MONTREAL--Dec. 15, 2004-- Transcontinental Inc. had another good year in 2004 and ended the year with strong operating results in the fourth quarter, which follows a record year and fourth quarter in 2003. Revenues were up 8% for the year and 9% in the fourth quarter, even though there was one less week of activity in 2004's fourth quarter compared to the same period in 2003. Fiscal 2004 was negatively affected by non-recurring items totalling $23 million, or $0.26 per share. These items involved a write-down of goodwill, impairment of assets, restructuring costs and a loss from discontinued operations. Excluding the non-recurring items, Transcontinental reported income of $152 million, or $1.71 per share in 2004, an increase of 6% over 2003. Had it not been for the higher than expected negative impact of about $0.03 per share related to the strong increase in the Canadian vs. US dollar towards the very end of fiscal 2004, Transcontinental would have reached its target earnings per share before non-recurring items of $1.72 to $1.80. Including the non-recurring items, net income for fiscal 2004 was $129 million or $1.45 per share, compared to $143 million, or $1.61 per share, in 2003. For the fourth quarter, income before non-recurring items was up 11% to $53 million, or $0.59 per share, compared to $47 million, or $0.53 per share, for the fourth quarter in 2003. Net income after non-recurring items was $28 million, or $0.32 per share. "This continuity in the growth of our revenues and earnings before non-recurring items, despite the often difficult market conditions, reflects the strong commitment of our employees who, through our Horizon 2005 business project, are finding new ways to reduce costs, improve efficiency and develop sales," said Luc Desjardins, president and chief executive officer of Transcontinental. "We will thus be able to continue creating long-term value for our customers, shareholders and employees. Our higher results stem also from our ability to integrate the acquisitions made over the course of the year, particularly the US direct marketing firm CC3, as well as from the turnaround of some of our operations, our capital investments, particularly in newspaper printing, and our disciplined financial management. It is encouraging to see that we closed the year with good progress in operating results, which should continue in 2005 and allow us to offset the expected negative impact of the stronger Canadian dollar." Daniel Denault, vice president and chief financial officer, said that "the Corporation is in solid financial position enabling continued growth in its strategic niches. Thanks to our significant cash flow, we reduced our net funded debt to total capitalization ratio to 24% as at October 31, 2004, which is much lower than the target ratio of 45% set by management. We also have $400 million in available credit facilities. This gives us the financial flexibility to be very active in the search for complementary acquisitions in the United States and Canada. Furthermore, in 2005 we will benefit from our capital investments made during 2004 while continuing to invest in the future: training our people, promoting our brands and acquiring state-of-the art equipment. Related to this last item, we announced on November 16th that we will be investing $53 million over the next two years, and that total investments in capital assets should reach $130 million in 2005." Note: For the analysis of fiscal and fourth quarter 2004 results, references to "operating income before depreciation and amortization" mean "operating income before depreciation and amortization, write-down of goodwill, impairment of assets and restructuring costs"; while references to "operating income margin before depreciation and amortization" mean "operating income margin before depreciation and amortization, write-down of goodwill, impairment of assets and restructuring costs." Fiscal 2004 Financial highlights For the fiscal year ended October 31, 2004, consolidated revenues rose to $2.05 billion, up 8% over revenues of $1.90 billion in fiscal 2003. This increase is largely due to the contribution of acquired companies CC3, Optipress and Avid Media in 2004. Additional revenue was also generated by investments in the Newspaper Printing Group and organic growth in the Media sector. These items more than offset the negative paper effect and the exchange-rate impact, as well as the additional $22 million in revenue from the extra week of operations in 2003. Operating income before depreciation and amortization rose 9% to $366 million in 2004, compared to $336 million in 2003, due to the contributions from acquisitions, investments and strategic initiatives, efficiency improvements and cost reductions across the company. These items offset lower sales prices in some printing segments. Operating income margin before depreciation and amortization continued to grow, rising from 17.7% in 2003 to 17.9% in 2004, one of the highest in the industry. Net income went from $143 million in 2003, or $1.61 per share, to $129 million in 2004, or $1.45 per share, following the recording of non-recurring items totalling $23 million, or $0.26 per share. Excluding these non-recurring items, net income was $152 million, or $1.71 per share, up 6% over 2003. Cash flow from continuing operations before changes in non-cash operating items rose by 11% to $279 million. As at October 31, 2004, the Corporation's net indebtedness stood at $317 million, only $4 million more than at the start of the year, despite