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- Decreases of 5% in consolidated revenue and 10%
in adjusted operating income before amortization compared
to second quarter 2008.
- Before negative impact of reduced direct mail
activities in the United States, consolidated revenue down
2% and adjusted operating income before amortization down
5%.
- Adjusted net income before unusual items of $30.2
million, versus $34.1 million in the second quarter
2008; on a per-share basis, adjusted net income of $0.37,
versus $0.42 for the same period in 2008.
- Impairment of intangible assets and write-off
of goodwill, principally related to commercial printing
activities, totalled $169 million during the quarter;
non-cash items having no effect on cash and cash flow from
operations.
- Rationalization plan announced on February 18,
2009 carried out. As expected, measures generated a total
of $27.5 million in restructuring costs and asset impairment.
- Net income: loss of $144.3 million in 2009
compared to earnings of $36.9 million in 2008. Decrease
mainly due to unusual items mentioned above.
- Signed a total of $625 million in financing
agreements since the end of first quarter 2009.
- Commencement of two new printing and marketing
communications contracts with Rogers Communications; full
impact of flyer-printing contract with Shoppers Drug Mart-Pharmaprix;
began final preparations to start printing the San Francisco
Chronicle in summer 2009.
- Appointment of Christian Trudeau as President
of the new Marketing Communications Sector and signing of
several promising contracts.
- Dividend kept at $0.08 per share.
- Standard & Poor’s lowers Transcontinental’s
credit rating from BBB to BBB (-) with a stable outlook.
DBRS leaves unchanged its BBB (H) with a stable outlook
rating for Transcontinental.
- Net funded debt to total capitalization ratio
of 49%, in the high end of the target range of 35% - 50%
set by management.
Montreal, June 11, 2009 – Before asset impairment,
goodwill write-off and restructuring costs, Transcontinental’s
results for the second quarter ended April 30, 2009 were better
than the previous quarter. Adjusted operating income before
amortization for the second quarter 2009 was down 10% compared
to a decline of 29% in the first quarter 2009. The Corporation
continued to carry out its major rationalization plan implemented
in the United States in November 2008 and extended to all
its other operations in February 2009. These measures, which
included the elimination of 1,500 jobs, limited the negative
impact of the recession. The full effect of the measures,
combined with beginning two new contracts for Rogers Communications,
printing the San Francisco Chronicle in summer 2009,
and promising developments in marketing communications activities
will put Transcontinental in a better position for the second
half of its fiscal year. With financing arrangements totalling
$625 million in place since February, management has
the resources required to pursue its business plan and projects.
“In the current context, excluding unusual items,
these are encouraging results that show an improvement over
the first quarter,” said François Olivier, President
and CEO of Transcontinental. “We reacted quickly and
adjusted our production capacity and costs to the demand in
each of our markets. I’d like to thank our employees
for their exceptional support of our rationalization efforts
and for the new and innovative ways they have found to do
their work. After three quarters of adjustment and refocusing,
and assuming no further deterioration in the present economic
situation and the execution of our rationalization plan, we
are confident that our profitability will continue to improve
in coming quarters.
“In a more general way,” noted Mr. Olivier,
“we will continue to benefit from our niche strategy,
our diversified and balanced customer base, the start of new
contracts and our financial resources. The year 2009 will
be one of transition for Transcontinental and we will come
out of it stronger and better positioned in each of our markets
to take advantage of the economic recovery.”
Financial Highlights
In the second quarter 2009, Transcontinental recorded
consolidated revenues of $563.4 million, down 5% from
$595.1 million in the second quarter of 2008. Adjusted
operating income before amortization was down 10%, from $89.0 million
to $80.5 million. The decline is mainly due to a major
decrease in the volume of direct mail activities in the United
States and, to a lesser extent, to the effects of the recession
on some printing and publishing activities. Excluding the
negative impact of the lower volume of direct mail activities
in the United States, consolidated revenues would have declined
2% and adjusted operating income before amortization would
have declined 5%. The decrease was mitigated by the positive
contribution of acquisitions, the positive impact of paper
on revenues and the positive fluctuations in the exchange
rate between the Canadian dollar and its U.S. and Mexican
counterparts, combined with growth in door-to-door distribution
activities, in the publishing of educational materials and
in digital and one-to-one marketing communication products.
