Highlights
- Deployed the crisis management plan rapidly and effectively in response to the COVID-19 pandemic, including putting in place strict measures to protect employee health and safety as well as financial support programs for employees who were temporarily laid off or on reduced work schedules.
- Revenues of $625.1 million; operating earnings of $44.1 million; and net earnings attributable to shareholders of the Corporation of $25.7 million ($0.30 per share).
- Adjusted operating earnings before depreciation and amortization(1) of $104.3 million; adjusted operating earnings(1) of $68.5 million; and adjusted net earnings attributable to shareholders of the Corporation(1) of $43.6 million ($0.50 per share).
- Maintained solid financial health with liquidities of $104.6 million and access to unused lines of credit of $435.3 million.
- Repaid Canadian dollar term loans of $300.0 million and U.S. dollar term loans of US$50.0 million ($66.4 million) in February 2020.
- Controlled costs and liquidities by temporarily laying off employees, mainly in the Printing Sector, reducing salaries throughout the sectors, at head office and for members of senior management, and deferring certain investment expenditures.
(1) Please refer to the section entitled “Non-IFRS Financial Measures” in this press release for a definition of these measures.
MONTRÉAL, June 10, 2020 (GLOBE NEWSWIRE) — Transcontinental Inc. (TSX: TCL.A TCL.B) announces its results for the second quarter of fiscal 2020, which ended April 26, 2020.
“I am very proud of the role we have played since the beginning of the COVID-19 crisis in ensuring the pursuit of our operations to support essential services to the population, in particular food packaging and printing services for newspapers and retailers, said François Olivier, President and Chief Executive Officer of TC Transcontinental. I am also very proud of the leadership and commitment of our teams, which successfully protected the health and safety of our employees and their families, thereby ensuring the continuity of our essential operations. I would especially like to thank our approximately 1,600 colleagues who were unfortunately temporarily laid off in the Printing Sector for their patience and understanding, and am glad that about 600 of them are already back to work.
“Our strength and resilience throughout this crisis, despite the suspension of a large portion of our printing activities, eloquently demonstrate our operational excellence and the relevance of our transformation into flexible packaging. In addition, the discipline, speed and effectiveness of our actions enabled us to maintain our financial health.
“In our Packaging Sector, we had a very solid quarter thanks to our agility in responding to the increased demand by our customers for packaging for food and everyday consumer products. This higher level of activity, combined with the continued realization of our synergies and efficiency gains, allowed us to generate improved profitability for the quarter.
“In the Printing Sector, our rapid cost reduction measures, combined with the various cost reduction initiatives implemented early in the fiscal year, allowed us to adjust to the volume decrease caused by the crisis and effectively protect the sector. In addition, our in-store marketing products printing team created innovative pandemic-related products, such as signage for physical distancing and plexiglass panels for several large Canadian retailers to protect their customers and employees. In addition, we manufactured protective visors for our employees and for local community organizations.
“To conclude, I am grateful for the exceptional commitment of our managers and employees in unprecedented circumstances, and very satisfied with the measures we implemented to manage the situation. We took great care of the health and safety of our employees while generating good profitability and significant cash flows. Although there is uncertainty in the immediate future, we are strongly positioned to take advantage of future opportunities.”
Financial Highlights
| (in millions of dollars, except per share amounts) | Q2 – 2020 | Q2 – 2019 | Variation in % | SIX MONTHS 2020 | SIX MONTHS 2019 | Variation in % |
| Revenues | $625.1 |
$767.4 |
(18.5)% | $1,330.9 | $1,519.0 | (12.4)% |
| Operating earnings before depreciation and amortization (2) | 97.3 | 93.7 | 3.8 | 193.0 | 197.4 | (2.2) |
| Adjusted operating earnings before depreciation and amortization (1) (2) | 104.3 | 115.7 | (9.9) | 213.3 | 223.8 | (4.7) |
| Operating earnings (2) | 44.1 | 43.1 | 2.3 | 84.9 | 96.7 | (12.2) |
| Adjusted operating earnings (1) (2) | 68.5 | 83.6 | (18.1) | 140.6 | 160.3 | (12.3) |
| Net earnings attributable to shareholders of the Corporation (2) | 25.7 | 22.3 | 15.2 | 32.1 | 50.4 | (36.3) |
| Net earnings attributable to shareholders of the Corporation per share (2) | 0.30 | 0.26 | 15.4 | 0.37 | 0.58 | (36.2) |
| Adjusted net earnings attributable to shareholders of the Corporation (1) (2) | 43.6 | 52.6 | (17.1) | 86.4 | 98.1 | (11.9) |
| Adjusted net earnings per share attributable to shareholders of the Corporation (1) (2) | 0.50 | 0.60 | (16.7) | 0.99 | 1.12 | (11.6) |
| (1) Please refer to the section entitled “Reconciliation of Non-IFRS Financial Measures” in this press release for adjusted data presented above. (2) The results for the current period reflect the impact of the adoption of the new IFRS 16 accounting standard, which applies to the Corporation for its fiscal year beginning October 28, 2019. The Corporation adopted the new standard using the modified retrospective transition method, whereby the cumulative impact of initial application has been reflected in opening retained earnings as at October 28, 2019, without restatement of comparative figures. Consequently, data might not be comparable. Please refer to Note 2 to the unaudited condensed interim consolidated financial statements for more information on the adoption of the new standard and Table #2 in the Management’s Discussion and Analysis. |
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2020 Second Quarter Results
Revenues decreased by $142.3 million, or 18.5%, from $767.4 million in the second quarter of 2019 to $625.1 million in the corresponding period of 2020. This decrease is largely due to the impact of the disposal of our paper packaging operations ($70.8 million), which were sold at the end of the first quarter of 2020, and a decrease in volume in the Printing Sector, mostly due to the impact of the COVID-19 pandemic in April 2020. The sale of the specialty media assets and event planning activities also contributed to this decrease. The organic decline in the Packaging Sector of $7.0 million, or 1.7%, is mainly due to the decrease in raw material costs.
