Transcontinental sees strong improvement in profitability for fourth consecutive quarter and resumes organic growth in revenues

- Growth of 18% in adjusted operating income before amortization compared
      to second quarter 2009 despite 4% decrease in revenues; on a comparable
      basis, revenues grew 2%.
    - Growth of 14% in adjusted net income applicable to participating
      shares; on a per-share basis, increase from $0.37 to $0.42.
    - Increase of $211.3 million in net income applicable to participating
      shares, from a loss of $144.3 million to a gain of $67 million; on a
      per-participating share basis, from a loss of $1.79 to a gain of $0.83.
    - Acquisition of LIPSO, a Canadian leader in mobile solutions, enhancing
      the Corporation's marketing communications offering and reflecting
      growth strategy for new media and digital platforms.
    - As part of the strategic development of solutions offered to local
      communities in Canada, launched the pre-shopping websites dealstreet.ca
      and publisac.ca, an online reputation management tool for businesses on
      weblocal.ca, and four community papers in Quebec.
    - Continued to implement a hybrid and Canada-wide newspaper and flyer
      printing platform that will become fully operational before the end of
      2010.
    - Concluded the sale of almost all of Transcontinental's direct mail
      assets in the United States to IWCO Direct, for net proceeds of
      $105.7 million.
    - Substantially improved the Corporation's financial position with a
      ratio of net indebtedness (including the securitization program) to
      adjusted operating income before amortization of 2.08 as at April 30,
      2010, versus 2.40 as at January 31, 2010 and 2.59 as at October 31,
      2009.

MONTREAL, June 8 /CNW Telbec/ - During the second quarter of fiscal 2010, Transcontinental resumed organic growth in revenues and generated, for the fourth quarter in a row, an increase in adjusted operating income before amortization. The printing of the San Francisco Chronicle daily, the contribution of the Marketing Communications Sector and the stabilization of the market in certain traditional segments all made a specific contribution to organic growth in revenues. The solid advances in operating income stem from the full impact of the rationalization measures implemented in fiscal 2009 and continuous improvement of operational efficiency. Transcontinental also strengthened its financial position, which enabled it to invest in the digital development of its Media Sector and its marketing communication operations, as shown by the acquisition of LIPSO, a Canadian leader in mobile solutions.

"I am very satisfied with our second quarter results and the performance of the past four quarters, which have all been higher than the previous comparable quarters," said François Olivier, President and Chief Executive Officer of Transcontinental. "We are systematically building the new Transcontinental by accompanying our customers with marketing strategies based on advertising personalization and the new communication platforms, while strengthening our traditional core business, which still provides extremely effective marketing tools. This strategy, combined with our employees' efforts to innovate and improve every day, will allow us to take full advantage of the opportunities that are opening up in our niches."

Transcontinental continued to improve its financial position during the quarter, with a ratio of net indebtedness (including the securitization program) to adjusted operating income before amortization of 2.08 at April 30, 2010, versus 2.40 as at January 31, 2010 and 2.59 as at October 31, 2009.

Financial Highlights

In the second quarter of 2010, Transcontinental generated consolidated revenues of $510.0 million, down 4% from $531.1 million in the same quarter in 2009. Excluding divestitures of publications, plant closures, the paper effect and the exchange rate effect, revenues were up 2%.

Adjusted operating income before amortization, which excludes unusual items, rose 18%, from $77 million to $91 million. The increase stems mainly from the full impact of the rationalization measures implemented in fiscal 2009, improved equipment productivity, and the contribution from printing the San Francisco Chronicle.

Net income applicable to participating shares was up $211.3 million, from a loss of $144.3 million in second quarter 2009 to a gain of $67.0 million in 2010. This increase is primarily due to impairment of goodwill and intangible assets and impairment of assets and restructuring costs in second quarter 2009, combined with a gain on the sale of almost all the assets of the Direct Mail Group in the United States on April 1, 2010 and the increase in adjusted operating income in 2010. On a per-participating share basis, net income applicable to participating shares went from a loss of $1.79 to a gain of $0.83.

Adjusted net income applicable to participating shares was up 14%, from $30.0 million in 2009 to $34.3 million in 2010. On a per-participating share basis, adjusted net income applicable to participating shares also increased 14%, from $0.37 to $0.42.

Lastly, adjusted operating income margin before amortization was up appreciably, from 14.5% in 2009 to 17.8% in 2010. The increase is mainly due to the full impact of the rationalization measures implemented in 2009 and continuous improvement in operational efficiency.

