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- Increase of 5% in adjusted operating income before
amortization despite a 9% decrease in consolidated revenue
compared to third quarter of 2008.
- Before the negative impact of reduced direct
mail activities in the United States, adjusted operating
income before amortization would have increased 10% and
consolidated revenue would have decreased 5%.
- Increase of 4% in adjusted net income, which
excludes unusual items such as restructuring costs; on a
per-share basis, adjusted net income increased from $0.37
to $0.39.
- Decrease of 15% in net income, primarily due
to unusual items; on a per-share basis, net income decreased
from $0.37 to $0.31.
- Adoption of a new capital structure indicator,
the ratio of indebtedness (including the securitization
program) to adjusted operating income before amortization.
The objective is to maintain this ratio within a range of
2.00 to 2.50 and we expect to achieve this by the end of
fiscal 2011. As at July 31, 2009, the ratio was 3.18.
- Concluded financing agreements totalling $135 million
and obtained increase of $25 million in Corporation’s
credit facilities.
- Started printing the San Francisco Chronicle
on July 6 as scheduled and gained new newspaper printing
customers in Quebec.
- Launched mobile versions of three business and
financial publications.
- Corporate Knights magazine includes
Transcontinental in its annual ranking of the Best 50 Corporate
Citizens for its environmental efforts.
Montreal, September 10, 2009 – Before unusual items
and despite the difficult economic situation, Transcontinental’s
profitability in the third quarter increased due to its rationalization
program and the daily efforts by employees across the organization
to improve efficiency and reduce costs. Furthermore, the full
impact of the new contracts announced previously, including
contracts to print the Rogers Communications’ magazines
and direct marketing products, the startup of printing of
the San Francisco Chronicle daily paper, the customers
gained in flyer and newspaper printing, the excellent performance
in educational book publishing, and the success of its integrated
service offering which combines new digital platforms with
print, partially offset the decrease in revenues stemming
from the recession.
“What is especially satisfying in our third-quarter
results is the improved profitability over the two previous
quarters and compared to the solid third quarter of 2008,”
said François Olivier, President and Chief Executive
Officer of Transcontinental. “For the first time this
year, our financial results were better than last year’s.
We’re beginning to see the full impact of the tough
decisions the recession obliged us to make from the start
of the fiscal year. I’d like to thank our employees
for their commitment to their company, which has had them
working on many efficiency improvement and cost-savings initiatives.
Thanks to everyone’s efforts, Transcontinental is now
a more flexible organization and in a position to keep developing
its integrated service offering, which is unique in Canada.
Our enviable financial position, strengthened by two new loans
and an increase in our credit facilities in the third quarter,
means that we can continue to invest wisely and prudently
in our future.”
“The market is still fragile,” noted Mr. Olivier,
“but we are headed in the right direction. I am certain
that we will come out of the recession stronger and in a good
position to take advantage of the economic recovery.”
The Corporation has decided to now use the ratio of net
indebtedness (including the securitization program) to adjusted
operating income before amortization as its primary indicator
of financial leverage. In addition, Transcontinental has set
the objective of maintaining this ratio within a target range
of 2.00 to 2.50 and expects to achieve that by the end of
fiscal 2011. As at July 31, 2009, the ratio was 3.18. Furthermore,
as at July 31, 2009, the Corporation’s net indebtednessto
total capitalization ratio was 49%, within the 35% - 50% range
set by management.
Financial Highlights
In the third quarter ended July 31, 2009, Transcontinental
recorded consolidated revenue of $533.1 million, down
9% from the $584.9 million recorded in the same quarter
in 2008. Adjusted operating income before amortization increased
5%, from $81.8 million in 2008 to $86.2 million
in 2009. The decrease in revenue is mainly due to the recession,
which led to a decline in the volume of direct mail activities
in the United States and in marketing product printing activities,
as well as advertising revenues in magazines and newspapers.
Net income decreased 15%, from $29.9 million to $25.3 million,
due to the unusual item of restructuring costs; on a per-share
basis, net income decreased from $0.37 to $0.31. Adjusted
net income, which excludes unusual items, rose 4%, from $29.9 million
to $31.2 million; on a per-share basis, adjusted net
income increased from $0.37 to $0.39.
A pre-tax amount of $7.5 million ($5.9 million
after tax) was charged to the third quarter with respect to
the consolidation of direct mail operations in the United
States and the rationalization program announced in February
2009. In the first three quarters of fiscal 2009, these measures
generated cost savings of about $50 million. The goal
for fiscal 2009 is to save more than $75 million and,
on an annualized basis, more than $100 million.
