Transcontinental's Adjusted Operating Income Increases for Fourth Consecutive Quarter

MONTREAL—September 12, 2013—Transcontinental's third-quarter revenues decreased from $517.0 million in 2012 to $493.8 million in 2013, mainly due to the end of the contract to print and distribute Zellers flyers after its store closures. Other factors were the change in the format and type of paper used by some of its major customers, difficult market conditions affecting its magazine, book and catalogue printing business, and a soft advertising market which continued to impact its Media Sector, particularly with respect to local markets. The decrease was partially offset by new printing contracts, higher volume in educational book publishing and the acquisitions of Modulo and Redux Media, among others.

Third quarter adjusted operating income rose 10.4 percent, from $49.9 million to $55.1 million. This growth stems mainly from additional synergies from the integration of Quad/Graphics Canada and higher volume in its educational book publishing business. It was partially offset by the above-noted soft advertising market and lower volume in its custom content creation business. Net income applicable to participating shares rose from $8.1 million, or $0.10 per share, to $32.4 million, or $0.42 per share. Excluding unusual items, adjusted net income applicable to participating shares rose 43.4 percent, from $24.9 million to $35.7 million. On a per-share basis, it rose from $0.31 to $0.46.

"Our third quarter results clearly outperformed in our industry," said François Olivier, president and CEO. "The growth in adjusted operating income is due mainly to the excellent work by our Printing Sector in achieving synergies from the acquisition of Quad/Graphics Canada, and our strategy to optimize our cost structure. Efforts to leverage our relationships with our major retail customers also continued to produce results. Despite the pressure we are facing with regards to the advertising market in our Media Sector, we have continued to roll out our digital offering and have launched several new products and services. For upcoming quarters, our solid financial position in conjunction with our capacity to generate significant cash flows, gives us the flexibility we need to continue to invest in our development and transform our operations in order to better meet the continually evolving needs of our customers."

Quarter Highlights

• To date, TC Transcontinental has achieved more than $35 million in synergies from the acquisition of Quad/Graphics Canada, and the corporation is on track to reach its initial objective of $40 million in synergies by the end of fiscal 2013 and plans to generate additional synergies in fiscal 2014.
• TC Transcontinental Printing signed a five-year agreement with Postmedia Network to print the Calgary Herald, which is published Monday to Saturday and has a daily circulation of about 80,000 copies. The contract will start in November 2013 and will not require additional investments by TC Transcontinental Printing given its highly efficient and flexible hybrid printing platform.
• TC Media launched AutoGo.ca, a new Website designed specifically for motorists looking for a new or used vehicle all across Canada. AutoGo.ca is the only automobile Website that lets users search based on lifestyle. AutoGo.ca received more than 30,000 unique visitors in the first month after it was launched.
• TC Media announced the launch of the TC Media Incubator, a laboratory for the creation, development and incubation of new digital products in the company. The TC Media Incubator will be headed by Bruno Leclaire, appointed Chief Digital Officer of TC Media. The lab will get officially underway in November 2013.
• TC Transcontinental was again named one of the best 50 corporate citizens in Canada in the annual ranking by independent media company Corporate Knights. This recognition shows the relevance of the steps taken by the Corporation to meet its commitment to sustainability.

Highlights of the first nine months

For the first nine months of 2013, TC Transcontinental's revenues were up 1.1%, from $1,527.0 million to $1,543.8 million. The increase stems mainly from the acquisition of Quad/Graphics Canada and acquisitions in the Media Sector. It was partially offset by the end of the contract to print and distribute Zellers flyers, by a difficult advertising environment and by the incentives granted for the early renewal of some contracts in 2012. Adjusted operating income grew 6.0 percent, from $148.8 million to $157.7 million, principally due to the synergies achieved from the acquisition of Quad/Graphics Canada. The increase was partially offset by the same factors as indicated above. Net income applicable to participating shares rose from a loss of $131.4 million, or $1.62 per share, to a profit of $77.7 million, or $1.00 per share. Excluding unusual items, adjusted net income applicable to participating shares rose 13.1 percent, from $87.5 million, or $1.08 per share, to $99.0 million, or $1.27 per share.

For more detailed financial information, please see Management's Discussion and Analysis for the third quarter ended July 31st, 2013, as well as the financial statements in the "Investors" section of its Website at www.tc.tc

Outlook

Further synergies from the second phase of the integration of the operations of Quad/Graphics Canada will be generated in the fourth quarter of 2013, but to a lesser degree than in past quarters. Furthermore, the Printing Sector plans to begin the final phase of the integration of these operations early in fiscal 2014, which should generate additional synergies. Since the start of fiscal 2013, Transcontinental has signed new agreements to print flyers and marketing products worth about $30 million on an annualized basis whose contribution should be noted more significantly in the fourth quarter of 2013. However, such contributions will be partially offset by the closing of Zellers stores and by lower volume in its magazine, book and catalogue printing business.

The difficult market conditions with respect to advertising spending in the local and national markets are likely to continue and also affect Transcontinental's newspaper and magazine publishing operations. As a result, the company will continue to focus on efficiency gains in order to limit potential repercussions on its profit margin. It will also continue to invest in the development of new products and services to ensure further diversification of its services.

Transcontinental expects an unfavorable variance in head office costs in the fourth quarter of 2013, versus 2012, as a result of favorable non-recurring items recorded in the fourth quarter of last year. The excess cash generated in upcoming quarters, in conjunction with an excellent financial position, should permit us to keep investing in internal projects and to make strategic acquisitions if opportunities arise.

Reconciliation of Non-IFRS Financial Measures

Financial data have been prepared in conformity with IFRS. However, certain measures used in this press release do not have any standardized meaning under IFRS and could be calculated differently by other companies. Transcontinental believes that many readers analyze the results based on certain non-IFRS financial measures because such measures are more appropriate for evaluating the Corporation's operating performance. Internally, Management uses such non-IFRS financial information as an indicator of business performance, and evaluates management's effectiveness with specific reference to these indicators. These measures should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with IFRS.

Dividends

Dividend on Participating Shares

The Corporation's Board of Directors declared a quarterly dividend of $0.145 per Class A Subordinate Voting Shares and Class B Shares. This dividend is payable on October 25, 2013 to participating shareholders of record at the close of business on October 7, 2013.

Dividend on Preferred shares

The Board declared a quarterly dividend of $0.4253 per share on cumulative 5-year rate reset first preferred shares, series D. This dividend is payable on October 15, 2013. On an annual basis, this represents a dividend of $1.6875 per preferred share.

Profile

Largest printer and leading provider of media and marketing activation solutions in Canada, TC Transcontinental creates products and services that allow businesses to attract, reach and retain their target customers. The Corporation specializes in print and digital media, the production of magazines, newspaper, books and custom content, mass and personalized marketing, interactive and mobile applications, TV production and door-to-door distribution.

Transcontinental (TSX:TCL.A)(TSX:TCL.B)(TSX:TCL.PR.D), known by the brands TC Transcontinental, TC Media and TC Transcontinental Printing, has approximately 9,500 employees in Canada and the United States, and reported revenues of C$2.1 billion in 2012.

Source: Transcontinental.