A Transformation Accomplished

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A Transformation Accomplished A TRANSFORMATION ACCOMPLISHED 2004 ANNUAL REPORT TABLE OF CONTENTS 2004 ANNUAL REPORT • QUEBECOR INC. 2004 in Brief 2 Highlights 4 Message to Shareholders 5 Working Hand in Glove 8 Vidéotron 10 Sun Media Corporation 12 TVA Group 14 Archambault Group 16 Books Segment 17 Canoe 18 Nurun 20 Le SuperClub Vidéotron 21 Quebecor World 22 Financial Section 24 List of Directors and Officers of Quebecor Inc. 118 General Information 120 QUEBECOR INC. 1 2004 IN BRIEF A productive year in all our lines of business January ■ Quebecor World signs multiyear contract with ALLTEL Publishing to print more than 145 directories in 37 U.S. states March May ■ Quebecor Media ■ Quebecor World’s ■ Vidéotron announces offers to buy all shares multiyear contract with $40.0 million investment of Netgraphe Valley Yellow Pages to in its broadband ■ archambaultZIK.ca, print 46 directories network and Internet ■ Le SuperClub Canada’s first French- is renewed service infrastructure Vidéotron acquires language music Jumbo Entertainment, download site with ■ Vidéotron becomes ■ TVA Network a cross-Canada chain per-track fees, the first major cable dominates Québec of 105 video and is launched company in Québec ratings with a 36% game stores to offer high-definition share of the French- February personal video recorder speaking audience, June ■ Quebecor World (HD-PVR) more than the other ■ Vidéotron steps up expands and upgrades three general-interest roll-out of its its digital printing April networks combined WiFi service facilities in the U.S. ■ Nurun acquires (BBM – Spring 2004) Ant Farm Interactive, an interactive marketing agency based in Atlanta, U.S.A., as part of repositionning begun with the sale of Mindready Solutions 2 QUEBECOR INC. July ■ Quebecor World announces purchase of 22 new presses to upgrade its U.S. manufacturing platform ■ Videotron Telecom signs first major outsourcing contract to host and manage September Quebecor World’s ■ Quebecor World servers and reorganizes its Nordic communications gravure platform in software for Scandinavia North America ■ Netgraphe is taken private October ■ Vidéotron adds 10 digital time-shifting channels November December January 2005 ■ TVA Network has 27 of ■ Acquisition of television ■ Netgraphe changes the top 30 television station Toronto 1 closes its corporate name to programs in Québec Canoe Inc. (BBM – Fall 2004) ■ Vidéotron’s cable Internet access service ■ Vidéotron becomes ■ Groupe Archambault passes the half-million first major cable France, a new customer mark company in Canada August European producer and to offer Voice over IP ■ TVA Group and Sun distributor of cultural ■ Restructuring measures telephone service Media Corporation sign content, is launched announced by agreement to buy Quebecor World cut television station ■ Refinancing raises 2,228 positions in 2004 Toronto 1 borrowing limit on with another 290 to be Vidéotron’s revolving eliminated in 2005; credit facility by $350.0 567 new positions will million and increases be created at other its ability to make plants distributions to Quebecor Media QUEBECOR INC. 3 HIGHLIGHTS Financial years ended December 31, 2004, 2003 and 2002 (in millions of Canadian dollars, except per share data) 2004 2003 1 2002 1 Operations Revenues $ 10,982.4 $ 11,200.1 $ 12,038.6 Operating income 2 1,759.4 1,529.8 1,933.4 Contribution to net income: Continuing operations 117.7 28.8 122.6 Gain on re-measurement of exchangeable debentures 36.4 –– Unusual items and write-down of goodwill (41.3) 37.4 (35.1) Discontinued operations (0.6) 0.2 (4.3) Net income 112.2 66.4 83.2 Cash flows provided by continuing operations 1,019.6 928.6 1,114.5 Basic per share data Contribution to net income: Continuing operations $ 1.82 $ 0.44 $ 1.90 Gain on re-measurement of exchangeable debentures 0.57 –– Unusual items and write-down of goodwill (0.64) 0.58 (0.54) Discontinued operations (0.01) 0.01 (0.07) Net income 1.74 1.03 1.29 Weighted average number of shares outstanding (in millions) 64.6 64.6 64.6 Financial position Working capital $ 4,888.2 $ 5,286.4 $ 5,681.8 Shareholders’ equity 1,443.6 1,384.9 1,466.8 Total assets 14,404.5 15,180.2 17,097.5 Employees 47,000 49,000 54,000 1 The comparative figures for the years 2003 and 2002 have been reclassified to conform with the definition adopted for the year ended December 31, 2004. 