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- Growth of 2% in revenues; excluding the foreign
exchange rate impact, growth of 5%.
- Decrease of 2% in adjusted operating income before
amortization; excluding the foreign exchange rate impact,
growth of 5%.
- Increase of 11% in net income; on a per-share
basis, net income rose from $0.40 to $0.46, a 15% increase.
- Increase of 2% in adjusted net income before
unusual items; on a per-share basis, adjusted net income
grew 5%, from $0.41 to $0.43, but growth of 15% excluding
the foreign exchange rate impact.
- Signing of exclusive six-year contract, valued
at $35 - $40 million a year, to print Rogers Communications’
magazines starting in February 2009; this is all new business
for Transcontinental.
- In digital, acquisitions of ThinData, a Canadian
leader in permission-based email marketing, and Acquizition.biz,
the most important marketplace in Canada for buying and
selling businesses; launch of recipefeast.com,
the English version of the highly successful site recettes.qc.ca.;
and introduction of mobile technology to the site thehockeynews.com.
- Announcement of investments totalling $80 million
in two printing plants in the Montreal area.
- Closure of the Halifax Daily News and
launch of the free Metro daily in Halifax, in partnership
with Metro International and Torstar.
- Extra $150 million added to the Corporation’s
bank credit facility, increasing it to $550 million.
- DBRS maintains its BBB (high) rating and improves
the trend for the Corporation’s Senior Unsecured Debentures.
Montreal, June 12, 2008 – Transcontinental posted
another good performance in the second quarter ended April
30, 2008, despite the negative impact of the foreign exchange
rate. The Corporation kept its focus on growth by continuing
to invest in new technologies and developing its digital media
while making strategic acquisitions. Transcontinental should
thus continue to profit from its integrated marketing service
offering for existing and new customers. The Corporation is
in an excellent financial position for further growth, with
a net funded debt to total capitalization ratio of 34% at
April 30, 2008. Unless there is a sudden rise in the Canadian
dollar, the negative impact of the foreign exchange rate should
diminish over the course of the fiscal year since the Canadian
dollar achieved parity with the U.S. dollar in the third quarter
of 2007, before exceeding it in the fourth quarter.
“We are reaping the rewards of our investments in
new technologies and our company-wide continuous improvement
efforts,” said François Olivier, President and
Chief Executive Officer of Transcontinental. “We have
again succeeded in offsetting the negative impact of the exchange
rate, and have done so despite the tougher conditions in the
media and print industries. Our solid balance sheet and significant
cash flows from operations put us in an excellent position
to serve our customers by developing growth platforms to meet
their new marketing requirements, as illustrated by the integration
of ThinData, the Canadian leader in permission-based email
marketing, into our service offering. We are also looking
for acquisitions in targeted niches across North America.”
Financial Highlights
In the second quarter of 2008, Transcontinental
recorded consolidated revenues of $595.1 million, compared
to $584.7 million in the same quarter in 2007, an increase
of 2%. Adjusted operating income before amortization was down
2%, from $92.8 million to $90.7 million. Excluding
the exchange rate fluctuations between the Canadian dollar
and its U.S. and Mexican counterparts, which had a negative
impact of $19.3 million on revenues and $6.5 million
on adjusted operating income before amortization, growth would
have been 5% in revenues and adjusted operating income before
amortization. The acquisition of PLM Group, the fourth largest
printer in Canada, as well as a series of other smaller but
strategic acquisitions in 2007 and 2008, as well as higher
sales in certain segments, more than offset lower demand in
other segments and additional investments in the Media sector.
Net income grew by 11%, from $34 million for the second
quarter of 2007 to $37.7 million in 2008; on a per-share
basis, net income rose 15%, from $0.40 to $0.46. Adjusted
net income, which does not take into account unusual items
arising from asset impairment, restructuring costs and unusual
adjustments to income taxes, was up 2%, from $34.4 million
to $34.9 million; on a per-share basis, adjusted net
income rose 5%, from $0.41 to $0.43. This higher percentage
reflects the positive impact of the Corporation’s normal
course issuer bid. Excluding the foreign exchange rate impact,
adjusted net income would have been $0.47 per share, up 15%
over the second quarter of 2007.
