Solid performance for Transcontinental in third quarter and first nine months of fiscal 2008



    
    - Growth of 6% in revenues for the third quarter and 4% for the first
      nine months of fiscal 2008; excluding the foreign exchange rate impact,
      growth of 8% and 7%, respectively.
    - Increase of 2% in adjusted operating income before amortization for the
      quarter and for the first nine months of the year; excluding the
      foreign exchange rate impact, growth of 4% and 8%, respectively.
    - Increase of 9% in net income for the third quarter and 25% for the
      first nine months; on a per-share basis, net income rose from $0.33 to
      $0.38 in third quarter, a 14% increase, and from $0.96 to $1.25 in the
      first nine months, an increase of 29%.
    - Increase of 7% in adjusted net income for the third quarter and 6% for
      the first nine months of the year.
    - On a per-share basis, adjusted net income rose from $0.34 to $0.38 in
      the third quarter, up 12%, and from $1.03 to $1.14 in the first nine
      months, up 11%; excluding the foreign exchange rate impact, growth was
      12% and 17%, respectively.
    - Announcement in August of an 18-year contract valued at $1.7 billion,
      coming into effect at the end of 2010, to print The Globe and Mail in
      most of its major markets in Canada, and of a $200 million investment
      in a new and innovative Canada-wide platform for newspaper and flyer
      printing.
    - Announcement today of a multi-year arrangement, valued at approximately
      $25 million per year, to print flyers for Shoppers Drug Mart
      (Pharmaprix in Quebec) all across Canada and to deliver other value-
      added services.
    - Acquisition of Rastar, a U.S.-based direct marketing company that
      specializes in interactive database marketing and variable data digital
      printing.
    - Excellent financial position with a view to continuing growth.
    

    MONTREAL, Sept. 11 /CNW Telbec/ - Transcontinental today announced a
solid financial performance for its third quarter ended July 31, 2008, and for
the first nine months of fiscal 2008. Despite the negative impact of the
foreign exchange rate, nearly all financial performance indicators are up
compared to the same period in 2007. The acquisition of PLM Group, as well as
a series of smaller but strategic acquisitions in 2007 and 2008, combined with
the strong performance of newspapers, Publi-Sac (Ad-Bag), flyer and book
printing, and Mexican operations, as well as strict cost controls and
disciplined financial management, more than offset the negative exchange rate
impact and the backlash of the U.S. credit crunch on the Corporation's direct
mail operations.
    "We are very pleased with our performance for the third quarter and the
first nine months of the year, which shows clear growth compared to 2007,"
said François Olivier, President and Chief Executive Officer of
Transcontinental. "Two areas in particular are very encouraging for the
future: we have continued to invest in organic growth, especially in strategic
segments such as digital media and newspaper printing; and we have continued
to attract major customers in Canada in our printing sectors. We fully intend
to maintain this momentum in the quarters ahead."
    After signing the six-year contract, valued at $35 - $40 million per
year, to print all of Rogers Communications' magazines starting February 1,
2009, Transcontinental today confirms another major advance in the context of
the consolidation of Canada's printing industry. Since last April,
Transcontinental has been printing Shoppers Drug Mart flyers all across
Canada. The work is handled by Transcontinental's Canada-wide network of
printing plants in Vancouver, Calgary, Toronto, Montreal, and Halifax. This
multi-year arrangement, valued at about $25 million per year, is new business
for the Corporation with no additional investment required. Shoppers Drug Mart
will also benefit from other value-added services, including door-to-door
distribution in Quebec with Publi-Sac (Ad-Bag).
    The Corporation is in a solid financial position to pursue its
development, including growth through acquisitions, with a net indebtedness to
total capitalization ratio of 35% as at July 31, 2008, at the bottom end of
the target range of 35% to 50% set by management.

    Financial Highlights

    In the third quarter, Transcontinental recorded consolidated revenues of
$584.9 million, compared to $551.1 million in the same quarter of 2007, an
increase of 6%. Adjusted operating income before amortization was up by 2%,
from $81.3 million in 2007 to $82.7 million in 2008. Excluding the exchange
rate fluctuations between the Canadian dollar and its U.S. and Mexican
counterparts, which had a negative impact of $9.3 million on revenues and
$2 million on adjusted operating income before amortization, growth would have
been 8% in revenues and 4% in adjusted operating income before amortization.
Thus, the acquisitions made in 2007 and 2008, in addition to organic growth in
a number of niches, more than offset the negative impact of the foreign
exchange rate.
    Net income rose from $27.8 million to $30.3 million, an increase of 9%;
on a per-share basis, net income grew 14%, from $0.33 to $0.38. Adjusted net
income, which does not take into account impairment of assets, restructuring
costs, and unusual adjustments to income taxes, increased 7%, from
$28.4 million to $30.3 million; on a per-share basis, adjusted net income rose
12%, from $0.34 to $0.38.
    In the first nine months of fiscal 2008, consolidated revenue rose 4%,
from $1.708 billion to $1.776 billion, while adjusted operating income before
amortization increased 2%, from $249.8 million to $255.8 million. Excluding
the foreign exchange rate impact, which reduced revenues by $49.6 million and
adjusted operating income before amortization by $13.8 million, growth would
have been 7% for revenues and 8% for adjusted operating income before
amortization.
    Net income rose 25%, from $82 million in the first nine months of 2007 to
$102.1 million in 2008. This substantial increase is primarily due to a
favourable change in unusual items, the contribution of business acquisitions,
and a decrease in financial expenses. On a per-share basis, net income
increased 29%, from $0.96 to $1.25. Adjusted net income, which does not take
into account impairment of assets, restructuring costs, and unusual
adjustments to income taxes, increased 6%, from $87.9 million to
$93.6 million. On a per-share basis, adjusted net income increased 11%, from
$1.03 to $1.14.
    Excluding the adverse effect of the exchange rate in the first nine
months of 2008, adjusted earnings per share would have been $1.21, for an
increase of 17% compared to the same period of 2007. This measure provides a
good indicator of the Corporation's operating performance in the first nine
months of the year.
    For more detailed financial information, please see Management's
Discussion and Analysis for the Third Quarter Ended July 31, 2008 at
www.transcontinental.com, under "Investors."

