Transcontinental continues to improve profitability, ends year with strong
fourth quarter
In the fourth quarter 2009
--------------------------
- Growth of 15% in adjusted operating income before amortization(1)
despite 9% decrease in revenues compared to 2008.
- Growth of 12% in adjusted net income applicable to participating
shares(2), which excludes unusual items; on a per-participating-share
basis, adjusted net income applicable to participating shares(3) rose
12%, from $0.59 to $0.66
- Growth in net income applicable to participating shares, from a loss of
$94.3 million to a gain of $43.1 million, primarily due to unusual
items; on a per-participating-share basis, net income increased from a
loss of $1.17 to a gain of $0.53.
For fiscal 2009
---------------
- Decrease of 3% in adjusted operating income before amortization(4) and
6% in revenues compared to fiscal 2008.
- Decrease of 7% in adjusted net income applicable to participating
shares(5), which excludes unusual items; on a per-participating-share
basis, adjusted net income applicable to participating shares(6)
decreased 6%, from $1.72 to $1.61.
- Decrease in net income applicable to participating shares, which went
from $6.6 million to a loss of $82.3 million, primarily due to unusual
items such as write-off of goodwill; on a per-participating-share
basis, net income declined from a gain of $0.08 to a loss of $1.02.
- Rapid implementation of a rationalization plan which generated
recurring cost-savings of about $110 million annually, including close
to $80 million in 2009.
- Creation of the Marketing Communications Sector dedicated to new
services in one-to-one advertising and new communication platforms.
- Acquisitions of Redwood Custom Communications, a leading North American
company in multi-platform custom communications, and Conversys, the
leading Canadian e-flyer provider.
- Continuation of digital development in the Media Sector, including the
highly successful launch of weblocal.ca, a Canada-wide search site for
local communities.
- Start of San Francisco Chronicle printing under a 15-year contract and
implementation of two new six-year printing contracts with Rogers
Communications.
- Conclusion of financing arrangements totalling $888 million, including
$100 million from a preferred share placement.
--------------------------------
1-2-3-4-5-6 Please see "Reconciliation of Non-GAAP Financial measures" on
page 8.
</pre>
<p/>
<p><location>MONTREAL</location>, <chron>Dec. 15</chron> /CNW Telbec/ - Cost savings of close to <money>$80 million</money> from the rationalization plan which Transcontinental quickly instituted to counter the recession and the multiple efficiency gains which resulted; start of major printing contracts, including those for the <location>San Francisco</location> Chronicle and Rogers Communications; ongoing investments over the past several years in technology, new media and brand development; and the solid performance of educational book publishing and door-to-door distribution operations: those are the main factors that enabled Transcontinental to improve its profitability from quarter to quarter in 2009 and to end the year with a strong fourth quarter. Reflecting this performance, adjusted operating income before amortization grew steadily during the year, culminating with 15% growth in the fourth quarter. Transcontinental also outdid its performance in 2008 in the past two quarters, despite the continued weakness in the economy.</p>
<p>"I am particularly proud of our operating performance in the fourth quarter-one of the best in our history-and the steady improvement in our financial results over the course of the year in very turbulent conditions," said François Olivier, President and Chief Executive Officer. "We are making it through this serious recession by doing better than most of our main competitors and gaining back much of the ground lost compared to 2008. We are dealing with the recession responsibly and with discipline. We also reacted right from the very start, and we did it in the Transcontinental way, calling on our people across the company to mobilize, be innovative and execute. They responded by coming up with new ways to improve efficiency and cut costs, and put forward original ideas for development. I want to thank them for their commitment, in a difficult time, to the interests of all employees and the long-term health of Transcontinental.</p>
<p>"We also signed financing agreements for a total of <money>$888 million</money> despite the tight credit situation, and we did so at competitive rates. I see this as acknowledgement by investors of our financial credibility, as well as their confidence in our growth strategy and prospects for the future. We plan to maintain our prudent balance between profits, costs, debt and investments.</p>
