Quebecor Inc. Reports Consolidated Third Quarter 2007 Results

MONTREAL, QUEBEC--(Marketwire - Nov. 8, 2007) - Quebecor Inc. (TSX:QBR.A - News; TSX:QBR.B - News) Prtfolio Investment Co (PIC)

HIGHLIGHTS - Quebecor Inc.'s operating income increases by $30.7 million (8.7%) in the third quarter of 2007; operating income up $58.4 million (29.9%) at Quebecor Media Inc. and down $33.3 million (-20.7%) at Quebecor World Inc. - Quebecor posts $35.2 million net loss, mainly because of impairment of goodwill ($174.4 million) and of long-lived assets ($131.4 million) at Quebecor World. - Quebecor Media's net income up $38.2 million (82.0%) to $84.8 million.

Quarterly customer growth for Cable segment's services: 70,100 more customers for cable telephone service, a record in absolute terms, 45,000 for cable Internet access, and 31,700 for all cable television services combined (including a 41,200 customer increase for illico Digital TV).

- Quebecor Media acquires all outstanding units of Osprey Media Income Fund ("Osprey Media") for total cash consideration of $414.4 million (excluding assumed liabilities).

- October 5, 2007: Quebecor Media completes placement of US$700.0 million aggregate principal amount of Senior Notes.

- November 7, 2007: agreement signed for sale and merger of Quebecor World's European operations with the Dutch firm Roto Smeets De Boer NV to create a new entity, Roto Smeets Quebecor.

Quebecor Inc. reports total revenues of $2.29 billion for the third quarter of 2007, a decrease of $133.8 million (-5.5%). Quebecor Media's revenues increased by $116.0 million (16.1%), while Quebecor World's revenues decreased by $253.8 million (-14.6%). The impact of the conversion of Quebecor World's revenues into Canadian dollars produced an unfavourable foreign exchange variance estimated at $105.0 million (1). Quebecor's operating income increased by $30.7 million (8.7%) to $384.4 million in the third quarter of 2007. Quebecor Media's operating income rose by $58.4 million (29.9%) to $253.6 million while Quebecor World's operating income decreased by $33.3 million (-20.7%) to $127.5 million.

"Quebecor grew its operating income by $30.7 million (8.7%) on the strength of Quebecor Media's robust third quarter 2007 performance," said Pierre Karl Peladeau, President and Chief Executive Officer of Quebecor Inc. "The excellent results at Quebecor Media were driven by significant customer growth for the Cable segment's services, as well as improved operating results in the Newspapers and Broadcasting segments. At the beginning of November 2007, Quebecor World announced the sale and merger of its European operations with the Dutch firm Roto Smeets De Boer NV to create a new entity, Roto Smeets Quebecor, which will be better positioned to meet the challenges facing the commercial printing industry in Europe. To obtain greater financial flexibility, Quebecor World also announced the early redemption of some of its Senior Notes and new terms governing its revolving credit facility. Finally, Quebecor World completed its North American retooling program in the third quarter of 2007, ahead of the originally scheduled completion date of 2008 and in time for its customers' year-end busy season."

Quebecor recorded a net loss of $35.2 million ($0.55 per basic share) in the third quarter of 2007, compared with net income of $33.8 million ($0.53 per basic share) in the same period of 2006. The unfavourable variance of $69.0 million ($1.08 per basic share) was due to the recognition by Quebecor World of a $174.4 million goodwill impairment charge in the third quarter of 2007, an unfavourable variance of $124.0 million in the reserve for restructuring of operations, impairment of assets and other special charges, an unfavourable variance of $44.2 million in the loss on debt refinancing, and a $20.5 million increase in financial expenses. These unfavourable items were partially offset by a $33.1 million increase in the unrealized gain on exchangeable debentures and a $30.7 million increase in operating income. Favourable variances of $203.1 million in non-controlling interest and $32.4 million in income tax were recorded in the third quarter of 2007, resulting primarily from the net impact of the factors discussed above.

Excluding unusual items, i.e., the reserve for restructuring of operations, impairment of assets and other special charges, impairment of goodwill, the unrealized gain on re-measurement of debentures and of a portfolio investment, the loss on debt refinancing and the loss (gain) on sales of businesses and other assets, all net of income tax and non-controlling interest, net income from continuing operations was $39.4 million in the third quarter of 2007 ($0.61 per basic share), compared with $35.4 million ($0.56 per basic share) in the same period of 2006, an increase of $4.0 million ($0.05 per basic share).

Quebecor Media generated net income of $84.8 million in the third quarter of 2007, compared with $46.6 million in the same quarter of 2006. The $38.2 million (82.0%) increase was mainly due to the $58.4 million increase in operating income.

