This is the best spin they could put on more red ink – more layoffs expected at all papers including Guardian and Journal Pioneer
“Net income went from $36.9 million in the second quarter of 2008 to a loss of $144.3 million in 2009.”
Editor – we will provide more in depth coverage of th Transcontinental 2nd Quarter results soon.
At first blush, the cost cutting of $100 million annually is not enough to overcome the losses of $144 already this year. We suspect their cash position is weak.
Transcontinental’s balance sheet is top heavy with intangible assets. The net net book value is negative. Since Quebecor is their major investor, we suspect Quebec nationalism is keeping Transcontinental alive not business smarts.
We question how an over leveraged, in our opinion, newspaper company can manage to take over the San Francisco Chronicle which went bankrupt or near-bankrupt. None of the US investors wanted the white elephant and Transcontinental’s distance and culture differences with west coast Americans is not a formula for profit.
Press release AKA spin doctor city
TRANSCONTINENTAL’S SECOND QUARTER: RATIONALIZATION MEASURES LIMIT IMPACT OF RECESSION
• Decreases of 5% in consolidated revenue and 10% in adjusted operating income before amortization compared to second quarter 2008.
• Before negative impact of reduced direct mail activities in the United States, consolidated revenue down 2% and adjusted operating income before amortization
down 5%.
• Adjusted net income before unusual items of $30.2 million, versus $34.1 million in the second quarter 2008; on a per-share basis, adjusted net income of $0.37, versus $0.42 for the same period in 2008.
• Impairment of intangible assets and write-off of goodwill, principally related to commercial printing activities, totalled $169 million during the quarter; non-cash items
having no effect on cash and cash flow from operations.
• Rationalization plan announced on February 18, 2009 carried out. As expected, measures generated a total of $27.5 million in restructuring costs and asset impairment.
• Net income: loss of $144.3 million in 2009 compared to earnings of $36.9 million in 2008. Decrease mainly due to unusual items mentioned above.
• Signed a total of $625 million in financing agreements since the end of first quarter 2009.
• Commencement of two new printing and marketing communications contracts with Rogers Communications; full impact of flyer-printing contract with Shoppers Drug Mart- Pharmaprix; began final preparations to start printing the San Francisco Chronicle in summer 2009.
• Appointment of Christian Trudeau as President of the new Marketing Communications Sector and signing of several promising contracts.
• Dividend kept at $0.08 per share.
• Standard & Poor’s lowers Transcontinental’s credit rating from BBB to BBB (-) with a stable outlook. DBRS leaves unchanged its BBB (H) with a stable outlook rating for
Transcontinental.
• Net funded debt to total capitalization ratio of 49%, in the high end of the target range of 35% – 50% set by management.
Montreal, June 11, 2009 – Before asset impairment, goodwill write-off and restructuring costs, Transcontinental’s results for the second quarter ended April 30, 2009 were better than the previous quarter. Adjusted operating income before amortization for the second quarter 2009 was down 10% compared to a decline of 29% in the first quarter 2009. The Corporation continued to carry out its major rationalization plan implemented in the United States in November 2008 and extended to all its other
operations in February 2009. These measures, which included the elimination of 1,500 jobs, limited the negative impact of the recession. The full effect of the measures, combined with beginning two new contracts for Rogers Communications, printing the San Francisco Chronicle in summer 2009, and promising developments in marketing communications activities will put Transcontinental in a better position for the second half of its fiscal year. With financing arrangements totalling $625 million in place since February, management has the resources required to pursue its business plan and projects.
“In the current context, excluding unusual items, these are encouraging results that show an improvement over the first quarter,” said François Olivier, President and CEO of Transcontinental. “We reacted quickly and adjusted our production capacity and costs to the demand in each of our markets. I’d like to thank our employees for their exceptional support of our rationalization efforts and for the new and innovative ways they have found to do their work. After three quarters of adjustment and refocusing, and assuming no further deterioration in the present economic situation and the execution of our rationalization plan, we are confident that our profitability will continue to improve in coming quarters.
“In a more general way,” noted Mr. Olivier, “we will continue to benefit from our niche strategy, our diversified and balanced customer base, the start of new contracts and our financial resources. The year 2009 will be one of transition for Transcontinental and we will come out of it stronger and better positioned in each of our markets to take advantage of the economic recovery.”