Operating earnings increased by $1.0 million, or 2.3%, from $43.1 million in the second quarter of 2019 to $44.1 in the second quarter of 2020 following a decrease in restructuring and other costs. Adjusted operating earnings decreased by $15.1 million, or 18.1 %, from $83.6 million in the second quarter of 2019 to $68.5 million in the second quarter of 2020. This decrease is mostly attributable to lower revenues in the Printing Sector. In addition to cost reduction measures related to COVID-19, the operational efficiency initiatives introduced early in the fiscal year helped to mitigate this decline. In addition, the Corporation benefited from a government subsidy that contributed in particular to maintaining jobs related to delivering essential services and putting in place programs to support financially employees who were temporarily laid off or on reduced work schedules. The Printing Sector’s adjusted operating earnings margin decreased from 16.6% in the second quarter of 2019 to 14.9% in the second quarter of 2020.
In the Packaging Sector, despite the impact of the disposal of the paper packaging segment, adjusted operating earnings increased by $4.1 million, from $34.1 million in the second quarter of 2019 to $38.2 million in the second quarter of 2020. This increase is attributable to the realization of synergies and operational efficiency initiatives in the sector and the significant volume increase in the operations supporting the supply chain for food retailers. The sector’s adjusted operating earnings margin increased from 8.1% in the second quarter of 2019 to 10.8% in the second quarter of 2020.
Net earnings attributable to shareholders of the Corporation increased by $3.4 million, or 15.2%, from $22.3 million in the second quarter of 2019 to $25.7 million in the second quarter of 2020. This increase is mainly attributable to the stability of operating earnings combined with the decrease in net financial expenses resulting from a reduction in net indebtedness during the year. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.26 in the second quarter of 2019 to $0.30 in the second quarter of 2020.
Adjusted net earnings attributable to shareholders of the Corporation decreased by $9.0 million, or 17.1%, from $52.6 million in the second quarter of 2019 to $43.6 million in the second quarter of 2020. This decrease is mostly due to lower adjusted operating earnings, partially offset by the decrease in financial expenses and adjusted income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.60 in the second quarter of 2019 to $0.50 in the second quarter of 2020.
2020 First Six Months Results
Revenues decreased by $188.1 million, or 12.4%, from $1,519.0 million in the first six months of 2019 to $1,330.9 million in the corresponding period in 2020. This decrease is largely due to lower volume in the Printing Sector, which was severely affected by the COVID-19 pandemic in April 2020. The sale of our paper packaging operations as well as the sale of the specialty media assets and event planning activities also contributed to the decrease. As for the organic decline in the Packaging Sector, it is attributable to the decrease in raw material costs and the organic decline of the paper packaging operations before their disposal in January 2020.
Operating earnings decreased by $11.8 million, or 12.2%, from $96.7 million in the first six months of 2019 to $84.9 million in the corresponding period of 2020. Adjusted operating earnings decreased by $19.7 million, or 12.3%, from $160.3 million to $140.6 million. These decreases are mainly due to lower revenues in the Printing Sector, partially mitigated by cost reductions measures related to COVID-19 and operational efficiency initiatives implemented early in the fiscal year in the Printing Sector, and by an increase in operating earnings in the Packaging Sector attributable to the realization of synergies and operational efficiency initiatives. In addition, lower restructuring and other costs had a positive impact on operating earnings.
Net earnings attributable to shareholders of the Corporation decreased by $18.3 million, or 36.3%, from $50.4 million in the first six months of 2019 to $32.1 million in the corresponding period in 2020. This decrease is mainly due to the previously explained lower operating earnings as well as the increase in income taxes, partially offset by the decrease in net financial expenses resulting from a reduction in net indebtedness during the year. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.58 in the first six months of 2019 to $0.37 in the corresponding period of 2020 due to the previously mentioned items.