In the first six months of fiscal 2008, consolidated revenue
rose 3%, from $1.16 billion to $1.19 billion, while
adjusted operating income before amortization increased 3%,
from $168.5 million to $173.1 million. Excluding
the foreign exchange rate impact, which reduced revenues by
$40.3 million and adjusted operating income before amortization
by $11.8 million, growth would have been 6% and 10%,
respectively.
Net income rose 32%, from $54.2 million in the first
half of 2007 to $71.8 million in 2008. This increase
is mainly due to a decrease in the tax rate, an increase in
adjusted operating income before amortization and a favourable
change in unusual items. On a per-share basis, net income
increased 38%, from $0.63 to $0.87. Adjusted net income, which
does not take into account unusual items arising from asset
impairment, restructuring costs and unusual adjustments to
income taxes, rose 6%, from $59.5 million to $63.3 million.
On a per-share basis, adjusted net income rose 10%, from $0.70
to $0.77.
Excluding the adverse effect of the exchange rate in the
first half of 2008, earnings per share would have been $0.84,
up 20% over the first half of 2007. This measure provides
a good indicator of the Corporation’s operating performance
in the first half of the year.
For more detailed financial information, please see Management’s
Discussion and Analysis for the Second Quarter Ended April
30, 2008 at www.transcontinental.com, under “Investors.”
Operating Highlights
The main operating highlights for the second quarter
of 2008 are as follows.
- Transcontinental signed an exclusive six-year contract
to print all of Rogers’ magazines, which number more
than 70 and include Châtelaine, Maclean’s,
L’actualité and Canadian Business.
This contract, which takes effect on February 1, 2009 and
is valued at $35 to $40 million a year, is new business
for Transcontinental. It will make Transcontinental Canada’s
biggest catalogue and magazine printer.
- On March 11, Transcontinental acquired ThinData Inc.,
the Canadian leader in permission-based email marketing.
ThinData’s services fit in perfectly with Transcontinental’s
strategy to increase its integrated marketing services,
including the expansion of its capabilities in premedia,
database management and analysis, direct marketing and cybermarketing,
so that the Corporation can offer unique business solutions
to its customers and its media assets.
- The digital and interactive front saw several other strategic
developments, including the acquisition of the most important
marketplace in Canada for buying and selling businesses,
Acquizition.biz,
a site that also makes it easier to find strategic or financial
partners; the launch of recipefeast.com,
the English-language counterpart of the highly popular site
recettes.qc.ca,
which receives more than a million visitors a month; and
the introduction of mobile technology (cell phone, BlackBerry
and Apple iPhone) to the popular thehockeynews.com
site, which receives close to 400,000 visitors a month and
has a readership of over two million for its print publication.
- On February 11, Transcontinental stopped publishing the
Halifax Daily News and on February 14 launched
a Metro free daily paper in partnership with Metro
International S.A. and Torstar Corporation. Management considers
this type of publication to be more suited to the Halifax
market.
- In February, Transcontinental announced two investment
projects totalling $80 million in the Montreal area.
The first, for $60 million, is to expand the Transcontinental
Transmag newspaper printing plant and buy state-of-the-art
technology so that customers, including Transcontinental
Media (which prints about 40 of its newspapers at the plant),
can put colour on every page of their publications, a key
requirement for growth in the newspaper industry. The second
investment, of $20 million, will be used to buy the
latest equipment for Transcontinental Interweb Montreal
on Montreal’s South Shore, which prints catalogues
and magazines.
Reconciliation of Non-GAAP Financial Measures
Financial data have been prepared in conformity
with Canadian Generally Accepted Accounting Principles (GAAP).
However, certain 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 as
a substitute for or superior to, measures of financial performance
prepared in accordance with GAAP.
The following table reconciles GAAP financial measures to
non-GAAP financial measures.
Environment
Transcontinental plans to continue exercising its
leadership in sustainable development in its own way: by mobilizing
its employees and taking concrete action. Achievements in
the second quarter include FSC (Forest Stewardship Council)
certifications for nine plants in Canada and the United States.
