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- Slight growth in revenues, from $596 million in
first quarter 2008 to $604.1 million in 2009; excluding
acquisitions and positive impact of paper prices and exchange
rate, revenues down 10%, mainly due to U.S. direct mail
activities, but also magazine publishing and commercial
products printing.
- Adjusted operating income before amortization
decreased 29%, from $82.4 million to $58.3 million.
- Due to negative organic growth and an unfavourable
variance in unusual items, net income declined from $34.1 million to a loss of $6.4 million; on a per-share basis,
net income fell from $0.41 to a loss of $0.08.
- Adjusted net income, which excludes unusual items,
decreased from $28.4 million to $15.1 million; on a per-share-basis,
it declined from $0.34 to $0.19.
- Instituted rationalization plan, with elimination
of 1500 jobs, for a total of $75 million in cost-cutting
measures on an annualized basis, including $50 million in
2009.
- Financing agreements total $400 million to date,
including $100 million in new funds.
- Signing, in December 2008, of a second six-year
contract, worth $150 million, with Rogers Communications
to produce its marketing products.
- Very high traffic volume following November launch
of weblocal.ca, a Canada-wide site for finding and rating
local businesses and services, with 1.8 million unique visitors
in the past 30 days.
Montreal, March 12, 2009 – The sharp and sudden onset
of the recession affected some of Transcontinental’s
activities in the first quarter 2009. On a comparable basis,
year over year, excluding acquisitions and the positive impact
of paper prices and the exchange rate, Transcontinental’s
consolidated revenues were down by 10% and adjusted operating
income before amortization decreased by 38% in the first quarter
of 2009. U.S. direct mail activities, magazine publishing
and commercial products printing were particularly affected
by the cancellation, decrease or postponement of promotional
and advertising campaigns, mainly by financial institutions
and car manufacturers.
To deal with this situation, the Corporation continued with
its rationalization plan to protect its financial health and
adjust production capacity to demand, particularly in its
U.S. direct mail and commercial printing operations, and to
address the drop in magazine advertising revenues. It also
instituted a series of other cost-saving measures throughout
the Corporation. These initiatives are expected to reduce
costs by about $75 million on an annualized basis, including
$50 million in 2009. Under this plan, certain plants and publications
have already been shut down, and others are slated for closure
in the future. About 1500 jobs have been eliminated, of which
about half are in the United States. Senior managers have
decided to contribute to cost-cutting efforts by working two
weeks without pay, which amounts to a 4% pay cut. For the
Board Chair and the Chief Executive Officer, it will amount
to 10%. Board members have agreed to a freeze on their retainers.
“We are confronting a situation that Transcontinental
has never had to deal with before,” said François
Olivier, President and CEO. “We are determined to protect
the financial health of our business even as we continue to
integrate the new marketing services and communication platforms
that our customers are demanding. The situation is a difficult
one in human terms, but we are acting in the best interests
of our employees and shareholders. We have asked our people
to use their initiative and creativity to help us weather
this storm. We are monitoring the situation very closely and
will make the necessary adjustments if the situation deteriorates
further.”
“These measures, combined with several new contracts
that take effect in 2009, will put us in a better position
in the second half of the year,” Mr. Olivier said. “This
includes our two new contracts to print Rogers Communications’
magazines and produce its marketing products, which took effect
at the beginning of the second quarter, and our contract to
print the San Francisco Chronicle. Thanks to our
sound financial position, strong brands, investments in leading-edge
technology for our printing network, and the introduction
of new marketing services and new communications platforms,
we will be able to seize the opportunities that will inevitably
turn up in this environment, while maintaining a prudent balance
between our profits, costs, debt and investments.”
As at January 31, 2009, the Corporation’s net funded
debt to total capitalization ratio was 43%, midway between
the 35% - 50% long-term objective set by management.
Financial Highlights
In the first quarter ended January 31, 2009, Transcontinental
recorded consolidated revenues of $604.1 million, compared
to $596 million in the same quarter of 2008. The contribution
from acquisitions and the positive impact of paper prices
and the exchange rate were almost entirely cancelled out by
negative organic growth, stemming mainly from U.S. direct
mail activities, the decline in magazine advertising revenue
and the difficult commercial printing market. Adjusted operating
income before amortization was down 29%, from $82.4 million
to $58.3 million, for the same reasons as above, in addition
to strategic investments in the Media Sector and, following
the introduction of new accounting standards, the start-up
costs of certain projects in the Printing Sector, which must
now be immediately expensed.
Net income declined from $34.1 million in the first quarter
2008 to a loss of $6.4 million, a decrease of $40.5 million
that stems mainly from negative organic growth, as well as
an unfavourable variance in unusual items, particularly impairment
of assets and restructuring costs. On a per-share basis, net
income decreased from $0.41 to a loss of $0.08.