Adjusted net earnings attributable to shareholders of the Corporation decreased by $11.7 million, or 11.9%, from $98.1 million in the first six months of 2019 to $86.4 million in the corresponding period in 2020. This decrease is mostly due to lower adjusted operating earnings, partially offset by the decrease in financial expenses resulting from a reduction in net indebtedness during the year. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $1.12 in the first six months of 2019 to $0.99 in the corresponding period of 2020.
For more detailed financial information, please see the Management’s Discussion and Analysis for the second quarter ended April 26, 2020 as well as the financial statements in the “Investors” section of our website at www.tc.tc.
Outlook
In the Packaging Sector, the vast majority of our operations support the supply chain for food retailers, who are experiencing an increase in volume due to the COVID-19 pandemic. After normalizing the impact of the sale of our paper packaging operations and the price of resin, we expect a slight organic growth in revenues for the remainder of the fiscal year. We also continue to expect an increase in our profit margins over last fiscal year as a result of our synergies, operational efficiency initiatives and organic growth anticipated in the second half of the fiscal year.
In the Printing Sector, we expect that the organic decline will continue to affect the majority of our verticals, and that it will be amplified by the impact of the COVID-19 pandemic, which continues to impact several of our customers. In recent weeks, we are however seeing a gradual recovery in some of our printing volumes which allowed us to recall approximately 600 of the 1600 temporarily laid-off employees. Operational efficiency and cost reduction initiatives taken since the beginning of the fiscal year will help mitigate the impact of volume declines on our operating earnings. The Company will continue to adjust its capacity to continue generating significant cash flows and solid operating margins.
To conclude, despite the fact that the impacts of the COVID-19 pandemic in the coming months remain unpredictable, we expect to continue generating significant cash flows from all our operating activities. This will enable us to reduce our net indebtedness, while providing us with the desired flexibility to continue our transformation through strategic and targeted acquisitions.
Non-IFRS Financial Measures
In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Standards (IFRS) and the term “dollar”, as well as the symbol “$” designate Canadian dollars.
In addition, in this press release, we also use non-IFRS financial measures for which a complete definition is presented below and for which a reconciliation to financial information in accordance with IFRS is presented in the section entitled “Reconciliation of Non-IFRS Financial Measures” and in Note 3, “Segmented Information”, to the interim condensed consolidated financial statements for the second quarter ended April 26, 2020.
| Terms Used | Definitions |
| Adjusted revenues | Revenues before the accelerated recognition of deferred revenues (1) |
| Adjusted operating earnings before depreciation and amortization | Operating earnings before depreciation and amortization as well as the accelerated recognition of deferred revenues (1), restructuring and other costs (gains), impairment of assets and the reversal of the fair value adjustment of inventory sold arising from business combinations |
| Adjusted operating earnings margin before depreciation and amortization | Adjusted operating earnings before depreciation and amortization divided by adjusted revenues |
| Adjusted operating earnings | Operating earnings before the accelerated recognition of deferred revenues (1), restructuring and other costs (gains), impairment of assets, as well as amortization of intangible assets arising from business combinations and reversal of the fair value adjustment of inventory sold arising from business combinations |
| Adjusted operating earnings margin | Adjusted operating earnings divided by adjusted revenues |
| Adjusted income taxes | Income taxes before income taxes on the accelerated recognition of deferred revenues (1), restructuring and other costs (gains), impairment of assets, amortization of intangible assets arising from business combinations and reversal of the fair value adjustment of inventory sold arising from business combinations as well as the retroactive application of a new directive as part of the U.S. tax reform |
| Adjusted net earnings attributable to shareholders of the Corporation | Net earnings attributable to shareholders of the Corporation before the accelerated recognition of deferred revenues (1), restructuring and other costs (gains), impairment of assets, amortization of intangible assets arising from business combinations and reversal of the fair value adjustment of inventory sold arising from business combinations, net of related income taxes as well as the retroactive application of a new directive as part of the U.S. tax reform |
| Net indebtedness | Total of long-term debt, of current portion of long-term debt, of lease liabilities and of current portion of lease liabilities, less cash |
| Net indebtedness ratio | Net indebtedness divided by the last 12 months’ adjusted operating earnings before depreciation and amortization |
(1) Related to the agreements signed with The Hearst Corporation. Please refer to Note 31 to the annual consolidated financial statements for the year ended October 27, 2019.