    Operating Highlights

    The main operating highlights for the third quarter of 2008 are as
follows.

    
    - In the third quarter, Transcontinental invested approximately
      $2 million in digital and interactive initiatives in the Media sector.
      Other developments include the acquisition of the most important
      marketplace in Canada for buying and selling businesses,
      Acquizition.biz, a site that also makes it easier to find strategic or
      financial partners; the launch of recipefeast.com, the English-language
      counterpart of the highly popular site recettes.qc.ca, which receives
      close to a million visitors a month; and the introduction of mobile
      technology (mobile phone, BlackBerry and Apple's iPhone) to the popular
      thehockeynews.com site, which receives close to 300,000 visitors a
      month and has a readership of over two million for its print
      publication.
    - On August 26, 2008, Transcontinental announced that it was awarded a
      $1.7 billion contract to print The Globe and Mail in most of its major
      markets in Canada until 2028. This contract, which comes into effect at
      the end of 2010, represents an extension of existing contracts with
      The Globe and Mail in the Atlantic Provinces, Quebec, and Ontario, and
      adds two new markets: Alberta and British Columbia. For
      Transcontinental, this represents approximately $95 million per year in
      revenue, of which about $25 million per year is new revenue. The
      printing will be done in Halifax, Montreal, Toronto, Calgary and
      Vancouver. In 2009 and 2010, Transcontinental will invest approximately
      $200 million in a new and innovative Canada-wide platform for newspaper
      and flyer printing, the first Canadian network to integrate the
      printing of these two products. This network will provide the capacity
      to deliver colour on every page for The Globe and Mail, and it will
      also address the needs of Transcontinental's retail customers on the
      flyer side.
    - On September 4, 2008, Transcontinental announced the acquisition of
      Rastar, Inc. This U.S.-based direct marketing company, headquartered in
      Salt Lake City, Utah, specializes in interactive database marketing and
      variable data digital printing, which enable it to offer fully
      personalized marketing communications services. Rastar's industry
      experience, combined with its digital printing expertise, will allow
      Transcontinental to further expand its integrated marketing services
      offering and enable its clients to achieve the best possible returns on
      their marketing campaigns. A privately-owned company with approximately
      US$50 million in annual revenue and 350 employees, Rastar counts many
      Fortune 500 companies among its clients in verticals such as the auto,
      consumer goods, and retail industries.

    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
                     For the Third Quarter Ended July 31
                                 (unaudited)


    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        July 31                 July 31

    (in millions of dollars,
     except per share amounts)      2008        2007        2008        2007
    -------------------------------------------------------------------------
    Net income                 $    30.3   $    27.8   $   102.1   $    82.0
    Non-controlling interest        (0.7)          -        (0.4)        0.3
    Income taxes                    12.3        13.2        23.7        36.7
    Discount on sale of
     accounts receivable             1.9         2.9         7.1         8.8
    Financial expenses               7.0         7.2        22.6        23.1
    Impairment of assets and
     restructuring costs             0.1         0.9         4.4         8.7
    Amortization                    31.8        29.3        96.3        90.2
    -------------------------------------------------------------------------
    Adjusted operating income
     before amortization       $    82.7   $    81.3   $   255.8   $   249.8
    -------------------------------------------------------------------------
    Net income                 $    30.3   $    27.8   $   102.1   $    82.0
    Impairment of assets and
     restructuring costs
     (after tax)                       -         0.6         3.0         5.9
    Unusual adjustments to
     income taxes                      -           -       (11.5)          -
    -------------------------------------------------------------------------
    Adjusted net income             30.3        28.4        93.6        87.9
    -------------------------------------------------------------------------
    Average number of shares
     outstanding                    80.8        84.5        82.0        85.2
    -------------------------------------------------------------------------
    Adjusted earnings
     per share                 $    0.38   $    0.34   $    1.14   $    1.03
    -------------------------------------------------------------------------
    Cash flow related to
     operating activities      $    77.9   $   113.5   $   134.2   $   136.0
    Changes in non-cash
     operating items                 2.0        47.1       (87.7)      (69.3)
    -------------------------------------------------------------------------
    Cash flow from operating
     activities before
     changes in non-cash
     operating items           $    75.9   $    66.4   $   221.9   $   205.3
    -------------------------------------------------------------------------

    Long-term debt                                     $   589.7   $   459.4
    Current portion of
     long-term debt                                        109.4        10.4
    Cash and cash equivalents                              (57.3)      (46.8)
    -------------------------------------------------------------------------
    Net indebtedness                                   $   641.8   $   423.0
    -------------------------------------------------------------------------

    Environment

    Transcontinental plans to continue exercising its leadership in
sustainable development in its own way: by mobilizing its employees and taking
concrete action. Achievements in the third quarter include the sponsorship, in
cooperation with its Métro daily newspaper, of the National Environment Show,
the largest event of its kind in Quebec, held at the Old Port of Montreal,
June 13-15, 2008; publication of the seventh issue of Vision durable, the
business magazine aimed at bridging the gap between the concept and
implementation of sustainable development for Quebec business people;
distribution to customers of Transcontinental's printing plants of the seventh
issue of EnviroTerms and Trends, focusing on printing industry issues, trends,
and terms; and the ongoing systematic presentation on the corporate intranet
of new environmental initiatives completed by employees from the operating
sectors as well as head office. Transcontinental management is solidly
committed to sustainable development and firmly believes that the outcome of
all these initiatives will be the creation of long-term value for
Transcontinental's employees, customers, and shareholders.