Adjusted net income, which does not take unusual items into
account, declined 11%, from $34.1 million to $30.2 million;
on a per-share basis, adjusted net income decreased from $0.42
to $0.37.
Net income went from $36.9 million in the second quarter
of 2008 to a loss of $144.3 million in 2009. The decrease
is mainly due to impairment of intangible assets and goodwill
write-off, principally related to commercial printing activities,
totalling $169 million, non-cash items having no effect
on cash and cash flow from operations. Net income was also
reduced by restructuring costs and asset impairment totalling
$27.5 million, stemming from rationalization measures.
On a per-share-basis, net income went from $0.45 to a loss
of $1.79.
In the first six months of fiscal 2009, consolidated revenue
decreased 2%, from $1.19 billion to $1.17 billion,
while adjusted operating income before amortization decreased
19%, from $171.4 million to $138.8 million. Net
income went from $71 million in the first half of 2008
to a loss of $150,7 million in 2009; on a per-share basis,
net income declined from $0.86 to a loss of $1.87. Adjusted
net income, which does not take into account unusual items
related to asset impairment, restructuring costs and goodwill
write-off, was down 28%, from $62.5 million to $45.3 million;
on a per-share basis, adjusted net income declined from $0.76
to $0.56.
As at April 30, 2009, the Corporation’s net funded
debt to total capitalization ratio was 49%, in the high end
of the target range of 35% - 50% set by management.
For more detailed financial information, please see Management’s
Discussion and Analysis for the Second Quarter Ended April
30, 2009, at www.transcontinental.com, under “Investors.”
Operating Highlights
Here are the main operating highlights for the second
quarter 2009.
- The Corporation continued to carry out its major rationalization
plan to keep Transcontinental financially solid, and modified
production capacity in each of its markets to meet demand.
To date, the equivalent of 1,400 positions have been cut—more
than half of them in the United States; in addition, five
print titles have ceased publication and four printing plants
have been merged or consolidated. A set of other measures
have also been implemented throughout the organization,
ranging from a hiring freeze to unpaid leave and shorter
work weeks. The savings from the restructuring should exceed
the targets set in the first quarter and will amount to
about $100 million on an annual basis, $75 million
of that in the current fiscal year. The full impact of these
measures will be felt starting in the second half of this
fiscal year. Lastly, the plant in Fairborn, Ohio, which
produces flyers for regional retailers, was sold following
a review of the Corporation’s business objectives
in this segment in the United States.
- In early 2009, the two new contracts with Rogers Communications
took effect: one is an exclusive six-year contract to print
all of Rogers’ magazines; the second, also for six
years, is to produce and print its marketing communications
products. These two major gains add to the full impact of
the Shoppers Drug Mart-Pharmaprix contract in 2009 and the
printing of the San Francisco Chronicle daily,
which will start in the summer of 2009.
- The mission of the new Marketing Communications sector,
created in November 2008, is to develop new avenues of growth
centred on new communications platforms, one-to-one marketing
and an integrated service offering. In the second quarter,
this sector signed several contracts with major brands such
as Reader’s Digest Canada and Purolator Courier. It
also received seven 2008 Pearl Awards, which recognize excellence
in the custom communications industry.
- In the second quarter, the Media sector continued to
extend and enrich its digital services offering through
various initiatives: the launch of icimamaison.ca,
a real estate selling site; the relaunch of publisac.ca;
the launch of online versions for the two finance magazines
Investment Executive and Finance et Investissement,
which will also soon release daily updates for BlackBerries
and the Apple iPhone. Also, traffic on weblocal.ca,
Transcontinental’s Canada-wide search site for finding
and rating local businesses now exceeds two million unique
visitors per month. Revenue generated by digital services
grew more than 30% in the first half compared to the same
period a year ago. In the second half of fiscal 2009, the
Media sector will continue to expand its digital services
offering while completing its rationalization measures.