<p><person>Mr. Olivier</person> continued, saying "the recurring cost savings of about <money>$110 million</money> a year achieved with our rationalization plan, our financial situation that allowed us in 2009-and will enable us in 2010-to further invest in our development, particularly in digital, and our decision to concentrate our new marketing communication services in a separate sector to encourage their expansion, put us in an excellent position to profit from the business opportunities that will arise in the next year in our continually evolving markets. Transcontinental is now more flexible and focused more than ever on its assets and strategic priorities. I am confident about the future."</p>
<p>As announced at the end of the third quarter, the Corporation has now decided to use the ratio of net indebtedness (including the securitization program) to adjusted operating income before amortization as its primary indicator of financial leverage. Management also set the objective of maintaining this ratio within a target range of 2.00 to 2.50 and expects to achieve that target before the end of fiscal 2011. At <chron>October 31</chron>, the ratio was at 2.59. Furthermore, as at <chron>October 31, 2009</chron>, the Corporation's net funded debt to total capitalization ratio was 42%, within the range of 35% - 50% set by Management.</p>
<p/>
<p>Financial Highlights</p>
<p/>
<p>In the fourth quarter ended <chron>October 31, 2009</chron>, Transcontinental recorded consolidated revenues of <money>$594 million</money> down 9% from <money>$653.3 million</money> in the fourth quarter of 2008, while adjusted operating income before amortization increased 15%, from <money>$108.3 million to $124.3 million</money>. The favourable fluctuations in the exchange rate between the Canadian dollar and its U.S. and Mexican counterparts contributed a positive <money>$0.8 million</money> to revenues and <money>$3.1 million</money> to operating income before amortization.</p>
<p>Net income applicable to participating shares went from a loss of <money>$94.3 million</money> in 2008 to a gain of <money>$43.1 million</money> in 2009, primarily due to the write-off of goodwill related to direct mail operations in the <location>United States</location> and a restructuring charge recognized in the fourth quarter 2008 financial results; on a per-participating-share basis, net income applicable to participating shares rose from a loss of <money>$1.17</money> to a gain of <money>$0.53</money>. Adjusted net income applicable to participating shares, which excludes asset impairment, rationalization costs and impairment of goodwill and intangible assets, increased 12%, from <money>$47.9 million</money> to 53.7 million; on a per-participating-share basis, adjusted net income applicable to participating shares grew 12%, from <money>$0.59 to $0.66</money>.</p>
<p/>
<p>For the 12-month period ended <chron>October 31, 2009</chron>, this strong fourth quarter largely offset the decline in the first two quarters during the middle of the recession. Consolidated revenues were down 6%, from <money>$2.43 billion to $2.29 billion</money>, while adjusted operating income before amortization decreased 3%, from <money>$361.5 million to $349.3 million</money>. The positive impact of the exchange rate between the Canadian dollar and its U.S. and Mexican counterparts added <money>$63.2 million</money> to revenues and <money>$16.6 million</money> to adjusted operating income before amortization. The decline in direct mail activities in the <location>United States</location> accounts for 43% of the decrease in the Corporation's consolidated revenues compared to fiscal 2008, the remainder mainly stems from the disposal of printing and publishing assets, and lower advertising and marketing spending.</p>
<p>Net income applicable to participating shares went from <money>$6.6 million</money> in 2008 to a net loss of <money>$82.3 million</money> in 2009. This decrease is principally due to the impairment of intangible assets, the write-off of assets and the cost of rationalization measures, as well as the write-off of goodwill, which were charged to fiscal 2009 financial results. Net of income taxes, these unusual items totalled <money>$212.5 million</money> for fiscal 2009 as a whole, or <money>$2.63</money> per participating share. On a per-participating-share basis, net income applicable to participating shares declined from a gain of <money>$0.08</money> to a loss of <money>$1.02</money>, down <money>$1.10</money>.</p>
<p>Adjusted net income applicable to participating shares, which excludes unusual items, decreased 7%, from <money>$140.3 million to $130.2 million</money>. On a per-participating-share basis, adjusted net income applicable to participating shares decreased 6%, from <money>$1.72 to $1.61</money>.</p>