    Corporate Affairs

    On May 23, 2008, Transcontinental announced the appointment of François R.
Roy to the company's board of directors. Mr. Roy is Vice Principal
(Administration and Finance) at McGill University, and was previously Chief
Financial Officer at Télémédia, Avenor, and Quebecor Inc. He also has a long
history of involvement in the Montreal arts community and has been a board
member of the Opéra de Montreal, the Montreal Museum of Fine Arts, the
Canadian Centre for Architecture, and the International Festival of Films on
Art. Mr. Roy earned his BA and MBA from the University of Toronto.
    On June 18, 2008, Rémi Marcoux, the founder and Executive Chairman of the
Board of Transcontinental, was invested as an Officer of the National Order of
Quebec by the Premier, Jean Charest. This prestigious award of merit was
presented at a ceremony at the Hôtel du Parlement in Quebec City.

    Dividend

    At its September 11, 2008 meeting, the Corporation's Board of Directors
declared a quarterly dividend of $0.08 per share on Class A Subordinate Voting
Shares and Class B shares. These dividends are payable on October 24, 2008 to
shareholders of record at the close of the Toronto Stock Exchange on
October 6, 2008. On an annual basis, this represents a dividend of $0.32 per
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 Transcontinental's website, which will be archived for 30 days.
For Media requests for information or interviews, please contact Nessa
Prendergast, director, media relations, at 514 954-2809.

    About Transcontinental

    The largest printer in Canada and sixth-largest in North America,
Transcontinental is also the country's leading publisher of consumer magazines
and French-language educational resources, and its second-largest community
newspaper publisher. Transcontinental distinguishes itself by creating
strategic partnerships that integrate the company into its customers' value
chain, notably through its unique newspaper printing outsourcing model and its
value-added services. From mass to highly personalized marketing, the company
offers its clients integrated solutions which include a continent-leading
direct marketing offering, a diverse digital platform and a door-to-door
advertising material distribution network. Transcontinental is a company whose
values, including respect, innovation and integrity, are central to its
operation.
    Transcontinental (TSX: TCL.A, TCL.B) has more than 15,000 employees in
Canada, the United States and Mexico, and reported revenues of C$2.3 billion
in 2007. 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, exchange rate,
energy costs, increased competition and the Corporation's capacity to
implement its strategic plan and cost-reduction program and make and integrate
acquisitions into its activities. The risks, uncertainties and other factors
that could influence actual results are described in the Corporation's
Management's Discussion and Analysis and the Annual Information Form.
    The forward-looking information in this release is based on current
expectations and information available as of September 11, 2008. 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
                                                                   unaudited


    (in millions of dollars,      Three months ended       Nine months ended
     except per share data)             July 31                 July 31
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------

    Revenues                   $   584.9   $   551.1   $ 1,776.0   $ 1,708.0
    Operating costs                431.5       403.9     1,307.3     1,260.7
    Selling, general and
     administrative expenses        70.7        65.9       212.9       197.5
    -------------------------------------------------------------------------

    Operating income before
     amortization, impairment
     of assets and
     restructuring costs            82.7        81.3       255.8       249.8
    Amortization (Note 4)           31.8        29.3        96.3        90.2
    Impairment of assets and
     restructuring costs
     (Note 5)                        0.1         0.9         4.4         8.7
    -------------------------------------------------------------------------

    Operating income                50.8        51.1       155.1       150.9
    Financial expenses (Note 6)      7.0         7.2        22.6        23.1
    Discount on sale of accounts
     receivable (Note 9)             1.9         2.9         7.1         8.8
    -------------------------------------------------------------------------

    Income before income
     taxes and non-controlling
     interest                       41.9        41.0       125.4       119.0
    Income taxes (Note 7)           12.3        13.2        23.7        36.7
    Non-controlling interest        (0.7)          -        (0.4)        0.3
    -------------------------------------------------------------------------
    Net income                 $    30.3   $    27.8   $   102.1   $    82.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per share (basic)
     (Note 11)
    Net income                 $    0.38   $    0.33   $    1.25   $    0.96
    -------------------------------------------------------------------------
    Per share (diluted)
     (Note 11)
    Net income                 $    0.37   $    0.33   $    1.24   $    0.96
    -------------------------------------------------------------------------

    Average number of shares
     outstanding (in millions)      80.8        84.5        82.0        85.2
    -------------------------------------------------------------------------

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



                             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                                   unaudited


                                  Three months ended       Nine months ended
    (in millions of dollars)            July 31                 July 31
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
                                           (restated               (restated
                                              Note 2)                 Note 2)
    -------------------------------------------------------------------------

    Net income                 $    30.3   $    27.8   $   102.1   $    82.0

    Other comprehensive
     income (loss):

    Unrealized net change in
     fair value of derivatives
     designated as cash flow
     hedges, net of income
     taxes of ($0.6) million
     and ($1.4) million for
     the three-month and
     nine-month periods ended
     July 31, 2008
     ($0.9 million and
     $1.5 million for the
     same periods in 2007)          (1.5)        1.8        (2.5)        3.0

    Reclassification adjustment
     for net gains on
     derivatives designated as
     cash flow hedges in prior
     periods transferred to net
     income in the current
     period, net of income taxes
     of $0.6 million and
     $2.5 million for the
     three-month and nine-month
     periods ended July 31, 2008
     ($0.5 million and
     $1.5 million for the same
     periods in 2007)               (1.3)       (1.2)       (5.5)       (3.4)
    -------------------------------------------------------------------------
    Net change in fair value of
     derivatives designated as
     cash flow hedges               (2.8)        0.6        (8.0)       (0.4)

    Unrealized net gains (losses)
     on translation of financial
     statements of self-sustaining
     foreign operations              3.0        (6.3)       10.5        (7.9)
    -------------------------------------------------------------------------
    Other comprehensive
     income (loss)                   0.2        (5.7)        2.5        (8.3)
    -------------------------------------------------------------------------
    Comprehensive income       $    30.5   $    22.1   $   104.6   $    73.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                                                   unaudited


                                                           Nine months ended
    (in millions of dollars)                                    July 31
    -------------------------------------------------------------------------
                                                            2008        2007
                                                                   (restated
                                                                      Note 2)
    -------------------------------------------------------------------------