In the first six months of fiscal 2010, consolidated revenues were down 7%, from $1.10 billion to $1.02 billion, while adjusted operating income before amortization grew 26%, from $136.2 million to $172.1 million. Net income applicable to participating shares went from a loss of $150.7 million in the first half of 2009 to a gain of $93.2 million in the same period in 2010; on a per-participating share basis, net income applicable to participating shares went from a loss of $1.87 to a gain of $1.16. Adjusted net income applicable to participating shares rose 24%, from $49.3 million to $61.2 million; on a per-participating share basis, adjusted net income applicable to participating shares also rose 25%, from $0.61 to $0.76.

For more detailed financial information, please see Management's Discussion and Analysis for the Second Quarter ended April 30, 2010 at www.transcontinental.com, under "Investors."

Operating Highlights

Below are the main operating highlights to date.

- In response to growing demand from its customers, Transcontinental
      enhanced its marketing communications solutions that use new media and
      digital platforms by acquiring LIPSO Systems on April 30, 2010. LIPSO
      is a Canadian leader in aggregated mobile solutions encompassing
      connectivity, transaction management and applications development. This
      acquisition allows Transcontinental to add several new key services to
      its marketing communications offering, including cell phone bar-code
      reading, electronic couponing for retail sales and electronic ticketing
      for transportation and entertainment.

    - In the second quarter, the Media Sector furthered the strategic
      development of its solutions for local communities in Canada by
      officially launching the pre-shopping websites dealstreet.ca and
      publisac.ca, which distribute thousands of geographically specific
      retail discounts to consumers every day. The business search site,
      weblocal.ca, also launched the first online reputation management tool
      for advertisers who subscribe to its services.

    - Providing solutions for local communities is an important area of
      growth for Transcontinental. Thus, four new community papers and their
      websites were launched in Quebec: Rive-Sud Express.ca, which serves
      Longueuil, Brossard and Saint-Lambert on Montreal's South Shore; Point
      de vue Sainte-Agathe and Point de vue Mont-Tremblant, in the
      Laurentians; and Abitibi Express in Val-d'Or and Amos in Abitibi. These
      launches fulfill consumer demand for Transcontinental to introduce a
      local and regional paper that would include, among other things, input
      from "citizen contributors." These new papers, combined with new
      digital services, will also bring the benefits of enhanced media tools
      to local businesses and their respective markets.

    - In print media, Transcontinental launched the first business-oriented
      French-language bookzine in Canada: PREMIUM - l'intelligence en
      affaires. This high-end bi-monthly publication is aimed at business
      executives and combines the best of book and magazine. It rounds out
      Transcontinental's portfolio of business publications.

    - With its innovations and state-of-the-art equipment, Transcontinental
      is increasing its market share in newspaper and flyer printing. In
      recent months several new customers have been added to its Canada-wide
      flyer printing and distribution network. In the United States, the new
      plant in Fremont, California, where printing of the San Francisco
      Chronicle is running smoothly, has won a new customer, a publisher of
      community newspapers in the San Jose area; the plant started printing
      one of these newspapers in April. It is also business growth that is
      driving the development of a hybrid platform to print newspapers and
      flyers being set up under a $1.7 billion, 18-year contract with The
      Globe and Mail, a first in Canada. The platform will be operational
      before the end of 2010.

    - After releasing its first Sustainability Report based on Global
      Reporting Initiative (GRI) standards in February 2010, Transcontinental
      continued to affirm its leadership in sustainable development. In the
      second quarter 2010, its Constructo business unit launched voirvert.ca,
      the first French-language website dedicated entirely to sustainable and
      environmental building practices in Quebec. This site is specifically
      designed to meet the needs of professionals and managers working in
      construction. Transcontinental's commitment to sustainable development
      also earned it the annual Best of Show award for the most
      environmentally progressive printing company overall. It received this
      honour, along with the Gold for "Most Environmentally Progressive
      Printer in Canada," 500+ employees, at the fifth annual Environmental
      Printing Awards organized by PrintAction magazine. Lastly, in the wake
      of the recent historic agreement to conserve the boreal forest,
      Transcontinental's paper purchasing policy was recognized for its major
      contribution to preservation efforts. The boreal forest agreement,
      signed by 21 major forest companies and nine environmental groups,
      seeks to preserve a large area of the boreal forest, to protect the
      endangered woodland caribou, and to apply the highest environmental
      standards to forest management.

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.

The following table reconciles GAAP financial measures to non-GAAP financial measures.

