Credit Suisse Global Leveraged Finance Conference March 28-30, 2006 - Phoenix, Arizona.
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Transcript of Credit Suisse Global Leveraged Finance Conference March 28-30, 2006 - Phoenix, Arizona.
Credit SuisseGlobal Leveraged Finance Conference
March 28-30, 2006 - Phoenix, Arizona
/2
Forward Looking Statements
This presentation contains forward-looking statements, which 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.
Currency
Unless noted otherwise, all dollars are expressed in Canadian dollars.
LTM Results are for the period ended December 31, 2005
/3
Mark D’Souza Vice President, Finance
Jean-François Pruneau Treasurer
Management Attendee
Quebecor Media Overview
/5
Key Highlights
Strong Brand Names with Leading Market Positions
Differentiated Bundled Product Offerings
Significant Barriers to Entry
Stable and Diversified Cash Flow Generation
Experienced Management Team
/6
Corporate Structure
Notes: Segmented revenues include inter-company revenues.Segmented EBITDA excludes head office.Vidéotron Telecom was merged with Vidéotron Ltée on 1/1/06.
54.7%
Inc.
45.3%
45% Economic 99% Voting100%
2005 Revenue : $2,703
2005 EBITDA : 734
2005 Revenue: $1,002
2005 EBITDA: 382
2005 Revenue: $916
2005 EBITDA: 222
2005 Revenue: $401
2005 EBITDA: 53
2005 Revenue: $487
2005 EBITDA: 75
#1 Pay television operator in Quebec; #3 cable operator in Canada; #1 video store
chain in Quebec
Largest newspaper publisher in Quebec;
second largest in Canada
100%
($ in millions)
Book Retailing
New MediaBusiness Telecom
Other
Largest French language broadcaster and magazine publisher in Quebec and in
North America
/7
Quebecor Media can reach 60% of English Canadians in major Canadian markets and 95% of French Canadians in Quebec on a weekly basis.
Leading Market Positions
Sources: BBM Survey (Sep 1 – Nov 30, 2004); NADbank 2003;PMB 2004; comscore (Media Metrix December 2004);CARD (Infopresse Annual Media Guide); IMS (Media Mix).
National Presence
#2 Newspaper publisher
Leading content-focused national and local Internet portals
Leading Market Position in Quebec
#1 Newspaper publisher
#1 Cable operator
#1 High speed Internet service provider
#1 Television broadcaster
#1 Magazine publisher
#1 Video store chain
#1 Music producer/distributor/retailer
#1 Internet portal
/8
Cable 52.1% Newspapers
30.3%
Leisure and Entertainment
3.7%
Broadcasting 7.2%
Cable37.1%
Other & Inter-Segment
0.9%Broadcasting
14.9%
Leisure andEntertainment
9.4%
Newspapers33.9%
Corporate & Other
2.4%
Business Telecommunications
3.8%
Business Telecommunications
4.3%
2005 EBITDA2005 Revenue
Revenues = $2.7 billion EBITDA = $734 million
QMI Diversified Financial Profile
Note: Cable excludes Vidéotron Telecom, which was merged with Vidéotron Ltée on 1/1/06.
/9
QMI Strategic Focus
Execute Residential and Mobile Telephony Strategy
Generate Free Cash Flow
Implement integrated on-line strategy
Improve Productivity
Target Accretive Acquisitions in Core Business Segments
/10
Notes:(1) Debt / EBITDA according to the Vidéotron credit agreement.(2) Debt / EBITDA according to the Sun Media credit agreement.(3) Debt / EBITDA according to the TVA credit agreement.
Free Cash Flow and conservative leverage at the subsidiary level minimize debt at the holding level
Free Cash Flow+
Additional Debt
Leverage (Debt / EBITDA)
Current 2.57x
Leverage (Debt / EBITDA)
Current 2.94x No debt
45% économic99% voting100% 100%
Editions QMI
(1) (2)
58% économic58% voting
Leverage (Debt / EBITDA)
Current 2.23x No debt(3)
QMI Financing Strategy
/11
Overview of Refinancing Plan – January 2006With the recent refinancing of its high yielding Notes, QMI continued to take advantage of favourable credit momentum and market conditions to meet its capital structure objectives.
