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- Growth of 41% in adjusted operating income before amortization despite 11%
decrease in revenues or 2.7% on a comparable basis.
- Growth of 68% in adjusted net income applicable to participating shares;
on a per-participating share basis, adjusted net income applicable to participating
shares rose 63%, from $0.19 to $0.31.
- Substantial growth in net income applicable to participating shares, from
a loss of $6.4 million to a gain of $26.2 million; on a per-participating
share basis, net income applicable to participating shares went from a loss
of $0.08 to a gain of $0.32.
- Announcement by the Corporation of a 12.5% increase in its quarterly dividend,
to $0.09 per participating share.
- New digital communication platforms: upcoming launch of pre-shopping site
dealstreet.ca/publisac.ca and online business reputation management tool on
weblocal.ca.
- Continued to work on setting up hybrid newspaper and flyer printing platform
in Transcontinental’s plants across Canada, to be fully operational
by late 2010.
- Corporation tables first Sustainability Report.
- As at January 31, 2010, the ratio of net indebtedness (including the securitization
program) to adjusted operating income before amortization was 2.40 compared
to 3.25 as at January 31, 2009.
- Agreement in February 2010 to sell substantially all of the assets of Direct
Mail Group in the U.S. to IWCO Direct, headquartered in Minnesota, for net
proceeds of more than US$100.0 million.
Montreal, March 17, 2010 –Transcontinental’s profitability was
up substantially in first quarter 2010 compared to first quarter 2009, for the
third quarter in a row. Adjusted operating income before amortization rose 5%
and 15% in the third and fourth quarters of 2009, and 41% in the first quarter
of 2010. This growth is directly related to the measures implemented in 2009
to rationalize costs and improve efficiency, the reorganization and divestiture
of certain operations and, to a certain extent, the stabilization in customer
advertising spending. Revenues were down 11% in the quarter, due to the negative
impact of the exchange rate, the divestiture or closure of plants and publications,
and paper prices. Excluding these latter items and thanks to the contribution
of the two contracts with Rogers Communications, which took effect in 2009,
and the contract to print the San Francisco Chronicle which started in
July 2009, revenues were down only 2.7%.
“Our first quarter results show a marked increase in our profitability
compared to the first quarter of 2009, and this is the third consecutive quarter
in which it has improved,” said François Olivier, President and
Chief Executive Officer. “I attribute our strong performance to four main
factors: continued customer confidence in our products and services, the reorganization
and sale of some of our operations, the rationalization plan that we quickly
implemented last year, and the concerted efforts by our employees to develop
greater efficiency. Furthermore, we kept investing to strengthen promising traditional
areas as well as our new digital communication platforms and to develop new
marketing services to meet the emerging needs of our customers. Which all helps
to build the new Transcontinental day by day!
“Transcontinental is now a more flexible organization, and one that is
even more focused on its strategic assets and priorities,” said Mr. Olivier.
“With our enviable financial situation, strong brands, unique approach
to combining print with digital, and investments, we will be able to keep providing
our customers with custom and turnkey solutions, and take full advantage of
opportunities as they arise in our markets.”
As at January 31, 2010, the ratio of net indebtedness (including the securitization
program) to adjusted operating income before amortization was 2.40, versus 3.25
as at January 31, 2009, due to the preferred share placement, an increase in
adjusted operating income before amortization, and the rise of the Canadian
versus the U.S. dollar. Furthermore, the Corporation has now achieved its objective,
set in fiscal 2009, of maintaining this ratio within a target range of 2.00
to 2.50. Note that in the first quarter, the Corporation repaid and cancelled
before maturity credit facilities of $150 million arranged with its banking
syndicate in fiscal 2009.
Financial Highlights
In the first quarter ended January 31, 2010, Transcontinental recorded consolidated
revenues of $559.3 million, compared to $625.4 million in the first quarter
2009, down 11%. The decrease stems mainly from an unfavourable exchange rate
effect of $20.5 million, the divestiture or closure of plants and publications,
net of acquisitions, which accounted for $18.2 million, and the decline in paper
prices which had a negative impact of $10.4 million on revenues. Excluding the
divestitures or closures of publications and plants, the impact of the exchange
rate and paper prices, and the acquisitions in fiscal 2009, the decline in revenues
was only 2.7%.
Adjusted operating income before amortization rose from $58.3 million to $82.4
million, up a significant 41%, mainly due to the impact of the rationalization
measures implemented in 2009 to combat the recession.
Net income applicable to participating shares rose substantially, from a loss
of $6.4 million in first quarter 2009 to a gain of $26.2 million; on a per-share
basis, it went from a loss of $0.08 to a gain of $0.32. Adjusted net income
applicable to participating shares, which does not take into account unusual
items related to asset impairment, restructuring costs and income tax adjustments,
also grew substantially, from $15.1 million to $25.3 million; on a per-share
basis, net income applicable to participating shares rose from $0.19 to $0.31.