Reconciliation of non-GAAP financial measures
                                 (unaudited)
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                        April 30                April 30
    (in millions of dollars,
     except per share amounts)      2010        2009        2010        2009
    -------------------------------------------------------------------------
    Net income (loss)
     applicable to
     participating shares     $     67.0  $   (144.3) $     93.2  $   (150.7)
    Dividends on preferred
     shares                          1.7           -         3.4           -
    Net loss (income)
     related to discontinued
     operations (after tax)        (34.7)        2.3       (32.9)       16.2
    Non-controlling interest           -        (0.1)        0.3         0.2
    Income taxes                    10.7       (13.6)       15.5       (16.1)
    Discount on sale of
     accounts receivable             0.3         1.4         0.9         3.1
    Financial expenses              10.5         8.7        20.5        16.1
    Impairment of goodwill
     and intangible assets             -       169.3           -       169.3
    Impairment of assets and
     restructuring costs             2.8        23.9         4.7        40.4
    -------------------------------------------------------------------------
    Adjusted operating
     income                         58.3        47.6       105.6        78.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Amortization                    32.7        29.4        66.5        57.7
    -------------------------------------------------------------------------
    Adjusted operating
     income before
     amortization             $     91.0  $     77.0  $    172.1  $    136.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income (loss)
     applicable to
     participating shares     $     67.0  $   (144.3) $     93.2  $   (150.7)
    Net loss (income)
     related to discontinued
     operations (after tax)        (34.7)        2.3       (32.9)       16.2
    Impairment of assets and
     restructuring costs
     (after tax)                     2.0        17.3         3.3        29.1
    Impairment of goodwill
     and intangible assets
     (after tax)                       -       154.7           -       154.7
    Unusual adjustments to
     income taxes                      -           -        (2.4)          -
    -------------------------------------------------------------------------
    Adjusted net income
     applicable to
     participating shares           34.3        30.0        61.2        49.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of
     participating shares
     outstanding                    80.8        80.8        80.8        80.8
    -------------------------------------------------------------------------
    Adjusted net income
     applicable to
     participating shares
     per share                $     0.42  $     0.37  $     0.76  $     0.61
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flow related to
     continuing operations    $    (57.4) $    (23.6) $     (0.8) $      9.2
    Changes in non-cash
     operating items              (128.1)      (74.2)     (134.0)      (91.0)
    -------------------------------------------------------------------------
    Cash flow from
     continuing opereations
     before changes in
     non-cash operating
     items                    $     70.7  $     50.6  $    133.2  $    100.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Long-term debt                                    $    786.7  $    746.8
    Current portion of
     long-term debt                                          5.9       175.3
    Cash and cash
     equivalents                                           (14.6)       (6.8)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net indebtedness                                  $    778.0  $    915.3
    -------------------------------------------------------------------------

Corporate Affairs

On April 1, 2010, having met U.S. regulatory requirements, Transcontinental announced that it had concluded the sale of almost all of its direct mail operations in the United States to IWCO Direct, a U.S. company headquartered in Minnesota. The agreement to sell the assets was announced on February 10, 2010, subject to regulators' approval. The facilities are in Warminster and Hamburg in Pennsylvania, in Fort Worth, Texas, and in Downey, California. The transaction resulted in net proceeds of $105.7 million. The sale reflects Management's decision to focus on the Corporation's most promising core business operations and on the development of digital products and services. Transcontinental is still the leader in direct marketing in Canada.

Dividend

At its June 8, 2010 meeting, the Corporation's Board of Directors declared a quarterly dividend of $0.09 per participating share on Class A Subordinate Voting Shares and Class B shares. These dividends are payable on July 22, 2010 to participating shareholders of record at the close of business on July 2, 2010. On an annual basis, this represents a dividend of $0.36 per participating share.

Furthermore, at the same meeting, the Board also declared a quarterly dividend of $0.4207 per share on cumulative 5-year rate reset first preferred shares, series D. These dividends are payable on July 15, 2010. On an annual basis, this represents a dividend of $1.6875 per preferred share.

Additional Information

Upon releasing its quarterly results, Transcontinental will hold a conference call for the financial community today at 4:15 p.m. (ET). Media may hear the call in listen-only mode or tune in to the simultaneous audio broadcast on the Corporation's Web site, which will then be archived for 30 days. For media requests for information or interviews, please contact Nessa Prendergast, Director, Media Relations, at 514-954-2809.