Financial Highlights
In the second quarter 2009, Transcontinental recorded consolidated revenues of $563.4 million, down 5% from $595.1 million in the second quarter of 2008. Adjusted operating income before amortization was down 10%, from $89.0 million to $80.5 million. The decline is mainly due to a major decrease in the volume of direct mail activities in the United States and, to a lesser extent, to the effects of the recession on some printing and publishing activities. Excluding the negative impact of the lower volume of direct mail activities in the United States, consolidated revenues would have declined 2% and adjusted operating income before amortization would have declined 5%. The decrease was mitigated by the positive contribution of acquisitions, the positive impact of paper on revenues and the positive
fluctuations in the exchange rate between the Canadian dollar and its U.S. and Mexican counterparts, combined with growth in door-to-door distribution activities, in the publishing of educational materials and in digital and one-to-one marketing communication products Adjusted net income, which does not take unusual items into account, declined 11%, from $34.1 million to $30.2 million; on a per-share basis, adjusted net income decreased from $0.42 to $0.37.
Net income went from $36.9 million in the second quarter of 2008 to a loss of $144.3 million in 2009.
The decrease is mainly due to impairment of intangible assets and goodwill write-off, principally related to commercial printing activities, totalling $169 million, non-cash items having no effect on cash and cash flow from operations. Net income was also reduced by restructuring costs and asset impairment 3 totalling $27.5 million, stemming from rationalization measures. On a per-share-basis, net income went from $0.45 to a loss of $1.79.
In the first six months of fiscal 2009, consolidated revenue decreased 2%, from $1.19 billion to $1.17 billion, while adjusted operating income before amortization decreased 19%, from $171.4 million to $138.8 million. Net income went from $71 million in the first half of 2008 to a loss of $150,7 million in 2009; on a per-share basis, net income declined from $0.86 to a loss of $1.87. Adjusted net income, which does not take into account unusual items related to asset impairment, restructuring costs and goodwill write-off, was down 28%, from $62.5 million to $45.3 million; on a per-share basis, adjusted net income declined from $0.76 to $0.56.
As at April 30, 2009, the Corporation’s net funded debt to total capitalization ratio was 49%, in the high end of the target range of 35% – 50% set by management.
For more detailed financial information, please see Management’s Discussion and Analysis for the Second Quarter Ended April 30, 2009, at www.transcontinental.com, under “Investors.”
Operating Highlights
Here are the main operating highlights for the second quarter 2009.
• The Corporation continued to carry out its major rationalization plan to keep Transcontinental financially solid, and modified production capacity in each of its markets to meet demand. To date, the equivalent of 1,400 positions have been cut—more than half of them in the United States; in addition, five print titles have ceased publication and four printing plants have been merged or consolidated. A set of other measures have also been implemented throughout the organization,
ranging from a hiring freeze to unpaid leave and shorter work weeks. The savings from the restructuring should exceed the targets set in the first quarter and will amount to about $100 million on an annual basis, $75 million of that in the current fiscal year. The full impact of these measures will be felt starting in the second half of this fiscal year. Lastly, the plant in Fairborn, Ohio, which produces flyers for regional retailers, was sold following a review of the Corporation’s business objectives in this segment in the United States.
• In early 2009, the two new contracts with Rogers Communications took effect: one is an exclusive six-year contract to print all of Rogers’ magazines; the second, also for six years, is to produce and print its marketing communications products. These two major gains add to the full impact of the Shoppers Drug Mart-Pharmaprix contract in 2009 and the printing of the San Francisco Chronicle daily, which will start in the summer of 2009.
• The mission of the new Marketing Communications sector, created in November 2008, is to develop new avenues of growth centred on new communications platforms, one-to-one marketing and an integrated service offering. In the second quarter, this sector signed several contracts with major brands such as Reader’s Digest Canada and Purolator Courier. It also received seven 2008 Pearl Awards, which recognize excellence in the custom communications industry.
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• In the second quarter, the Media sector continued to extend and enrich its digital services offering through various initiatives: the launch of icimamaison.ca, a real estate selling site; the relaunch of publisac.ca; the launch of online versions for the two finance magazines Investment Executive and Finance et Investissement, which will also soon release daily updates for BlackBerries and the Apple iPhone. Also, traffic on weblocal.ca, Transcontinental’s Canada-wide search site for finding
and rating local businesses now exceeds two million unique visitors per month. Revenue generated by digital services grew more than 30% in the first half compared to the same period a year ago. In the second half of fiscal 2009, the Media sector will continue to expand its digital services offering while completing its rationalization measures.
Reconciliation of Non-GAAP Financial Measures
Financial data have been prepared in conformity with Canadian Generally Accepted Accounting Principles (GAAP). However, certain measures used in this press release do not have any standardized meaning under GAAP and could be calculated differently by other companies. The Corporation believes that certain non-GAAP financial measures, when presented in conjunction with comparable GAAP financial measures, are useful to investors and other readers because that information is an appropriate measure for evaluating the Corporation’s operating performance.
Internally, the Corporation uses this non-GAAP 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 GAAP.
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