Thank you, Jean-Paul, for your kind introduction, and hello everyone.

First of all, I’d like to say how honoured I am to be speaking to you. I was truly impressed by the names of the business leaders who have or will be addressing this forum. It shows that the Rendez-vous financiers Les Affaires are considered a prestigious event within our business community. Congratulations to you and your team, Jean-Paul.

Thank you for coming.

This is the first speech I’ve given in public since my appointment in February. And it’s not by accident. Even though Transcontinental is a North American company, we have deep roots in Montreal and we are proud to belong to its business community. Also, this event is organized by our newspaper, Les Affaires. That’s what you call a joint effort.

I’d like to take a moment to say hello to all the members of the Transcontinental family who are here today. I’d like to particularly mention Rémi Marcoux, our founder and executive chairman of the Board; Isabelle Marcoux, vice president of the Board and vice president of Corporate Development; Natalie Larivière, president of our Media sector, and Benoît Huard, our chief financial officer.

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I have a very simple goal this morning: to share with you my passion for a great company that is, even in Quebec, still a well-kept secret. Even when people know of us, they are unaware of the full scope of our geographic and financial reach, and the products and services we offer.

On that note, Jean-Paul, I’ll tell you something that I’ve never dared to admit to you even in private. So it’s a scoop! In an awareness survey conducted in 2002, 85% of respondents said they knew of Les Affaires, which is to its credit, but half of them thought it belonged to our “favourite competitor.”

So I hope to give you a taste for Transcontinental by showing you a company that is different: different in its people, its culture and its values; different in its philosophy and business model, and in its growth strategy. It is all these components combined that account for our success over such a long period of time.

Hence the title of my speech: The Transcontinental difference is what makes it a success.

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Since a picture is worth a thousand words, I’ve decided to spare you several thousand by using visual media.

My presentation is divided into four sections:

Then, as is the tradition at this event, I will answer your questions.

PART I

Who?

If you asked me who we are, I’d spontaneously answer that we’re 15,000 employees, thousands of customers and some 4,000 shareholders. Those are the three pillars of our Corporation. Everything we do is based on the common long-term interests of these three pillars.

 

Our Employees

Henry Ford, who was not a theoretician or a dreamer, liked to say that: “A company’s two most important assets don’t show up on its balance sheet. They are its people and its reputation.” 

This is a good statement of our profound conviction. The best strategies go nowhere without the right people to carry them out. We want to have employees who are motivated, who share our values, who work as a team and who can adapt quickly to new technologies. We train and coach our people accordingly. Since the start of this decade, we have mobilized our people through two business projects: Horizon 2005 and Evolution 2010.

For us, values are particularly important. The challenge is to make sure that they guide daily behaviour all across the company and we’ve taken concrete steps to meet that challenge. For example, during their annual evaluation, employees are assessed on whether they act in line with our corporate values.

Our people are also trained in our culture of continuous improvement. Just to give you an idea, since 2002 we have completed more than 800 continuous improvement projects, both in administrative processes and production.

Every time a Kaizen workshop or “5S” certificate is completed, we hold an official presentation. Like Rémi before me, I try to get onto the shop floor as much as possible. People are so proud to present the results of their team effort! This direct contact with employees is true to Transcontinental’s reputation for being a very human company.

All of our plants and main administrative offices will be “5S” certified by early 2009, an achievement I’m very proud of.

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Furthermore, our employees are guided by leaders who know how to build enthusiasm, develop the talent around them, convey the company vision and create a sense of trust. To ensure this continues, we set up the Mission: Leadership program for our 1500 main managers. The purpose of this program, which takes several days to complete, is to equip our managers with a set of shared tools they can use to strengthen our culture of continuous improvement and empower employees. More than 85% of our managers have completed this program.

Imagine scenes like the ones you see on screen occurring for almost all of our 15,000 employees who, since 2002, have taken two-day courses on our values and continuous improvement in a similar set up, outside their regular work environment.

As for me, I maintain direct contact with our leaders through an online tool, The President’s Email. I use it to educate and provide information, depending on the circumstances. It’s also interactive, because I invite our managers to send me their comments and feedback by email.

Lastly, for our senior management teams, we introduced the 360 Feedback program. This is an evaluation exercise that provides them with feedback from their peers and members of their own teams. It provides them with clear feedback on their behaviour as leaders and on the areas where they need to improve. I myself have survived this “test”!

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These are concrete examples of how we develop and motivate our people. Transcontinental is a company that maximizes its potential by bringing the talent of its employees to the fore.

Our Customers

Second pillar: our customers.

