Transcontinental Announces Q1 Results; Maintains Target for 2004
Press release from the issuing company
MONTREAL--March 16, 2004-- Transcontinental Inc. earnings in the first quarter of 2004 were affected by the timing effect resulting from the inclusion of an additional week of activity at the end of fiscal 2003 and the negative impact of the exchange rate. Excluding these two items, earnings per share would have been the same as in the first quarter of 2003. The many sales developments, efficiency improvements and cost reduction initiatives under the Horizon 2005 business project offset both the tough market conditions anticipated by management in December 2003 and lower spending by certain types of newspaper and magazine advertisers. Reflecting its confidence in the remaining portion of the fiscal year, Transcontinental is maintaining its earnings per common share target of $1.72 to $1.80 for 2004, and is increasing the dividend paid to holders of common shares by 29% from $0.14 to $0.18 per year.
In the first quarter ended January 31, 2004, Transcontinental reported consolidated revenues of $462 million compared to $475 million for the same period in 2003, down 3%. Operating income before depreciation and amortization stood at $74 million versus $77 million in 2003, down 4%. Net income decreased from $30 million in the first quarter of 2003 to $26 million in 2004; on a per share basis, it dropped from $0.34 to $0.30. About $0.02 of this decrease is due to the timing effect resulting from the inclusion of an additional week of activity in 2003, which effectively replaced, in this year's first quarter, the last week of October 2003, one of the busiest periods of the year, with the last week of January 2004, one of the slowest. Another $0.02 was due to the negative impact of the exchange rate. Cash flow from operations before changes in non-cash operating items increased slightly, from $61 million in the first quarter of 2003 to $62 million in 2004.
"We expected the market to be tough in 2004, but with our niche-based strategy and the positive impact of Horizon 2005, we are continuing to do better than the vast majority of our competitors," said Daniel Denault, Vice President and Chief Financial Officer of Transcontinental. "The contribution, in coming quarters, of the CC3 and Optipress operations acquired during the first quarter, the ongoing Horizon 2005 initiatives to increase revenues and improve efficiency, and the many investments in 2003, particularly with respect to printing the daily La Presse, will more than offset the difficult market conditions, which will continue. Management is maintaining its common share target for fiscal 2004, and with its solid balance sheet, the Corporation is in an excellent position to pursue its growth."
Highlights of First Quarter 2004
In addition to the above-mentioned items, Luc Desjardins, President and Chief Operating Officer, gave the following highlights for the first quarter of 2004:
-- Revenues in the Information Products Printing sector rose 5% and its operating income before depreciation and amortization rose 12%. Revenue growth stemmed primarily from starting to print La Presse at the new Transcontinental Metropolitan plant. Income growth came primarily from capital investments in the printing sector and from transferring the printing of the former CanWest newspapers to the Borden and Halifax plants in the Atlantic provinces. Operating income margin before depreciation and amortization increased from 17.5% in the first quarter of 2003 to 18.6% in the first quarter of 2004.
-- Revenues in the Marketing Products Printing sector decreased 7%, from $216 million to $201 million. Operating income before depreciation and amortization went from $26 million to $25 million, down 5%. These decreases are partly due to difficult market conditions in the printing of lower value-added marketing products and reduction in flyer printing volumes. The operating income margin before depreciation and amortization increased slightly, from 12% to 12.3%.
-- Revenues in the Media sector decreased 3%, from $123 million in 2003 to $119 million in 2004. Operating income before depreciation and amortization decreased 17%, from $24 million to $20 million. The revenue decrease stems mainly from lower advertising spending by national advertisers, mainly in the "automotive" and "government" categories, and from the transfer of certain printing activities to another operating sector. The revenue decrease, the sector transfer of newspaper printing in the Atlantic provinces, and additional investments in the development of some publications account for the decrease in operating income. Operating income margin before depreciation and amortization decreased from 19.5% in the first quarter of 2003 to 16.6% in the first quarter of 2004.
-- 100-day integration plans are being implemented for the CC3 and Optipress acquisitions, and are on schedule.
-- Under Horizon 2005, about 1000 employees have taken the training course to instil the culture of continuous improvement and employee participation throughout the company, bringing to over 5500 the number of employees who have taken the course to date. There have also been a further 10 Kaizen workshops, bringing the total number to over 80. In the area of sales development, the five market teams set up in 2003 continued to offer their services systematically to targeted customers in North America. Given the success of these first teams, seven new teams have been formed and will start operating in the second quarter. Lastly, in the area of standardization, Transcontinental is continuing to deploy an integrated manufacturing software program.
-- Remi Marcoux, Chairman of the Board and CEO of Transcontinental, was selected as one of Canada's 10 most respected CEOs by his peers, in a survey of 255 business leaders across the country conducted by KPMG.
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