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- 2% growth in adjusted operating income before amortization;
excluding the foreign exchange impact, growth of 7%.
- 20% growth in cash flow from continuing operations before
changes in non-cash operating items.
- Slight increase in net income; on a per-share basis,
net earnings rose 3%, from $0.39 to $0.40.
- 4% decrease in adjusted net income; excluding the foreign
exchange impact, growth of 9%; on a per-share basis, adjusted
net income remained stable at $0.41.
- Annual earnings-per-share objective of $1.52 to $1.65
before unusual items maintained, as announced at the start
of the fiscal year, despite the rising Canadian dollar.
- Launch of Canadian edition of More magazine
a big success.
- Start-up in April of the new press at Transcontinental
Saint-Hyacinthe, which now prints flyers for the Provigo
banner, added upon renewal of contract with Loblaw Companies
Ltd.
- Excellent financial position for further growth.
Montreal, June 14, 2007 – Transcontinental
today reported solid financial results for its second quarter
ended April 30, 2007, despite a negative foreign exchange
impact and a soft advertising market in certain segments.
As mentioned in the previous quarter, management expects results
for the second half to be higher than they have historically
been compared to the first half. This is due to the change
in its business portfolio — related primarily to the
acquisition of Chenelière Éducation in 2006
— and the trend to greater seasonality in certain niches.
Transcontinental remains in an excellent position to achieve
earnings per share before unusual items in the previously
announced range of $1.52 to $1.65 for 2007.
“We are very satisfied with the second-quarter
results and the first half of the year, which are promising
for the remainder of 2007,” said Luc Desjardins, president
and chief executive officer of Transcontinental.
“We are gradually reaping the benefit
from our major reorganization projects in Canada, the United
States and Mexico, as well as from our investments in new
technology and the ongoing continuous improvement initiatives
throughout the company, which have more than offset the negative
foreign exchange impact and the softness in certain segments
of the advertising market. For the rest of the year we plan
to focus our efforts on sales growth, digital development
in the Media sector and improving our ability to compete,
primarily in the commercial printing sector.”
“Due to the recent rise in the Canadian
dollar, we have revised our assumptions for the rest of the
year downward, from $1.10 CAD/USD to $1.05 CAD/USD,”
Mr. Desjardins said. “Taking into account the unfavorable
impact of this change and the previously announced investment
of about five million dollars in Evolution 2010
initiatives, as well as the positive impact of our share buy-back
program, we are maintaining our earnings-per-share objective
of $1.52 to $1.65 for fiscal 2007. This objective would be
maintained even with the assumption of an exchange rate at
parity by the end of the year.”
The Corporation is in an excellent financial
position for further growth, with a net funded debt to total
capitalization ratio of 28% as at April 30, 2007.
Financial Highlights
In its second quarter, Transcontinental reported a 2% increase
in consolidated revenues, to $580.7 million, compared
to $570.9 million for the same quarter a year earlier.
Adjusted operating income before amortization rose 2% to $92.8 million,
compared to $91.4 million in 2006. Excluding the exchange
rate fluctuations between the Canadian dollar and its U.S.
and Mexican counterparts, which lowered revenue by $3.4 million
and adjusted operating income before amortization by $5.2 million,
adjusted operating income before amortization would have grown
7%. Thus the acquisitions made in 2006, higher volumes in
certain segments and many cost-reduction initiatives throughout
the Corporation more than offset lower volume in other segments
and additional investments in the Media sector.
Net income rose slightly, from $33.7 million
in the second quarter of 2006 to $34 million in 2007;
on a per-share basis, net earnings were up 3%, from $0.39
to $0.40. Adjusted net income, which does not take into account
unusual items related to asset impairment and restructuring
costs, declined 4%, from $35.8 million to $34.5 million;
on a per-share basis, adjusted net income remained stable
at $0.41. Excluding the exchange rate impact, growth would
have been 9%.
In the first six months of fiscal 2007, consolidated
revenue was up slightly, from $1.136 billion to $1.149 billion,
while adjusted operating income before amortization was down
slightly, from $170.6 million to $168.5 million. Excluding
the exchange rate impact, which reduced revenue by $8.6 million
and adjusted operating income before amortization by $8.7 million,
adjusted operating income before amortization would have been
up 4%.