Reconciliation of Non-IFRS Financial Measures
The financial information has been prepared in accordance with IFRS. However, financial measures used, namely adjusted revenues, adjusted operating earnings before depreciation and amortization, adjusted operating earnings, adjusted operating earnings margin, adjusted income taxes, adjusted net earnings attributable to shareholders of the Corporation, adjusted net earnings attributable to shareholders of the Corporation per share, net indebtedness and net indebtedness ratio, for which a reconciliation is presented in the following table, do not have any standardized meaning under IFRS and could be calculated differently by other companies. We believe that many of our readers analyze the financial performance of the Corporation’s activities based on these non-IFRS financial measures as such measures may allow for easier comparisons between periods. These measures should be considered as a complement to financial performance measures in accordance with IFRS. They do not substitute and are not superior to them.
We also believe that adjusted revenues, adjusted operating earnings before depreciation and amortization, adjusted operating earnings and adjusted net earnings attributable to shareholders of the Corporation are useful indicators of the performance of our operations. Furthermore, management also uses some of these non-IFRS financial measures to assess the performance of its activities and managers.
Regarding net indebtedness and net indebtedness ratio, we believe that these indicators are useful to measure the Corporation’s financial leverage and ability to meet its financial obligations.
| Reconciliation of operating earnings – Second quarter and cumulative | ||||
| Three months ended | Six months ended | |||
| (in millions of dollars) | April 26, 2020 | April 28, 2019 | April 26, 2020 | April 28, 2019 |
| Operating earnings | $44.1 | $43.1 | $84.9 | $96.7 |
| Restructuring and other costs | 7.0 | 21.5 | 20.3 | 25.9 |
| Amortization of intangible assets arising from business combinations (1) | 17.4 | 18.5 | 35.4 | 37.2 |
| Impairment of assets | — | 0.5 | — | 0.5 |
| Adjusted operating earnings | $68.5 | $83.6 | $140.6 | $160.3 |
| Depreciation and amortization (2) | 35.8 | 32.1 | 72.7 | 63.5 |
| Adjusted operating earnings before depreciation and amortization | $104.3 | $115.7 | $213.3 | $223.8 |
| (1) Intangible assets arising from business combinations include our customer relationships, trademarks and non-compete agreements. |
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| (2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations. | ||||
| Reconciliation of net earnings attributable to shareholders of the Corporation – Second quarter | ||||
| Three months ended | ||||
| April 26, 2020 | April 28, 2019 | |||
| (in millions of dollars, except per share amounts) | Total | Per share | Total | Per share |
| Net earnings attributable to shareholders of the Corporation | $25.7 | $0.30 | $22.3 | $0.26 |
| Restructuring and other costs, net of related income taxes | 4.8 | 0.06 | 16.0 | 0.18 |
| Amortization of intangible assets arising from business combinations, net of related income taxes (1) | 13.1 | 0.14 | 13.9 | 0.16 |
| Impairment of assets, net of related income taxes | — | — | 0.4 | — |
| Adjusted net earnings attributable to shareholders of the Corporation | $43.6 | $0.50 | $52.6 | $0.60 |
| (1) Intangible assets arising from business combinations include our customer relationships, trademarks and non-compete agreements. |
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| Reconciliation of net earnings attributable to shareholders of the Corporation – Cumulative | ||||
| Six months ended | ||||
| April 26, 2020 | April 28, 2019 | |||
| (in millions of dollars, except per share amounts) | Total | Per share | Total | Per share |
| Net earnings attributable to shareholders of the Corporation | $32.1 | $0.37 | $50.4 | $0.58 |
| Restructuring and other costs, net of related income taxes | 27.6 | 0.32 | 19.3 | 0.22 |
| Amortization of intangible assets arising from business combinations, net of related income taxes (1) | 26.7 | 0.30 | 28.0 | 0.32 |
| Impairment of assets, net of related income taxes | — | — | 0.4 | — |
| Adjusted net earnings attributable to shareholders of the Corporation | $86.4 | $0.99 | $98.1 | $1.12 |
| (1) Intangible assets arising from business combinations include our customer relationships, trademarks and non-compete agreements. | ||||
| Reconciliation of net indebtedness | ||||||
| (in millions of dollars, except ratios) | As at April 26, 2020 |
As at October 27, 2019 |
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| Long-term debt | $999.1 | $1,381.9 | ||||
| Current portion of long-term debt | 88.8 | 1.2 | ||||
| Lease liabilities (1) | 116.4 | — | ||||
| Current portion of lease liabilities (1) | 21.7 | — | ||||
| Cash | (104.6 | ) | (213.7 | ) | ||
| Net indebtedness (1) | $1,121.4 | $1,169.4 | ||||
| Adjusted operating earnings before depreciation and amortization (last 12 months) (1) | $465.3 | $475.8 | ||||
| Net indebtedness ratio (1) | 2.4 | x | 2.5 | x | ||
| (1) The results for the current period reflect the impact of the adoption of the new IFRS 16 accounting standard, which applies to the Corporation for its fiscal year beginning October 28, 2019. The Corporation adopted the new standard using the modified retrospective transition method, whereby the cumulative impact of initial application has been reflected in opening retained earnings as at October 28, 2019, without restatement of comparative figures. Consequently, data might not be comparable. Please refer to Note 2 to the unaudited condensed interim consolidated financial statements for more information on the adoption of the new standard and Table #2 of the Management’s Discussion and Analysis for the second quarter ended April 26, 2020. | ||||||
Dividend
The Corporation’s Board of Directors declared a quarterly dividend of $0.225 per share on Class A Subordinate Voting Shares and Class B Shares. This dividend is payable on July 22, 2020 to shareholders of record at the close of business on July 3, 2020.