Profile

Transcontinental creates marketing products and services that allow businesses to attract, reach and retain their target customers. The Corporation is the largest printer in Canada and Mexico, and fourth-largest in North America. As the leading publisher of consumer magazines and French-language educational resources, the second-largest community newspaper publisher, and with its digital platforms that deliver unique content through more than 120 websites, it is also one of Canada's leading media groups. In addition, Transcontinental offers marketing products and services that use new communications platforms supported by database analytics, premedia, e-flyers, email marketing, custom communications and mobile solutions.

Transcontinental (TSX: TCL.A, TCL.B, TCL.PR.D) has 11,000 employees in Canada, the United States and Mexico, and reported revenues of C$2.4 billion in 2009. For more information about the Corporation, please visit www.transcontinental.com.

Note: This press release contains certain forward-looking statements concerning the future performance of the Corporation. Such statements, based on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown. We caution that all forward-looking information is inherently uncertain and actual results may differ materially from the assumptions, estimates or expectations reflected or contained in the forward-looking information, and that actual future performance will be affected by a number of factors, many of which are beyond the Corporation's control, including, but not limited to, the economic situation, structural changes in its industries, exchange rate, availability of capital, energy costs, increased competition, as well as the Corporation's capacity to implement its strategic plan and rationalization plan, engage in strategic transactions and integrate acquisitions into its activities. The risks, uncertainties and other factors that could influence actual results are described in the Management's Discussion and Analysis and Annual Information Form.

The forward-looking information in this release is based on current expectations and information available as of June 8, 2010. The Corporation's management disclaims any intention or obligation to update or revise any forward-looking statements unless otherwise required by the Securities Authorities.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)
                                                                   unaudited

                                  Three months ended        Six months ended
    (in millions of dollars,
     except per share data)             April 30                April 30
    -------------------------------------------------------------------------
                                    2010        2009        2010        2009
    -------------------------------------------------------------------------

    Revenues                  $    510.0  $    531.1  $  1,021.6  $  1,095.9
    Operating costs                354.1       394.2       728.4       831.0
    Selling, general and
     administrative expenses        64.9        59.9       121.1       128.7
    -------------------------------------------------------------------------

    Operating income before
     amortization,
     impairment of assets,
     restructuring costs and
     impairment of goodwill
     and intangible assets          91.0        77.0       172.1       136.2
    Amortization                    32.7        29.4        66.5        57.7
    Impairment of assets and
     restructuring costs             2.8        23.9         4.7        40.4
    Impairment of goodwill
     and intangible assets             -       169.3           -       169.3
    -------------------------------------------------------------------------

    Operating income (loss)         55.5      (145.6)      100.9      (131.2)
    Financial expenses              10.5         8.7        20.5        16.1
    Discount on sale of
     accounts receivable             0.3         1.4         0.9         3.1
    -------------------------------------------------------------------------

    Income (loss) before
     income taxes and non-
     controlling interest           44.7      (155.7)       79.5      (150.4)
    Income taxes (recovered)        10.7       (13.6)       15.5       (16.1)
    Non-controlling interest           -        (0.1)        0.3         0.2
    -------------------------------------------------------------------------

    Net income (loss) from
     continuing operations          34.0      (142.0)       63.7      (134.5)
    Net income (loss) from
     discontinued operations        34.7        (2.3)       32.9       (16.2)
    -------------------------------------------------------------------------
    Net income (loss)               68.7      (144.3)       96.6      (150.7)
    Dividends on preferred
     shares, net of related
     income taxes                    1.7           -         3.4           -
    -------------------------------------------------------------------------
    Net income (loss)
     applicable to
     participating shares     $     67.0  $   (144.3) $     93.2  $   (150.7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income (loss) per
     participating share -
     basic and diluted
    Continuing operations     $     0.40  $    (1.76) $     0.75  $    (1.67)
    Discontinued operations         0.43       (0.03)       0.41       (0.20)
    -------------------------------------------------------------------------
                              $     0.83  $    (1.79) $     1.16  $    (1.87)
    -------------------------------------------------------------------------

    Average number of
     participating shares
     outstanding (in
     millions)                      80.8        80.8        80.8        80.8
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.