    Balance, beginning of period, as previously
     reported                                          $   806.4   $   769.0
    Adjustments to opening retained earnings (Note 2)          -       (19.9)
    -------------------------------------------------------------------------
                                                           806.4       749.1
    Financial Instruments - Recognition and
     Measurement                                               -        (0.2)
    -------------------------------------------------------------------------
    Restated balance, beginning of period                  806.4       748.9
    Net income                                             102.1        82.0
    -------------------------------------------------------------------------
                                                           908.5       830.9
    Premium on redemption of shares (Note 11)              (32.5)      (37.2)
    Dividends on shares                                    (18.8)      (17.4)
    -------------------------------------------------------------------------
    Balance, end of period                             $   857.2   $   776.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



                                                 CONSOLIDATED BALANCE SHEETS
                                                                   unaudited

    (in millions of dollars)
    -------------------------------------------------------------------------
                                                           As at       As at
                                                         July 31, October 31,
                                                            2008        2007
    -------------------------------------------------------------------------

    Current assets
      Cash and cash equivalents                        $    57.3   $    48.5
      Accounts receivable (Note 9)                         196.8       196.9
      Income taxes receivable                               15.7        28.8
      Inventories                                           91.3        91.0
      Prepaid expenses and other current assets             20.5        18.4
      Future income tax assets                              13.6        16.6
    -------------------------------------------------------------------------
                                                           395.2       400.2

    Property, plant and equipment                          823.5       739.7
    Goodwill                                               965.8       934.6
    Intangible assets                                      168.0       172.5
    Future income tax assets                                70.3        64.6
    Other assets                                            91.9        90.3
    -------------------------------------------------------------------------
                                                       $ 2,514.7   $ 2,401.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Current liabilities
      Accounts payable and accrued liabilities         $   327.8   $   400.5
      Income taxes payable                                  48.7        59.8
      Deferred subscription revenues and deposits           45.1        52.9
      Future income tax liabilities                          2.0         4.8
      Current portion of long-term debt                    109.4        14.2
    -------------------------------------------------------------------------
                                                           533.0       532.2

    Long-term debt                                         589.7       523.3
    Future income tax liabilities                          112.7       108.4
    Other liabilities                                       62.4        58.2
    -------------------------------------------------------------------------
                                                         1,297.8     1,222.1
    -------------------------------------------------------------------------

    Non-controlling interest                                 0.1         2.2
    -------------------------------------------------------------------------

    Commitments (Note 18)

    Shareholders' equity
      Share capital (Note 11)                              379.5       395.1
      Contributed surplus (Note 13)                         10.7         9.2
      Retained earnings                                    857.2       806.4
      Accumulated other comprehensive loss (Note 14)       (30.6)      (33.1)
    -------------------------------------------------------------------------
                                                           826.6       773.3
    -------------------------------------------------------------------------
                                                         1,216.8     1,177.6
    -------------------------------------------------------------------------
                                                       $ 2,514.7   $ 2,401.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                   unaudited


                                  Three months ended       Nine months ended
    (in millions of dollars)            July 31                 July 31
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------

    Operating activities
      Net income               $    30.3   $    27.8   $   102.1   $    82.0
      Items not affecting cash
       and cash equivalents
        Amortization (Note 4)       37.6        38.4       112.5       108.8
        Impairment of assets
         (Note 5)                      -         0.1         1.9         3.6
        Loss (gain) on
         disposal of assets          0.3           -         0.7        (0.2)
        Future income taxes         13.0        (2.6)        4.1         1.3
        Non-controlling
         interest                   (0.7)          -        (0.4)        0.3
        Net change in accrued
         pension benefit asset
         and liability              (3.8)        1.6         1.9         6.8
        Stock-based
         compensation
         (Notes 12 and 13)           0.6         0.6         2.4         1.8
        Other                       (1.4)        0.5        (3.3)        0.9
    -------------------------------------------------------------------------
      Cash flow from operating
       activities before
       changes in non-cash
       operating items              75.9        66.4       221.9       205.3
      Changes in non-cash
       operating items               2.0        47.1       (87.7)      (69.3)
    -------------------------------------------------------------------------
      Cash flow related to
       operating activities         77.9       113.5       134.2       136.0
    -------------------------------------------------------------------------

    Investing activities
      Business acquisitions
       (Note 15)                    (5.4)       (5.3)      (22.3)      (15.5)
      Acquisitions of property,
       plant and equipment         (62.0)      (28.2)     (153.5)      (83.0)
      Disposals of property,
       plant and equipment           0.4         1.0         0.9         2.0
      Increase in other assets     (16.1)       (5.6)      (29.1)      (19.1)
    -------------------------------------------------------------------------
      Cash flow used in
       investing activities        (83.1)      (38.1)     (204.0)     (115.6)
    -------------------------------------------------------------------------

    Financing activities
      Reimbursement of long-term
       debt                         (7.7)     (106.0)      (10.9)     (108.8)
      Increase in revolving term
       credit facility              47.9        74.0       152.9       113.5
      Dividends on shares           (6.4)       (5.8)      (18.8)      (17.4)
      Redemption of shares
       (Note 11)                    (3.8)      (34.6)      (48.7)      (49.7)
      Issuance of shares
       (Note 11)                     0.2         0.3         0.6         0.7
      Other                         (1.1)       (0.1)       (0.2)       (0.6)
    -------------------------------------------------------------------------
      Cash flow related to (used
       in) financing activities     29.1       (72.2)       74.9       (62.3)
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash and cash
     equivalents denominated in
     foreign currencies              1.4        (0.5)        3.7        (0.6)
    -------------------------------------------------------------------------

    Increase (decrease) in cash
     and cash equivalents           25.3         2.7         8.8       (42.5)
    Cash and cash equivalents
     at beginning of period         32.0        44.1        48.5        89.3
    -------------------------------------------------------------------------
    Cash and cash equivalents
     at end of period          $    57.3   $    46.8   $    57.3   $    46.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Additional information
      Interest paid            $    10.8   $    13.1   $    27.6   $    27.1
      Income taxes paid
       (recovered)                  (9.4)       10.2        18.8        55.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



                              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                                                   unaudited
                                        Periods ended July 31, 2008 and 2007
    -------------------------------------------------------------------------

    The interim financial statements should be read in conjunction with the
most recent annual consolidated financial statements.