Normal Course Issuer Bid
In February 2020, the Corporation received approval from the Toronto Stock Exchange to amend its normal course issuer bid (“NCIB”) in order to increase the maximum number of Class A Subordinate Voting Shares that may be repurchased from 1,000,000 Class A Subordinate Voting Shares, representing approximately 1.36% of the 73,360,754 issued and outstanding Class A Subordinate Voting Shares as of September 18, 2019 (the “reference date”), to 2,000,000 Class A Subordinate Voting Shares, representing approximately 2.73% of the 73,360,754 issued and outstanding Class A Subordinate Voting Shares on the reference date. No other terms of the NCIB have been amended.
Purchases under the NCIB, which began on October 1, 2019 and will end no later than September 30, 2020, will be made through the facilities of the Toronto Stock Exchange and/or alternative Canadian trading systems in accordance with its requirements. Under its current NCIB, as of May 29, 2020, the Corporation had repurchased 450,450 of its Class A Subordinate Voting Shares at a weighted-average price of $15.70 per share, for a total cash consideration of $7.1 million (no change since February 14, 2020).
Additional information
Conference Call
Upon releasing its 2020 second quarter results, the Corporation will hold a conference call for the financial community today at 4:15 p.m. The dial-in numbers are 1 647 788-4922 or 1 877 223-4471. Media may hear the call in listen-only mode or tune in to the simultaneous audio broadcast on the Corporation’s website, which will then be archived for 30 days. For media requests or interviews, please contact Nathalie St-Jean, Senior Advisor, Corporate Communications of TC Transcontinental, at 514 954-3581.
Profile
TC Transcontinental is a leader in flexible packaging in North America, and Canada’s largest printer. The Corporation is also positioned as the leading Canadian French-language educational publishing group. For over 40 years, TC Transcontinental’s mission has been to create quality products and services that allow businesses to attract, reach and retain their target customers.
Respect, teamwork, performance and innovation are the strong values held by the Corporation and its employees. TC Transcontinental’s commitment to its stakeholders is to pursue its business activities in a responsible manner.
Transcontinental Inc. (TSX: TCL.A TCL.B), known as TC Transcontinental, has approximately 8,500 employees, the majority of which are based in Canada, the United States and Latin America. TC Transcontinental had revenues of more than C$3.0 billion for the fiscal year ended October 27, 2019. For more information, visit TC Transcontinental’s website at www.tc.tc.
Forward-looking Statements
Our public communications often contain oral or written forward-looking statements which are based on the expectations of management and inherently subject to a certain number of risks and uncertainties, known and unknown. By their very nature, forward-looking statements are derived from both general and specific assumptions. The Corporation cautions against undue reliance on such statements since actual results or events may differ materially from the expectations expressed or implied in them. Forward-looking statements may include observations concerning the Corporation’s objectives, strategy, anticipated financial results and business outlook. The Corporation’s future performance may also be affected by a number of factors, many of which are beyond the Corporation’s will or control. These factors include, but are not limited to, the economic situation in the world, structural changes in the industries in which the Corporation operates, the exchange rate, availability of capital at a reasonable rate, bad debts from certain customers, import and export controls, raw materials and transportation costs, competition, the Corporation’s ability to generate organic growth in its Packaging Sector, the Corporation’s ability to identify and engage in strategic transactions and effectively integrate acquisitions into its activities without affecting its growth and its profitability, while achieving the expected synergies, the political and social environment as well as regulatory and legislative changes, in particular with regard to the environment or door-to-door distribution, changes in consumption habits related, in particular, to issues involving sustainable development and the use of certain products or services such as door-to-door distribution, the impact of digital product development and adoption on the demand for retailer-related services and other printed products, change in consumption habits or loss of a major customer, the impact of customer consolidation, the safety and quality of its packaging products used in the food industry, innovation of its offering, the protection of its intellectual property rights, concentration of its sales in certain segments, cybersecurity and data protection, the inability to maintain or improve operational efficiency and avoid disruptions that could affect its ability to meet deadlines, recruiting and retaining qualified personnel in certain geographic areas and industry sectors, taxation, interest rates, indebtedness level and the impact of the COVID-19 pandemic on its operations, facilities and financial results, change in consumption habits from consumers and changes in the operations and financial position of the Corporation’s customers due to the pandemic and the effectiveness of plans and measures implemented in response thereto. The main risks, uncertainties and factors that could influence actual results are described in the Management’s Discussion and Analysis for the year ended October 27, 2019, updated in the Management’s Discussion and Analysis for the quarter ended April 26, 2020, and in the latest Annual Information Form.