                       CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                                                   unaudited

                                  Three months ended        Six months ended
    (in millions of dollars)            April 30                April 30
    -------------------------------------------------------------------------
                                    2010        2009        2010        2009
    -------------------------------------------------------------------------

    Net income (loss)         $     68.7  $   (144.3) $     96.6  $   (150.7)

    Other comprehensive
     income (loss):

    Unrealized net change in
     fair value of
     derivatives designated
     as cash flow hedges,
     net of income taxes of
     $1.5 million and ($0.4)
     million for the three-
     month and six-month
     periods ended April 30,
     2010 ($1.5 million and
     ($0.3) million for the
     same periods in 2009)          (0.3)        3.5        (5.4)       (2.3)

    Reclassification
     adjustments for net
     change in fair value of
     derivatives designated
     as cash flow hedges in
     prior periods,
     transferred to net
     income in the current
     period, net of income
     taxes of $0.5 million
     and $0.6 million for
     the three-month and
     six-month periods ended
     April 30, 2010
     ($0.6 million and
     $2.1 million for the
     same periods in 2009)           5.3         1.9         7.2         5.2
    -------------------------------------------------------------------------
    Net change in fair value
     of derivatives
     designated as cash flow
     hedges                          5.0         5.4         1.8         2.9

    Unrealized net gains
     (losses) on translation
     of financial statements
     of self-sustaining
     foreign operations             (2.0)        3.6        (2.9)       (1.8)
    -------------------------------------------------------------------------
    Other comprehensive
     income (loss)                   3.0         9.0        (1.1)        1.1
    -------------------------------------------------------------------------
    Comprehensive income
     (loss)                   $     71.7  $   (135.3) $     95.5  $   (149.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                                                   unaudited

                                                            Six months ended
    (in millions of dollars)                                    April 30
    -------------------------------------------------------------------------
                                                            2010        2009
    -------------------------------------------------------------------------

    Balance, beginning of period                      $    645.9  $    753.5
    Net income (loss)                                       96.6      (150.7)
    -------------------------------------------------------------------------
                                                           742.5       602.8
    Dividends on participating shares                      (13.8)      (12.9)
    Dividends on preferred shares                           (3.6)          -
    -------------------------------------------------------------------------
    Balance, end of period                            $    725.1  $    589.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.


                                                 CONSOLIDATED BALANCE SHEETS
                                                                   unaudited

    -------------------------------------------------------------------------
                                                           As at       As at
                                                        April 30, October 31,
    (in millions of dollars)                                2010        2009
    -------------------------------------------------------------------------

    Current assets
      Cash and cash equivalents                       $     14.6  $     34.7
      Accounts receivable                                  358.8       306.0
      Income taxes receivable                               17.3         4.1
      Inventories                                           74.7        74.3
      Prepaid expenses and other current assets             21.5        20.1
      Future income taxes                                    8.4        11.0
    -------------------------------------------------------------------------
                                                           495.3       450.2

    Property, plant and equipment                          932.3       938.8
    Goodwill                                               672.7       673.4
    Intangible assets                                      186.4       184.3
    Future income taxes                                    143.6       141.5
    Other assets                                            57.9        68.3
    Assets from discontinued operations                        -        93.2
    -------------------------------------------------------------------------
                                                      $  2,488.2  $  2,549.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Current liabilities
      Accounts payable and accrued liabilities        $    268.3  $    360.0
      Income taxes payable                                  28.1        27.0
      Deferred subscription revenues and deposits           39.0        37.2
      Future income taxes                                    2.0         0.5
      Current portion of long-term debt                      5.9         7.0
    -------------------------------------------------------------------------
                                                           343.3       431.7

    Long-term debt                                         786.7       818.8
    Future income taxes                                    107.0       109.0
    Other liabilities                                       57.4        43.8
    Liabilities from discontinued operations                   -        31.1
    -------------------------------------------------------------------------
                                                         1,294.4     1,434.4
    -------------------------------------------------------------------------

    Non-controlling interest                                 0.3         0.1
    -------------------------------------------------------------------------

    Commitments

    Shareholders' equity
      Share capital                                        476.3       476.5
      Contributed surplus                                   13.3        12.9

      Retained earnings                                    725.1       645.9
      Accumulated other comprehensive loss                 (21.2)      (20.1)
    -------------------------------------------------------------------------
                                                           703.9       625.8
    -------------------------------------------------------------------------
                                                         1,193.5     1,115.2
    -------------------------------------------------------------------------
                                                      $  2,488.2  $  2,549.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.