<p>For more detailed financial information, please see Management's Discussion and Analysis for the Fiscal Year Ended <chron>October 31, 2009</chron> and the full financial statements at <a href="http://www.transcontinental.com">www.transcontinental.com</a>, under "Investors."</p>
<p/>
<p>Rationalization Plan</p>
<p/>
<p>The Corporation quickly instituted a rationalization plan with the goal of matching Transcontinental's production capacity to demand in each of its markets and the decreased advertising revenues of its magazines and newspapers. Five printing plants were merged or consolidated, two others were sold, eight publications were stopped and two were sold. Close to 2,000 jobs were eliminated, half of them in the direct mail operations in the <location>United States</location>. A set of other temporary measures, ranging from targeted control of hiring to unpaid leaves and shorter workweeks were also instituted across the organization. Senior executives contributed by taking two weeks of unpaid leave but still working, which represents a 4% reduction in salary. In all, the recurring cost savings amounted to about <money>$110 million</money>, of which close to <money>$80 million</money> was achieved in 2009.</p>
<p/>
<p>Operating Highlights</p>
<p/>
<p>In 2009, Transcontinental continued to implement its unique two-pronged growth strategy: build the new and strengthen promising traditional activities. This strategy is in line with its mission to help businesses and advertisers identify, reach and keep target consumers through a global and integrated offering. Transcontinental defines itself as a supplier of custom marketing solution on print or digital communications platforms.</p>
<p>Below, in light of this strategy, are the sector highlights for fiscal 2009.</p>
<p/>
<pre>
Marketing Communications Sector
-------------------------------
</pre>
<p/>
<p>Transcontinental's development going forward will be strongly influenced by its ability to offer its customers new services in one-to-one advertising (database analytics, permission-based email marketing and custom communications), as well as new communications platforms. Fiscal 2009 was rich in actions and concrete achievements in this area.</p>
<p/>
<pre>
- Creation, in November 2008, of the Marketing Communications sector. The
purpose of this sector is to augment Transcontinental's integrated
offering by providing customers with solutions based on the development
of new one-to-one marketing services and new communication platforms.
- Appointment of Christian Trudeau as President of the Marketing
Communications sector. He started his duties in April 2009. From 2004,
Mr. Trudeau was President and CEO of Centria Commerce, a company that
specializes in e-commerce. Prior to that he was President and CEO of
BCE Emergis, a North American leader in e-commerce, and also held
executive positions with Bell Canada and the Montreal Stock Exchange.
- The service offering in this new sector was enhanced by two strategic
acquisitions in fiscal 2009: Toronto-based Redwood Custom
Communications, a North American leader in custom communications,
specializing in turnkey solutions that provide personalized content for
print and digital; and Conversys, based in London, Ontario, Canada's
leading provider of e-flyers, specializing in the repurposing and
adaptation of print content into interactive Web-based content.
- As fiscal 2009 came to an end, Management decided to dedicate the
Marketing Communications sector to its principal role, concentrating
its new services in this sector and transferring its Canadian
commercial printing and direct mail operations to the Printing sector.
This will help intensify the new and solidify the Corporation's
traditional core business.
</pre>
<p/>
<p>On the basis of the most recent restructuring in <chron>November 2009</chron>, the Marketing Communications sector has annualized revenues of about <money>$120 million</money> and more than 800 employees.</p>
<p/>
<pre>
Media Sector
------------
</pre>
<p/>
<p>The Media sector covers the publishing of magazines, newspapers and books, door-to-door distribution and the management of over 120 Internet sites and portals. This sector has also been very active at building the new while strengthening its core activities.</p>
<p/>
<pre>
- In 2009, Transcontinental continued to invest in strategic development
of the Media sector, focusing on Web-based services. One of the
highlights was the launch of weblocal.ca, a Canada-wide search site
that offers local advertisers a showcase on the Internet and helps
consumers quickly find, rate and comment on local services. The portal
has already exceeded two million unique visitors per month.
