Transcontinental Reports 1.7 Percent Q4 Increase, 1.3 Percent Decline for Fiscal 2014

MONTREAL—December 10, 2014—Transcontinental Inc.'s revenues increased 1.7 percent in the fourth quarter, from $562.6 million to $571.9 million. The increase is mainly due to the contribution from the acquisitions of Capri Packaging and the Quebec weekly newspapers owned by Sun Media Corp., as well as new printing and distribution agreements. This growth was partly offset by lower advertising revenues in both sectors.

In the fourth quarter, adjusted operating earnings rose 16.4 percent, from $83.4 million to $97.1 million. This performance stems from cost-reduction initiatives in both sectors and the positive impact of the share-price variance on the stock-based compensation expense, as well as the net contribution from acquisitions and disposals. It was partly offset by lower advertising revenues. Net earnings applicable to participating shares improved, from a loss of $94.5 million, or $1.21 per share, to a profit of $9.0 million, or $0.12 per share. This improvement is mainly due to a decrease in the asset impairment charge and an increase in adjusted operating earnings, partially offset by higher restructuring costs. Adjusted net earnings applicable to participating shares grew 20.6 percent, from $55.9 million, or $0.71 per share, to $67.4 million, or $0.87 per share.

Highlights of Fiscal 2014
In 2014, TC Transcontinental's revenues were down 1.3 percent, from $2,096.7 million to $2,069.4 million. The decrease is mainly due to lower advertising revenues in both sectors, particularly in our newspaper and marketing-products printing activities and our consumer magazine publishing activities, and to the sale of Rastar's assets. The decline was partially offset by the contribution from new distribution, newspaper-printing and magazine-printing agreements, and from acquisitions.

Adjusted operating earnings was up 10.2 percent, from $233.6 million to $257.4 million, due to cost-reduction initiatives in our two sectors, the positive impact of the share-price variance on the stock-based compensation expense and the net contribution from acquisitions and disposals. This increase was, however, mitigated by lower revenues, as noted above. Net earnings applicable to participating shares improved, from a loss of $23.4 million, or $0.30 per share, to a profit of $105.1 million, or $1.35 per share. This improvement stems mainly from a lower asset impairment charge in 2014 and an increase in our adjusted operating earnings, partially offset by higher restructuring and other costs. Excluding unusual items, adjusted net earnings applicable to participating shares rose 13.4 percent, from $148.3 million, or $1.90 per share, to $168.2 million, or $2.16 per share.

"We had an excellent year in fiscal 2014, thanks to all the initiatives we rolled out during the year," said François Olivier, president and CEO of TC Transcontinental. "Our solid performance is the result of our sales development efforts, the optimization of our cost structure and the proactive management of our portfolio of assets. All these actions more than offset the impact of a challenging advertising market in 2014."

Olivier continued: More specifically, we signed new printing and distribution agreements, consolidated the weekly newspaper market in Quebec and diversified our operations by investing in a new area of growth, flexible packaging. We also divested certain segments that no longer met our growth requirements and continued to adapt our cost structure to market realities. We believe that by continuing to maximize our printing platform, by strengthening the Media Sector, by growing our digital offering and by developing the packaging division we will be able to keep generating significant cash flows and maintain our excellent financial position so that we can continue our transformation."

Other Highlights of Fiscal 2014

• The corporation completed the acquisition of the assets of Capri Packaging, a supplier of flexible packaging solutions, operating two facilities located in Clinton, MO. The acquisition will add about US$72 million to Transcontinental Inc.'s revenues. As part of the transaction, the seller, Schreiber Foods has signed a 10-year agreement to secure Capri Packaging as a strategic supplier of flexible packaging, which represents about 75 percent of Capri's total revenues.
• To maintain its financial flexibility, the Corporation signed a private financing agreement for $250 million in senior unsecured notes at a rate of 3.897 percent due in 2019. The Corporation also exercised its right to redeem all outstanding Preferred Shares on October 15, 2014, for a total of $100 million. Lastly, the corporation extended its credit facility for two additional years, until February 2020.
• Transcontinental Inc. completed the acquisition of the Quebec weekly newspapers and their related Web properties owned by Sun Media Corporation. This transaction will add about $20 million to Transcontinental Inc.'s operating earnings before amortization. Furthermore, with the conclusion of this transaction, the TC Media consolidated newspaper portfolio in Quebec now contains more than 110 titles.
• The corporation recorded a $41.4 million charge for restructuring and other costs, related to the completion of the integration of the operations of Quad/Graphics Canada and to workforce reductions stemming from the integration of the weekly newspapers acquired from Sun Media.
• Transcontinental Inc. signed a definitive agreement to sell all its consumer magazines, their Websites and all related platforms produced in Montreal and Toronto to TVA Group for $55.5 million. This transaction, which is subject to approval by regulators, including the Competition Bureau, also covers the printing of the magazines being sold, as well as the extension to 2022 of the contract signed in December 2013 to print some of TVA Group. publications.

For more detailed financial information, please see Management's Discussion and Analysis for the fiscal year ended October 31, 2014, as well as the financial statements in the "Investors" section visit: www.tc.tc

Outlook
New agreements to print newspapers and flyers should contribute to Transcontinental's operating earnings and we will continue our efforts to attract other Canadian newspaper publishers to our highly efficient print network. It will also keep developing solutions to meet the evolving needs of retailers. Furthermore, the recently announced closures of some printing plants will allow it to consolidate production in more technologically advanced facilities, which should improve efficiency. However, the printing of magazines, newspapers, books and marketing products will still be affected by declining revenues, primarily due to decreased advertising spending. The company will therefore focus on maximizing the profitability of our printing platform in fiscal 2015.

The integration of Capri Packaging is ongoing, as is the development of this promising new avenue of growth in the production of flexible packaging solutions. In the short term, the company will seek to improve efficiency and organic sales growth with our current and prospective clients. Results in this niche continue to meet its expectations and its approach to growth opportunities will be a disciplined one.

The disposition, subject to regulatory clearances, of its consumer magazines will allow it to focus on the greater business opportunities in the local advertising market. Going forward, following the regulatory approval of our acquisition of the Quebec weekly newspapers owned by Sun Media, Transcontinental expects to achieve about $20 million in synergies, primarily in 2015, which should offset the decline in the local advertising market. Given the challenging conditions in the advertising market, it will make further adjustments to our cost structure and continue to develop our digital and interactive marketing products for retailers, among others, and enhance our business and education offerings.

The company will continue to generate significant cash flows in the short-term, and its excellent financial position should permit us to continue applying our multi-pronged capital management approach, which allows it to reduce our debt, pay dividends and invest in its transformation. Transcontinental has also secured long-term financing to preserve the financial flexibility required to implement its growth strategy. Its printing operations will therefore continue to get the most out of its highly efficient network and its two sectors will concentrate on their core competencies in order to improve profitability and further our transformation.

About Transcontinental Inc.
Canada's largest printer, with operations in print and digital media, publishing and flexible packaging, TC Transcontinental's mission is to create products and services that allow businesses to attract, reach and retain their target customers. Respect, teamwork, performance and innovation are strong values held by the corporation and its commitment to all stakeholders is to pursue its business and philanthropic activities in a responsible manner. Transcontinental Inc. (TSX: TCL.A, TCL.B), known as TC Transcontinental, has over 8,500 employees in Canada and the United States, and revenues of C$2.1 billion in 2014.

Source: Transcontinental Inc.