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- 6% growth in revenues.
- Net income of $27.9 million, or $0.31 per share in the
first quarter of 2006, down 4% over $29.1 million, or $0.33
per share, in the first quarter of 2005, due to the negative
foreign exchange impact combined with slight increases in
amortization and financial expenses.
- Excluding the negative foreign-exchange impact and unusual
items, earnings per share would have been $0.36, an increase
of 9% over the first quarter of 2005.
- Dividends to shareholders will increase by 18% to $0.065
per share starting in the second quarter.
- Purchased for cancellation 2,354,200 shares under normal
course issuer bid launched last November, for a total consideration
of $44.8 million as of March 14, 2006.
- A solid financial position to pursue growth, with a net
indebtedness to total capitalization ratio of 28% as at
January 31, 2006.
- Transcontinental’s management maintains its previously
stated earnings-per-share objective before unusual items
of $1.50 to $1.60 for fiscal 2006.
Montreal, March 15, 2006 – For the fiscal quarter ended
January 31, 2006, Transcontinental’s revenues reached
$547.4 million, up 6% over $515.3 million in the
first quarter of 2005. The increase stems mainly from the
acquisition of U.S.-based direct marketer JDM in February,
2005, as well as from organic revenue growth of 2%, but was
mitigated by the negative impact of the Canadian dollar’s
appreciation and competitive market conditions in commercial
printing. These latter factors particularly affected net income,
which stood at $27.9 million, or $0.31 per share, in
the first quarter of 2006, down 4% from $29.1 million,
or $0.33 per share, in the year-earlier quarter.
“Our first-quarter results are in line with our expectations,
with revenue growth coming both from acquisitions and sales
development initiatives while the exchange rate continued
to have an impact on our bottom line,” said Luc Desjardins,
president and chief executive officer of Transcontinental.
“Our response to the stronger Canadian dollar has been
the implementation of our revised manufacturing strategy,
a $53-million investment to replace seven older presses with
three state-of-the-art machines and the reorganization of
certain operations. This important program is now almost finished
and should see its final stages wrap up in the third quarter
of this year in our book printing operations.
“The combination of a solid balance sheet and strong
cash flows puts us in a favourable position to continue to
invest in our development,” continued Mr. Desjardins.
“We will step up our strategic investments relating
to our five-year plan, Evolution 2010, in the coming quarters,
particularly in the areas of digital media and product and
service development in our Media sector. We are also looking
at various acquisition opportunities in our target niches
and continue to make progress with potential customers for
our newspaper outsourcing model.”
Benoît Huard, vice president and chief financial officer,
added: “Taking into consideration a constant exchange
rate of 1.15 CAD/USD for the remainder of the year, current
energy prices and the positive effect from the share buy-back
program, Transcontinental’s management maintains its
previously stated earnings-per-share objective before unusual
items of $1.50 to $1.60 for fiscal 2006”.
Financial Highlights
In the first quarter ended January 31, 2006, Transcontinental
reported consolidated revenues of $547.4 million versus
$515.3 million in the same quarter of 2005, a 6% increase,
while adjusted operating income before amortization 1
decreased by less than 1% to $79.2 million from $79.9 million
in 2005. The increases of 2%, or $12.2 million, in organic
growth in revenues and 1%, or $1.0 million, in organic
growth in adjusted operating income before amortization stem
primarily from newspaper printing, catalogue and magazine
printing and the publishing of weekly newspapers in Quebec.
These activities more than offset competitive market conditions
in the commercial printing market and lower book printing
sales volumes due to the reorganization and consolidation
of the Louiseville plant. The acquisition completed in fiscal
2005 of U.S. direct marketer JDM added $23.1 million
to revenues and $3.2 million to adjusted operating income
before amortization. The paper effect had a $3.8-million positive
impact on revenues but a slightly negative $0.3-million effect
on adjusted operating income before amortization. Finally,
fluctuations in the exchange rate between the Canadian dollar
and its U.S. and Mexican counterparts had a negative effect
of $7.0 million on revenues and $4.6 million on
adjusted operating income before amortization.