- With its strong brands and popular content, Transcontinental has been
very successful over the past several years at broadening its presence
on the Internet. In 2009, for instance, Coup de pouce magazine used its
25th anniversary to launch a new, interactive and consumer-friendly
site. For their part, The Hockey News, Canadian Living, the daily Métro
paper and the financial and business news publications Les Affaires,
Finance et Investissement and Investment Executive can now be accessed
via mobile technology.
- In addition to a revenue model based on selling advertising pages in
its newspapers and magazines, Transcontinental is now also selling
advertising banners on its websites and subscriptions on its portals
such as weblocal.ca. Transcontinental reported $27.5 million in
revenues from its websites, up 30% over 2008, and these Web-based
activities are profitable. Its 120 sites and portals reach an average
of more than six million unique visitors per month.
- The creation of the 360 Solutions sales team is a particularly
promising development. The goal of this team is to present an
integrated offering of print products and digital tools from the Media
sector, and even the rest of the company, to major customers. The team
already has a number of solid achievements to its credit.
- Door-to-door distribution activities have continued to grow despite the
recession, and Publisac (Ad-Bag) continues to prevail as a highly
effective and profitable marketing tool for retailers. A number of new
clients have been added over the past year. Note that since January
2008, Ad-Bag is made out of oxo-biodegradable plastic certified by
Environmental Products Inc. (EPI(R)).
- Chenelière Éducation, Canada's leading publisher of French-language
educational books, had another excellent year in 2009 due in part to
the educational reform in Québec. It has won numerous awards for the
quality of its products and services. For its part, the daily paper
Métro is probably one of the only dailies in North America whose
revenues have grown, confirming its status as the most-read paper on
the Island of Montreal.
</pre>
<p/>
<p>The Media sector generated revenues of <money>$607 million</money> in 2009 and has 3,100 employees. The president is Natalie Larivière.</p>
<p/>
<pre>
Printing Sector
---------------
</pre>
<p/>
<p>To promote efficiency, printing activities are now grouped into a single sector, which is the Corporation's most important source of revenues. In 2009, the continuous improvement of efficiency and the introduction of state-of-the-art technologies were central to the advances in this sector.</p>
<p/>
<pre>
- The Printing sector has always been distinguished by its efficiency and
ability to execute. In 2009, in response to the recession, it embarked
on a major review of its assets so that it could systematically adjust
costs to demand, plant by plant, group by group and region by region.
In addition to many local rationalization measures, units were grouped
together and less strategic assets were sold or closed.
- In 2009, capital expenditures were concentrated on the initiatives that
were either absolutely necessary or strategic. Transcontinental did,
however, continue to benefit from some $500 million in capital
investments over the past three years, which put the organization at
the head of one of the most modern platforms in North America,
particularly with respect to newspapers, flyers and magazines. Its
state-of-the-art equipment strengthened its lead in each of its niches.
Moreover, two new exclusive six-year contracts with Rogers
Communications took effect early in 2009: the first, to print all of
Rogers' magazines, and the second, to produce and print its marketing
products. These two major gains are added to the full-year impact of
the Shoppers Drug Mart-Pharmaprix contract and to the many new
customers added in flyer and newspaper printing.
- The printing and distribution activities for the San Francisco
Chronicle, under a 15-year contract worth US$1 billion (excluding
paper), started in July at the new plant in Fremont, California.
Transcontinental invested about US$230 million in this new plant which
is equipped with the latest technologies allowing for maximum use of
colour and glossy paper, a first in the United States. Moreover, the
modernization of the Transcontinental Transmag plant in Montreal was
completed on time and the new presses started rolling in the second
half of fiscal 2009. This required an investment of about $60 million.
- The establishment of a unique Canada-wide newspaper and flyer printing
network, a first in Canada, is on schedule. This platform will offer
The Globe and Mail, under an 18-year and $1.7 billion contract starting
at the end of 2010, the possibility of putting colour on each page; it
also makes the latest print technologies available to
Transcontinental's retail customers. This hybrid manufacturing
platform, which represents a total investment of $175 million, is a new
way for Transcontinental to specialize its plants and will give it a
key edge in terms of synergy and operating efficiency.