For the purpose of this presentation, I’ll restrict myself to our major North American partners. What you see is a non-exhaustive list which most definitely does not indicate a value judgement. We like you all and you are all important!

As you can see, Transcontinental has business relations with an impressive list of organizations: major retail chains, national advertisers, financial institutions, major corporations, as well as newspaper, magazine and book publishers. This year, two prestigious names were added to this list: Shoppers Drug Mart-Pharmaprix and Rogers Communications.

Once the business relationship is established, our goal is to meet all of our customers’ needs for printing and marketing products and services.

Two features of our customer base reduce the risk and uncertainty related to our operations. First, no client accounts for more than 5% of our consolidated revenues. Furthermore, we have less exposure to economic cycles for two reasons: 60% of our revenues come from niches that are less subject to cyclical variations and 60% of our printing revenues come from long-term contracts. 

Customers are the reason Transcontinental is in business. Our business philosophy is clear: the best way to create value for shareholders is to create value for customers. A company doesn’t always need a complicated business strategy or strategic plan to identify its directions for growth. All it has to do is listen to its customers. It’s more certain and less costly than using consultants. But don’t get me wrong, we’re very fond of our consultants!

 

Our Shareholders

Shareholders are the third pillar of the company. Transcontinental has been a public company since 1984 and our some 80 million shares outstanding are traded on the Toronto Stock Exchange.

It is always a great pleasure to meet with our shareholders at our annual shareholders’ meeting. It is an event that we prepare for very carefully to make sure everyone enjoys getting together and celebrating our success. You are all very welcome to attend our next annual meeting, which will be held in February 2009.

We take the interests of our shareholders to heart. Our dividend has grown from 6 cents a share in 1997 to 28 cents in 2007. This year we increased it by 14%, to 32 cents. In fact, we have increased our dividend every year for the past seven years. We want our shareholders to benefit from the growth of their company.

 

I’d like to mention a current project that is important for our shareholders: the Finance Evolution Program. This project has mobilized about a hundred people in finance activities all across the company. The goal is to provide real time access to the information we need to help us make the best business decisions. We’re setting up the best financial controls and best procedures in the industry. This initiative is headed by Benoît Huard.

Transcontinental is also a family-run operation. I see that as a major advantage. According to the biggest study on this subject conducted by the Harvard Business School, family-run companies tend to have a longer-term vision. Their stability means that they are building on a solid foundation and they create more long-term value for shareholders.

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To end this first part, I would say this: that when it comes to Transcontinental, being an investor, being a customer or being an employee means being connected to a company whose core values are central to its operations and whose people work as a team for the long-term benefit of our three pillars.

PART II

What?

Now let’s talk about What.

Transcontinental’s primary role is to help its customers identify, reach and retain their target consumers. We do this by offering products and services in printing, publishing and marketing, which includes many new Web-based technology platforms, which our clients are using more and more in their marketing campaigns.

In this second part, I’d like to give you an idea of Transcontinental’s scope, by providing a quick overview of our assets and giving you a sense of our financial performance over the past 10 years.

A.        Quick Overview

In short, Transcontinental:

 

I.          Biggest printer in Canada and sixth-largest in North America.

In Canada, we are the biggest printer, with annualized revenues of $1.1 billion, including $220 million from products exported to the United States from our Canadian facilities. We handle all our customers’ printing needs, from coast to coast. As a complement to our print offering, we provide database and digital services. We have a network of 43 plants and shops.

In the United States, we are one of the biggest suppliers of integrated direct marketing services, with annualized revenues of $365 million. In all, we have nine plants in the United States, of which eight are in direct marketing. Those eight are in Pennsylvania, California, Utah and Texas.

In Mexico, we are the country’s leading printer, with annualized revenues of $85 million. We have three plants in Mexico. We print flyers and catalogues for all the major retailers and we also serve book and magazine publishers. It’s a fast-growing market.

 

2.        Fourth-largest print media group in Canada

Transcontinental is Canada’s fourth-largest print media group. We have offices in seven provinces. Our vision is to offer advertisers all across the country access to communities of interest and to local communities, and to do so in both official languages.

We are Canada’s biggest publisher of consumer magazines. Our 40-odd titles, which are among the most prestigious in the industry, have a monthly readership of over 11 million country-wide. Our magazines are major brands. The most recent addition, Vita, is the French-language counterpart to More magazine. Its launch in mid-September was a great success. Our magazine revenues amount to about $215 million a year.

We are also the largest publisher of community newspapers in the Eastern half of the country, with three million readers a week. Our stable of publications includes 12 daily papers, including Metro in Montreal, 134 weekly, bi-weekly or monthly papers, and a number of specialty titles. We have a presence in the four Atlantic provinces, in Quebec, in Eastern Ontario and in Saskatchewan. We bring in about $250 million a year from newspaper publishing.