Net income decreased by 4%, from $29.1 million in the
first quarter of 2005 to $27.9 million in 2006, mainly
due to a negative exchange-rate effect combined with slight
increases in amortization and financial expenses. On a per-common-share
basis, net income decreased from $0.33 to $0.31. Excluding
the negative foreign-exchange impact and unusual items, earnings
per share would have been $0.36, representing an increase
of 9% over the first quarter of 2005.
Highlights of Operations
The following are the main operating highlights by sector
for the first quarter of 2006:
- Revenues in the Printing Products and Services sector
rose slightly to $171.1 million in the first quarter
of 2006 from $170.6 million in the year-earlier quarter,
an increase of 0.3%, while adjusted operating income before
amortization declined by 11.9%, from $29.0 million
to $25.5 million. Organic growth in revenues was generated
primarily in the Newspaper Group, stemming from an increase
in page counts, increased volume from the federal election
and the new contract to print The New York Times
for the Ontario and Upstate New York markets at Transcontinental
Interweb Toronto, the first time the venerable daily has
ever been printed outside the U.S. For the balance of the
fiscal year, this Group will continue to benefit from the
New York Times contract, plus the Olympic Games coverage
in February should also have a positive impact. While Mexican
operations continue to face a challenging environment, they
did continue to benefit from new sales initiatives. The
Book Group is expected to complete the reorganization and
consolidation of the Louiseville plant by May, while the
installation of the new Goss press in the Beauceville plant
is expected to be completed in June. The adjusted operating
income margin before amortization decreased from 17.0% in
the first quarter of 2005 to 14.9% in the first quarter
of 2006. This decrease can mostly be attributed to competitive
market conditions in commercial printing and the negative
exchange-rate effect.
- Revenues in the Marketing Products and Services sector
rose from $242 million in the first quarter of 2005 to $267.2 million in 2006, an increase of $25.2 million, or 10.4%,
while adjusted operating income before amortization rose
10.9%, from $33.9 million in the first quarter of 2005 to
$37.6 million in 2006. The driver of growth was the acquisition
of JDM, completed in February 2005. In addition, the new
Premedia Group, created following the launch of our Evolution
2010 business plan, was quite successful in the quarter.
Furthermore, the Direct Marketing Group in the U.S. completed
its reorganization and plant consolidation. The adjusted
operating income margin before amortization remained stable
at 14.1% in the first quarter of 2006 as organic growth
in retail printing operations was offset by the negative
foreign-exchange impact.
- Revenues in the Media sector rose from $129.1 million
in the first quarter of 2005 to $133.8 million in 2006,
an increase of $4.7 million, or 3.6%, while adjusted
operating income before amortization remained relatively
stable at $19.7 million, down 1.4% from $20.0 million.
Organic growth was generated in the publishing of daily
and weekly newspapers in Quebec and the Atlantic Provinces
as well as in the distribution of advertising material.
On the other hand, magazine publishing was negatively affected
by lower advertising in certain categories, higher postal
costs and higher circulation and promotion expenses to increase
the subscription base of The Hockey News, which is
now approaching its pre-NHL lockout numbers. Promising partnerships
with the strong brands AskMen.com and Yellow Pages Group
were also signed during the quarter. The adjusted operating
income margin before amortization decreased slightly from
15.5% to 14.7%. Investments in the development of new products
and services and in the digital strategy should increase
over the next three quarters.
Strategic Orientation Update: Evolution 2010
Evolution 2010, our new business project launched on
November 16, 2005, builds on the achievements of Horizon
2005 but will go one step further. Transcontinental needs
to adapt and change to the new realities of increased competition
and globalization, a stronger Canadian dollar, technological
advances and the emergence of new media channels. We will
thus need to invest more than ever in our long-term development.
Growth will be challenging in the coming years due to intense
competition in some printing segments and increased strategic
expenses needed to further differentiate ourselves. Evolution
2010 will put more emphasis on our role as a marketing
advisor to our customers, by developing an even greater knowledge
of their markets and integrating us into their value chain.
