expenses.

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three-month periods Nine-month periods ended September 30 ended September 30 ---------------------------------------------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Revenues Television $72,400 $76,176 $264,407 $261,767 Publishing 17,638 19,219 52,336 55,744 Intersegment items (824) (1,118) (2,884) (2,706) ---------------------------------------------------------------------------- 89,214 94,277 313,859 314,805 Operating, selling and administrative expenses Television 72,711 66,164 242,560 225,317 Publishing 14,384 16,062 44,316 46,449 Intersegment items (824) (1,118) (2,884) (2,706) ---------------------------------------------------------------------------- 86,271 81,108 283,992 269,060 Operating (loss) income Television (311) 10,012 21,847 36,450 Publishing 3,254 3,157 8,020 9,295 ---------------------------------------------------------------------------- $2,943 $13,169 $29,867 $45,745 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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