</pre>
<p/>
<p>On the basis of the most recent restructuring in <chron>November 2009</chron>, the Printing sector has annualized revenues of <money>$1.57 billion</money> and 8,600 employees. Its president is <person>Brian Reid</person>. Promoted to this position in <chron>November 2008</chron>, <person>Mr. Reid</person> has been with Transcontinental since 1992. From 2003, he was Senior Vice President of the catalogue and magazine printing group in <location>Canada</location> and the <location>United States</location>.</p>
<p/>
<p>Reconciliation on Non-GAAP Financial Measures</p>
<p/>
<p>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.</p>
<p/>
<p>The following table reconciles GAAP financial measures to non-GAAP financial measures.</p>
<p/>
<pre>
Reconciliation of non-GAAP financial measures
(unaudited)
-------------------------------------------------------------------------
For the quarters For the years
ended October 31 ended October 31
(in millions of dollars,
except per share amounts) 2009 2008 2009 2008
-------------------------------------------------------------------------
Net income (loss) applicable
to participating shares $ 43.1 $ (94.3) $ (82.3) $ 6.6
Dividends on preferred
shares 0.5 - 0.5 -
Non-controlling interest - - 0.3 (0.4)
Income taxes 12.7 (54.8) (2.7) (31.7)
Discount on sale of accounts
receivable 0.6 2.2 4.5 9.3
Financial expenses 14.2 7.9 41.0 30.5
Impairment of goodwill and
intangible assets 3.3 192.1 172.6 192.1
Impairment of assets and
restructuring costs 11.7 23.0 78.0 27.4
-------------------------------------------------------------------------
Adjusted operating income 86.1 76.1 211.9 233.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Amortization 38.2 32.2 137.4 127.7
-------------------------------------------------------------------------
Adjusted operating income
before amortization $ 124.3 $ 108.3 $ 349.3 $ 361.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss)
applicable to
participating shares $ 43.1 $ (94.3) $ (82.3) $ 6.6
Impairment of assets
and restructuring
costs (after tax) 7.5 15.4 54.6 18.4
Impairment of goodwill
and intangible assets
(after tax) 3.1 126.8 157.9 126.8
Unusual adjustments to
income taxes - - - (11.5)
-------------------------------------------------------------------------
Adjusted net income
applicable to
participating shares 53.7 47.9 130.2 140.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average number of
participating shares
outstanding 80.8 80.8 80.8 81.7
-------------------------------------------------------------------------
Adjusted net income
applicable to
participating shares
per share $ 0.66 $ 0.59 $ 1.61 $ 1.72
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flow related to
operating activities $ 82.8 $ 152.4 $ 78.8 $ 284.0
Changes in non-cash
operating items (16.0) 74.8 (168.7) (12.9)
-------------------------------------------------------------------------
Cash flow from operating
activities before changes
in non-cash operating
items $ 98.8 $ 77.6 $ 247.5 $ 296.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Long-term debt $ 819.0 $ 602.1
Current portion of
long-term debt 7.8 194.3
Cash and cash equivalents (34.7) (90.7)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net indebtedness $ 792.1 $ 705.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</pre>
<p/>
<p>Sustainable Development</p>
<p/>
<p>Transcontinental has made sustainable development a priority.</p>
<p>After adopting a forward-looking Paper Purchasing Policy that was more stringent than current standards and certifications, Transcontinental began working with suppliers and customers to help them concretely, as a team, tackle sustainability together. The results of this joint effort continue to be very encouraging. From 2008 to 2009, the use by customers of "Gold" category paper, the best in terms of compliance with sustainable forest management, increased 55%. That follows on a 37% increase between 2007 and 2008; nearly half of our printed products use paper from the Gold category.</p>
<p>Moreover, in 2009, Transcontinental's 42 printing facilities in <location>Canada</location> and the <location>United States</location> all obtained triple forest product chain-of-custody certification. This guarantees that the paper manufacturing process complies with the most stringent standards for sustainable forest management. Note also that the new Fremont plant, which prints the <location>San Francisco</location> Chronicle, is one of the first printing plants in <location>North America</location> to be built to Leadership in Energy and Environmental Design (LEED) standards.</p>