We will also aim at improving our content, product and service
offering, and technology platform so that we can serve our
advertisers, readers and website visitors even better. Furthermore,
we will be stressing organic growth, based on innovative and
creative initiatives by our people, while continuing to target
strategic acquisitions. We will also be investing more heavily
in our long-term development.
Management believes that the goals of this business project
can be achieved in five ways: by introducing new products
and services on a multi-channel platform; by offering integrated
marketing services with a focus on value-added services; by
reducing cycle times in both production and administrative
functions; by growing sales organically; and, lastly, by developing
our talent.
In the first quarter of 2006, on the media side we became
the co-publisher of the newly launched Canadian version of
the world’s number-one online men’s lifestyle
magazine, AskMen.com, which boasted approximately 10 million
unique visitors worldwide in January 2006. We also forged
ahead with our partnership with Yellow Pages Group for the
publishing of new and innovative guides. The first two issues
of these guides will target home improvement consumers, combining
Transcontinental’s Décormag and Style
at Home brands with the Yellow Pages™ brand, and
will be published in the spring of this year. We also elaborated
the profile and started the search to fill the position of
Vice President, Digital Media.
On the print side, we completed the reorganization and consolidation
of our Eastern U.S. direct marketing operations, we installed
and ramped up the new Goss press in our Boucherville plant,
we continued to work on the reorganization and consolidation
of our Louiseville plant, we continued to implement our integrated
manufacturing software in our printing plants and, finally,
we pursued our discussions with potential customers for our
newspaper outsourcing model.
Furthermore, we launched our Finance Evolution program, which
aims to reengineer our financial processes over the next three
years. We also pursued numerous efforts for cross-selling
initiatives, our market team approach and the development
of our premedia offering.
Reconciliation of Non-GAAP Financial Measures
Financial data have been prepared in conformity with Canadian
Generally Accepted Accounting Principles (GAAP). However,
certain financial measures used in this press release do not
have any standardized meaning under GAAP and could be calculated
differently by other companies. The Corporation believes that
certain non-GAAP financial measures, when presented in conjunction
with comparable GAAP financial measures, are useful to investors
and other readers because that information is an appropriate
measure for evaluating the Corporation's operating performance.
Internally, the Corporation uses this non-GAAP financial information
as an indicator of business performance, and evaluates management's
effectiveness with specific reference to these indicators.
These measures should be considered in addition to, not a
substitute for or superior to, measures of financial performance
prepared in accordance with GAAP. Below is a table reconciling
GAAP financial measures to non-GAAP financial measures.
Normal Course Issuer Bid
As announced on November 16, 2005, Transcontinental Inc. has
been authorized to purchase for cancellation on the open market,
between November 21, 2005 and November 20, 2006, up to 887,015
of its Class B Shares, representing 5% of the 17,740,294 issued
and outstanding Class B Shares as of November 11, 2005, and
up to 3,578,325 of its Class A Subordinate Voting Shares,
representing 5% of the 71,566,506 issued and outstanding Class
A Subordinate Voting Shares as of November 11, 2005. The purchases
are made in the normal course of business at market prices
through the facilities of the Toronto Stock Exchange in accordance
with the requirements of the exchange.
As of March 14, 2006, the Corporation had bought back 1,972,200
Class A Subordinate Voting Shares and 382,000 Class B Shares,
for a total consideration of approximately $44.8 million.
Dividend Increase
At its March 15, 2006 meeting, the Corporation’s Board
of Directors voted a quarterly dividend of $0.065 per share
on Class A Subordinate Voting Shares and Class B Shares, which
is an increase of 18% over the dividend paid last quarter.
These dividends are payable on May 1st, 2006 to shareholders
of record at the close of business on April 10, 2006. On an
annual basis, this represents a dividend of $0.26 per common
share.
Additional Information
Management's Discussion and Analysis for the first
quarter of 2006, along with full financial statements, are
posted on the home page of the Corporation’s Web site
at www.transcontinental.com.
Upon releasing its quarterly results, Transcontinental will
hold a conference call with financial analysts today at 4:15
p.m. EST. There will be a simultaneous audio broadcast on
Transcontinental's website, which will be archived for 30
days.