This certification indicates that a product is environmentally
and socially responsible, and 18 of our facilities are now
FSC certified. Furthermore, since February 20, Publi-Sac has
been manufactured using biodegradable plastic. For this, the
Distribution Group management chose the oxo-biodegradable
technology developed by EPI, a Vancouver firm that has pioneered
innovative environmental technologies. Lastly, Transcontinental
and its Métro daily paper have agreed to be
the official sponsors of Montreal’s National Environment
Show, the largest event of its kind in Quebec, which will
be held in the Old Port of Montreal from June 13 – 15,
2008.
Further recognition: in March, Jantzi Social Index®
(JSI), a market-capitalization socially weighted common stock
index consisting of 60 Canadian companies that pass a set
of broadly based environmental and social rating criteria,
announced that Transcontinental remains a member of its select
group of companies. Transcontinental has been on the index
since March 2004.
Corporate Affairs
On May 14, Transcontinental received an additional
commitment of $150 million from its banking syndicate for
a period of 364 days. This arrangement brings the Corporation’s
credit facility to $550 million and gives management greater
flexibility to pursue its growth strategy. In addition, due
to the Corporation’s sound financial position and operating
performance, rating agency DBRS has maintained Transcontinental’s
BBB (high) rating and improved the trend for its Senior Unsecured
Debentures.
On May 23, Transcontinental announced the appointment of
François R. Roy to the Corporation’s board of
directors. Mr. Roy has in-depth experience as a senior financial
executive in the media, print and marketing sectors which
will provide unique insight and perspective that will help
Transcontinental’s growth. Mr. Roy has a long history
of involvement in the Montreal arts community. He is currently
Vice Principal, Administration and Finance, at McGill University.
Transcontinental’s senior executives continue to stand
out in Canadian society and its business community. After
receiving the Order of Canada in 2007, Rémi Marcoux,
the executive chairman of the board and founder of Transcontinental,
was recently named an Officer of the National Order of Quebec,
the most prestigious distinction awarded by the Quebec government.
In addition, Isabelle Marcoux, vice chair of the board of
Transcontinental and vice president of Corporate development,
was elected to the board of Rogers Communications, a major
communications and media coporation. In 2007, she was named
one of Canada’s “Top 40 Under 40.”
Dividend
At its June 12, 2008 meeting, the Corporation’s
Board of Directors declared a quarterly dividend of $0.08
per share on Class A Subordinate Voting Shares and Class B
shares. These dividends are payable on July 25, 2008 to shareholders
of record at the close of business on July 7, 2008. On an
annual basis, this represents a dividend of $0.32 per share.
Additional Information
Upon releasing its quarterly results, Transcontinental
will hold a conference call for the financial community today
at 4:15 p.m. (ET). Media may hear the call in listen-only
mode or tune in to the simultaneous audio broadcast on Transcontinental’s
website, which will be archived for 30 days. For Media requests
for information or interviews, please contact Nessa Prendergast,
director, media relations, at 514 954-2809.
About Transcontinental
The largest printer in Canada and sixth-largest
in North America, Transcontinental is also 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 15,000
employees in Canada, the United States and Mexico, and reported
revenues of C$2.3 billion in 2007. For more information
about the Corporation, please visit www.transcontinental.com.
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 and the
Corporation’s capacity to implement its strategic plan
and cost-reduction program and make and integrate acquisitions
into its activities. The risks, uncertainties and other factors
that could influence actual results are described in the Corporation’s
Management’s Discussion and Analysis and the Annual
Information Form.
The forward-looking information in this release is based
on current expectations and information available as of June
12, 2008. The Corporation’s management disclaims any
intention or obligation to update or revise any forward-looking
statements unless otherwise required by the Securities Authorities.
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For information:
Media
Nessa Prendergast
Director, Media Relations
Transcontinental Inc.
Telephone: (514) 954 2809
nessa.prendergast@transcontinental.ca
Financial Community
Benoît Huard
Vice President and Chief Financial Officer
Transcontinental Inc.
Telephone: 514 954 4162
benoit.huard@transcontinental.ca
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