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Montreal, December 6, 2007 – Transcontinental
Inc. announced today that it will be restating its financial
statements for prior years. In the context of the preparation
of its year-end financial statements, management identified
two non-cash accounting errors. First, income tax liabilities
at the end of fiscal 2006 were understated by approximately
$10 million. This was mainly related to accounting provisions
for income taxes on inter-company transactions and to future
income tax assets on operating losses considered twice. Second,
property, plant and equipment of Mexican subsidiaries were
overstated by approximately $10 million at the end of
fiscal 2006, due to amortization calculated incorrectly. The
impact of these restatements on net income will total approximately
$20 million, of which approximately $10 million
relates to 2006 and approximately $10 million relates
to prior years. This is not expected to have any impact on
cash flow or cash balances. Prior to these restatements, 2006
net income was $137.9 million and 2006 total property,
plant and equipment was $713.6 million.
Transcontinental’s Board of Directors, on the recommendation
of management, has concluded that it is necessary to restate
the Corporation’s audited consolidated financial statements
for each of the prior years affected. As a result, Transcontinental’s
financial statements as previously published and filed in
respect of each prior period should no longer be relied upon.
Transcontinental is currently working to finalize and file
its restated financial statements for fiscal 2006 and they
will be available when it releases its 2007 financial statements
later in December 2007.
“We take our obligation to provide accurate financial
information very seriously and our internal controls remain
very strong overall,” said Benoît Huard, Vice
President and Chief Financial Officer. “In fact, recent
improvements in controls and procedures led to the discovery
of these two errors and reduce the risk of similar errors
occurring again. The restatement will not impact Transcontinental’s
business, its current earnings or its ability to generate
cash flow.”
For his part, Rémi Marcoux, Executive Chairman of the
Board, stated, “Though this situation is regrettable,
it is limited only to two specific items which we are correcting.
My full confidence remains in our Management team and the
future of Transcontinental.”
The results set forth in this document, including expected
restatement impacts, are preliminary and unaudited and reflect
known restatement adjustments all as of the time of the issuance
of this press release. These results are subject to change
as a result of any adjustments arising from the restatement
process, subsequent events and the completion of the audit
of the financial statements by the Corporation’s independent
auditors.
About Transcontinental
The largest printer in Canada and sixth-largest
in North America, Transcontinental also ranks as the country’s
leading publisher of consumer magazines and French-language
educational resources, and its 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 include a continent-leading
direct marketing offering, a diverse digital platform and
a door-to-door advertising material distribution network.
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 14,500
employees in Canada, the United States and Mexico, and reported
revenues of C$2.3 billion in 2006.
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For information:
Media
Nessa Prendergast
Director, Media Relations
Transcontinental Inc.
Telephone: (514) 954 2809
nessa.prendergast@transcontinental.ca
Financial Community
Jennifer F. McCaughey
Director, Investor Relations
Transcontinental Inc.
Telephone: (514) 954 2821
jennifer.mccaughey@transcontinental.ca
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