Transcontinental reports $51.9 million Q4 loss on charges, restructuring costs

MONTREAL – Transcontinental beat expectations even as it lost $51.9 million in the fourth quarter despite a 12-per-cent increase in revenue, citing one-time items including an impairment charge on a tax asset.

The Montreal-based printer posted a loss of 65 cents per share in the quarter compared with $30.8 million of net income applicable to participating shares, or 38 cents per share, in the same period last year.

Revenue rose to $585.1 million from $521.6 million.

Transcontinental noted unusual items totalled $113.5 million in the fourth quarter, including a $57.2-million impairment charge on the carrying value of a U.S. deferred tax asset and $23 million in restructuring costs.

On an adjusted basis, Transcontinental posted a fourth-quarter profit of $61.9 million, or 77 cents per share, compared with $54.5 million, or 68 cents per share, year over year.

Transcontinental was expected to earn 64 cents per share in adjusted income on $598 million of revenue in the fourth quarter, according to analysts polled by Thomson Reuters.

For the full year, the company reported a loss of $183.3 million, or $2.27 per share compared to net income applicable to participating shares of $120.7 million, or $1.49 per share, in the same period of 2011.

It said the drop was largely due to a $232-million asset impairment related to the media sector, which was non-cash.

Adjusted earnings per share were $1.85 on $2.11 billion in revenues for 2012.

Analysts had estimated earnings excluding one-time items would be $1.75 per share on $2.1 billion of revenues.

“I am especially pleased with how we have ended fiscal 2012,” president and CEO Francois Olivier said in a release.

“As expected, despite the volatile advertising market, revenues and profitability in the fourth quarter grew due to the contribution from the integration of Quad/Graphics Canada, Inc. and the good performance of the Media Sector.”

Drew McReynolds of RBC Capital Markets said the results were “slightly better than expected” on higher media margins, which were “a positive surprise.”

Internal revenues grew by 0.2 per cent in the quarter, including a 0.9 per cent decrease in printing and 1.9 per cent gain in media.

Overall margins were better than forecast at 17.2 per cent, helped by a 21.2 per cent margin rate for the printing segment.

Transcontinental said that it reached agreement with Hearst after the quarter ended to amend terms of the 15-year contract that started in 2009 to print the San Francisco Chronicle. In the new year, it will receive US$200 million to compensate for price reductions of about US$30 million per year because the paper will only require up to two-thirds of the printing equipment.

Transcontinental, which will continue to print the daily and own the plant and equipment, said it doesn’t expect to sustain a significant hit to the profitability of the Freemont, Calif., facility.

Analysts expected the quarterly results would continue to reflect a challenging print revenue environment and soft advertising market, while margins would be negatively impacted by the ongoing integration of Quad/Graphics and contract renewal incentives.

Transcontinental completed on Mar. 1 its acquisition of the Canadian assets of Quad Graphics.

The Montreal-based company has been consolidating its production in a smaller number of modern plants as it increases its digital media offering.

Its printing plant in the Montreal suburb of Lasalle is slated to close later this month, affecting about 150 jobs.

Transcontinental is the largest printer in Canada and fourth-largest in North America. It publishes consumer magazines, community newspapers in Quebec and the Atlantic provinces, and French-language educational resources.

It has 11,000 employees in Canada and the United States, and reported revenues of C$2 billion in 2011.

On the Toronto Stock Exchange, its shares gained 45 cents, or 4.73 per cent, at $9.97 in afternoon trading.