Objectives Refinancing Impact
Reasonable leverage
Pro forma QMI leverage of 4.7x at Dec. 31, 2005 down from over 7x at YE ’01
Reduce interest expense
Consolidated interest savings estimated at $80M, including the impact of the July 2005 partial tender
Enhance liquidity Increase size of revolving credit facility from $75M to $100M
364 day (renewable) Revolver replaced with 5 year Revolver
Enhance flexibility Covenant package reflecting improved credit profile
Increased ability to pay dividends
Optimize debt portfolio
Extended maturities to 2011 - 2016
Material portion of prepayable debt (without penalty)
Balanced mix of floating rate and fixed rate debt
/13
Nationwide Presence and Strategically Clustered
Nationwide presence covering key markets offers national advertising and distribution solutions
Clustering provides significant cost efficiencies and opportunities for bundled advertising packages
195 Community Newspapers andSpecialty Publications
8 Paid Urban Dailies
3 Free Commuter Dailies
/14
Strong and Established Newspaper Franchise
Le Journal de Montréal 1 272.7 1,238.9 1964
The Toronto Sun 2 199.0 1,910.4 (a) 1971
Le Journal de Québec 1 103.4 357.0 1967
The London Free Press 1 86.8 248.0 1849
The Edmonton Sun 2 73.2 380.0 1978
The Calgary Sun 2 66.4 362.4 1980
The Winnipeg Sun 2 41.8 250.7 1980
The Ottawa Sun 2 50.3 264.8 1988
Total 893.6 5,012.2
Urban Daily PublicationsAvg. Daily Circulation
Weekly Readership
Note: Circulation data from Sun Media as of December 2005. Readership based on NADbank 7-day cumulative data. (a) Based on total readership, whereas figures for other newspapers reflect local market only.
(average daily circulation and weekly readership in 000’s)
Market Position
Year Founded
13
Sun Media’s community newspapers are often the only general circulation newspapers published in their respective markets – the majority hold a #1 market position
/15
Reported revenue and EBITDA have grown at a CAGR of 2.2% and 3.3% (4.3% excluding the impact of the recent start-up of free dailies), respectively, since 1999.
Demonstrated Financial Performance
$202
$183
$198
$219$225 $228
$222
150
165
180
195
210
225
240
255
$270
1999 2000 2001 2002 2003 2004 2005
$ m
illio
ns
CAGR = 3.3%
$803
$826$815
$832$846
$888
$916
750
775
800
825
850
875
900
925
$950
1999 2000 2001 2002 2003 2004 2005
$ m
illio
ns
Reported EBITDA
Note: Excludes discontinued operations. Note: Excludes discontinued operations.
CAGR = 2.2%
Reported Revenue
/16
Sun Media has continued to deliver industry leading margins despite increased costs from new free dailies and higher raw material costs
Maintained Strong Margins
* As of January 31, 2006. ** As of November 31, 2005. Notes: Torstar & CanWest - Newspaper segment.
GTC - Media segment.
Sun Media EBITDA Margin Peer Comparison (LTM)
26.2%
27.2%27.2%26.6%
24.5%24.4%
22.8%
14%
16%
18%
20%
22%
24%
26%
28%
30%
1999 2000 2001 2002 2003 2004 2005
EB
ITD
A M
arg
in
26.2%
20.2%
17.5%
16.3%
13%
16%
19%
22%
25%
28%
Torstar GTC* CanWest** Sun Media
Pu
blis
hin
g E
BIT
DA
Ma
rgin
24,3%
/17
35.8%
34.7%
36.3% 36.3%36.8%
38.7%
30%
32%
34%
36%
38%
40%
2000 2001 2002 2003 2004 2005
Strong and Growing Market Share
Market Share*
Sun Media is the second largest newspaper publisher in Canada, with a 21.0% national market share (1)
All urban daily newspapers rank first or second in their markets (1)
Urban Dailies ROP Linage
Notes: CNA December reports.* Market share vs. competing broadsheets (including The Globe and Mail).
(1) In terms of weekly paid circulation.
/18
Strong Market Reception for Free Dailies
Source: NADbank 2004 Study; Montreal CMA, Toronto CMA. Leger Marketing Study, Vancouver, October 2005, Sample: 1,000.