Unless otherwise indicated by the Corporation, forward-looking statements do not take into account the potential impact of non-recurring or other unusual items, nor of disposals, business combinations, mergers or acquisitions which may be announced or entered into after the date of June 10, 2020. The forward-looking statements in this press release are made pursuant to the “safe harbour” provisions of applicable Canadian securities legislation. The forward-looking statements in this release are based on current expectations and information available as at June 10, 2020. Such forward-looking information may also be found in other documents filed with Canadian securities regulators or in other communications. The Corporation’s management disclaims any intention or obligation to update or revise these statements unless otherwise required by the securities authorities.
For information:
CONSOLIDATED STATEMENTS OF EARNINGS
Unaudited
| Three months ended | Six months ended | ||||||||
| April 26, | April 28, | April 26, | April 28, | ||||||
| (in millions of Canadian dollars, unless otherwise indicated and per share data) | 2020 | 2019 | 2020 | 2019 | |||||
| Revenues | $ | 625.1 | $ | 767.4 | $ | 1,330.9 | $ | 1,519.0 | |
| Operating expenses | 520.8 | 651.7 | 1,117.6 | 1,295.2 | |||||
| Restructuring and other costs | 7.0 | 21.5 | 20.3 | 25.9 | |||||
| Impairment of assets | — | 0.5 | — | 0.5 | |||||
| Operating earnings before depreciation and amortization | 97.3 | 93.7 | 193.0 | 197.4 | |||||
| Depreciation and amortization | 53.2 | 50.6 | 108.1 | 100.7 | |||||
| Operating earnings | 44.1 | 43.1 | 84.9 | 96.7 | |||||
| Net financial expenses | 11.7 | 16.2 | 25.7 | 33.9 | |||||
| Earnings before income taxes | 32.4 | 26.9 | 59.2 | 62.8 | |||||
| Income taxes | 6.6 | 4.6 | 26.9 | 12.4 | |||||
| Net earnings | 25.8 | 22.3 | 32.3 | 50.4 | |||||
| Non-controlling interest | 0.1 | — | 0.2 | — | |||||
| Net earnings attributable to the shareholders of the Corporation | $ | 25.7 | $ | 22.3 | $ | 32.1 | $ | 50.4 | |
| Net earnings per share – basic | $ | 0.30 | $ | 0.26 | $ | 0.37 | $ | 0.58 | |
| Net earnings per share – diluted | $ | 0.30 | $ | 0.26 | $ | 0.37 | $ | 0.58 | |
| Weighted average number of shares outstanding – basic (in millions) | 87.0 | 87.3 | 87.2 | 87.3 | |||||
| Weighted average number of shares – diluted (in millions) | 87.0 | 87.4 | 87.2 | 87.4 | |||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited
| Three months ended | Six months ended | |||||||||||
| April 26, |
April 28, | April 26, |
April 28, | |||||||||
| (in millions of Canadian dollars) | 2020 |
2019 | 2020 |
2019 | ||||||||
| Net earnings | $ | 25.8 | $ | 22.3 | $ | 32.3 | $ | 50.4 | ||||
| Other comprehensive income | ||||||||||||
| Items that will be reclassified to net earnings | ||||||||||||
| Net change related to cash flow hedges | ||||||||||||
| Net change in the fair value of designated derivatives – Foreign exchange risk | (10.6 | ) | (2.3 | ) | (11.1 | ) | (2.7 | ) | ||||
| Net change in the fair value of designated derivatives – Interest rate risk | (15.8 | ) | (4.6 | ) | (15.6 | ) | (4.6 | ) | ||||
| Reclassification of the net change in the fair value of designated derivatives recognized in net earnings during the period | 1.0 | (0.1 | ) | 1.8 | 0.1 | |||||||
| Related income taxes | (6.8 | ) | (0.6 | ) | (6.6 | ) | (0.7 | ) | ||||
| (18.6 | ) | (6.4 | ) | (18.3 | ) | (6.5 | ) | |||||
| Cumulative translation differences | ||||||||||||
| Net unrealized exchange gains on the translation of the financial statements of foreign operations | 127.5 | 20.6 | 135.1 | 32.9 | ||||||||
| Net losses on hedge of the net investment in foreign operations | (67.0 | ) | (0.4 | ) | (66.3 | ) | (1.0 | ) | ||||
