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Acquisitions Drive Transcontinental’s Revenue Gains for the Quarter

September 6, 2012
MONTREAL—Sept. 6, 2012—Transcontinental Inc.’s revenues grew 8 percent in the third quarter, from $479.4 million to $517.0 million. This growth was driven primarily by the acquisition of  Quad/Graphics Canada  and Redux Media, among others, the volume generated from new printing contracts and the launches of new community newspapers in Quebec.

It was, however, mitigated by the expected reduction in sales in the Educational Book Publishing Group, due mainly to the end of the school reform in Quebec, the incentives granted at the renewal of certain printing contracts and the decrease in national advertising in community newspapers outside Quebec. Excluding acquisitions, divestitures and closures, the impact of the exchange rate and the paper component variance, organic revenue growth was negative by 3 percent in the third quarter.

Transcontinental QS 2012
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Adjusted operating income was down 13 percent during the same period, from $57.1 million to $49.9 million. This decrease is mainly due to lower volume from educational book sales, as indicated above, as well as a soft national advertising market outside Quebec and incentives granted at the renewal of certain contracts. This decrease was partially offset by improved printing platform efficiency.

Net income applicable to participating shares declined 74 percent, from $31.5 million to $8.1 million. This decrease is mainly due to restructuring, integration and acquisition costs related to the acquisition of Quad/Graphics Canada, Inc., to net income from discontinued operations namely, one- and two-color book printing, and to the reduction in adjusted operating income. Excluding unusual items and discontinued operations, adjusted net income applicable to participating shares was down 23 percent, from $32.5 million to $24.9 million.

“The third quarter results demonstrate the resilience of our printing operations and the adverse impact of difficult market conditions on some niches in the Media Sector,” said François Olivier, president and CEO. “In the Printing Sector, the integration of Quad/Graphics Canada, Inc. progressed and we are on track to generate the anticipated synergies of more than $40 million over the next 18 months.

“In fact, starting in the fourth quarter, we will reap the benefits of this acquisition more significantly. We sold our remaining one- and two-color book printing assets and renewed several contracts with national retailers. We also recently extended contracts to print Rogers’ marketing products and magazines.

Olivier noted also that, ”although the Media Sector has been affected by the exceptional events that have lowered the results of the Educational Book Publishing Group, we continued to invest in the development of new products and services. The scope of our digital network was expanded through the acquisition of Redux Media and the partnership with Glacier‍ Media.

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