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- Growth of 9% in adjusted* operating income before
amortization; excluding the foreign exchange rate impact,
growth of 17%.
- Organic growth in revenues of 3.4% and 5.5% organic
growth in adjusted* operating income before amortization.
- Growth of 22% in cash flow from operations before
changes in non-cash operating items.
- Growth of 13% in net income; on a per-share basis,
net earnings rose 18%, from $0.28 to $0.33.
- Slight increase in adjusted* net income; on a
per-share basis, adjusted* net earnings rose from $0.33
to $0.34, up 3%, but growth of 18% excluding the foreign
exchange rate impact.
- Annual earnings-per-share objective of $1.52
to $1.65 maintained, as announced at the start of the fiscal
year, despite the rising Canadian dollar.
- Announcement on August 21 of takeover bid to
acquire PLM Group, Canada’s fourth-largest printer
and mailing of takeover bid circular to PLM Group shareholders
on September 10.
- Excellent financial position for further growth.
*Please refer to “Reconciliation
of Non-GAAP Financial Measures.”
Montreal, September 13, 2007 – Transcontinental
today reported solid financial results for its third quarter
ended July 31, 2007, despite a negative foreign exchange impact.
After its promising second quarter, all financial performance
indicators are up in the third quarter over the same period
in 2006.
“We are very satisfied with the results
for the third quarter and first nine months of the year,”
said Luc Desjardins, president and chief executive officer
of Transcontinental. “We had said in the two prior quarters
that the second half, and particularly the fourth quarter,
would be better than it historically has been compared to
the first half, primarily because of the evolution of our
business portfolio and the trend to greater seasonality in
some niches. We are also reaping the benefit of our major
reorganization projects, especially in commercial printing
in Canada, as well as the turnaround in our Mexican operations.
These achievements have more than offset the negative impact
of the exchange rate, the higher-than-expected cost of starting
up our new flyer printing equipment, which is now fully operational,
and lower-than-expected direct-marketing revenue in the United
States.”
Mr. Desjardins continued: “For the rest
of the year we will focus our efforts on sales development,
digital development in our Media sector and further improvement
in our competitiveness. Taking into account a constant exchange
rate of $1.05 CAD/USD, we are maintaining our earnings-per-share
objective of $1.52 to $1.65 for fiscal 2007. We would maintain
this objective even if the CAD/USD achieved parity by the
end of the year.”
The Corporation is in an excellent financial
position for further growth through acquisitions, among other
things, with a net funded debt to total capitalization ratio
of 27% as at July 31, 2007, which is below the 35% - 50% objective
set by the Board of Directors. Pro forma the PLM
acquisition, which will be paid in cash and financed from
existing credit facilities, the net debt to total capitalization
ratio would have been about 32%.
Financial Highlights
In its third quarter, Transcontinental reported a 3% increase
in consolidated revenues, to $546.5 million, compared
to $528.9 million for the same quarter a year earlier.
Adjusted operating income before amortization rose 9%, from
$74.8 million in 2006 to $81.3 million in 2007.
Excluding the exchange rate fluctuations between the Canadian
dollar and its U.S. and Mexican counterparts, which lowered
revenue by $7.6 million and adjusted operating income
before amortization by $6.3 million, revenue would have
grown 4.8% and adjusted operating income before amortization
17.1%. Thus the acquisitions made in 2006, higher volumes
in certain segments and many cost-reduction initiatives throughout
the Corporation more than offset the lower volume in other
segments.
Net income rose 13%, from $24.7 million
to $27.8 million; on a per-share basis, net earnings
were up 18%, from $0.28 to $0.33. Adjusted net income, which
does not take into account unusual items related to asset
impairment, restructuring costs and unusual adjustments to
income taxes of $2.4 million in 2006, was up slightly,
from $28.3 million to $28.4 million; on a per-share
basis, adjusted net income rose 3%, from $0.33 to $0.34. Excluding
the exchange rate impact, adjusted earnings per share grew
18%.
In the first nine months of fiscal 2007, consolidated
revenue was up 2%, from $1.665 billion to $1.695 billion,
while adjusted operating income before amortization was up
2%, from $245.4 million to $249.8 million. Excluding
the exchange rate impact, which reduced revenue by $16.2 million
and adjusted operating income before amortization by $15 million,
revenue grew 2.8% and adjusted operating income before amortization
7.9%.
Net income was down 5%, from $86.3 million
in the first nine months of 2006 to $82 million in 2007.
The decrease stems primarily from higher restructuring and
asset impairment costs, higher amortization costs related
to acquisitions and equipment investments since last year,
and higher financial expenses. On a per-share basis, net earnings
declined 3%, from $0.99 to $0.96. Adjusted net income, excluding
after-tax asset impairment and restructuring costs of $5.9 million
in 2007 and $3.3 million in 2006, as well as unusual
adjustments to income taxes of 2.4 million in 2006, was
down 4%, from $92 million to $87.9 million. On a
per-share basis, adjusted net income declined 2%, from $1.05
to $1.03.