                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                   unaudited

                                  Three months ended        Six months ended
    (in millions of dollars)            April 30                April 30
    -------------------------------------------------------------------------
                                    2010        2009        2010        2009
    -------------------------------------------------------------------------

    Operating activities
      Net income (loss)       $     68.7  $   (144.3) $     96.6  $   (150.7)
      Less : Net income
       (loss) from disconti-
       nued operations              34.7        (2.3)       32.9       (16.2)
    -------------------------------------------------------------------------
      Net income (loss) from
       continuing operations        34.0      (142.0)       63.7      (134.5)

      Items not affecting
       cash and cash
       equivalents
        Amortization                38.7        35.2        78.8        68.4
        Impairment of assets         0.2         8.4         0.3        24.9
        Impairment of
         goodwill and
         intangible assets             -       169.3           -       169.3
        Gain on disposal of
         assets                     (0.2)       (1.2)       (0.6)       (1.3)
        Future income taxes         (2.6)      (21.3)       (9.1)      (29.1)
        Net change in
         accrued pension
         benefit asset and
         liability                   1.3        (1.7)       (0.7)       (4.1)
        Stock-based
         compensation                1.1         0.6         1.6         0.8
        Other                       (1.8)        3.3        (0.8)        5.8
    -------------------------------------------------------------------------
        Cash flow from opera-
         ting activities
         before changes in
         non-cash operating
         items                      70.7        50.6       133.2       100.2
        Changes in non-cash
         operating items          (128.1)      (74.2)     (134.0)      (91.0)
    -------------------------------------------------------------------------
        Cash flow related to
         operating activi-
         ties of continuing
         operations                (57.4)      (23.6)       (0.8)        9.2
    -------------------------------------------------------------------------
        Cash flow related
         to operating
         activities of
         discontinued
         operations                  7.1         1.7         5.8       (21.6)
    -------------------------------------------------------------------------
                                   (50.3)      (21.9)        5.0       (12.4)
    -------------------------------------------------------------------------

    Investing activities
      Business acquisitions         (2.2)       (1.3)       (2.8)      (13.0)
      Acquisitions of
       property, plant and
       equipment                   (26.3)      (62.6)      (89.0)     (159.8)
      Disposals of property,
       plant and equipment           0.8         3.0         1.6         3.1
      Increase in intangible
       assets and other
       assets                       (7.4)       (9.3)      (10.6)      (11.5)
    -------------------------------------------------------------------------
      Cash flow related to
       investing activities
       of continuing
       operations                  (35.1)      (70.2)     (100.8)     (181.2)
    -------------------------------------------------------------------------
      Cash flow related to
       investing activities
       of discontinued
       operations                   93.0         1.3        92.2        (0.2)
    -------------------------------------------------------------------------
                                    57.9       (68.9)       (8.6)     (181.4)
    -------------------------------------------------------------------------

    Financing activities
      Increase in long-term
       debt                          4.8       100.2        37.7       100.2
      Reimbursement of long-
       term debt                    (2.7)       (1.6)       (7.8)       (3.2)
      Increase (decrease) in
       revolving term credit
       facility                    (16.9)      (18.7)      (29.6)       28.1
      Dividends on
       participating shares         (7.3)       (6.4)      (13.8)      (12.9)
      Dividends on preferred
       shares                       (1.7)          -        (3.6)          -
      Other                          2.0        (0.8)        1.4        (1.3)
    -------------------------------------------------------------------------
      Cash flow related to
       financing activities
       of continuing
       operations                  (21.8)       72.7       (15.7)      110.9
    -------------------------------------------------------------------------
      Cash flow related to
       financing activities
       of discontinued
       operations                   (0.9)          -        (0.9)       (0.3)
    -------------------------------------------------------------------------
                                   (22.7)       72.7       (16.6)      110.6
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash and
     cash equivalents
     denominated in
     foreign currencies                -        (0.3)        0.1        (0.7)
    -------------------------------------------------------------------------

    Decrease in cash and
     cash equivalents              (15.1)      (18.4)      (20.1)      (83.9)
    Cash and cash
     equivalents at
     beginning of period            29.7        25.2        34.7        90.7
    -------------------------------------------------------------------------
    Cash and cash
     equivalents at end of
     period                   $     14.6  $      6.8  $     14.6  $      6.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Additional information
      Interest paid           $     11.1  $      3.1  $     20.4  $     14.6
      Income taxes paid
       (recovered)            $     35.0  $     (0.6) $     34.1  $     18.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.
For further information: Media: Nessa Prendergast, Director, Media Relations, Transcontinental Inc., (514) 954-2809, nessa.prendergast@transcontinental.ca; Financial Community: Jennifer F. McCaughey, Director, Investor Relations, Transcontinental Inc., (514) 954-2821, jennifer.mccaughey@transcontinental.ca; www.transcontinental.com