Net income was down 12%, from $61.6 million
in the first half of 2006 to $54.2 million in 2007. The
decrease stems primarily from asset impairment and higher
restructuring costs. In 2007, these costs were mainly related
to the restructuring plan for commercial printing operations
announced in the first quarter. On a per-share basis, net
earnings declined from $0.70 to $0.63. Adjusted net income,
excluding pre-tax restructuring charges of $7.8 million
in 2007 and $3.2 million in 2006, was down 7%, from $63.8
million to $59.5 million. On a per-share basis, adjusted net
income decreased 4%, from $0.73 to $0.70.
Excluding the negative foreign exchange impact
in the first half of 2007 and unusual items, earnings per
share would have been $0.78, up 7% over the first half of
2006. This measurement is a good indicator of the Corporation’s
operating performance for the first half of the year.
For more detailed financial information, please
see Management’s Discussion and Analysis for the
second quarter of 2007 at www.transcontinental.com, under
“Investors.”
Operating Highlights
The main operating highlights for the second quarter of 2007
are as follows:
- On February 21, Transcontinental announced the creation
of a division, under Ted Markle as senior vice president,
dedicated to the North American development of its outsourced
newspaper printing offer and operating its newspaper printing
plants in the United States. The preliminary stages of the
San Francisco Chronicle project are going well.
The site has been chosen, the printing equipment ordered
and the team responsible for setting up the project infrastructure
and hiring will be in place within a few weeks. Discussions
are ongoing with a number of U.S. daily newspaper publishers.
- Transcontinental is consolidating its leading position
in delivering products and services to Canadian retailers.
In the first quarter of 2007, the Corporation announced
a five-year agreement with Hudson’s Bay Company to
print all flyers for Zellers, The Bay and Home Outfitters.
The contract includes materials for the loyalty programs
run by these banners, as well as a number of new value-added
products and services. The contract started on February
1, 2007, and is valued at $350 million, of which approximately
$75 million is new business for Transcontinental.
In April, Transcontinental started printing flyers for the
Provigo chain at its plant in Saint-Hyacinthe, Quebec, under
the new agreement with Loblaw Companies Limited that took
effect in 2006. With this contract, Transcontinental renewed
its flyer printing for the Loblaws banner across Canada
and added, as of this spring, the Provigo banner. The contract
has an annualized value of more than $60 million, of
which one third is new business from Provigo.
- On March 21, following an exclusive agreement signed
with renowned U.S. publisher Meredith Corporation, Transcontinental
launched the Canadian version of More magazine,
named Magazine of the Year in the United States
by Advertising Age. Designed for women aged 40 and up, More
fills an underserved niche in the Canadian market and rounds
out Transcontinental’s portfolio of women’s
magazines. The first issue was a big success with advertisers
and readers.
- Transcontinental has always endorsed environmental conservation
and sustainable development, and this commitment has been
recognized over the years by numerous awards. Transcontinental
plans to continue to exercise its leadership in this area
by mobilizing employees and taking concrete action. In the
second quarter, the Transcontinental Printing Book Group
introduced a brochure for book publishers to promote a new
paper made of 100% post-consumer recycled content. Furthermore,
Transcontinental Media announced the launch of the magazine
Vision Durable, whose mission is to help businesses
embrace sustainable development.
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 that reconciles
GAAP financial measures to non-GAAP financial measures.
Dividend
At its June 14, 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. These
dividends are payable on July 27, 2007 to shareholders of
record at the close of business on July 9, 2007. On an annual
basis, this represents a dividend of $0.28 per common share.
Dividends paid by Transcontinental to Quebec residents are
eligible dividends as per the proposed changes announced during
the March 23, 2006 Quebec Budget speech.
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-only mode or tune
in to the simultaneous audio broadcast on Transcontinental’s
website, which will be archived for 30 days.
About Transcontinental Inc.
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 second 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 June 14, 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
Pierre Leduc
Media Relations
Telephone: (416) 859-8562
pleduc@tsa.ca
Financial Community
Jennifer F. McCaughey
Director, Investor Relations
Transcontinental Inc.
Telephone: (514) 954-2821
jennifer.mccaughey@transcontinental.ca
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