investments of close to $300 million in business acquisitions and equipment. The net funded debt to total capitalization ratio was 24%, much lower than the 45% target ratio set by management. Moreover, the Corporation's available credit facilities were unused, so that Transcontinental had about $400 million in available credit. The following are the results by operating sector for fiscal 2004. Revenues in the Information Products Printing sector were up 10%, from $651 million in 2003 to $714 million in 2004. The increase is due to the contribution from the Optipress printing operations, as well as organic growth, largely in newspaper and magazine printing. These items more than offset the negative exchange rate and paper effect. Operating income before depreciation and amortization rose from $127 million in 2003 to $149 million in 2004, up 18%, due to organic growth mainly in newspaper printing, as well as cost reductions. Operating income margin before depreciation and amortization rose from 19.5% in 2003 to 20.9% in 2004. Revenues in the Marketing Products Printing sector rose from $838 million in 2003 to $909 million in 2004, up 9%. Revenue growth in this sector is primarily due to the acquisition of CC3, which more than offset the negative paper effect and the lower revenues from commercial printing in Canada due to downward pressure on prices. Operating income before depreciation and amortization rose 12%, from $112 million to $125 million, due mainly to the acquisition of CC3 and the turnaround in the Warminster direct marketing plant in the Philadelphia area, which gained additional business volume due to the CC3 integration. Operating income margin before depreciation and amortization increased from 13.3% in 2003 to 13.7% in 2004. Revenues in the Media sector grew 6%, from $497 million in 2003 to $524 million in 2004. Growth was due to the acquisition of the Optipress newspapers and Avid Media magazines, as well as higher revenues in community newspapers and the distribution of advertising material in Quebec. These items more than offset the lower advertising spending by national advertisers, particularly in the "automotive" and "government" categories, which affected the revenues of our daily newspapers in the Atlantic provinces and our business publications. Operating income before depreciation and amortization decreased from $100 million in 2003 to $97 million in 2004. This decrease is primarily due to reduced spending by national advertisers; limited contribution from the Optipress newspapers due to a slower than anticipated integration; and the negative contribution from the Avid Media magazines stemming from the seasonal nature of these operations. Operating income margin before depreciation and amortization declined from 20% in 2003 to 18.4% in 2004. This temporary decrease is due to the effects of the acquisitions of the publishing operations of Optipress and Avid Media. The margin from the contribution of these acquisitions will improve in the coming quarters as the identified synergies materialize and the seasonal impact of Avid Media's operations is reversed. Fourth quarter 2004 Financial highlights As expected, Transcontinental ended fiscal 2004 with good progress in results excluding non-recurring items. Revenues for the fourth quarter ended October 31 rose to $565 million compared to $519 million in 2003, an increase of 9%. This growth stems from acquisitions made during the fiscal year, as well as organic growth in the Information Products Printing and Media sectors. These items more than offset the one less week of activity in 2004 compared to 2003 and the significant negative impact of the exchange rate. Operating income before depreciation and amortization rose 5% to $112 million. The contribution from acquisitions and organic growth more than offset the $6 million negative exchange rate impact and the additional $5 million from the extra week of activity recorded in 2003. The operating income margin before depreciation and amortization went from 20.5% in the fourth quarter of 2003 to 19.8% in the fourth quarter of 2004. The decrease is due to the negative impact of the exchange rate and to acquisitions made during the year for which the synergies have not yet fully materialized. Net income in the fourth quarter was $28 million, or $0.32 per share, compared to $47 million, or $0.53 per share, in 2003. The decrease is due to the recording of non-recurring items totalling $0.27 per share during the quarter. These items consist of the write-down of goodwill related to our Mexican operations of $13 million, or $0.14 per share, asset impairment expense stemming from our revised manufacturing strategy of $7 million, or $0.06 per share, and a non-recurring charge of $6 million, or $0.07 per share, recorded under discontinued operations due to an unfavourable California court judgment against Transcontinental. These items are discussed in detail in the Management's Discussion and Analysis for fiscal 2004. Excluding the above non-recurring items, earnings per share rose from $0.53 in the fourth quarter of 2003 to $0.59 in 2004, an increase of 11%. Cash flow from continuing operations before changes in non-cash operating items rose to $83 million in the fourth quarter of 2004, an increase of 19% over the same period in 2003. Due to the significant cash flow from operations and an increase in the changes in non-cash operating items of $71 million, fiscal 2004 closed with $140 million in cash and a net funded debt to capitalization ratio of 24%.