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- 1% revenue growth.
- Adjusted net income down 10% excluding unusual items,
due mainly to lower volume in some segments, the negative
impact of the exchange rate and intensified investments
in the Media sector; on a per-share basis, adjusted net
earnings were down 9%, from $0.32 to $0.29.
- Annual earnings per share objective before unusual items
maintained.
- Renewal of normal course issuer bid from November 21,
2006 to November 20, 2007.
- 7.7% increase in annual shareholder dividend, which will
increase to $0.07 per share from the second quarter.
- Announcement of a $9.2-million restructuring plan in
the commercial products printing segment
- 15-year contract worth US$1 billion to print the
San Francisco Chronicle and related products, and
establishment of a U.S. division.
- Renewal of five-year contract worth $350 million,
of which $75 million is new business, with the Hudson’s
Bay Company to print its flyers and loyalty program materials.
- Solid financial position for further growth.
Montreal, March 15, 2007 – Transcontinental today
reported first-quarter results that were lower than the same
quarter a year ago. The acquisitions made in 2006, higher
volume in certain niches and continued efforts to reduce costs
partially offset the expected negative impact of the exchange
rate, the weakness in the advertising market in certain segments,
and the cost of special investments in brand promotion, title
launches and digital initiatives in the Media sector. Transcontinental
management is expecting the second half of the year to be
superior to what it has been historically, compared to the
first half, when the change in its business mix is taken into
consideration, driven by the Chenelière Éducation
acquisition last year, as well as a trend towards greater
seasonality from some of its other business groups. Transcontinental
is thus in an excellent position to achieve earnings per share
before unusual items within the announced range of $1.52 -
$1.65 for 2007, based on a constant exchange rate of $1.10 CAD/USD
for the rest of the year.
“Given our intensified investment program in our Media
sector in the first quarter, we are very satisfied with our
results,” said Luc Desjardins, president and chief executive
officer of Transcontinental. “We have reaped the benefits
of our major restructuring initiatives, higher volume in some
niches, investments in new technologies and the company-wide
focus on continuous improvement. In the remainder of the year,
as set out in our Evolution 2010 business project,
we will be focusing on sales development, on organic growth
including newspaper outsourcing projects in the United States,
and on our development plan for our Media sector.”
Mr. Desjardins continued: “I’m very confident
that we will continue to grow over the medium and long term,
notably through acquisitions. We have the solid financial
base to do so, with a net funded debt to total capitalization
ratio of 28% and about $400 million available in existing
credit facilities and operating credit margins. As a sign
of our confidence in the future, today we are announcing a
7.7% increase in the dividend paid to common shareholders,
from $0.26 to $0.28 per year.”
Financial Highlights
In the first quarter ended January 31, 2007, Transcontinental
reported a 1% increase in consolidated revenue to $568 million,
compared to $565 million for the same quarter a year earlier.
Adjusted operating income before amortization was down 4%
at $75.7 million, compared to $79.2 million in 2006.
The decrease stems from lower volume in some segments, the
negative impact of the exchange rate, and additional investment
in the Media sector, factors which were partially offset by
acquisitions made in 2006, higher volumes in other segments
and many cost-reduction initiatives throughout the company.
Fluctuations in the exchange rate between the Canadian dollar
and its U.S. and Mexican counterparts lowered revenue by $5.1 million
and adjusted operating income before amortization by $3.5 million.
Net earnings were down $7.7 million, or 28%, from $27.9 million
in the first quarter of 2006 to $20.2 million in 2007.
The decrease stems mainly from restructuring costs in certain
segments, the negative impact of the exchange rate, additional
investment in the Media sector and lower sales in certain
businesses. On a per-share basis, net earnings declined 23%,
from $0.31 to $0.24.