    1. Significant accounting policies

    These interim consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles ("GAAP"),
using the same accounting policies as outlined in Note 1 and Note 3 to the
consolidated financial statements for the year ended October 31, 2007, except
for the changes in accounting policies disclosed in Note 3. The operating
results for the interim periods are not necessarily indicative of full-year
results due to the seasonality of certain operations of the Corporation.
Results of both media and printing operations are significantly influenced by
the advertising market, which is stronger in the second and fourth quarters.
The fall is also the strongest period for book printing and for our business
segment of educational resources publishing.

    2. Restatement

    In the context of the preparation of its consolidated financial statements
for the year ended October 31, 2007, the Corporation's management identified
two accounting errors in prior years' financial statements relating to the
amortization of property, plant and equipment and income taxes.

    Amortization of property, plant and equipment

    For the nine-month period ended July 31, 2007, opening retained earnings
and accumulated other comprehensive loss have been reduced by $10.1 million
and $2.0 million, respectively. For the three-month and nine-month periods
ended July 31, 2007, comprehensive income has been increased by $0.5 million
and $0.8 million, respectively.

    Income taxes

    For the nine-month period ended July 31, 2007, opening retained earnings
have been reduced by $9.8 million.

    3. Changes in accounting policies

    a) Financial Instruments - Disclosures

    On November 1, 2007, the Corporation adopted Section 3862, Financial
Instruments - Disclosures, replacing Section 3861 - Financial Instruments -
Disclosure and Presentation. This Section describes the required disclosures
related to the significance of financial instruments on the entity's financial
position and performance and the nature and extent of risks arising from
financial instruments to which the entity is exposed and how the entity
manages those risks. This Section complements the principles of recognition,
measurement and presentation of financial instruments of Sections 3855,
Financial Instruments - Recognition and Measurement, 3863, Financial
Instruments - Presentation and 3865, Hedges.

    The adoption of this Section implied that the Corporation now presents
sensitivity analysis regarding foreign exchange risk, interest rate risk,
commodity prices risk and stock-based compensation costs risk. Comparative
information about the nature and extent of risks arising from financial
instruments is not required in the year Section 3862 is adopted.

    b) Financial Instruments - Presentation

    On November 1, 2007, the Corporation adopted Section 3863, Financial
Instruments - Presentation, replacing Section 3861 - Financial Instruments -
Disclosure and Presentation. This Section establishes standards for
presentation of financial instruments and non-financial derivatives.
    The adoption of this Section did not have a significant impact on the
consolidated financial statements.

    c) Capital Disclosures

    On November 1, 2007, the Corporation adopted Section 1535, Capital
Disclosures. This Section establishes standards for disclosing information
about an entity's capital and how it is managed to enable users of financial
statements to evaluate the entity's objectives, policies and procedures for
managing capital.
    The adoption of this Section implied that information on capital
management is now included in the notes to the consolidated financial
statements. This information is included in Note 17, Capital management.

    d) Accounting changes

    On November 1, 2007, the Corporation adopted the revised version of
Section 1506 of the CICA Handbook, Accounting changes. This Section
establishes criteria for changing accounting policies and treatment and
disclosure of changes in accounting policies, changes in accounting estimates
and correction of errors.
    The adoption of this Section implied that the Corporation makes voluntary
changes in accounting policies only if they result in the financial statements
providing reliable and more relevant information. Changes in accounting
policies made by the Corporation are applied retrospectively unless doing so
is impracticable or the change in accounting policies is made on the initial
application of a primary source of GAAP in accordance with specific
transitional provisions in that primary source. A change in accounting
estimates is generally recognized prospectively and material prior period
errors are corrected retrospectively.

    4. Amortization
                                  Three months ended       Nine months ended
                                             July 31                 July 31
    (in millions of dollars)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Property, plant and
     equipment                   $  29.3     $  27.3     $  88.5     $  83.6
    Intangible assets                2.2         1.5         6.1         4.7
    Deferred charges                 0.3         0.5         1.7         1.9
    -------------------------------------------------------------------------
                                    31.8        29.3        96.3        90.2
    Deferred charges,
     presented in revenues,
     operating costs and
     financial expenses              5.8         9.1        16.2        18.6
    -------------------------------------------------------------------------
                                 $  37.6     $  38.4     $ 112.5    $  108.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    5. Impairment of assets and restructuring costs


                                                   Nine months ended July 31
    -------------------------------------------------------------------------
    (in millions of dollars)                                           Total
    -------------------------------------------------------------------------
                                                         Charged
                                                       to income  Forecasted

    (a) Newspaper operations
        Media
        Workforce reduction
         costs                                           $   1.4     $   1.4
        Transfer of printing
         equipment and other costs                           0.6         0.9
        Printing Products and
         Services
        Workforce reduction costs                            0.3        0.3
    -------------------------------------------------------------------------
                                                             2.3        2.6
        Media
        Impairment of assets                                 1.9        1.9
    -------------------------------------------------------------------------
                                                         $   4.2    $   4.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Commercial printing
        Printing Products and
         Services
        Workforce reduction
         costs                                           $   1.8    $   1.8
        Transfer of printing
         equipment and other
         costs                                               1.4        1.7
        Marketing Products and
         Services
        Workforce reduction
         costs                                               1.6        1.6
        Transfer of printing
         equipment and other
         costs                                               0.8        0.8
    -------------------------------------------------------------------------
                                                             5.6        5.9
        Printing Products and
         Services
        Impairment of assets                                 0.3        0.3
        Marketing Products and
         Services
        Impairment of assets                                 3.3        3.3
    -------------------------------------------------------------------------
                                                         $   9.2    $   9.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Toronto printing
         operations
        Workforce reduction
         costs                                           $   3.0    $   3.0
        Transfer of printing
         equipment and other
         costs                                               1.0        1.0
    -------------------------------------------------------------------------
                                                             4.0        4.0
        Impairment of assets                                 0.2        0.2
    -------------------------------------------------------------------------
                                                         $   4.2    $   4.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (d) Book printing operations
        Workforce reduction costs                        $   1.3    $   1.3
        Transfer of printing
         equipment and other costs                           3.9        3.9
    -------------------------------------------------------------------------
                                                             5.2        5.2
        Impairment of assets                                 1.6        1.6
    -------------------------------------------------------------------------
                                                         $   6.8    $   6.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
        Total
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   Nine months ended July 31
    -------------------------------------------------------------------------
    (in millions of dollars)                                            2008
    -------------------------------------------------------------------------
                               Liability                           Liability
                                   as at                               as at
                              October 31,    Charged                 July 31,
                                    2007   to income        Paid        2008