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.
Reconciliation of non-GAAP financial
measures
(unaudited)
Financing Activities
In an environment in which credit is tight and costly,
Transcontinental has successfully completed several refinancing
and financing arrangements since the end of the first quarter.
In the second quarter, the Corporation announced it had completed
a long-term private placement offering of $100 million
in unsecured debentures underwritten by the Solidarity Fund
QFL, a Quebec-based development capital company. It also announced
the extension, to August 2010, of its $300-million securitization
of receivables program set up in 2001. Since the end of the
second quarter, the Corporation has renewed credit facilities
of $125 million for one year with its bank syndicate,
and arranged $100 million in financing through a five-year
loan from the Caisse de dépôt et placement du
Québec.
The commitment of this $625 million in various financings
reflects the financial market’s confidence in Transcontinental.
Corporate Affairs
On March 12, 2009, Transcontinental announced the
appointment of Christian Trudeau as President of its Marketing
Communications sector and as a member of the Corporation’s
Executive Committee. The purpose of the new sector is to deliver
integrated marketing solutions to Transcontinental’s
customers by focusing on the development of new one-to-one
advertising services, new communication platforms and the
production of marketing communications products. Mr. Trudeau
assumed his duties on April 9. From 2004, he was President
and Chief Operating Officer of Centria Commerce, an e-commerce
company. Previously, Mr. Trudeau was President and Chief Operating
Officer of BCE Emergis, a North American leader in e-commerce,
and he also held senior executive positions at Bell Canada
and the Montréal Exchange.
Dividend
At its June 11, 2009 meeting, the Corporation’s
Board of Directors maintained the quarterly dividend of $0.08
per share on Class A Subordinate Voting Shares and Class B
Shares. These dividends are payable on July 24, 2009 to shareholders
of record at the close of business on July 6, 2009. 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
Web site, which will be archived for 30 days. For Media requests
for information or interviews, please contact Maxim Labrie,
Media Relations, at 514-954-4176.
Profile
Transcontinental provides printing, publishing and
marketing services that deliver exceptional value to its clients
and provide a unique, integrated platform for them to reach
and retain their target audiences. Transcontinental is the
largest printer in Canada and in Mexico, and sixth-largest
in North America. It is also the country’s leading publisher
of consumer magazines and French-language educational resources,
the second-largest community newspaper publisher, and its
digital platform delivers unique content through more than
120 Web sites. Its Marketing Communications Sector provides
advertising services and marketing products using new communications
platforms supported by database analytics, premedia, email
marketing, and custom communications. Transcontinental is
a growing company with a culture of continuous improvement
and financial discipline, whose values, including respect,
innovation and integrity, are central to its operation.
Transcontinental (TSX: TCL.A, TCL.B) has approximately 13,500
employees in Canada, the United States and Mexico, and reported
revenue of C$2.4 billion in 2008. 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
forwardlooking 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, availability of Capital, energy costs, increased
competition, the Corporation’s capacity to implement
its strategic plan and rationalization plan, and make and
integrate acquisitions into its activities. The risks, uncertainties
and other factors that could influence actual results are
described in the Management’s Discussion and Analysis
and Annual Information Form.
The forward-looking information in this release is based
on current expectations and information available as of June
11, 2009. The Corporation’s management disclaims any
intention or obligation to update or revise any forward-looking
statements unless otherwise required by the Securities Authorities.
- 30 -
For information:
Media
Maxim Labrie
Media Relations
Transcontinental Inc.
Telephone: 514 954-4176
maxim.labrie@transcontinental.ca
Financial Community
Jennifer F. McCaughey
Director, Investor Relations
Transcontinental Inc.
Telephone: 514 954 2821
jennifer.mccaughey@transcontinental.ca |
