Transcontinental Sees Strong Improvement in Profitability

Transcontinental continued to improve its financial position during the quarter, with a ratio of net indebtedness (including the securitization program) to adjusted operating income before amortization of 2.08 at April 30, 2010, versus 2.40 as at January 31, 2010 and 2.59 as at October 31, 2009.

Financial Highlights
In the second quarter of 2010, Transcontinental generated consolidated revenues of $510.0 million, down 4% from $531.1 million in the same quarter in 2009. Excluding divestitures of publications, plant closures, the paper effect and the exchange rate effect, revenues were up 2%.

Adjusted operating income before amortization, which excludes unusual items, rose 18%, from $77 million to $91 million. The increase stems mainly from the full impact of the rationalization measures implemented in fiscal 2009, improved equipment productivity, and the contribution from printing the San Francisco Chronicle.

Net income applicable to participating shares was up $211.3 million, from a loss of $144.3 million in second quarter 2009 to a gain of $67.0 million in 2010. This increase is primarily due to impairment of goodwill and intangible assets and impairment of assets and restructuring costs in second quarter 2009, combined with a gain on the sale of almost all the assets of the Direct Mail Group in the United States on April 1, 2010 and the increase in adjusted operating income in 2010. On a per-participating share basis, net income applicable to participating shares went from a loss of $1.79 to a gain of $0.83.

Adjusted net income applicable to participating shares was up 14%, from $30.0 million in 2009 to $34.3 million in 2010. On a per-participating share basis, adjusted net income applicable to participating shares also increased 14%, from $0.37 to $0.42.

Lastly, adjusted operating income margin before amortization was up appreciably, from 14.5% in 2009 to 17.8% in 2010. The increase is mainly due to the full impact of the rationalization measures implemented in 2009 and continuous improvement in operational efficiency.

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