(1) Internal statistics as of December 31, 2005
24 Hours Toronto has a pick-up rate of 98%
24 heures has a circulation that is 10% higher than Metro’s
Confirms Sun Media’s strategy and will translate into robust long-term return on its current investment
24 Hours Toronto
24 heuresMontreal
24 HoursVancouver
Circulation 249,900 136,700 128,600
Readership (Daily) 308K 153K 28% vs. 18%by Metro
Exclusive Readership 46% 35% N/A
Readership (Adult 18-49) 80% 80% 64%
Readership (Female) 56% 49% 61%
(1)
/19
Circulation Strategies
Sun Media is implementing various initiatives in order to stimulate
circulation and increase revenues
Install additional boxes and dealer racks
Increase telemarketing to attract new customers and lengthen subscription
terms
Invest in content and format ("star" columnists)
Reduce cover price in specific markets (25¢ in Ottawa and 50¢ in Toronto)
Introduce 7-day home delivery for Toronto Sun
/20
Online Strategy
Consumers are increasingly relying on Internet as a primary source of information, contributing to the negative trend in circulation Sun Media is implementing a more formal online strategy to compensate for lower circulation
Six Urban Daily websites redesigned in 2005 to reflect vibrant tabloid personality of Urban Dailies
In Q4-2005, unique visitors and page views grew 30%
$2M of online retail advertising revenues in H2-2005, a new revenue stream at Sun Media
Priorities for 2006
Improve sites functionality to increase traffic (videos, blogs, e-mail alerts, etc.)
Protect and grow the classified franchise by integrating three verticals (Jobs, Cars, and Real Estate)
/22
Leading Canadian Cable Operator
- 1,506K basic subs (475K digital subs) as of Dec. 31
- Fastest growing digital TV provider in Canada (cable or satellite) during LTM
- Superior offering including VOD and SVOD
Cable TV
- 638K HSD subs as of Dec. 31
- Fastest growing cable Internet provider in Canada during LTM
- Highest speed in its market
Internet
- Launched in H1-2005- Hybrid VoIP telephony
service- 163K subs as of
Dec. 31- Integration of
Vidéotron Telecom on January 1st, 2006
- Strong lift effect for other services
Telephony
- Will operate under a MVNO strategy (“white label”) utilizing Rogers Wireless’ network
- Expected to be launched in H1-2006
- Will complete Vidéotron bundling offer
Wireless
Quadruple Play
Vidéotron continues to lead the industry in new service deployment.
/23
Robust new service deployment has led to strong financial performance.
Strong Financial Performance
$275
$236
$341
$382
150
200
250
300
350
400
$450
2002 2003 2004 2005
$ m
illio
ns
CAGR = 17.5%
$781$805
$872
$1,002
700
750
800
850
900
950
$1,000
1,050
2002 2003 2004 2005
$ m
illio
ns
Reported EBITDA
Note: Excludes Vidéotron Telecom, which was merged with Vidéotron Ltée on 1/1/06.
CAGR = 8.7%
Reported Revenue
/24
Continued Momentum in Q4 2005 Subscriber Results
Basic cable: 34,500 net additions – largest quarterly net growth in five years
Digital cable: 50,000 net additions – largest quarterly increase since service was launched in 1999
High speed Internet: 50,300 net additions – largest quarterly increase since service was launched in 1998
VoIP telephony: 67,000 net additions
Q4 2005 subscriber results continue Vidéotron’s positive momentumand highlight success of bundling strategy.
/25
2005
Growing Basic Cable Subscriber Base
2002 2003 2004
Net Change (LTM) in Cable TV Subscribers (000’s)
Vidéotron has realized eight consecutive quarters of positive net adds on an LTM basis (net adds of 34,500 subscribers in Q4 ’05, the largest quarterly increase in the last five years) and improved momentum since the launch of telephony service.
53.6
/26
High-Speed Internet CustomersDigital Customers
Digital Services Subscriber Growth
Vidéotron is the fastest growing Canadian cable digital TV and HSD service provider Cable telephony launch and Bell’s recent anti-piracy measures (new smart
cards) have been followed by increased momentum for Vidéotron’s digital services
75%
100%
125%
150%
175%
200%
225%
250%
275%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Su
bs
cri
be
rs a
s p
erc
en
t o
f b
as
e p
eri
od
(%
) Vidéotron
Rogers
Shaw
Cogeco
Source: Vidéotron and Company Reports.
75%
125%
175%
225%
275%
325%
375%
425%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Su
bsc
rib
ers
as p
erce
nt o
f bas
e p
erio
d (%
) Vidéotron
Rogers
Shaw
Cogeco
Vidéotron C
AGR = 44%
20042002 2003 2005
Vidéotron C
AGR = 28%
20042002 2003 2005
/27
Strong Residential Telephony Momentum
Strong consumer reception 47%+ lift experienced (more than one
new product) in Q4 ’05 25% new customers in Q4 ’05
• 98% taking more than 1 product
• 68% taking all three
(1) Includes some areas of North Shore.