| Related income taxes | (1.9 | ) | — | (1.7 | ) | (0.2 | ) | |||||
| 62.4 | 20.2 | 70.5 | 32.1 | |||||||||
| Items that will not be reclassified to net earnings | ||||||||||||
| Changes related to defined benefit plans | ||||||||||||
| Actuarial gains (losses) on defined benefit plans | 11.5 | (4.6 | ) | 15.5 | (7.7 | ) | ||||||
| Related income taxes | 3.1 | (1.4 | ) | 4.1 | (2.2 | ) | ||||||
| 8.4 | (3.2 | ) | 11.4 | (5.5 | ) | |||||||
| Other comprehensive income | 52.2 | 10.6 | 63.6 | 20.1 | ||||||||
| Comprehensive income | $ | 78.0 | $ | 32.9 | $ | 95.9 | $ | 70.5 | ||||
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited
| Accumulated | ||||||||||||||||||||
| other | Non- | |||||||||||||||||||
| Share | Contributed | Retained | comprehensive | controlling | Total | |||||||||||||||
| (in millions of Canadian dollars) | capital | surplus | earnings | income (loss) | Total | interest | equity | |||||||||||||
| Balance as at October 27, 2019 | $ | 641.9 | $ | 1.1 | $ | 1,069.9 | $ | (25.9 | ) | $ | 1,687.0 | $ | 4.2 | $ | 1,691.2 | |||||
| Impact of the transition to IFRS 16 | — | — | (13.2 | ) | — | (13.2 | ) | — | (13.2 | ) | ||||||||||
| Balance as at October 27, 2019 – adjusted | 641.9 | 1.1 | 1,056.7 | (25.9 | ) | 1,673.8 | 4.2 | 1,678.0 | ||||||||||||
| Net earnings | — | — | 32.1 | — | 32.1 | 0.2 | 32.3 | |||||||||||||
| Other comprehensive income | — | — | — | 63.6 | 63.6 | — | 63.6 | |||||||||||||
| Shareholders’ contributions and distributions to shareholders | ||||||||||||||||||||
| Share redemptions | (3.8 | ) | — | (3.3 | ) | — | (7.1 | ) | — | (7.1 | ) | |||||||||
| Exercise of stock options | 1.9 | (0.2 | ) | — | — | 1.7 | — | 1.7 | ||||||||||||
| Dividends | — | — | (38.7 | ) | — | (38.7 | ) | — | (38.7 | ) | ||||||||||
| Balance as at April 26, 2020 | $ | 640.0 | $ | 0.9 | $ | 1,046.8 | $ | 37.7 | $ | 1,725.4 | $ | 4.4 | $ | 1,729.8 | ||||||
| Balance as at October 28, 2018 | $ | 642.4 | $ | 1.1 | $ | 979.8 | $ | 10.8 | $ | 1,634.1 | $ | — | $ | 1,634.1 | ||||||
| Net earnings | — | — | 50.4 | — | 50.4 | — | 50.4 | |||||||||||||
| Other comprehensive income | — | — | — | 20.1 | 20.1 | — | 20.1 | |||||||||||||
| Shareholders’ contributions and distributions to shareholders | ||||||||||||||||||||
| Dividends | — | — | (37.6 | ) | — | (37.6 | ) | — | (37.6 | ) | ||||||||||
| Income taxes on share issuance costs | (0.3 | ) | — | — | — | (0.3 | ) | — | (0.3 | ) | ||||||||||
| Balance as at April 28, 2019 | $ | 642.1 | $ | 1.1 | $ | 992.6 | $ | 30.9 | $ | 1,666.7 | $ | — | $ | 1,666.7 | ||||||
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited
| As at | As at | ||||
| April 26, | October 27, | ||||
| (in millions of Canadian dollars) | 2020 | 2019 (1) | |||
| Current assets | |||||
| Cash | $ | 104.6 | $ | 213.7 | |
| Accounts receivable | 448.4 | 520.7 | |||
| Income taxes receivable | 12.4 | 10.2 | |||
| Inventories | 290.3 | 304.2 | |||
| Prepaid expenses and other current assets | 19.5 | 20.0 | |||
| 875.2 | 1,068.8 | ||||
| Property, plant, equipment | 768.7 | 820.1 | |||
| Right-of-use assets | 116.9 | — | |||
| Intangible assets | 639.8 | 686.2 | |||
| Goodwill | 1,152.7 | 1,145.3 | |||
| Deferred taxes | 31.5 | 27.2 | |||
| Other assets | 38.4 | 34.2 | |||
| $ | 3,623.2 | $ | 3,781.8 | ||
| Current liabilities | |||||
| Accounts payable and accrued liabilities | $ | 384.6 | $ | 420.0 | |
| Provisions | 7.1 | 14.1 | |||
| Income taxes payable | 16.1 | 12.8 | |||
| Deferred revenues and deposits | 10.9 | 9.3 | |||
| Current portion of long-term debt | 88.8 | 1.2 | |||
| Current portion of lease liabilities | 21.7 | — | |||
| 529.2 | 457.4 | ||||
| Long-term debt | 999.1 | 1,381.9 | |||
| Lease liabilities | 116.4 | — | |||