For more detailed financial information, please see Management’s Discussion
and Analysis for the First Quarter ended January 31, 2010 at www.transcontinental.com,
under “Investors.”
Operating Highlights
Below are the main operating highlights to date.
- Transcontinental’s growth is largely based on its ability to provide
its customers with advertising personalization services and digital communication
platforms that meet their new business needs. This is the exact focus of the
Marketing Communications Sector, which was created early in fiscal 2009. The
forward momentum of Marketing Communications has continued in the first quarter
with the signing of several promising agreements with major retail brands
in Canada. These agreements cover our advertising personalization services,
which include personalized emails, data analytics and creation of custom content.
Also, in March 2010, we launch the pre-shopping platform dealstreet.ca for
English-speaking consumers, and publisac.ca for French-speaking consumers,
in concert with the Publisac team. This solution allows our retail clients
to optimize the return on their advertising dollar and consumers to compare
and choose the best deals on the Internet.
- The digital development of brands in the Media Sector is going well. For
our magazines, for instance, revenues related to the Internet and wireless
grew over 30% in the first quarter. In recent developments, weblocal.ca now
offers local businesses the first online reputation management tool in Canada.
This application will help companies probe, gather and analyze information
about themselves on the Internet and in social networks, and adjust their
marketing strategy accordingly.
- As a printer, Transcontinental has always stood out for its manufacturing
efficiency, technological innovation and comprehensive offering. Its technological
superiority attracts major new clients year after year. Customers include
Shoppers Drug Mart-Pharmaprix, Rogers Communications and the San Francisco
Chronicle, now being printed at our new plant in Fremont, California.
In this context, in the first quarter Transcontinental started to implement
a unique hybrid newspaper and flyer printing platform through its network
of plants across Canada. This hybrid platform, a first in Canada, comes under
an 18-year and $1.7 billion contract with The Globe and Mail that will
start in early fiscal 2011. It will make it possible for The Globe and
Mail to print on glossy paper with colour on every page, and retail clients
will have access to the latest printing technology. This highly promising
project will require a total investment of about $175 million.
- At its annual meeting of shareholders on February 18, 2010, Transcontinental
officially tabled its first Sustainability Report based on the Global Reporting
Initiative (GRI), an international standard for sustainability methodology.
Already recognized as a leader in environmental protection and as an organization
that is involved in the communities in which it operates, Transcontinental
plans to broaden its leadership to include sustainable development, which
is both a continuation and expansion of the Corporation’s commitment
to the environment. The report is available on the home page of the Transcontinental
website.
- In light of the major structural changes in our industry and the inevitable
consolidation underway in a number of segments, on February 10, 2010, Transcontinental
announced that it had signed an agreement to sell most of its direct mail
assets in the United States to IWCO Direct, a company headquartered in Minnesota,
USA. The transaction, which must be approved by regulators, will generate
net proceeds of more than US$100.0 million and is expected to close in our
second quarter. This decision reflects management’s plan to focus its
energies on core operations and to emphasize the development of its digital
products and services. Note that Transcontinental remains the leader in direct
marketing in Canada.
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.
Dividend
At its March 17, 2010 meeting, the Corporation’s Board of Directors declared
a quarterly dividend of $0.09 per participating share on Class A Subordinate
Voting Shares and Class B shares which represents an increase of 12.5% over
the dividend paid in the previous quarter. These dividends are payable on April
30, 2010 to participating shareholders of record at the close of business on
April 12, 2010. On an annual basis, this represents a dividend of $0.36 per
participating share.
Furthermore, at the same meeting, the Board also declared a quarterly dividend
of $0.4161 per share on cumulative 5-year rate reset first preferred shares,
series D. These dividends are payable on April 15, 2010. On an annual basis,
this represents a dividend of $1.6875 per preferred 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 the
Corporation’s Web site, which will then be archived for 30 days. For media
requests for information or interviews, please contact Sylvain Morissette, Vice
President, Corporate Communications of Transcontinental, at 514-954-4007.
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 fourth-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, e-flyers, email marketing, and custom communications. Transcontinental
is a company that seeks growth 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, TCL.PR.D) has approximately 12,500 employees
in Canada, the United States and Mexico, and reported revenue of C$2.4 billion
in 2009. 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, structural changes in its industries, exchange
rate, availability of capital, energy costs, increased competition, as well
as the Corporation’s capacity to implement its strategic plan and rationalization
plan, engage in strategic transactions 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 March 17, 2010. 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
Sylvain Morissette
Vice-President, Corporate Communications
Transcontinental Inc.
Telephone: 514 954-4007
sylvain.morissette@transcontinental.ca
Financial Community
Jennifer F. McCaughey
Director, Investor Relations
Transcontinental Inc.
Telephone: 514 954 2821
jennifer.mccaughey@transcontinental.ca
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