In the first quarter of fiscal 2007, the Corporation initiated
a restructuring plan for its commercial printing operations
in its two printing sectors which resulted in total restructuring
costs of $9.2 million before tax, of which $6.7 million
before tax was recorded in the first quarter. This restructuring,
which includes, among other things, the closing of certain
smaller facilities, will allow for a significant reduction
in this business segment’s operating costs. In total,
$7.2 million were booked for restructuring projects in
the first quarter of 2007, compared to $0.1 million in
the year-earlier quarter.
Adjusted net income, which does not include unusual items
related to impairment of assets and restructuring costs, decreased
10%, from $28 million in the first quarter of 2006 to
$25 million in 2007. On a per-share basis, adjusted net
income was down 9%, from $0.32 to $0.29.
For more detailed financial information, please see First
Quarter Ended January 31, 2007 Results on the Transcontinental
website at www.transcontinental.com, under “Investors.”
Operating Highlights
The main highlights for the first quarter of 2007 are as
follows:
- Transcontinental has identified newspaper printing in
the United States as a major area of growth in future years.
On November 17, 2006, an important step was announced with
the signing of a 15-year contract, worth US$1 billion,
in which Hearst Corporation outsources the printing of the
San Francisco Chronicle and its related products
to Transcontinental. Unlike similar agreements with Canadian
newspaper publishers, this contract excludes paper. On a
comparable basis, it would be worth about US$2 billion
over 15 years. The San Francisco Chronicle is the
leading paper in the Bay Area, which is the fifth most-populous
market in the United States, and ranks 14th among daily
papers overall with an average daily circulation of more
than 400,000 copies.
- On February 21, 2007, Transcontinental announced that
it has established a division that will devote all its time
to the development in North America of outsourced newspaper
printing and the operation of its newspaper printing plants
in the United States. Ted Markle has been appointed senior
vice president of this division. The prestige of the San
Francisco Chronicle and its owner has enhanced Transcontinental’s
credibility and heightened awareness of Transcontinental
among major daily paper publishers in the United States.
Talks are at different stages with a number of these publishers,
and the Corporation is optimistic about eventually announcing
another contract.
- Transcontinental leads in flyer printing in Canada and
this segment continues to grow within the company, both
in terms of business from major retail chains and from non-traditional
advertisers. On December 12, 2006, the Corporation announced
that it had signed a five-year contract with the Hudson’s
Bay Company to print all of its flyers for Zellers, The
Bay and Home Outfitters, as well as the material for their
loyalty programs. The contract also covers the use of value-added
products and services, including a variety of direct mail
and catalogue printing services. The five-year contract
starts on February 1, 2007 and is valued at about $350 million,
of which about $75 million is new business for Transcontinental.
To ensure its growth in this niche continues, Transcontinental
also invested $25 million to expand its Saint-Hyacinthe
plant near Montreal to make room for a state-of-the-art flyer
printing press. The new equipment will be fully operational
by the spring.
- Transcontinental believes that in the future, TV schedules
and information about TV programs will be disseminated via
digital platforms. Thus, after turning TV Guide
into an exclusively online publication last fall, the Corporation
announced an agreement on November 30 to make TVGuide.ca
accessible via Sympatico.MSN.ca, the most popular website
in Canada. The decision announced on November 24 to sell
Transcontinental’s interest in TV Hebdo to
Les Publications TVA inc. reflects this same strategy.
- Local and regional newspapers serve as the voice of their
communities. Whether on paper or online, these publications
are important strategic assets for the Corporation. In December
2006, Transcontinental purchased two more community papers
in Saskatchewan, The Radville Star and The
Deep South Star, bringing to 165 the total number of
papers in its portfolio, including 12 daily papers in the
Atlantic provinces and Montreal’s primary free daily
paper, Métro.
- On March 21, 2007, following an exclusive agreement with
renowned U.S. publisher Meredith Corporation, Transcontinental
will launch the Canadian version of More magazine,
which has been highly successful in the United States. Aimed
at women aged 40 and older, More mines an under-exploited
niche in the Canadian market and rounds out Transcontinental’s
selection of women’s magazines. The first issue received
an enthusiastic response from advertisers and future readers.