Excluding the negative foreign exchange impact
in the first nine months of 2007, adjusted earnings per share
would have been $1.17, up 11% over 2006. This measurement
is a good indicator of the Corporation’s operating performance
for the first nine months of the year.
For more detailed financial information, please
see Management’s Discussion and Analysis for the
third quarter ended July 31, 2007 at www.transcontinental.com,
under “Investors.”
Operating Highlights
The main operating highlights for the third quarter of 2007
are as follows:
- Several acquisitions in the Media sector, including the
newspapers The Grenfell Sun, The Broadview
Express and The Oxbow Herald in Saskatchewan,
as well as The Seaway News in Ontario. Also, we
completed the acquisition of six construction and renovation
magazines from Les Éditions Ma Maison print media
group, confirming our position as the leader in this market
in Quebec. We also launched Transcontinental Custom Communications,
a joint venture with the U.K. agency Seven Squared, to offer
custom publishing services to Canadian and U.S. clients,
an important growth segment for Transcontinental moving
forward.
- On the printing side, Transcontinental was selected to
print Harry Potter et les reliques de la mort (Harry
Potter and the Deathly Hallows), the over-800-page
seventh and final volume in the Harry Potter series. Transcontinental,
for the third consecutive volume, was the designated printer
of the French edition for the Canadian market. Furthermore,
work on the project to print the San Francisco Chronicle
is on schedule. The team is in place, the site has been
chosen and the printing equipment ordered. Transcontinental
is also in discussions with several other daily newspaper
publishers. The expansion of Transcontinental Metrolitho
in Sherbrooke, which specializes in short-run book printing,
will be completed in the first quarter of 2008. We also
started to print flyers for Provigo on the new equipment
in our Saint-Hyacinthe plant, under the new agreement signed
with Loblaw Company Ltd. in 2006.
- Recognized as a leader in the protection of the environment
and sustainable development, Transcontinental plans to continue
exercising this leadership by mobilizing its employees and
implementing concrete action. Among other things, in the
third quarter, Transcontinental Direct Montreal became Transcontinental’s
first Web printer to obtain “chain-of-custody”
certification under the Forest Stewardship Council (FSC).
This certification identifies products that are produced
responsibly for society and the environment. Six sheetfed
printing plants in Manitoba, Ontario and Quebec have already
obtained this certification. We also published the second
issue of the magazine Vision durable, whose mission
is to educate business people about 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.
Corporate Affairs
On August 21, 2007, Transcontinental announced that it was
making a takeover bid to acquire PLM Group, the fourth largest
printer in Canada. Transcontinental is making an all-cash
offer to acquire all of PLM’s approximately 29.5 million
shares outstanding, on a fully diluted basis, at C$3.50 per
share, for a total enterprise value of about $130 million
including debt. Transcontinental and PLM have signed a Support
Agreement pursuant to which the PLM Board of Directors has
unanimously agreed to recommend that shareholders accept the
offer of Transcontinental. Barry N. Pike, founder and Chairman
of the Board and Chief Executive Officer of PLM, and Pike
Holdings Inc., a holding company controlled by Mr. Pike, which
combined hold approximately 51.2% of the shares outstanding,
have signed a hard Lock-Up Agreement pursuant to which they
have agreed to tender the shares they hold and accept the
offer of Transcontinental.
On September 10, Transcontinental sent PLM
shareholders a takeover bid circular. During that same period,
the PLM Board of Directors sent its shareholders a circular
that recommends, among other things, acceptance of the offer
of Transcontinental.
Transcontinental’s offer is subject to
certain usual conditions, including the deposit of 66 2/3%
of shares outstanding and obtaining regulatory approvals.
In this regard, the Corporation received approval from the
Competition Bureau on September 10, 2007. The transaction
is expected to close in October 2007.
Dividend
At its September 13, 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 October 26, 2007 to
shareholders of record at the close of business on October
5, 2007. On an annual basis, this represents a dividend of
$0.28 per common share. Dividends paid by Transcontinental
to Canadian residents are eligible dividends under federal
and provincial Income Tax laws.
Additional Information
Upon releasing its quarterly results, Transcontinental will
hold a conference call for the financial community today at
2:15 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. For media requests
for information or interviews, please contact Nessa Prendergast,
Director, Media Relations, at (514) 954-2809.
About Transcontinental
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 and the
Corporation’s capacity to implement its strategic plan
and cost-reduction program and make and integrate acquisitions
into its activities. The risks, uncertainties and other factors
that could influence actual results are described in the Corporation’s
Management’s Discussion and Analysis and the
Annual Information Form.
The forward-looking information in this release
is based on current expectations and information available
as of September 13, 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
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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