    (a) Newspaper operations
        Media
        Workforce reduction
         costs                   $     -     $   1.4     $   1.3     $   0.1
        Transfer of printing
         equipment and other
         costs                         -         0.6         0.6           -
        Printing Products and
         Services
        Workforce reduction costs      -         0.3         0.3           -
    -------------------------------------------------------------------------
                                       -         2.3         2.2         0.1
        Media
        Impairment of assets         n/a         1.9         n/a         n/a
    -------------------------------------------------------------------------
                                 $     -     $   4.2     $   2.2     $   0.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Commercial printing
        Printing Products and
         Services
        Workforce reduction
         costs                   $   1.1     $     -     $   0.5     $   0.6
        Transfer of printing
         equipment and other
         costs                         -           -           -           -
        Marketing Products and
         Services
        Workforce reduction
         costs                       0.3           -         0.3           -
        Transfer of printing
         equipment and other
         costs                         -         0.2         0.2           -
    -------------------------------------------------------------------------
                                     1.4         0.2         1.0         0.6
        Printing Products and
         Services
        Impairment of assets         n/a           -         n/a         n/a
        Marketing Products and
         Services
        Impairment of assets         n/a           -         n/a         n/a
    -------------------------------------------------------------------------
                                 $   1.4     $   0.2     $   1.0     $   0.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Toronto printing
         operations
        Workforce reduction
         costs                   $   0.6     $     -     $   0.2     $   0.4
        Transfer of printing
         equipment and other
         costs                         -           -           -           -
    -------------------------------------------------------------------------
                                     0.6           -         0.2         0.4
        Impairment of assets         n/a           -         n/a         n/a
    -------------------------------------------------------------------------
                                 $   0.6     $     -     $   0.2     $    0.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (d) Book printing
         operations
        Workforce reduction
         costs                   $     -     $     -     $     -     $     -
        Transfer of printing
         equipment and other
         costs                         -           -           -           -
    -------------------------------------------------------------------------
                                       -           -           -           -
        Impairment of assets         n/a           -         n/a         n/a
    -------------------------------------------------------------------------
                                 $     -     $     -     $     -     $     -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
        Total                    $   2.0     $   4.4     $   3.4     $   1.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   Nine months ended July 31
    -------------------------------------------------------------------------
    (in millions of dollars)                                            2007
    -------------------------------------------------------------------------
                                                         Charged
                                                       to income        Paid

    (a) Newspaper operations
        Media
        Workforce reduction
         costs                                           $     -     $     -
        Transfer of printing
         equipment and other
         costs                                                 -           -
        Printing Products and
         Services
        Workforce reduction costs                              -          -
    -------------------------------------------------------------------------
                                                               -          -
        Media
        Impairment of assets                                   -        n/a
    -------------------------------------------------------------------------
                                                         $     -     $    -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Commercial printing
        Printing Products and
         Services
        Workforce reduction
         costs                                           $   1.8     $   0.6
        Transfer of printing
         equipment and other
         costs                                               1.1         1.1
        Marketing Products and
         Services
        Workforce reduction
         costs                                               1.5         1.1
        Transfer of printing
         equipment and other
         costs                                                 -           -
    -------------------------------------------------------------------------
                                                             4.4         2.8
        Printing Products and
         Services
        Impairment of assets                                 0.3         n/a
        Marketing Products and
         Services
        Impairment of assets                                 3.3         n/a
    -------------------------------------------------------------------------
                                                         $   8.0     $   2.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Toronto printing
         operations
        Workforce reduction
         costs                                           $   0.2     $   1.0
        Transfer of printing
         equipment and other
         costs                                               0.4         0.4
    -------------------------------------------------------------------------
                                                             0.6         1.4
        Impairment of assets                                   -         n/a
    -------------------------------------------------------------------------
                                                         $   0.6     $   1.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (d) Book printing
         operations
        Workforce reduction
         costs                                           $     -     $     -
        Transfer of printing
         equipment and other
         costs                                               0.1         0.1
    -------------------------------------------------------------------------
                                                             0.1         0.1
        Impairment of assets                                   -         n/a
    -------------------------------------------------------------------------
                                                         $   0.1     $   0.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
        Total                                            $   8.7     $   4.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    a)  On February 11, 2008, the Corporation initiated a restructuring plan
        for its newspaper operations in the Media sector which includes the
        closing of the Daily News in Halifax and the launch of a free daily
        newspaper, Metro, for the Halifax market. The restructuring is
        expected to be completed by the end of fiscal 2008. During the first
        quarter of fiscal 2008, the Corporation performed an impairment test
        on the assets of the Daily News in Halifax, mainly comprised of non-
        amortizable intangible assets, and, as a result, recorded an
        impairment charge of $1.9 million.

    b)  During the first quarter of fiscal 2007, the Corporation initiated a
        restructuring plan for its commercial printing operations in the
        Printing Products and Services and Marketing Products and Services
        sectors. The restructuring is expected to be completed in 2008.

    c)  During the second quarter of fiscal 2006, the Corporation adopted a
        plan for the consolidation of its commercial products and direct-
        marketing printing facilities located in the Toronto area in the
        Marketing Products and Services sector. The consolidation is expected
        to be completed in 2008.

    d)  During the second quarter of fiscal 2005, the Corporation announced
        the consolidation of certain book printing operations in the Printing
        Products and Services sector. The consolidation was completed during
        the first quarter of 2007.

