Transcontinental Consolidates U.S. Facilities
MONTREAL—Transcontinental Direct USA, the U.S. direct mail subsidiary of Transcontinental Inc., will consolidate production from its Warminster, PA, facility to its plant in Hamburg, PA. The move will result in the elimination of 460 positions, though employees will be offered the opportunity to apply for available positions in Hamburg. The transfer of production should be complete by January 2009.
The company cited turmoil impacting the financial markets—financial institutions represent a large portion of Transcontinental Direct USA's customer base—and the subsequent curtailing of their marketing programs as being behind the move. Transcontinental will take a pre-tax restructuring charge of between C$15 million and C$20 million in the fourth quarter, and another C$10 million to C$15 million to be charged in future quarters.
In light of the significant deterioration of market conditions, the company also completed a goodwill impairment test for its U.S. direct mail business. As a result, Transcontinental will completely write off the goodwill associated with this business in the fourth quarter. The impairment, amounting to approximately C$195 million, is a non-cash charge to income and will not affect the corporation's liquidity, cash flow from operating activities or debt covenants, or have any impact on future operations.