Transcontinental Has Strong Profitability Gain on Lower Revenue in Q1

As at January 31, 2010, the ratio of net indebtedness (including the securitization program) to adjusted operating income before amortization was 2.40, versus 3.25 as at January 31, 2009, due to the preferred share placement, an increase in adjusted operating income before amortization, and the rise of the Canadian versus the U.S. dollar. Furthermore, the Corporation has now achieved its objective, set in fiscal 2009, of maintaining this ratio within a target range of 2.00 to 2.50. Note that in the first quarter, the Corporation repaid and cancelled before maturity credit facilities of $150 million arranged with its banking syndicate in fiscal 2009.

Financial Highlights

In the first quarter ended January 31, 2010, Transcontinental recorded consolidated revenues of $559.3 million, compared to $625.4 million in the first quarter 2009, down 11%. The decrease stems mainly from an unfavourable exchange rate effect of $20.5 million, the divestiture or closure of plants and publications, net of acquisitions, which accounted for $18.2 million, and the decline in paper prices which had a negative impact of $10.4 million on revenues. Excluding the divestitures or closures of publications and plants, the impact of the exchange rate and paper prices, and the acquisitions in fiscal 2009, the decline in revenues was only 2.7%.

Adjusted operating income before amortization rose from $58.3 million to $82.4 million, up a significant 41%, mainly due to the impact of the rationalization measures implemented in 2009 to combat the recession.

Net income applicable to participating shares rose substantially, from a loss of $6.4 million in first quarter 2009 to a gain of $26.2 million; on a per-share basis, it went from a loss of $0.08 to a gain of $0.32. Adjusted net income applicable to participating shares, which does not take into account unusual items related to asset impairment, restructuring costs and income tax adjustments, also grew substantially, from $15.1 million to $25.3 million; on a per-share basis, net income applicable to participating shares rose from $0.19 to $0.31.

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