In the first nine months of fiscal 2009, consolidated revenue
amounted to $1.701 billion, down 4% from $1.776 billion
in 2008. Adjusted operating income before amortization decreased
11%, from $253.2 million to $225 million. Net income
went from $100.9 million in 2008 to a loss of $125.4 million
in 2009, largely due to impairment of intangible assets and
the write-off of goodwill related primarily to marketing product
printing activities, and to the restructuring costs related
to the rationalization program. On a per-share basis, net
income went from $1.23 to a loss of $1.55.
Adjusted net income, which excludes impairment of assets,
restructuring costs and unusual adjustments to income taxes,
decreased 17%, from $92.4 million to $76.5 million;
on a per-share basis, it was down 16%, from $1.13 to $0.95.
It is important to note that adjusted earnings per share
grew steadily during fiscal 2009, from $0.19 in the first
quarter to $0.37 in the second and $0.39 in the third. This
measurement is a good indicator of operating performance in
the first nine months of fiscal 2009.
For more detailed financial information, please see Management’s
Discussion and Analysis for the Third Quarter Ended July 31,
2009, at www.transcontinental.com, under “Investors.”
Operating Highlights
The main operating highlights for the third quarter
of 2009 illustrate Transcontinental’s strategy to build
the new and strengthen its promising traditional operations.
- Despite the impact of the decrease in advertising revenues
on its magazines and newspapers, results in the Media sector
were stable compared to the third quarter of 2008. Door-to-door
distribution activities and educational book publishing
contributed to this stability by generating higher revenues
than in 2008. While its brands continue to reap awards and
recognition for both their print and Internet versions,
Media continued to implement its digital strategy. This
included the launch of a new interactive and user-friendly
website for magazine Coup de pouce, as well as
introducing mobile applications for the financial and business
news of Les Affaires, Finances et Investissement,
and Investment Executive. Since the start of fiscal
2009, the Corporation has invested about six million dollars
on developing the Media sector, mainly its digital platforms.
The sector’s network of more than 120 sites receives
more than six million unique visitors per month.
- The new Marketing Communications Sector has allowed Transcontinental
increase its offer to existing customers by providing products
and services that are ideally suited to their new needs
and to new consumer behaviours. The finest achievements
in this area include additional business with major names
such as Shoppers Drug Mart-Pharmaprix, Zellers and Purolator.
Recent strategic acquisitions have greatly contributed to
the increase in sales, namely Conversys (e-flyer), ThinData
(permission-based email marketing), Redwood Custom Communications
(custom communications) and Rastar (data-driven direct marketing
solutions and variable-data digital printing).
- Excluding the effects of the rationalization of direct
mail operations in the United States, revenues in the Printing
sector were down slightly and profitability was basically
stable. The third quarter was marked by the startup of printing
of the San Francisco Chronicle, which took place
as scheduled. The new printing plant in Fremont, California
where the daily paper is being printed is one of the first
in North America to be built to the standards of Leadership
in Energy and Environmental Design (LEED). We also gained
customers in the flyer and newspaper printing operations,
including two leading groups of weekly papers in the Quebec
City area: Le Canada français and L’Avantage.
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
For third quarter ended July 31,
(unaudited)
Sustainable Development
Transcontinental has set up a task force whose mandate
is to produce an initial report on sustainable development
within Transcontinental. Sustainable development includes
social development, economic development and environmental
protection. The report will be written to meet the standards
of the Global Reporting Initiative, a respected reference
which sets out the methodology for this type of report.
In addition, Transcontinental was again listed in the select
group of the Best 50 Corporate Citizens in 2009, chosen by
the magazine Corporate Knights. The magazine defines
corporate citizens as ones who “do the best job of keeping
their end of the social contract, while innovating solutions
for the problems that will determine whether our civilizations
succeeds or fails.”Corporate Affairs
On July 28, 2009, Transcontinental announced that it had
concluded two new financing arrangements for a total of $135 million.
This included a five-year loan of $50 million from the
Société générale de financement
du Québec, and a six-year loan of €55.6 million
($85.7 million) with HypoVereinsbank, a major European
bank, to be used to purchase production equipment over the
next two years.
Transcontinental also announced that it had added $25 million
to the $125 million one-year credit facilities arranged
with its bank syndicate on May 5, 2009. Transcontinental has
thus obtained additional flexibility in managing its working
capital and capital expenditures, or to meet any other specific
need.
Dividend
At its September 10, 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 October 23, 2009 to
shareholders of record at the close of business on October
5, 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 13,000
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 September
10, 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.
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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
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