Corporate Affairs
During the quarter, Transcontinental announced that it appointed
Rob Young as president of Transcontinental Direct in the U.S.
Mr. Young now leads Transcontinental’s U.S. direct marketing
activities from Warminster, Pennsylvania, reporting directly
to Guy Manuel, president of Transcontinental’s Marketing
Products and Services sector. Having climbed steadily through
the sales, operations and manufacturing teams of commercial
printing and marketing services businesses over the past 20-plus
years, Mr. Young has a solid grounding in Transcontinental
Direct’s business segment.
At the end of the quarter, the Corporation announced the departure
of two of its senior executives. The position of president
of Transcontinental Media, formerly held by André Préfontaine,
is temporarily being filled by Luc Desjardins during the ongoing
search for a full-time replacement. Also departed is Daniel
Denault, the Corporation’s former chief financial officer.
Benoît Huard, corporate treasurer since 2002, has been
appointed interim chief financial officer after is departure
and has been official appointed vice president and chief financial
officer today. Mr. Huard has over 20 years of experience and
held a number of top positions in the financial management
of major public corporations over the course of his career.
On February 14, 2006, Philippe Huard became corporate controller,
replacing James Aziz, who has been appointed vice president,
finance of our Printing Products and Services sector. Mr.
Huard has more than 20 years experience in finance and accounting
in both public and private corporations.
Lastly, Transcontinental’s Annual Meeting of Shareholders
will be held on Wednesday, March 22, 2006, at 4 p.m., at Hôtel
Omni Mont-Royal, Salon des Saisons, 1050 Sherbrooke St. West
in Montreal. There will be an audio broadcast of the event
on the Corporation’s website. The meeting will be preceded
by a press conference at the same location at 11 a.m.
Profile
The largest printer in Canada and seventh in North America,
Transcontinental is also the country’s leading consumer
magazine publisher and second-largest community newspaper
publisher. Transcontinental distinguishes itself by creating
strategic partnerships that integrate the company into its
customers’ value chain, notably through its unique newspaper
printing outsourcing model and its value-added services. From
mass to highly personalized marketing, the company offers
its clients integrated solutions which also include a diverse
digital platform and a door-to-door distribution network of
advertising material. Transcontinental is a company whose
values, including respect, innovation and integrity, are central
to its operation.
Transcontinental (TSX: TCL.A, TCL.B) has more than 14,000
employees in Canada, the United States and Mexico, and reported
revenues of CA$2.2 billion (US$1.9 billion) in 2005.
Note: This press release contains certain forward-looking
statements concerning the future performance of the Corporation.
Such statements, based on the current expectations of management,
inherently involve numerous risks and uncertainties, known
and unknown. We caution that all forward-looking information
is inherently uncertain and actual results may differ materially
from the assumptions, estimates or expectations reflected
or contained in the forward-looking information, and that
actual future performance will be affected by a number of
factors, many of which are beyond the Corporation’s
control, including, but not limited to, the economic situation,
exchange rate, energy costs, increased competition, the Corporation’s
capacity to implement its strategic plan and cost reduction
program and make and integrate acquisitions. The risks, uncertainties
and other factors that could influence actual results are
described in Management’s Discussion and Analysis
for the first quarter of 2006 and for the fiscal year ended
October 31, 2005 and the 2005 Annual Information Form.
The forward-looking information in this release is based on
current expectations and information available as of March
15, 2006. We disclaim any intention or obligation to update
or revise any forward-looking statements unless otherwise
required by the Securities Authorities.
- 30 -
1 -This is a non-GAAP financial measure. Please refer to the section ńReconciliation of Non-GAAP financial measuresî on pp. 4-5 for more information.
For
Information:
Media
Jake Brennan
Media Relations Coordinator
Transcontinental Inc.
Telephone: (514) 954-4000
jake.brennan@transcontinental.ca
Financial Community
Jennifer F. McCaughey
Investor Relations Analyst
Telephone: (514) 954-4155
jennifer.mccaughey@transcontinental.ca
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