6.114.9
22.830.0
41.8
55.4
96.0
117.5
145.1
163.0
73.5
2.8
0
20
40
60
80
100
120
140
160
180
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Su
bs
cri
be
rs (
'00
0)
Telephony Subscribers Roll-out Progress
Territory Launch DateNumber of
Homes (‘000s)
South Shore January 24 300
Laval March 29 145
West Island May 30 90
Quebec City July 11 268
Rest of Montreal August 17 825
North Shore (1) November 24 57
Total Dec. 31, 2005 1,685
/28
30
35
40
45
50
$55
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
AR
PU
Vidéotron has realized a strong 8.6% CAGR in its ARPU since 2001.
Net Total ARPU
Source: Vidéotron (ARPU excludes accounting changes relating to installation revenues starting Q2-04).
Growing ARPU
CAGR = 8.6%
2002 2003 20042001 2005
/29
Bundling Results in Lower Churn
(a) Figures presented are monthly averages.
2004 2005
Monthly Churn (a)
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
Jan
Feb Mar Apr
May Ju
n Jul
AugSep
tOct
Nov Dec Jan
Feb Mar Apr
May Ju
n Jul
AugSep
tOct
Nov Dec
Internet Only
Cable Only
2 Prod. Bundled (Cable + Int)
3 Prod. Bundled Clients
Other Businesses Overview
/31
TVA - Leading Margins and Market Share
4%
14%
19%22%
0%
5%
10%
15%
20%
25%
CogecoInc.*
CanWest* Chum* TVA
Bro
adca
stin
g E
BIT
DA
Mar
gin
(%
)
Industry leading margins
•As at November 31, 2005Note: TVA is excluding Sun TV
Peer Comparison (LTM) French-language TV Market Share
Consistently delivering strong market share despite increased fragmentation – 19 of top 20 shows in Fall 2005 season
Source: Audimétrie BBM; Monday - Sunday, 6am to 2am. 2 years +August 29th to December 4th 2005.
Radio-Canada (CBC)15%
TQS13%
Tele-Quebec
3%
Specialty Channels
31%
Other8%
TVA31%
/32
Quebec’s leading Internet portals: General and special interests (Jobboom, Réseaucontact, Autonet, Canoe)
In September 2005, launched Micasa.ca, a portal devoted to real estate In the first month of operations, Micasa.ca was the #1 real-estate site in Québec with
over 536K unique visitors and 5.4M page views (Source: ComScore MediaMetrix)
Canoe is well positioned to take full advantage of the Internet
QMI’s value should benefit from Canoe’s impressive growth
Canoe: Blossoming in a Growing Market
-4
-2
0
2
4
6
8
10
2002 2003 2004 2005
-20%-15%-10%-5%0%5%10%15%20%25%30%EBITDA (in $M)
Margin (%)
Note: Excluding Progisia
Financial Highlights
/34
QMI – Financial Performance
Revenues ($ million) 2005 2004 YoY (%)
Cable 1,002.0 871.6 15.0%Newspapers 915.6 888.1 3.1%Broadcasting 401.4 358.0 12.1%Leisure and Entertainment 255.4 241.7 5.7%Business Telecom 102.1 78.6 29.9%Interactive Tech & Comm 65.1 51.9 25.4%Internet/Portals 50.0 34.5 44.9%Other & Inter-Segment (88.7) (62.0) 43.1%
Total 2,702.9 2,462.4 9.8%
EBITDA ($ million) 2005 2004 YoY (%)
Cable 382.0 341.2 12.0%Newspapers 222.2 227.8 -2.5%Broadcasting 53.0 80.5 -34.2%Leisure and Entertainment 27.0 22.7 18.9%Business Telecom 31.3 22.6 38.5%Interactive Tech & Comm 3.9 2.3 69.6%Internet/Portals 10.5 4.5 133.3%Other & Corporate Expenses 3.7 (4.4) -184.1%
Total 733.6 697.2 5.2%
/35
QMI’s intense focus on profitable growth and cost containment has resulted in significant improvements in EBITDA and Free Cash Flow
Current capex programs at QMI and Vidéotron are expected to impact Free Cash Flow in the short-run; significant growth is expected in the future
$45
$120
$146
$192
$124
0
50
100
150
200
$250
2001 2002 2003 2004 2005
$ m
illio
ns
Free Cash Flow Growth
Note: Free Cash Flow is defined as EBITDA, less interest expense, less cash taxes, less Capex.
Vidéotron Free Cash Flow Sun Media Free Cash Flow
$163$164$165$171$136
$13$29
$6
0
50
100
150
200
$250
2001 2002 2003 2004 2005
$ m
illio
ns
$42$63
$107
$157
$127
0
40
80
120
160
$200
2001 2002 2003 2004 2005
$ m
illio
ns
QMI Consolidated Free Cash Flow