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- Growth of 18% in adjusted operating income before
amortization compared to second quarter 2009 despite 4%
decrease in revenues; on a comparable basis, revenues grew
2%.
- Growth of 14% in adjusted net income applicable
to participating shares; on a per-share basis, increase
from $0.37 to $0.42.
- Increase of $211.3 million in net income applicable
to participating shares, from a loss of $144.3 million to
a gain of $67 million; on a per-participating share basis,
from a loss of $1.79 to a gain of $0.83.
- Acquisition of LIPSO, a Canadian leader in mobile
solutions, enhancing the Corporation’s marketing communications
offering and reflecting growth strategy for new media and
digital platforms.
- As part of the strategic development of solutions
offered to local communities in Canada, launched the pre-shopping
websites dealstreet.ca and publisac.ca, an online reputation
management tool for businesses on weblocal.ca, and four
community papers in Quebec.
- Continued to implement a hybrid and Canada-wide
newspaper and flyer printing platform that will become fully
operational before the end of 2010.
- Concluded the sale of almost all of Transcontinental’s
direct mail assets in the United States to IWCO Direct,
for net proceeds of $105.7 million.
- Substantially improved the Corporation’s
financial position with a ratio of net indebtedness (including
the securitization program) to adjusted operating income
before amortization of 2.08 as at April 30, 2010, versus
2.40 as at January 31, 2010 and 2.59 as at October 31, 2009.
Montreal, June 8, 2010 – During the second quarter
of fiscal 2010, Transcontinental resumed organic growth in
revenues and generated, for the fourth quarter in a row, an
increase in adjusted operating income before amortization.
The printing of the San Francisco Chronicle daily,
the contribution of the Marketing Communications Sector and
the stabilization of the market in certain traditional segments
all made a specific contribution to organic growth in revenues.
The solid advances in operating income stem from the full
impact of the rationalization measures implemented in fiscal
2009 and continuous improvement of operational efficiency.
Transcontinental also strengthened its financial position,
which enabled it to invest in the digital development of its
Media Sector and its marketing communication operations, as
shown by the acquisition of LIPSO, a Canadian leader in mobile
solutions.
“I am very satisfied with our second quarter results
and the performance of the past four quarters, which have
all been higher than the previous comparable quarters,”
said François Olivier, President and Chief Executive
Officer of Transcontinental. “We are systematically
building the new Transcontinental by accompanying our customers
with marketing strategies based on advertising personalization
and the new communication platforms, while strengthening our
traditional core business, which still provides extremely
effective marketing tools. This strategy, combined with our
employees’ efforts to innovate and improve every day,
will allow us to take full advantage of the opportunities
that are opening up in our niches.”
Transcontinental continued to improve its financial position
during the quarter, with a ratio of net indebtedness (including
the securitization program) to adjusted operating income before
amortization of 2.08 at April 30, 2010, versus 2.40 as at
January 31, 2010 and 2.59 as at October 31, 2009.
Financial Highlights
In the second quarter of 2010, Transcontinental
generated consolidated revenues of $510.0 million, down 4%
from $531.1 million in the same quarter in 2009. Excluding
divestitures of publications, plant closures, the paper effect
and the exchange rate effect, revenues were up 2%.
Adjusted operating income before amortization, which excludes
unusual items, rose 18%, from $77 million to $91 million.
The increase stems mainly from the full impact of the rationalization
measures implemented in fiscal 2009, improved equipment productivity,
and the contribution from printing the San Francisco Chronicle.
Net income applicable to participating shares was up $211.3
million, from a loss of $144.3 million in second quarter 2009
to a gain of $67.0 million in 2010. This increase is primarily
due to impairment of goodwill and intangible assets and impairment
of assets and restructuring costs in second quarter 2009,
combined with a gain on the sale of almost all the assets
of the Direct Mail Group in the United States on April 1,
2010 and the increase in adjusted operating income in 2010.
On a per-participating share basis, net income applicable
to participating shares went from a loss of $1.79 to a gain
of $0.83.
Adjusted net income applicable to participating shares was
up 14%, from $30.0 million in 2009 to $34.3 million in 2010.
On a per-participating share basis, adjusted net income applicable
to participating shares also increased 14%, from $0.37 to
$0.42.
Lastly, adjusted operating income margin before amortization
was up appreciably, from 14.5% in 2009 to 17.8% in 2010. The
increase is mainly due to the full impact of the rationalization
measures implemented in 2009 and continuous improvement in
operational efficiency.
In the first six months of fiscal 2010, consolidated revenues
were down 7%, from $1.10 billion to $1.02 billion, while adjusted
operating income before amortization grew 26%, from $136.2
million to $172.1 million. Net income applicable to participating
shares went from a loss of $150.7 million in the first half
of 2009 to a gain of $93.2 million in the same period in 2010;
on a per-participating share basis, net income applicable
to participating shares went from a loss of $1.87 to a gain
of $1.16. Adjusted net income applicable to participating
shares rose 24%, from $49.3 million to $61.2 million; on a
per-participating share basis, adjusted net income applicable
to participating shares also rose 25%, from $0.61 to $0.76.
For more detailed financial information, please see Management’s
Discussion and Analysis for the Second Quarter ended April
30, 2010 at www.transcontinental.com, under “Investors.”