Adjusted net income, which excludes unusual items related
to asset impairment, restructuring costs and income tax adjustments,
decreased from $28.4 million to $15.1 million. On a per-share
basis, adjusted net income decreased from $0.34 to $0.19.
For more detailed financial information, please see Management’s
Discussion and Analysis for the First Quarter Ended January
31, 2009, at www.transcontinental.com, under “Investors.”
Operating Highlights
Here are the main operating highlights for the year
to date.
- Early in fiscal 2009, Transcontinental adopted a new
operating structure, which primarily involved the creation
of the Marketing Communications Sector. The core business
for this new sector is the creation and development of services
in advertising personalization, new communications platforms
and marketing products printing. Transcontinental then enriched
its service offering in this sector by making two strategic
acquisitions: Toronto-based Redwood Custom Communications,
a North American leader in custom communications, which
creates turnkey custom publishing and branded content solutions
for both print and digital platforms; and Conversys, located
in London, Ontario, Canada’s leading print-to-Web
provider, which specializes in the seamless transformation
of print materials such as flyers into interactive Web content.
- As Canada’s leader in direct marketing, in December
2008 Transcontinental signed a second six-year contract,
worth $150 million, to produce all of Rogers Communications’
direct marketing products and print a variety of other marketing
communication products. This new contract comes on the heels
of another six-year contract, which took effect in February
2009, to print all of Rogers’ magazines.
- In November 2008, Transcontinental launched weblocal.ca,
a Canada-wide Web site for finding and rating local businesses
and their products and services. Highly interactive, weblocal.ca
generates its content from information entered by users.
In the past 30 days alone, the site has attracted 1.8 million
unique visitors. This is a remarkable achievement that bodes
well for its commercialization phase. This initiative will
allow Transcontinental to generate new revenue and enrich
its multi-channel offering to local advertisers.
- In newspaper printing, work on the plant that will print
the San Francisco Chronicle is on time and production
will start in June 2009. Also, modernization of Transcontinental
Transmag in Montreal is almost finished and the new presses
will start up in the third quarter 2009.
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.
Financing Activities
In February 2009, the Corporation announced financing
agreements totalling $400 million. The first was a new private
placement offering of $100 million in unsecured debentures
underwritten by the Solidarity Fund QFL, a development capital
fund based in Quebec. The second extends, to August 2010,
the Corporation’s $300 million accounts receivable securitization
program set up in 2001.
In this period of tight and expensive credit, management
views this as investors’ recognition of Transcontinental’s
solid financial situation and as evidence of their confidence
in the Corporation’s growth strategy and future prospects.
Management expects that it will be able to cover all of its
financing needs for 2009 in the near future.
Sustainable Development
In 2007, Transcontinental adopted a forward-looking
Paper Purchasing Policy which goes well beyond existing standards
and certifications. Since then, managers have taken steps
to make our suppliers and customers more aware of this policy
and to help them move forward with us. The Corporation is
proud to announce the concrete and verifiable results of our
day-to-day efforts: from 2007 to 2008, Transcontinental customers’
use of “Gold” ranked papers, which meet the highest
standards of sustainable forest management, rose by 37%. This
trend intensified in the first quarter.
Furthermore, by the end of the first quarter, Transcontinental’s
45 printing facilities in Canada and the United States had
all obtained triple chain-of-custody certifications, ensuring
that papermaking processes meet the most demanding standards
for sustainable forest management.
Corporate Affairs
On November 14, 2008, Transcontinental announced
the immediate appointment of Brian Reid as President of the
Printing Sector. This sector comprises Transcontinental’s
services to retailers and publishers of newspapers, magazines,
books and catalogues, as well as direct mail activities in
the United States and operations in Mexico. It reports revenue
of about $1.5 billion a year. Mr. Reid joined Transcontinental
in 1992 and has been very successful at every stage of his
career. From 2003 he was Senior Vice President, Catalogue
and Magazine Printing Group for North America. He is also
on the Corporation’s Executive Committee.
On January 8, 2009, Transcontinental announced the appointment
of Sylvain Morissette to the position of Vice President, Corporate
Communications, effective February 2. Reporting to the President
and CEO, Mr. Morissette is a member of the Corporation’s
Executive Committee. Mr. Morissette brings Transcontinental
the benefit of more than 20 years in corporate communications,
including eight years as a member of the Rona management team.
When he joined Transcontinental, he was President and CEO
of the Association of Quebec Advertising Agencies.
Dividend
At its March 12, 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 April 24, 2009 to shareholders
of record at the close of business on April 6, 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 Nessa Prendergast,
Director, Media Relations, at 514-954-2809.
About Transcontinental
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 sixth-largest in North America.
It is also the country’s leading publisher of consumer
magazines and French-language educational resources, its 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 operations 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
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,
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 March
12, 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
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 |