2 Operating income before amortization, financial expenses, reserves for restructuring of operations, impairment of assets and other special charges, gains (losses) on sales of businesses, shares of a subsidiary and other assets, gain on re-measurement of exchangeable debentures, net (loss) gain on debt refinancing and on repurchase of redeemable preferred shares of a subsidiary and write- down of goodwill. Share Price (QBR.SV.B) Operating Income EnIn dollars dollars EnIn million millions of dollarsde dollars 2,000 1,933 60 1,794 1,702 1,759 1,530 50 1,500 1,403 1,355 1,513 40 1,061 1,000 917 30 572 500 697 389 612 20 183 10 0 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Quebecor Media Inc.Quebecor World Inc. Quebecor Inc. 4 QUEBECOR INC. MESSAGE TO SHAREHOLDERS In 2004, Quebecor reaped the fruits of several years of restructuring efforts at both of its major subsidiaries, Quebecor World and Quebecor Media. The financial picture is positive: operating income was up $229.6 million (15%) to $1.76 billion in 2004. Revenues totalled $10.98 billion. Net income surged nearly 70% to $112.2 million ($1.74 per basic share), compared with $66.4 million ($1.03 per basic share) in 2003. QUEBECOR’S TRANSFORMATION ACCOMPLISHED 2004 will go down in Quebecor’s corporate history as the year we completed the repositioning launched at the beginning of the new millennium. The Company now has two operating subsidiaries, each an industry leader. At the end of the 1990s, Quebecor Printing became the world’s largest commercial printer with the takeover of World Color Press. Quebecor World fell on hard times in 2002 and 2003, but management did what had to be done to turn the business around and set it back on the path to growth and success. In 2004, those changes started to pay off. Meanwhile, the acquisition of Groupe Vidéotron in 2000, coming on the heels of the takeover of Sun Media Corporation at the beginning of 1999, led to the creation of Quebecor Media. The subsidiary subsequently implemented a successful conver- gence strategy that yielded improved results, a healthier balance sheet, and a string of achieve- ments. Quebecor Media positions our Company firmly in the world of media, telecommunications and new technologies – the world of the future. After selling the Company’s controlling interest in Donohue and making a timely decision to pull out of the pulp and paper industry, management has therefore successfully rebalanced the Company’s assets, setting Quebecor on track to continue its growth and profitability. PIERRE KARL PÉLADEAU President and Chief Executive Officer JEAN NEVEU Chairman of the Board MESSAGE TO SHAREHOLDERS At Quebecor World, we have had to contend with consumer demand. Your Company effected this sea change obstacles thrown up by both the external environment and in a remarkably short space of time. the subsidiary’s internal structure over the last three years. These challenges galvanized the management team as at QUEBECOR MEDIA’S no time before during the previous 15 years. They forced 2004 was an our executives to make the hard decisions that needed to excellent year SUBSIDIARIES SHINE be taken to secure Quebecor World’s future survival and for Quebecor growth. It was a daunting task but the 2004 results met our Media in financial terms, with 7.1% revenue growth and expectations. a 14.0% increase in operating income. All subsidiaries contributed to the improvement, led by Vidéotron, which Our business model has proven its worth and is paying increased its operating income by 23.9% to post its best dividends. We are not afraid of the competition in the annual performance since becoming part of Quebecor markets in which we operate. We are number 1 in most of Media. Vidéotron is now tackling new markets, including our lines of business. We play to win. That has always residential telephone service. been the Quebecor credo. Sun Media Corporation held its leading position in To achieve its targets, Quebecor practises a manage- 2004, posting a strong performance in an increasingly ment style based on enterprise and team work. The competitive marketplace. Revenues and operating executives of our subsidiaries form a united team on income were both up. Stringent cost control and a which each player works to support the others. Since the constant search for new revenue streams have kept Sun success of the Quebecor family of companies is the Media one of the best managed and most profitable ultimate objective of every team member, our executives newspaper chains in Canada, year after year. work hand in glove on joint convergence and business development projects. TVA Group continued to dominate the Québec television market. In a strategically important transaction, VIDÉOTRON, it gained a foothold in the English-Canadian television market by buying television station Toronto 1, in INNOVATIVE AND EFFICIENT partnership with Sun Media Corporation. When we bought Groupe Vidéotron in 2000, the cable Archambault Group and Quebecor Media’s Books company was facing competition for the first time in segment registered continued growth. To help Québec its history. We thoroughly reviewed Vidéotron’s business artists signed with Archambault Group break into philosophy and overhauled its management systems. European markets, the subsidiary expanded its reach with Before long, it took its place into one of Canada’s most the creation of Groupe Archambault France S.A.S., a innovative and productive cable providers.
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