Plus, we now host over 120 websites or Internet portals that receive an average of four million unique visitors a month, all across Canada. Most of these sites are extensions of our magazines and newspapers, but others have no print counterpart. These sites account for annual revenues of more than $20 million.

I’d just like to mention that our newspaper Les Affaires was the first print publication in Canada to directly integrate video webcasting into its online site. We are Canadian pioneers in webcasting.

With Publi-Sac, we are also the leader in door-to-door distribution in Quebec, serving three million households a week.

Lastly, since we acquired Chenelière Éducation in 2006, we have become the main publisher of French-language educational resources in Canada, which is a new growth platform for us.

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In short, we are engaged in two major trades that are changing rapidly: publisher and printer.

As a publisher, we produce editorial content that is used in our publications and our websites and Internet portals. Our customers are consumers and the national and local advertisers who want to reach those consumers. Our publishing operations come under our Media sector, which posted revenues of $630 million in 2007.

As a printer, we provide two major services: production services for book, magazine and newspaper publishers, and printing and marketing services for retailers, financial institutions and major corporations. We help them all identify, reach and retain their target consumers.

I often say that our Media sector is the priority area of growth for Transcontinental. Here you see one of the reasons for that. Although it only generates 26% of our consolidated revenues of $2.3 billion dollars, the Media sector accounts for 44% of the Corporation’s operating income.

 

B.        Superior financial performance over the past ten years.

Our assets, which are solid, well-regarded and well rooted in their markets, have enabled Transcontinental to become, over the past ten years, one of the best performing printers and publishers in North America. In the past several years, this fact has been obscured by the unprecedented rise in the Canadian dollar versus its U.S. counterpart.

To give you an idea, from 2003 to 2007, the exchange rate reduced our revenues by $181 million, our operating income by $73 million and our net earnings per share by 57 cents. That’s enormous, but we believe it is all behind us now. We have weathered the storm again.

I’d like to now illustrate our excellent financial performance over the past 10 years using a few graphs and charts.

1.         “Revenue Growth” Chart

2.         EBITDA Chart

3.         “Cash Flow from Operations before Amortization” and “Spending on Fixed Assets” Chart

4.         “Growth from 1997-2007” Chart

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To wrap up this part, a quick word on our financial management. We aim for a reasonable level of debt, and growth that takes place in stages. For example, at July 31, 2008, our net funded debt to total capitalization ratio was 35%, which is the lowest end of the 35% - 50% by our Evolution 2010 business project. This disciplined and prudent financial management may not be glamorous, but it’s less risky for our shareholders. When you combine that with our ability to generate cash flow from operations, it gives us the flexibility we need to invest in our development. Furthermore, in the current financial context, it’s definitely an advantage!

PART III

How?

Now we’re at the how, that is, the thing that fundamentally distinguishes one company from another. I’ve already talked about the mobilization of our employees, our culture, the idea of complementary services and our financial stability. I’d now like to talk to you about our growth strategy.

In general, we have a niche-based strategy. We aim for two things: to be the best in each of our niches, and to become, within a five-year horizon, the number one or number two player in each of our markets. We are convinced that this creates a winning environment for our shareholders. On the international scene we also have a targeted strategy: the United States and Mexico are our priority markets. We have no ambitions to go global.

Now let’s look at what that means for our two primary occupations.

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As a publisher, our strategy is community-based.

With our newspapers, we serve local communities. These are well-rooted in their communities and play a vital social, cultural and economic role. We have great faith in their future, as a complement to the Internet. Our local and regional newspapers are a major area of growth for us.

With respect to magazines and periodicals, we serve communities of interest, which means that they are specialized in a certain number of niches.

For example, our women’s publications accompany Canadian women through every stage of their lives, and they do so in both official languages. This is a promising niche for us.

We are pursuing the same strategy in other niches, such as “business and finance,” “home and garden,” and “sports and recreation.”

Thanks to the power of our brands and the relevance of our content, we have been very successful at establishing our presence on the Internet. I talked about this earlier. It is from this combination of print and digital that our future growth will come, because it meets the needs of consumers and the expectations of advertisers, by providing them with top-quality access to targeted communities. That’s our mission.

As a printer, we are the first – and the best, of course! – in our niches in Canada: flyers, books, newspapers, direct marketing, catalogues and magazines, commercial products and premedia. In each niche we differentiate ourselves by our global offer.