Reconciliation of Non-GAAP Financial Measures
Financial data have been prepared in conformity with 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.
Below is a table reconciling GAAP financial measures to
non-GAAP financial measures.
Normal Course Issuer Bid
On November 15, 2006, the Corporation was authorized to
purchase for cancellation on the open market, between November
21, 2006 and November 20, 2007, up to 3,448,698 of its Class
A Subordinate Voting Shares, representing 5% of the 68,973,966
issued and outstanding Class A Subordinate Voting Shares as
of November 7, 2006, and up to 852,907 of its Class B Shares,
representing 5% of the 17,058,145 issued and outstanding Class
B Shares as of November 7, 2006. The purchases will be made
in the normal course of business at market prices through
the facilities of the Toronto Stock Exchange in accordance
with the requirements of the exchange.
Between November 21, 2006 and January 31, 2007, the Corporation
purchased 427,400 of its Class A Subordinate Voting Shares
at a weighted average price of $21.32 for a total consideration
of $9.1 million and 5300 of its Class B Shares at a weighted
average price of $21.21 for a total consideration of $0.1 million
under its new normal course issuer bid.
Between November 1, 2006 and November 20, 2006, the Corporation
purchased 39,600 of its Class A Subordinate Voting Shares
at a weighted average price of $20.07 for a total consideration
of $0.8 million and it did not purchase any Class B Shares,
under its prior normal course issuer bid.
Dividend Increase
At its March 15, 2007 meeting, the Corporation’s Board
of Directors declared a quarterly dividend of $0.07 per share
on Class A Subordinate Voting Shares and Class B Shares, which
represents an increase of 7.7% over the dividend paid in the
previous quarter. These dividends are payable on April 27,
2007 to shareholders of record at the close of business on
April 9, 2007. On an annual basis, this represents a dividend
of $0.28 per common share.
Additional Information
Upon releasing its quarterly results, Transcontinental will
hold a conference call for the financial community today at
4:15 p.m. Media may hear the call in listen-in mode or tune
in to the simultaneous audio broadcast on Transcontinental’s
website, which will be archived for 30 days.
Profile
The largest printer in Canada and sixth-largest in North
America, Transcontinental also ranks as the country’s
leading publisher of consumer magazines and French-language
educational resources, and its second-largest community newspaper
publisher. Transcontinental distinguishes itself by creating
strategic partnerships that integrate the company into its
customers’ value chain, notably through its unique newspaper
printing outsourcing model and its value-added services. From
mass to highly personalized marketing, the company offers
its clients integrated solutions which include a continent-leading
direct marketing offering, a diverse digital platform and
a door-to-door advertising material distribution network.
Transcontinental is a company whose values, including respect,
innovation and integrity, are central to its operation.
Transcontinental (TSX: TCL.A, TCL.B) has more than 14,500
employees in Canada, the United States and Mexico, and reported
revenues of C$2.3 billion in 2006.
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, energy costs, increased competition, the Corporation’s
capacity to implement its strategic plan and cost-reduction
program and make and integrate acquisitions. The risks, uncertainties
and other factors that could influence actual results are
described in the Management’s Discussion and Analysis
for the first quarter of 2007 and Management’s Discussion
and Analysis for the fiscal year ended October 31, 2006 and
the 2006 Annual Information Form.
The forward-looking information in this release is based
on current expectations and information available as of March
15, 2007. We disclaim 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
Jake Brennan
Media Relations Coordinator
Transcontinental Inc.
Telephone: (514) 954-4000
jake.brennan@transcontinental.ca
Financial Community
Jennifer F. McCaughey
Director, Investor Relations
Transcontinental Inc.
Telephone: (514) 954-4000
jennifer.mccaughey@transcontinental.ca
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