| Deferred taxes | 121.3 | 120.2 | |||
| Provisions | 0.5 | 1.9 | |||
| Other liabilities | 126.9 | 129.2 | |||
| 1,893.4 | 2,090.6 | ||||
| Equity | |||||
| Share capital | 640.0 | 641.9 | |||
| Contributed surplus | 0.9 | 1.1 | |||
| Retained earnings | 1,046.8 | 1,069.9 | |||
| Accumulated other comprehensive income (loss) | 37.7 | (25.9 | ) | ||
| Attributable to the shareholders of the Corporation | 1,725.4 | 1,687.0 | |||
| Non-controlling interests | 4.4 | 4.2 | |||
| 1,729.8 | 1,691.2 | ||||
| $ | 3,623.2 | $ | 3,781.8 | ||
| (1) Certain comparative figures have been reclassified to conform to the presentation adopted in the current year. | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
| Three months ended | Six months ended | |||||||||||
| April 26, |
April 28, | April 26, |
April 28, | |||||||||
| (in millions of Canadian dollars) | 2020 |
2019 | 2020 |
2019 | ||||||||
| Operating activities | ||||||||||||
| Net earnings | $ | 25.8 | $ | 22.3 | $ | 32.3 | $ | 50.4 | ||||
| Adjustments to reconcile net earnings and cash flows from operating activities: | ||||||||||||
| Impairment of assets | — | 0.5 | — | 0.5 | ||||||||
| Depreciation and amortization | 58.5 | 56.0 | 118.8 | 111.4 | ||||||||
| Financial expenses on long-term debt and lease liabilities | 12.3 | 15.6 | 26.7 | 31.8 | ||||||||
| Net losses on disposal of assets | 0.4 | 0.1 | 1.9 | 0.3 | ||||||||
| Net losses on business disposals | 0.1 | — | 4.4 | — | ||||||||
| Income taxes | 6.6 | 4.6 | 26.9 | 12.4 | ||||||||
| Net foreign exchange differences and other | 2.2 | 1.8 | 3.5 | 1.5 | ||||||||
| Cash flows generated by operating activities before changes in non-cash operating items and income taxes paid | 105.9 | 100.9 | 214.5 | 208.3 | ||||||||
| Changes in non-cash operating items | 20.3 | 19.3 | (8.3 | ) | 16.2 | |||||||
| Income taxes paid | (11.5 | ) | (20.7 | ) | (27.8 | ) | (41.2 | ) | ||||
| Cash flows from operating activities | 114.7 | 99.5 | 178.4 | 183.3 | ||||||||
| Investing activities | ||||||||||||
| Business combinations, net of acquired cash | — | — | (7.7 | ) | — | |||||||
| Business disposals | — | — | 232.1 | — | ||||||||
| Acquisitions of property, plant and equipment | (27.1 | ) | (17.6 | ) | (50.2 | ) | (53.3 | ) | ||||
| Disposals of property, plant and equipment | 0.1 | — | 0.2 | — | ||||||||
| Increase in intangible assets | (4.9 | ) | (6.1 | ) | (9.3 | ) | (11.2 | ) | ||||
| Cash flows from investing activities | (31.9 | ) | (23.7 | ) | 165.1 | (64.5 | ) | |||||
| Financing activities | ||||||||||||
| Reimbursement of long-term debt | (366.9 | ) | — | (375.2 | ) | — | ||||||
| Net decrease in credit facility | — | (40.1 | ) | — | (35.8 | ) | ||||||
| Financial expenses on long-term debt | (11.0 | ) | (14.4 | ) | (24.2 | ) | (31.6 | ) | ||||
| Repayment of principal on lease liabilities | (5.4 | ) | — | (10.6 | ) | — | ||||||
| Interest on lease liabilities | (0.8 | ) | — | (1.4 | ) | — | ||||||
| Exercise of stock options | — | — | 1.7 | — | ||||||||
| Dividends | (19.5 | ) | (19.3 | ) | (38.7 | ) | (37.6 | ) | ||||
| Share redemptions | — | — | (7.1 | ) | — | |||||||
| Cash flows from financing activities | (403.6 | ) | (73.8 | ) | (455.5 | ) | (105.0 | ) | ||||
| Effect of exchange rate changes on cash denominated in foreign currencies | 0.8 | (0.3 | ) | 2.9 | 1.1 | |||||||
| Net change in cash | (320.0 | ) | 1.7 | (109.1 | ) | 14.9 | ||||||
| Cash at beginning of period | 424.6 | 53.7 | 213.7 | 40.5 | ||||||||
| Cash at end of period | $ | 104.6 | $ | 55.4 | $ | 104.6 | $ | 55.4 | ||||
| Non-cash investing activities | ||||||||||||
| Net change in capital asset acquisitions financed by accounts payable | — | $ | 1.3 | $ | (0.8 | ) | $ | 3.8 | ||||