<p>Lastly, this year the Corporation produced its first sustainable development report, prepared using the methodology and guidelines recommended by Global Reporting Initiative (GRI), a highly respected source for methodology. A summary will be available in the 2009 Annual Report and the full report will be available on the Transcontinental site at transcontinental.com in <chron>February 2010</chron>.</p>
<p>Sustainable development incorporates social progress, economic development and protection of the environment. In 2009, Transcontinental once again made it into the select club of the Best 50 Corporate Citizens, ranked by Corporate Knights magazine. The magazine defines a corporate citizen as "a company that fulfills its part of the social contract, while innovating solutions to pressing social and environmental challenges of our time." Transcontinental has been part of this group since 2004.</p>
<p/>
<p>Financing Activities</p>
<p/>
<p>In a general context of tight credit, Transcontinental successfully completed, primarily in the second half of fiscal 2009, several refinancing and financing arrangements. These agreements, totalling <money>$888 million</money>, are as follows:</p>
<p/>
<pre>
- a private placement of $100 million in unsecured debentures
underwritten by the Solidarity Fund QFL, a development capital fund
based in Quebec;
- the extension, to August 2010, of the $300 million accounts receivable
securitization program put in place in 2001;
- renewed bank credit facilities of $150 million for one year with its
bank syndicate; on December 4, 2009, the Corporation reimbursed and
cancelled these credit facilities;
- a $100 million credit facility (five years) from the Caisse de dépôt et
placement du Québec;
- a $50 million term loan (five years) from the Société générale de
financement du Québec;
- a six-year financing agreement for 55.6 million euros ($88.4 million)
with major European bank HypoVereinsbank, to acquire production
equipment over the next two years;
- and lastly, placement of cumulative rate reset first preferred shares
for gross proceeds of $100.0 million.
</pre>
<p/>
<p>Management sees these agreements as investor acknowledgement of Transcontinental's financial credibility, as well as concrete evidence of their confidence in the Corporation's growth strategy and prospects.</p>
<p/>
<p>Corporate Affairs</p>
<p/>
<p>On <chron>October 8</chron>, Transcontinental announced the appointment of <person>Pierre Fitzgibbon</person> to the Board of Directors of the Corporation. President and Chief Executive Officer of Atrium Innovations, <person>Mr. Fitzgibbon</person> has enjoyed a 30-year career in public companies and financial institutions and will bring the benefit of his experience to Transcontinental. In another development, J.V. <person>Raymond Cyr</person> decided to leave the Board after 12 years of invaluable service. Over the years, <person>Mr. Cyr</person> contributed to Transcontinental's growth with outstanding professionalism. The Chairman of the Board thanks him on his own behalf and on behalf of all shareholders.</p>
<p/>
<p>Dividend</p>
<p/>
<p>At its <chron>December 15, 2009</chron> meeting, the Corporation's Board of Directors declared the quarterly dividend of <money>$0.08</money> per participating share on Class A Subordinate Voting Shares and Class B shares. These dividends are payable on <chron>January 28, 2010</chron> to participating shareholders of record at the close of business on <chron>January 8, 2010</chron>. On an annual basis, this represents a dividend of <money>$0.32</money> per common share.</p>
<p>Furthermore, at the same meeting, the Board also declared a quarterly dividend of $0.4854 per share on cumulative 5-year rate reset first preferred shares, series D. These dividends are payable on <chron>January 15, 2010</chron>.</p>
<p/>
<p>Additional Information</p>
<p/>
<p>Upon releasing its results for fiscal 2009, Transcontinental will hold a conference call for the financial community today at <chron>4:15 p.m. (ET</chron>). Media may hear the call in listen-only mode or tune in to the simultaneous audio broadcast on the Corporation's Web site at <a href="http://www.transcontinental.com">www.transcontinental.com</a>, on the Home Page of the Investors section. The broadcast will be archived for 30 days. To join the call, dial 416-644-3414 or 1 800-733-7571. For media requests for information or interviews, please contact Sylvain Morissette, Vice President, Corporate Communications of Transcontinental, at 514-954-4007.</p>
<p/>
<p>Profile</p>
<p/>
<p>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 <location>Canada</location> and in <location>Mexico</location>, and sixth-largest in <location>North America</location>. 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 growth-oriented company with a culture of continuous improvement and financial discipline, whose values, including respect, innovation and integrity, are central to its operation.</p>