Operating Highlights
Below are the main operating highlights to date.
- In response to growing demand from its customers, Transcontinental
enhanced its marketing communications solutions that use
new media and digital platforms by acquiring LIPSO Systems
on April 30, 2010. LIPSO is a Canadian leader in aggregated
mobile solutions encompassing connectivity, transaction
management and applications development. This acquisition
allows Transcontinental to add several new key services
to its marketing communications offering, including cell
phone bar-code reading, electronic couponing for retail
sales and electronic ticketing for transportation and entertainment.
- In the second quarter, the Media Sector furthered the
strategic development of its solutions for local communities
in Canada by officially launching the pre-shopping websites
dealstreet.ca and publisac.ca, which distribute thousands
of geographically specific retail discounts to consumers
every day. The business search site, weblocal.ca, also launched
the first online reputation management tool for advertisers
who subscribe to its services.
- Providing solutions for local communities is an important
area of growth for Transcontinental. Thus, four new community
papers and their websites were launched in Quebec: Rive-Sud
Express.ca, which serves Longueuil, Brossard and Saint-Lambert
on Montreal’s South Shore; Point de vue Sainte-Agathe
and Point de vue Mont-Tremblant, in the Laurentians;
and Abitibi Express in Val-d’Or and Amos
in Abitibi. These launches fulfill consumer demand for Transcontinental
to introduce a local and regional paper that would include,
among other things, input from “citizen contributors.”
These new papers, combined with new digital services, will
also bring the benefits of enhanced media tools to local
businesses and their respective markets.
- In print media, Transcontinental launched the first business-oriented
French-language bookzine in Canada: PREMIUM
– l’intelligence en affaires. This high-end
bi-monthly publication is aimed at business executives and
combines the best of book and magazine. It rounds out Transcontinental’s
portfolio of business publications.
- With its innovations and state-of-the-art equipment,
Transcontinental is increasing its market share in newspaper
and flyer printing. In recent months several new customers
have been added to its Canada-wide flyer printing and distribution
network. In the United States, the new plant in Fremont,
California, where printing of the San Francisco Chronicle
is running smoothly, has won a new customer, a publisher
of community newspapers in the San Jose area; the plant
started printing one of these newspapers in April. It is
also business growth that is driving the development of
a hybrid platform to print newspapers and flyers being set
up under a $1.7 billion, 18-year contract with The Globe
and Mail, a first in Canada. The platform will be operational
before the end of 2010.
- After releasing its first Sustainability Report based
on Global Reporting Initiative (GRI) standards in February
2010, Transcontinental continued to affirm its leadership
in sustainable development. In the second quarter 2010,
its Constructo business unit launched voirvert.ca, the first
French-language website dedicated entirely to sustainable
and environmental building practices in Quebec. This site
is specifically designed to meet the needs of professionals
and managers working in construction. Transcontinental’s
commitment to sustainable development also earned it the
annual Best of Show award for the most environmentally progressive
printing company overall. It received this honour, along
with the Gold for “Most Environmentally Progressive
Printer in Canada,” 500+ employees, at the fifth annual
Environmental Printing Awards organized by PrintAction
magazine. Lastly, in the wake of the recent historic agreement
to conserve the boreal forest, Transcontinental’s
paper purchasing policy was recognized for its major contribution
to preservation efforts. The boreal forest agreement, signed
by 21 major forest companies and nine environmental groups,
seeks to preserve a large area of the boreal forest, to
protect the endangered woodland caribou, and to apply the
highest environmental standards to forest management.
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.
(Click table to enlarge)
Corporate Affairs
On April 1, 2010, having met U.S. regulatory requirements,
Transcontinental announced that it had concluded the sale
of almost all of its direct mail operations in the United
States to IWCO Direct, a U.S. company headquartered in Minnesota.
The agreement to sell the assets was announced on February
10, 2010, subject to regulators’ approval. The facilities
are in Warminster and Hamburg in Pennsylvania, in Fort Worth,
Texas, and in Downey, California. The transaction resulted
in net proceeds of $105.7 million. The sale reflects Management’s
decision to focus on the Corporation’s most promising
core business operations and on the development of digital
products and services. Transcontinental is still the leader
in direct marketing in Canada.
Dividend
At its June 8, 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. These dividends are payable on July 22,
2010 to participating shareholders of record at the close
of business on July 2, 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 $0.4207 per share on cumulative 5-year
rate reset first preferred shares, series D. These dividends
are payable on July 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 Nessa Prendergast, Director, Media Relations,
at 514-954-2809.
Profile
Transcontinental creates marketing products and
services that allow businesses to attract, reach and retain
their target customers. The Corporation is the largest printer
in Canada and Mexico, and fourth-largest in North America.
As the leading publisher of consumer magazines and French-language
educational resources, the second-largest community newspaper
publisher, and with its digital platforms that deliver unique
content through more than 120 websites, it is also one of
Canada’s leading media groups. In addition, Transcontinental
offers marketing products and services that use new communications
platforms supported by database analytics, premedia, e-flyers,
email marketing, custom communications and mobile solutions.
Transcontinental (TSX: TCL.A, TCL.B, TCL.PR.D) has 11,000
employees in Canada, the United States and Mexico, and reported
revenues 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 June
8, 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
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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