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Transcontinental’s Third
Quarter: All Financial Indicators Up, Coupled With Organic
Growth in Revenues and Profits
- For second consecutive quarter, positive organic
growth in revenues, up 3.2% over 2009. Slight 0.8% decrease
in consolidated revenues, mainly due to asset disposals.
- Increase of 9.2% in adjusted operating income
before amortization.
- Significant increase in adjusted operating income
margin before amortization, from 16.4% in 2009 to 18.0%
in 2010.
- Increase of 10.3% in adjusted net income applicable
to participating shares; on a per-participating share basis,
it rose from $0.39 to $0.43.
- Increase of 14.2% in net income applicable to
participating shares; on a per-participating share basis,
it rose from $0.31 to $0.35.
- In integrated offering of local solutions for
communities in Canada, launch of three weekly papers in
Quebec, redesign of Publisac.ca
shopping portal and creation of Dealstreet.ca.
- In the development and marketing of mobile solutions,
agreements signed with the Toronto Transit Commission and
the Société de transport de Laval to provide
a text messaging service for riders.
- Following upon the July 2009 start-up of the
Fremont plant that prints the San Francisco Chronicle,
implementation of a Canada-wide hybrid platform to print
newspapers and retail flyers starting no later than early
fiscal 2011.
- For the seventh year, Corporate Knights ranks
Transcontinental as one of Canada’s Best 50 Corporate
Citizens for social and environmental responsibility.
- Continued improvement in the Corporation’s
financial position, with a ratio of net indebtedness (including
the securitization program) to adjusted operating income
before amortization of 1.85 as at July 31, 2010, compared
to 2.08 as at April 30, 2010 and 2.59 as at October 31,
2009.
Montreal, September 8, 2010 – For the fifth quarter
in a row, Transcontinental improved its operating income,
excluding unusual items, over the previous fiscal year. All
financial indicators were up, with positive growth in revenues
and profits. These excellent results stem primarily from the
Corporation’s diversified customer base of retailers,
advertisers and publishers; its leading position in each of
its niches; the success of its unique service offering which
combines new digital and print platforms; the rationalization
measures implemented in 2009; and the important contributions
from print contracts signed in recent years.
“I am very satisfied with the return to organic revenue
growth for our second quarter in a row and the fact that all
financial indicators were up in the third quarter of 2010
over the third quarter of 2009, which was, itself, higher
than that of 2008,” said François Olivier, President
and Chief Executive Officer of Transcontinental. “It
is encouraging to see that all three sectors contributed to
the organic growth in revenues, even as we continued to develop
our offering to accompany our customers in their new marketing
needs. I’d like to thank our employees for their commitment
to always serving our customers better and for their daily
efforts to improve efficiency.
“I am optimistic about the coming quarters, even though
the economic context is still unstable,” said Mr. Olivier.
“Our already enviable financial position should continue
to improve given the dual impact of our higher operating income
and, with the end of the major investments in print infrastructures,
the decrease in our capital expenditures. We will thus be
in an excellent position to make targeted strategic acquisitions
in new media and digital technology. We will also continue
to develop our offering to meet the growing demand from our
customers for custom marketing programs tied in with one-to-one
advertising and mobile technology. We will also continue to
identify possibilities for synergies across the Corporation,
notably by integrating our service offering and getting the
most out of our top-performing equipment.”
The Corporation continued to improve its financial position,
with a ratio of net indebtedness (including the securitization
program) to adjusted operating income before amortization
of 1.85 as at July 31, 2010, compared to 2.08 as at April
30, 2010 and 2.59 as at October 31, 2009.
Financial Highlights
In the third quarter ended July 31, 2010,
Transcontinental recorded consolidated revenues of $500.3
million compared to $504.4 million in the same quarter of
2009, down 0.8%. Excluding acquisitions, divestitures or closures
of plants and publications, the paper effect and the exchange
rate effect, revenues grew 3.2%. This is the second quarter
in a row in which Transcontinental has generated positive
organic growth in revenues.
Adjusted operating income before amortization grew 9.2%,
from $82.6 million in 2009 to $90.2 million in 2010, and operating
income margin rose from 16.4% to 18.0%. This dual increase
is mainly due to the impact of the rationalization measures
in 2009, to the contribution from new printing contracts,
and to the higher advertising spending by major retailers.
During the quarter Transcontinental also recorded positive
growth in adjusted operating income, which amounted to $3.2
million, up 6.0%, mainly due to the rationalization measures
in 2009 and enhanced operational efficiency across the organization.
Net income applicable to participating shares rose 14.2%,
from $25.3 million in 2009 to $28.9 million in 2010. The increase
stems mainly from the higher operating income, partially offset
by increased income taxes, a higher net loss related to discontinued
operations, and by dividends on Preferred Shares. On a per-share
basis, net income applicable to participating shares rose
from $0.31 to $0.35.
Adjusted net income applicable to participating shares was
up 8.2%, from $31.8 million in 2009 to $34.4 million. On a
per-share basis it rose from $0.39 to $0.43.
In the first nine months of fiscal 2010, consolidated
revenues amounted to $1.522 billion versus $1.600 billion
in 2009, down 4.9%. Excluding acquisitions, divestitures and
closures, the paper effect and exchange rates, organic growth
in revenues was 1.1%. Adjusted operating income before amortization
rose from $218.8 million in 2009 to $262.3 million in 2010,
up an appreciable 19.9%.