<p>Transcontinental (TSX: TCL.A, TCL.B, TCL.PR.D) has approximately 12,500 employees in <location>Canada</location>, the <location>United States</location> and <location>Mexico</location>, and reported revenue of C$2.3 billion in 2009. For more information about the Corporation, please visit <a href="http://www.transcontinental.com">www.transcontinental.com</a>.</p>
<p/>
<p>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.</p>
<p>The forward-looking information in this release is based on current expectations and information available as of <chron>December 15, 2009</chron>. The Corporation's management disclaims any intention or obligation to update or revise any forward-looking statements unless otherwise required by the Securities Authorities. For further information: Media: Sylvain Morissette, Vice President, Corporate Communications Transcontinental Inc., (514) 954-4007, <a href="mailto:[email protected]">[email protected]</a>, <a href="http://www.transcontinental.com">www.transcontinental.com</a>; Financial Community: Jennifer F. McCaughey, Director, Investor Relations, Transcontinental Inc., (514) 954-2821, <a href="mailto:[email protected]">[email protected]</a></p>
<p/>
<pre>
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For the years ended October 31
(in millions of dollars, except per share data)
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Revenues $ 2,294.6 $ 2,429.3
Operating costs 1,680.8 1,784.1
Selling, general and administrative expenses 264.5 283.7
-------------------------------------------------------------------------
Operating income before amortization, impairment
of assets, restructuring costs and impairment
of goodwill and intangible assets 349.3 361.5
Amortization 137.4 127.7
Impairment of assets and restructuring costs 78.0 27.4
Impairment of goodwill and intangible assets 172.6 192.1
-------------------------------------------------------------------------
Operating income (loss) (38.7) 14.3
Financial expenses 41.0 30.5
Discount on sale of accounts receivable 4.5 9.3
-------------------------------------------------------------------------
Loss before income taxes and non-controlling
interest (84.2) (25.5)
Income taxes recovered (2.7) (31.7)
Non-controlling interest 0.3 (0.4)
-------------------------------------------------------------------------
Net income (loss) (81.8) 6.6
Dividends on preferred shares, net of related
income taxes 0.5 -
-------------------------------------------------------------------------
Net income (loss) applicable to participating
shares $ (82.3) $ 6.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) per share - basic $ (1.02) $ 0.08
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Net income (loss) per share - diluted $ (1.02) $ 0.08
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Average number of participating shares
outstanding (in millions) 80.8 81.7
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The notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended October 31
(in millions of dollars)
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2009 2008
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Net income (loss) $ (81.8) $ 6.6
Other comprehensive income (loss):
Unrealized net change in fair value of
derivatives designated as cash flow hedges,
October 31, 2008) 9.2 (17.6)
Reclassification adjustments for net change in
fair value of derivatives designated as cash
flow hedges in prior periods, transferred to
income in the current period, net of income
taxes of $3.9 million for the year ended
October 31, 2009 ($(3.4) million for the year
ended October 31, 2008) 6.7 (7.4)
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Net change in fair value of derivatives designated
as cash flow hedges 15.9 (25.0)
Unrealized net gains on translation of financial
statements of self-sustaining foreign operations 4.7 17.4
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Other comprehensive income (loss) 20.6 (7.6)
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Comprehensive loss $ (61.2) $ (1.0)
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the years ended October 31
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(in millions of dollars) 2009 2008
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Balance, beginning of year, as previously
reported $ 756.5 $ 806.4
Change in accounting policies - Goodwill and
intangible assets (3.0) (1.7)
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Restated balance, beginning of year 753.5 804.7
Net income (loss) (81.8) 6.6
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671.7 811.3
Premium on redemption of participating shares - (32.5)
Dividends on participating shares (25.8) (25.3)
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Balance, end of year $ 645.9 $ 753.5
