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Transcontinental Revenues Up, But Americ Disc Caused A $30 Million Loss

Thursday, June 07, 2001

Press release from the issuing company

Montreal, June 6, 2001 - Transcontinental Group has distinguished itself in its industry by again posting very strong results in its strategic activities for the second quarter of 2001. The Corporation also announced that it is following through on its decision to evaluate its options with respect to its interest in Americ Disc by adopting a formal plan of disposal. It is currently negotiating a sale with one of the potential buyers who have submitted proposals in recent weeks. Operating results for Americ Disc, as well as the assets and liabilities associated with its activities, are thus being presented separately in the financial statements in the second quarter. Excluding Americ Disc, the second quarter ended April 30, 2001 saw Transcontinental's consolidated revenues reach $450.9 million, up 10% compared to $411.4 million in 2000. Operating income was $54.6 million, up 28% over $42.5 million a year ago. On a per-share basis, net earnings from continuing operations rose 21%, from $0.47 to $0.57, an increase which is all the more significant given that the weighed average number of common shares outstanding increased by three million compared to the same period the previous year. Cash flow from operations increased 22%, from $41.2 million in 2000 to $50.2 million in 2001 (from $1.11 to $1.25 per share). For the first six months of fiscal 2001, again excluding Americ Disc, consolidated revenues were up 15%, from $780.3 million in 2000 to $899.5 million in 2001. Operating income reached $97.8 million, an increase of 29% over the $75.7 million posted in 2000. On a per-share basis, net earnings from continuing operations increased 25%, from $0.79 to $0.99. Cash flow from operations grew 22%, from 76 million in 2000 to $93 million in 2001 (from $2.05 to $2.40 per share). In the second quarter, the Corporation incurred a loss of $53.7 million from activities related to Americ Disc, $52 million of which was a one-time charge related to the formal plan of disposal and current sale process. Americ Disc's results, including the one-time charge, are presented in the financial statements as discontinued operations, in accordance with generally accepted accounting principles. Including this non-recurring item, the Corporation posted a net loss of $30.9 million in the second quarter, compared to net earnings of $17.1 million in the same quarter in 2000. On a per-share basis, the net loss was $0.77 compared to net earnings of $0.46 in the prior period. For the first six months of the fiscal year, the Corporation posted a net loss of $16.9 million compared with net earnings of $28.9 million. On a per-share basis, the net loss was $0.44 compared to net earnings of $0.78 in the first half of 2000. "The performance of our strategic sectors, particularly that of our Printing and Media sectors, is all the more remarkable given the general slowdown in the North American economy," said Remi Marcoux, Chairman and CEO of Transcontinental Group. "We have also continued to benefit from the multiple synergies created in recent years, which have reduced costs and improved productivity right across the company." "The decision to adopt a formal plan of disposal of Americ Disc resulting in a one-time charge was a difficult one," said Mr. Marcoux. "It is, however, consistent with our plan to concentrate on growing our strategic sectors. As we have often said in the past year, CD manufacturing is not part of our strategic activities. Moreover, the industry is undergoing an active period of consolidation. Following this decision, Transcontinental remains very healthy financially and is in an excellent position to continue its growth." General Comments on Operating Results Luc Desjardins, President and Chief Operating Officer, outlined the highlights of the quarter. Printing sector revenues increased by 13% and operating income by 34% over the second quarter of 2000. This confirms Transcontinental's position as one of the most profitable printers in North America. The many streamlining and cost-reduction measures implemented in recent years, including the closure or merger of printing plants, have had an increasingly positive effect on the Printing sector's performance. Despite a more pronounced slowdown in the American economy, exports to the United States have increased 22% in the past six months and sales outside Canada represented 36% of the sector's total sales during this period. The Book group's excellent performance is worthy of mention and 60% of its sales are now in the United States. Transcontinental has also substantially improved operating results in Mexico. Lastly, the Corporation acquired Imprimerie la Renaissance, a high-quality commercial printer in Quebec City. Its operations will be integrated with those of Litho Acme-Prescom, making Transcontinental the largest printer in Quebec City. Media sector revenues rose by 9% and operating income by 29% compared to 2000. Integration of the Telemedia magazines acquired in March 2000 is moving ahead well, with synergies and cost-reduction measures resulting in more than the initially forecast $8 million in savings. Among the highlights of the quarter are the successful launches of Metro, the tabloid distributed to users of the Montreal subway system, of Elle Canada, which generated more than $1 million in advertising revenues with its first issue, as well as of the portals lesaffaires.com, aimed at the French-language business community, and MochaSofa.ca, aimed at Canadian women from coast to coast. Lastly, the acquisition of UniMedia/Gesca's weekly newspapers has made Transcontinental the largest publisher of weekly newspapers in Quebec and the second largest in Canada. The Interactive Marketing sector continued to actively integrate its printing, data management, Internet solutions and call centre operations. This sector plays an important strategic role in the Corporation's service offering since it includes one-to-one marketing. Revenues are up 11% over the corresponding quarter in 2000 but operating income is down 18%, due in large part to the slowdown in the American economy. Combined operating income for the first six months has nonetheless increased by 12% over 2000. "The Corporation has posted an excellent performance in the first six months of the fiscal year," noted Luc Desjardins. "Despite an expected decrease in advertising expenditures in the months ahead, our many streamlining and cost-reduction programs should enable us to post year-over-year increase in earnings during the final six months of the fiscal year in our three strategic sectors." On April 30, 2001, the Corporation's net debt for continuing operations was $385.9 million, down from $446.9 million at the end of the second quarter in fiscal 2000, due to the application towards the debt of the net proceeds of the issue of 4,000,000 Class A Subordinate Voting Shares completed on February 20, 2001. Dividend Declared At its June 6, 2001 meeting, the Corporation's Board of Directors voted a quarterly dividend of $0.05 per share on Class A Subordinate Voting Shares and Class B shares. These dividends are payable on July 16, 2001 to shareholders of record at noon on July 9, 2001. Profile One of the 10 largest commercial printers in North America and the largest publisher of consumer magazines in Canada, G.T.C. Transcontinental Group Ltd. is a Canadian corporation that is also engaged in interactive marketing and Internet solutions, weekly newspaper publishing and door-to-door distribution of advertising material. Through this completely integrated network, Transcontinental is able to provide its customers total service. The Corporation has 11,500 employees in Canada, the United States and Mexico.




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