Net income applicable to participating shares went from
a net loss of $125.4 million in 2009 to a gain of $122.1 million
in 2010; on a per-share basis, it went from a net loss of
$1.55 to a gain of $1.51. Lastly, adjusted net income applicable
to participating shares rose 17.9%, from $81.1 million to
$95.6 million; on a per-share basis it rose from $1.00 to
$1.18.
For the second year in a row, adjusted net income applicable
to participating shares grew steadily quarter over quarter
in fiscal 2010, increasing from $0.34 in the first quarter
to $0.42 in the second and $0.43 in the third.
For more detailed financial information, please see Management’s
Discussion and Analysis for the Third Quarter ended July 31,
2010 at www.transcontinental.com, under “Investors.”
Operating Highlights
The operating highlights for the third quarter 2010
reflect the key directions identified by the Corporation in
its strategic plan, and its core competencies.
- Offering integrated solutions to local communities in
Canada is one of these key directions, and it involves a
broad range of print and digital channels: some 170 newspapers
and their websites, the door-to-door distribution and portal
Publisac.ca
/ Dealstreet.ca,
the Canada-wide local search site weblocal.ca,
and a series of websites such as merkado.ca.
Achievements in the third quarter include the launch of
three weekly papers in Quebec: Point de vue Sainte-Agathe
and Point de vue Mont-Tremblant in the Laurentians,
and Abitibi Express for the towns of Val-d’Or
and d’Amos. On the digital front, we redesigned the
shopping site Publisac.ca and introduced Dealstreet.ca,
its English-language counterpart. Furthermore, the introduction
of mobile applications for Canadian Living, Coup de
Pouce, Les Affaires, Finance et Investissement, Investment
Executive, Metro and The Hockey News has been
highly successful. The thn.mobi version for The
Hockey News recently topped one million users, putting
it among the top performers in downloaded mobile applications.
This is how Transcontinental is meeting the new needs of
Canadian consumers, who are increasingly turning to the
Web or new communication platforms for their information.
- Another strategic direction: development and marketing
of mobile solutions. With its Mobile Solutions Division
created after the acquisition of LIPSO, Transcontinental
is Canada’s leading company in this forward-looking
segment, which seeks to facilitate communications and transactions
between organizations and mobile users. Highlights of the
third quarter include two agreements to provide custom text
messaging services: one with the Toronto Transit Commission,
the third largest public transit system in North America,
and the other with the Société de transport
de Laval in Quebec. Transit riders on the Toronto transit
system can now find the arrival times of upcoming streetcars,
in real time, anywhere along their routes. Riders on the
Laval transit system can do the same for buses. LIPSO already
provides the same service to Translink, Metro Vancouver’s
regional transportation authority, and a number of other
commercial applications to large transportation organizations
in North America and Europe.
- Printing is one of the Corporation’s core competencies
and Transcontinental has always stood out for its culture
of technological innovation and efficiency. Since 2007,
the Corporation has invested some $700 million in capital
expenditures that have included three major projects. First
there was the building of the Fremont plant, which has been
printing the San Francisco Chronicle since July
2009; this was followed by the modernization of the Transcontinental
Transmag newspaper printing plant in Montreal, which was
completed in 2009; the focus has now turned to the Canada-wide
hybrid platform to print newspapers and retail flyers, which
will be fully operational by no later than early fiscal
2011. Using state-of-the-art technology, this unique platform
will generate new revenues as well as significant gains
in synergies and efficiency. For their part, The Globe
and Mail and Transcontinental’s retail customers
will enjoy print quality, format options and colour options
that have no equivalent in Canada. The Corporation will
reap the full benefit of these investments in the years
ahead.
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)
Sustainable Development
The Corporation’s commitment to social responsibility
and sustainable development was again recognized in the third
quarter. For the seventh year, Corporate Knights ranked Transcontinental
among the Best 50 Corporate Citizens in Canada. In addition
to environmental practices, this ranking takes into account
labour relations, community involvement, occupational health
and safety, and the quality of corporate governance. Corporate
Knights Inc. is an independent Canadian company that publishes
the magazine of the same name dedicated to corporate social
responsibility. This magazine is the most widely read magazine
in the world in its category.
Note that in the second quarter, Transcontinental published
its first complete Sustainability Report and received the
“Best of Show” award from the magazine PrintAction
for “most environmentally responsible corporation”
in Canada overall, in 2009. It goes without saying that the
Corporation’s paper purchasing policy played a key role
in these awards.
Lastly, Transcontinental’s 2009 annual report, Working
Together, Listening to Consumers, received a Gold Award
for “Most Engaging annual report worldwide” as
well as two Platinum Awards from the 2009 Vision Awards
Annual Report Competition from the League of American
Communications Professionals (LACP). Selected from among more
than 4,000 entries representing 25 countries worldwide, Transcontinental
also won a Platinum Award for Most Engaging annual report
in the Americas Region, and a Platinum Award for excellence
within its industry on the development of the annual report.
Transcontinental is the only Canadian company to rank in the
top ten of the Top 100 Annual Reports.
Dividend
At its September 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 October
21, 2010 to participating shareholders of record at the close
of business on October 1, 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 $0.4253 per share on cumulative 5-year
rate reset first Preferred Shares, series D. These dividends
are payable on October 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. (DST). 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 keep
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 largest community newspaper publisher
in Quebec and the Atlantic provinces, 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 about
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 September
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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