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The notes are an integral part of the consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
As at October 31
(in millions of dollars)
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2009 2008
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Current assets
Cash and cash equivalents $ 34.7 $ 90.7
Accounts receivable 330.7 207.1
Income taxes receivable 4.1 4.5
Inventories 78.2 99.3
Prepaid expenses and other current assets 23.0 16.1
Future income taxes 11.9 28.1
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482.6 445.8
Property, plant and equipment 978.7 936.7
Goodwill 673.4 842.6
Intangible assets 181.2 184.1
Future income taxes 165.8 141.0
Other assets 68.0 64.8
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$2,549.7 $2,615.0
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Current liabilities
Accounts payable and accrued liabilities $ 378.3 $ 442.9
Income taxes payable 26.8 48.3
Deferred subscription revenues and deposits 43.7 49.6
Future income taxes 0.5 9.9
Current portion of long-term debt 7.8 194.3
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457.1 745.0
Long-term debt 819.0 602.1
Future income taxes 110.0 99.3
Other liabilities 48.3 65.5
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1,434.4 1,511.9
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Non-controlling interest 0.1 0.1
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Commitments, guarantees and contingent liabilities
Shareholders' equity
Share capital 476.5 379.5
Contributed surplus 12.9 11.3
Retained earnings 645.9 753.5
Accumulated other comprehensive loss (20.1) (41.3)
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625.8 712.2
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1,115.2 1,103.0
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$2,549.7 $2,615.0
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The notes are an integral part of the consolidated financial statements.
Approved on behalf of the Board of Directors,
(s) Rémi Marcoux (s) Richard Fortin
Rémi Marcoux Richard Fortin,
Director Director
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 31
(in millions of dollars)
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2009 2008
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Operating activities
Net income (loss) $ (81.8) $ 6.6
Items not affecting cash and cash equivalents
Amortization 161.7 149.8
Impairment of assets 21.1 16.9
Impairment of goodwill and intangible assets 172.6 192.1
Loss (gain) on disposal of assets (1.2) 0.4
Future income taxes (31.9) (66.9)
Net change in accrued pension benefit asset
and liability (7.4) (6.0)
Stock-based compensation 4.3 2.3
Other 10.1 1.7
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Cash flow from operating activities before
changes in non-cash operating items 247.5 296.9
Changes in non-cash operating items (168.7) (12.9)
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Cash flow related to operating activities 78.8 284.0
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Investing activities
Business acquisitions (14.4) (67.3)
Acquisitions of property, plant and equipment (261.9) (228.7)
Disposals of property, plant and equipment 16.3 1.9
Increase in other assets and intangible assets (25.5) (31.3)
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Cash flow related to investing activities (285.5) (325.4)
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Financing activities
Increase in long-term debt 281.8 -
Repayment of long-term debt (108.4) (26.0)
Increase (decrease) in revolving term credit
facility (89.7) 177.7
Dividends on participating shares (25.8) (25.3)
Redemption of participating shares - (48.7)
Issuance of participating shares 0.2 0.6
Issuance of preferred shares 96.8 -
Other (0.6) (0.2)
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Cash flow related to financing activities 154.3 78.1
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Effect of exchange rate changes on cash and cash
equivalents denominated in foreign currencies (3.6) 5.5
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Increase (decrease) in cash and cash equivalents (56.0) 42.2
Cash and cash equivalents at beginning of year 90.7 48.5
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Cash and cash equivalents at end of year $ 34.7 $ 90.7
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The notes are an integral part of the consolidated financial statements.
For further information: Media: Sylvain Morissette, Vice President, Corporate Communications, Transcontinental Inc., (514) 954-4007, [email protected], www.transcontinental.com; Financial Community: Jennifer F. McCaughey, Director, Investor Relations, Transcontinental Inc., (514) 954-2821, [email protected]
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