    6.  Financial expenses

                                  Three months ended       Nine months ended
                                        July 31                 July 31
    (in millions of dollars)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Financial expenses on
     long-term debt              $   7.3     $   6.8     $  21.9     $  21.4
    Other expenses (revenues)       (0.3)       (0.6)        0.7         0.1
    Foreign exchange loss              -         1.0           -         1.6
    -------------------------------------------------------------------------
                                 $   7.0     $   7.2     $  22.6     $  23.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three-month and nine-month periods ended July 31, 2008,
capitalized interest on property, plant and equipment amounted to $1.2 million
and $3.2 million, respectively ($0.5 million and $1.3 million for the same
periods in 2007).

    7. Income taxes

                                  Three months ended       Nine months ended
                                        July 31                 July 31
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Statutory tax rate              28.4%       32.4%       30.4%       32.2%
    Effect of foreign tax rate
     differences                    (4.8)       (2.8)       (4.6)       (3.3)
    Other                            5.8         2.6         2.3         1.9
    -------------------------------------------------------------------------
    Effective tax rate before
     the following items:           29.4        32.2        28.1        30.8
      Effect of changes in
       statutory tax rates (a)         -           -        (5.6)          -
      Retroactive taxes (b)            -           -        (3.6)          -
    -------------------------------------------------------------------------
                                       -           -        (9.2)          -
    -------------------------------------------------------------------------
    Effective tax rate              29.4%       32.2%       18.9%       30.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    a)  On December 13, 2007, Bill C-28 received third reading in the House
        of Commons. Accordingly, the federal corporate income tax rate
        reductions announced in the October 30, 2007 Economic Statement
        became substantively enacted for the purpose of preparing the
        consolidated financial statements in accordance with Canadian GAAP.
        This decrease in federal tax rate reduced both the income tax expense
        and net future income tax liabilities by $7.0 million during the
        first quarter of fiscal 2008.

    b)  During the second quarter of fiscal 2008, the Corporation entered
        into an agreement with the tax authorities and settled its obligation
        regarding Bill 15 enacted in June 2006 for an amount of $3.9 million.
        An amount of $8.4 million had been provided for in the third quarter
        of fiscal 2006 with regards to this obligation. A decrease of
        $4.5 million in current income tax expense has therefore been
        recorded to reflect this settlement.

    8. Employee future benefits

    Pension plans

    The Corporation offers various contributory and non-contributory defined
benefit pension plans and defined contribution pension plans to its employees
and those of its participating subsidiaries. The cost related to those plans
is as follows:


                                  Three months ended       Nine months ended
                                        July 31                 July 31
    (in millions of dollars)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Pension plans
      Defined benefit pension
       plans                     $   2.4     $   6.3     $  14.1     $  17.5
      Defined contribution
       pension plans                 0.8         0.8         2.3         2.4
    -------------------------------------------------------------------------
                                 $   3.2     $   7.1     $  16.4     $  19.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9. Accounts receivable

    As at July 31, 2008, $265 million of accounts receivable ($273 million as
at October 31, 2007) had been sold under the accounts receivable
securitization program, of which $37 million ($37 million as at October 31,
2007) was kept by the Corporation as retained interest, resulting in a net
consideration of $228 million, including C$195 million and US$32 million
($236 million as at October 31, 2007, including C$209 million and US$29
million) which represents the maximum net consideration the Corporation could
have obtained on those dates in accordance with the program terms and
conditions. The retained interest is recorded in the Corporation's accounts
receivable at the lower of cost and fair market value. Under the program, the
Corporation recognized an aggregate discount on sale of accounts receivable of
$1.9 million and $7.1 million for the three-month and nine-month periods ended
July 31, 2008, respectively ($2.9 million and $8.8 million for the same
periods in 2007).

    10. Revolving credit

    During the third quarter of fiscal 2008, the Corporation amended its
credit agreement to provide an additional tranche ("Tranche B") to the current
revolving credit facility. Tranche B amounts to $150 million, for a total
amount of revolving credit facility of $550 million. Tranche B is available
for a 364-day period. The applicable interest rate on Tranche B is based on
the credit rating assigned by Standard & Poor's Ratings Services. Depending on
the form of borrowing chosen by the Corporation for Tranche B, the interest
rate applicable is, either bank prime rate, bankers' acceptance rate + 0.575%
or LIBOR + 0.575%, based on the current credit rating. Facility fees of 0.225%
are applicable on Tranche B, whether it is drawn or not. The other terms and
conditions of Tranche B are as disclosed in Note 14 of the latest annual
consolidated financial statements.

    11. Share capital

    Earnings per share

    The table below shows the calculation of basic and diluted earnings per
share:

                                  Three months ended       Nine months ended
                                         July 31                 July 31
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Numerator (in millions
     of dollars)
      Net income                 $  30.3     $  27.8     $ 102.1     $  82.0
    -------------------------------------------------------------------------
    Denominator (in millions)
      Weighted average number
       of shares outstanding
       - basic                      80.8        84.5        82.0        85.2
      Dilutive effect of stock
       options and warrants          0.1         0.2         0.1         0.2
    -------------------------------------------------------------------------
      Weighted average number
       of shares outstanding
       - diluted                    80.9        84.7        82.1        85.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share     $  0.38     $  0.33      $ 1.25     $  0.96
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings per share   $  0.37     $  0.33      $ 1.24     $  0.96
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Stock options presented below were considered to be anti-dilutive in the
calculation of the diluted earnings per share since their exercise price was
greater than the average stock price during those periods.

                        Three months        Three months        Three months
                       ended July 31      ended April 30    ended January 31
                      2008      2007      2008      2007      2008      2007
    -------------------------------------------------------------------------
    Stock
     options     1,385,495   612,600 1,387,495   629,420 1,519,340   638,340
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the first quarter of 2008, the 350,000 warrants giving right to
acquire Class A Subordinate Voting Shares expired.

