Transcontinental Reports Organic Growth in All Three Market Sectors
Other Financial Highlights
• Free cash flow from operations increased significantly as cash flow from operations, before changes in non-cash operating items, increased 9 percent, from $64.5 million to $70.2 million and capital expenditures decreased, from $62.7 million to $20.7 million.
• As at Jan. 31, 2011, the ratio of net indebtedness (including the securitization program) to adjusted operating income before amortization was 1.78x, as compared to 1.82x as at October 31, 2010 and 2.40x as at Jan. 31, 2010. The ratio of net indebtedness to operating income before amortization is slightly above the target of 1.5x set by management. Over the next few quarters, it should get closer to the target given the expected increase in cash flow generation and reduction in capital expenditures.
• In the past few months, Transcontinental improved its financial flexibility and optimized its debt portfolio. On Dec. 21, 2010, Standard & Poor’s raised Transcontinental’s credit rating from BBB- (stable) to BBB (stable) reflecting the continued improvement in Transcontinental's financial position and prospects. In addition, after the end of the quarter, Transcontinental prepaid and cancelled its $100 million term credit facility with Caisse de dépôt et placement du Québec. To increase its financial flexibility, Transcontinental also set up a new two-year $200 million securitization program with a Canadian bank, however it does not believe it will use this program in the near term.
• Transcontinental concluded a four-year agreement with Canadian Tire, worth several hundred million dollars, starting in January 2012. This new agreement expands services to cover Canadian Tire’s flyer printing needs on a national scale, for all of its banners, and the printing of marketing materials as well as distribution service in Eastern Canada. In addition, Canadian Tire will be able to draw on Transcontinental's other services, such as data analytics, Canada-wide distribution, e3 flyer production, direct marketing programs via print, mobile and email channels, and advertising campaigns in Transcontinental's consumer magazines, newspapers and media websites. This new agreement will add about $30 to $40 million in incremental revenues on an annual basis and makes Transcontinental Canadian Tire’s leading provider of marketing solutions across Canada.