Transcontinental Reports 4% Decrease in Revenues
Wednesday, March 14, 2012
Press release from the issuing company
Transcontinental’s Inc. revenues decreased by 4% in the first quarter, from $514.8 million to $495.9 million, driven primarily by the sale of its black and white book printing business, destined for U.S. exports, completed last September, which was part of the asset swap transaction in which it acquired Quad/Graphics Canada on March 1st. Revenues were also impacted by lower volume from the non-recurring revenue from the printing contract for the Canadian Census last year and to a lesser extent, the printing of magazines and books. This first quarter decrease was mitigated by the Media sector, most notably from the growth of its digital media and community newspaper businesses, as a result of recent investments. Consolidated revenues are expected to return on a growth path over the next year given the contribution from the Quad/Graphics Canada acquisition as well as other contracts such as Canadian Tire.
For this same period, adjusted operating income decreased 12%, from $48.7 million to $43.0 million, driven primarily by the Media sector due to a softer advertising environment coupled with continued competitive pressures in the local solutions marketplace and to a lesser extent by lower first quarter volume in the Printing sector. Net income applicable to participating shares decreased from $25.7 million, or $0.32 per share, to a loss of $33.3 million, or $0.41 per share. This decrease is mainly due to a tax provision of $58.0 million related to notices of re-assessment, which the Corporation intends to contest, pertaining to deductions on investments in capital assets made by the Corporation, as well as interprovincial allocation of income. Excluding unusual items, adjusted net income applicable to participating shares decreased 6%, from $28.8 million, or $0.36 per share, to $27.1 million, or $0.33 per share.
“The acquisition of the Canadian assets of Quad/Graphics is an important milestone in our development, said François Olivier, President and Chief Executive Officer of TC Transcontinental. It strengthens our print business going forward given the industry dynamics and it allows us to extend our integrated marketing activation offering to many new customers. In fact, our transformation continues to ramp up with the growth of our digital and interactive revenues again this quarter.
We continue to maintain a strong financial position with a solid balance sheet and an ability to generate significant cash flow. If the advertising markets remain stable, we expect to improve our performance in the balance of the year given the lift from the Quad/Graphics Canada acquisition, the full impact from new contracts and the benefits related to the integration of our Media and Interactive sectors. We are confident in our strategy and future prospects and as such have increased our dividends on participating shares by 7%.”
Other Highlights of the Quarter
For more detailed financial information, please see Management’s Discussion and Analysis for the first quarter ended January 31, 2012and the complete financial statements on our website at www.tc.tc, under “Investors.”
Reconciliation of Non-IFRS Financial Measures
Financial data have been prepared in conformity with IFRS. However, certain measures used in this press release do not have any standardized meaning under IFRS and could be calculated differently by other companies. We believe that many readers analyze our results based on certain non-IFRS financial measures because such measures are more appropriate for evaluating the Corporation’s operating performance. Internally, Management uses such non-IFRS 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 IFRS.
At its March 12, 2012 meeting, the Corporation’s Board of Directors declared a quarterly dividend of $0.145 per Class A Subordinate Voting Shares and Class B Shares. This dividend is payable on April 26, 2012 to participating shareholders of record at the close of business on April 6, 2012. The Corporation thus increased the dividend per participating share by 7%, or $0.04 per share, raising the new annual dividend to $0.58 per share, from $0.54 per share. This increase is a reflection of Transcontinental’s strong cash flow position. Furthermore, at the same meeting, the Board also declared a quarterly dividend of $0.4196 per share on cumulative 5-year rate reset first preferred shares, series D. This dividend is payable on April 16, 2012. On an annual basis, this represents a dividend of $1.6875 per preferred share.
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