Quebecor World posted a net loss of US$319.8 million in the third quarter of 2007, compared with net income of US$11.2 million in the same period of 2006. The unfavourable variance of US$331.0 million was due primarily to recognition of goodwill impairment in the amount of US$166.0 million, impairment of long-lived assets in the amount of US$128.0 million, and a US$53.1 million loss on debt refinancing.

On November 7, 2007, Quebecor World and RSDB NV ("RSDB") announced that they have signed a definitive Share Purchase Agreement (SPA) and Implementation Agreement to sell/merge Quebecor World's European operations to RSDB Group. RSDB will buy Quebecor World's European operations and Quebecor World will retain a 29.9% interest in the merged entity that will be named "Roto Smeets Quebecor" (RSQ) and will be listed on Euronext Amsterdam.

Under the terms of the Share Purchase Agreement and Implementation Agreement, RSDB will deliver to Quebecor World, at closing, cash, a note and shares valued in the aggregate at approximately 240 million Euros (US$341.0), subject to certain post-closing adjustments. More specifically, the consideration payable to Quebecor World will be comprised of approximately 150 million Euros (US$213.0 million) in cash, a 35 million Euros (US$50.0 million) note and 1.4 million shares in RSQ, representing approximately 29.9% of the issued and outstanding shares of the combined business post-closing.

Completion of the merger is conditional, among other things, on the approval of the shareholders of RSDB and receipt of clearances from the European Commission. Closing is expected to take place by the end of 2007. Roto Smeets Quebecor, the new merged company, will become the leading player in the European printing industry and the leader in the European market.

Quebecor World completed its annual goodwill impairment testing in the third quarter of 2007. Taking into account financial information such as the sale and merger of its European operations with RSDB, Quebecor World management determined that the carrying value of goodwill for its European reporting unit was not recoverable and that the resulting impairment of such goodwill amounted to its entire carrying value of US$166.0 million at September 30, 2007.

Following impairment tests on various units in North America and Europe, triggered in the latter case primarily by the merger of the European operation, Quebecor World concluded that certain assets were impaired. Accordingly, Quebecor World recorded an impairment of long-lived assets charge of US$128.0 million on certain equipment, machinery and buildings during the third quarter of 2007.

Quebecor World recorded a US$53.1 million loss on debt refinancing in the third quarter of 2007 in connection with the early redemption, announced on September 28, 2007, of most of the 8.42%, 8.52%, 8.54% and 8.69% Senior Notes issued by Quebecor World Capital Corporation. The redemption was completed on October 29, 2007.

Year-to-date

On a year-to-date basis, Quebecor's revenues decreased by $192.5 million (-2.7%) to $6.95 billion. Quebecor Media's revenues increased by $246.6 million (11.4%) while Quebecor World's revenues decreased by $450.7 million (-8.9%). The impact of the conversion of Quebecor World's revenues into Canadian dollars produced an unfavourable foreign exchange variance estimated at $113.0 million (2).

Quebecor's operating income increased by $28.9 million (2.9%) to $1.03 billion in the first nine months of 2007. Operating income increased by $115.4 million (20.6%) to $676.7 million at Quebecor Media and decreased by $83.6 million (-18.8%) to $361.1 million at Quebecor World.

Quebecor's year-to-date net loss was $6.6 million ($0.10 per basic share), compared with $13.1 million ($0.20 per basic share) in the same period of 2006, a $6.5 million ($0.10 per basic share) improvement.

Excluding unusual items, i.e., the reserve for restructuring of operations, impairment of assets and other special charges, impairment of goodwill, the unrealized gain on re-measurement of debentures and of a portfolio investment, the loss on debt refinancing and the loss (gain) on sales of businesses and other assets, all net of income tax and non-controlling interest, net income was $87.4 million in the first nine months of 2007 ($1.36 per basic share), compared with $82.5 million ($1.29 per basic share) in the same period of 2006, an increase of $4.9 million ($0.07 per basic share).

Quebecor Media recorded net income of $214.7 million in the first nine months of 2007, compared with a net loss of $72.6 million in the same period of 2006. The $287.3 million improvement was due primarily to the favourable impact on the analysis of the 2007 numbers of the recognition in the first nine months of 2006 of a $342.1 million loss on debt refinancing. The $115.4 million increase in operating income was also a factor in the improvement.

Quebecor World recorded a year-to-date net loss of US$391.0 million, compared with a net loss of US$9.5 million in the same period of 2006. The unfavourable variance of US$381.5 million was due to essentially the same factors as those noted above in the discussion of the third quarter 2007 results.

Dividend

On November 8, 2007, the Quebecor Inc. Board of Directors declared a quarterly dividend of $0.05 per share on Class A Multiple Voting Shares and Class B Subordinate Voting Shares, payable on December 18, 2007 to shareholders of record at the close of business on November 23, 2007. This dividend is designated to be an eligible dividend, as provided under subsection 89(14) of the Canadian Income Tax Act and its provincial counterpart.