Despite Difficult Economy, Transcontinental Improves Profitability
The Corporation has decided to now use the ratio of net indebtedness (including the securitization program) to adjusted operating income before amortization as its primary indicator of financial leverage. In addition, Transcontinental has set the objective of maintaining this ratio within a target range of 2.00 to 2.50 and expects to achieve that by the end of fiscal 2011. As at July 31, 2009, the ratio was 3.18. Furthermore, as at July 31, 2009, the Corporation’s net indebtednessto total capitalization ratio was 49%, within the 35% – 50% range set by management.
In the third quarter ended July 31, 2009, Transcontinental recorded consolidated revenue of $533.1 million, down 9% from the $584.9 million recorded in the same quarter in 2008. Adjusted operating income before amortization increased 5%, from $81.8 million in 2008 to $86.2 million in 2009. The decrease in revenue is mainly due to the recession, which led to a decline in the volume of direct mail activities in the United States and in marketing product printing activities, as well as advertising revenues in magazines and newspapers.
Net income decreased 15%, from $29.9 million to $25.3 million, due to the unusual item of restructuring costs; on a per-share basis, net income decreased from $0.37 to $0.31. Adjusted net income, which excludes unusual items, rose 4%, from $29.9 million to $31.2 million; on a per-share basis, adjusted net income increased from $0.37 to $0.39.
A pre-tax amount of $7.5 million ($5.9 million after tax) was charged to the third quarter with respect to the consolidation of direct mail operations in the United States and the rationalization program announced in February 2009. In the first three quarters of fiscal 2009, these measures generated cost savings of about $50 million. The goal for fiscal 2009 is to save more than $75 million and, on an annualized basis, more than $100 million.