Take the case of a retailer who prints flyers through our Canada-wide network. Upstream, we offer premedia services, which is the creative (photography, layout, etc.). Downstream, we offer door-to-door distribution services, electronic flyers and in-store digital displays. We also provide an array of direct marketing services, including data analysis and email marketing. We can also print the retailer’s catalogues, annual report and posters. Lastly, we can offer advertising in our magazines or newspapers, and handle the retailer’s in-house newsletter through our custom publishing service.

“Targeting,” “niche,” “specialization”: those are the words that define our strategy and that go straight to the heart of the new trends.

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Another aspect of our strategy is that we systematically invest in our niches with high growth potential. I mentioned the development of digital media earlier. I’ll give you two other examples: direct marketing and services to publishers.

Direct marketing

Direct marketing meets the needs of advertisers who want to target their consumers more effectively so they can get a better return on their advertising dollar. This touches on a profound trend: one-to-one advertising. And we head a network of facilities that can serve the entire North American continent.

We recently strengthened our offer by acquiring leaders in their markets: in Canada, the printer PLM Group, and ThinData, a pioneering firm in email marketing; in the United States, Rastar, which offers individualized marketing services.

Services to Publishers

When it comes to the printing services we offer publishers, you are mainly familiar with what we do for daily papers. I must say that the figures are worthy of a headline.

In August, for example, we announced the extension of an 18-year contract, to 2028, valued at $1.7 billion, with The Globe and Mail. We will invest about $200 million in an innovative pan-Canadian platform that will print newspapers and flyers.

In 2009, we will also start printing the San Francisco Chronicle under a 15-year contract worth more than a billion dollars. The plant is being built now. For us, this gives us a major foothold in the United States. The San Francisco Chronicle is owned by Hearst Corporation, and is the leading paper in the Bay Area, which is the fifth-largest market in the U.S. It has an average circulation of more than 400,000 copies a day.

On screen is a video clip of the plant where we print La Presse. You’d think you were at NASA! At Transcontinental, we have identified newspaper printing as one of our key growth segments. We have a unique outsourcing model tailored to fit the needs of innovators and consolidators who have decided they want to come out on top in the current wave of radical change sweeping the daily paper publishing industry.

We also serve magazine and book publishers.

In February 2009, we will become Canada’s biggest magazine printer when we start our exclusive six-year contract to print Rogers’ 70 magazines. The contract is valued at about $40 million a year.  

Lastly, in books, we are the leading printer not only in Canada, but also in Mexico. As with magazines, we serve the U.S. from our Canadian printing plants and we have specialized in short and medium runs.

PART IV

Why reinvent ourselves?

Transcontinental is constantly evolving. Our Evolution 2010 business project identified four major areas that define our future success: talent, organic sales growth, operational efficiency and digital media.

Circumstances force us to admit, however, that we are entering a turbulent period. Globalization, demographic change, new consumer behaviours, growing concern about the environment and new technologies are all radically changing the way we work, get information, entertain ourselves and consume. The combined impact of these factors has already had a major impact on the demands and expectations of our clients, and I believe that we are only seeing the tip of the iceberg.

Last week we held our annual senior management meeting, which was attended by some 200 participants from across the company. We agreed that to keep growing—our key objective—and given these new realities, we had to start reinventing ourselves right now.

We will thus continue to develop our basic activities, but will enhance them by adding new services, particularly digital platforms, to maximize our growth potential. That’s what I like to call our “winning combo.”

To put it briefly, we will remain an outstanding printer and the most creative of publishers. But more and more we will provide marketing solutions on a range of platforms so that we can fulfil our main mission, which is to help our customers reach their target consumers.

That’s the future of our industry and Transcontinental will be there.

CONCLUSION

To conclude, I’d like to say a few words about the future of the printing and publishing industries. Like most other industries, they are undergoing profound and rapid change, but they continue to offer excellent opportunities for development. I’m an optimist-realist.

First, at Transcontinental, we have the right strategy, the right business plan, the financial resources and the leaders to succeed. Plus, we have continually invested in the development of our products, services and brands.

Our goal is to help advertisers reach consumers. Since the late 1990s, we have broadened our service offering to include the Internet and new communication platforms. We plan to pursue and intensify this shift.

At the same time, I am certain that print will long remain the cornerstone of any communication, sales or marketing strategy, with new media its complement. And vice versa: the efficacy of new media is greatly increased when it is paired with print. Both will complement each other and work together. That is the only way we will continue to maximize the return on our client’s marketing dollar.

So, as in the past, Transcontinental will continue to adapt to the new realities of its customers. I am very optimistic about our company’s growth potential.

Thank you for your attention.