    Exercise of stock options

    When officers and senior executives exercise their stock options, the
amounts received from them are credited to share capital. For stock options
granted since November 1, 2002, the amount previously accounted for as an
increase to contributed surplus is also transferred to share capital. For the
three-month and nine-month periods ended July 31, 2008, the amounts received
were $0.2 million and $0.6 million, respectively, and no amount was
transferred from contributed surplus to share capital for the same periods.
For the three-month and nine-month periods ended July 31, 2007, the amounts
received were $0.3 million and $0.7 million, respectively, and $0.1 million
and $0.2 million were transferred from contributed surplus to share capital
for the same periods.

    Redemption of shares

    The Corporation was authorized to purchase for cancellation on the open
market, between December 20, 2007 and December 19, 2008, up to 3,333,994 of
its Class A Subordinate Voting Shares, representing 5% of the 66,679,889
issued and outstanding Class A Subordinate Voting Shares as at December 10,
2007, and up to 845,271 of its Class B Shares, representing 5% of the
16,905,432 issued and outstanding Class B Shares as at December 10, 2007.
    The Corporation was authorized to purchase for cancellation on the open
market, between November 21, 2006 and November 20, 2007, up to 3,448,698 of
its Class A Subordinate Voting Shares, representing 5% of the 68,973,966
issued and outstanding Class A Subordinate Voting Shares as at November 7,
2006, and up to 852,907 of its Class B Shares, representing 5% of the
17,058,145 issued and outstanding Class B Shares as at November 7, 2006.
    Purchases were made in the normal course of business at market prices
through the facilities of the Toronto Stock Exchange in accordance with the
requirements of the exchange.
    During the three-month and nine-month periods ended July 31, 2008 and
2007, the following purchases have been made:


                                                                       Total
                                      Number        Weighted   consideration
                                   of shares         average    (in millions
                                   purchased           price      of dollars)

                                                  Three months ended July 31
    -------------------------------------------------------------------------
                                                                        2008
    -------------------------------------------------------------------------

    Class A                          191,500        $  19.80        $    3.8

    Class B                                -               -               -
    -------------------------------------------------------------------------
                                                                    $    3.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Book value                                                      $    1.1

    Premium paid                                                         2.7
    -------------------------------------------------------------------------
                                                                    $    3.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                   Nine months ended July 31
    -------------------------------------------------------------------------
                                                                        2008
    -------------------------------------------------------------------------

    Class A                        2,894,100        $  16.77         $  48.5

    Class B                            8,000        $  18.34             0.2
    -------------------------------------------------------------------------
                                                                     $  48.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Book value                                                       $  16.2

    Premium paid                                                        32.5
    -------------------------------------------------------------------------
                                                                     $  48.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                       Total
                                      Number        Weighted   consideration
                                   of shares         average    (in millions
                                   purchased           price      of dollars)

                                                  Three months ended July 31
    -------------------------------------------------------------------------
                                                                        2007
    -------------------------------------------------------------------------

    Class A                        1,554,900        $  21.26        $   33.0

    Class B                           72,200        $  21.75             1.6
    -------------------------------------------------------------------------
                                                                    $   34.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Book value                                                      $    8.8

    Premium paid                                                        25.8
    -------------------------------------------------------------------------
                                                                    $   34.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                   Nine months ended July 31
    -------------------------------------------------------------------------
                                                                        2007
    -------------------------------------------------------------------------

    Class A                        2,213,900        $  21.29         $  47.1

    Class B                          119,800        $  21.76             2.6
    -------------------------------------------------------------------------
                                                                     $  49.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Book value                                                       $  12.5

    Premium paid                                                        37.2
    -------------------------------------------------------------------------
                                                                     $  49.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. Stock-based compensation plans

    Share unit plan

    The Corporation offers a share unit plan to its senior executives under
which deferred share units ("DSU") and restricted share units ("RSU") are
granted.
    There were no share units granted for the three-month periods ended
July 31, 2008 and 2007. For the nine-month period ended July 31, 2008,
194,850 RSU were granted (138,310 DSU and 30,788 RSU in 2007).
    As at July 31, 2008, 103,282 DSU and 221,357 RSU were outstanding (165,478
DSU and 26,507 RSU in 2007). The expenses recorded in the consolidated
statements of income for the three-month periods ended July 31, 2008 and 2007
were $0.1 million and $0.2 million, respectively. For the nine- month periods
ended July 31, 2008 and 2007, the expenses recorded in the consolidated
statements of income were $0.9 million and $0.6 million, respectively. An
amount of $0.4 million has been paid under the plan for the three-month and
nine-month periods ended July 31, 2008 (no amount paid in 2007).

    Stock option plan

    As at July 31, 2008, 1,820,621 stock options were outstanding, of which
1,215,951 could be exercised.
    No stock options were granted for the three-month periods ended July 31,
2008 and 2007. For the nine-month periods ended July 31, 2008 and 2007,
159,700 and 160,100 stock options were granted with a weighted average
exercise price of $15.51 and $20.90, respectively.
    The table below summarizes the assumptions used to calculate the weighted
average fair value of stock options granted on the date of grant using the
Black-Scholes model for the nine-month periods ended July 31:


                                                            2008        2007
    -------------------------------------------------------------------------
    Fair value of stock options                          $  4.04     $  5.16

    Assumptions:
      Dividend rate                                          1.2%        1.1%
      Expected volatility                                   26.0%       22.6%
      Risk-free interest rate                               3.65%       3.96%
      Expected life                                      5 years     5 years
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    13. Contributed surplus
                                                           Nine months ended
                                                                 July 31
    (in millions of dollars)                                2008        2007
    -------------------------------------------------------------------------
    Balance, beginning of period                       $     9.2   $     6.9
    Compensation costs relating to stock option plan
     (Notes 11 and 12)                                       1.5         1.8
    Exercise of stock options (Note 11)                        -        (0.2)
    -------------------------------------------------------------------------
    Balance, end of period                             $    10.7   $     8.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    14. Accumulated other comprehensive loss
                                             Foreign             Accumulated
                                            Currency        Cash  Other Com-
                                         Translation        Flow  prehensive
    (in millions of dollars)              Adjustment      Hedges        Loss
    -------------------------------------------------------------------------
    Balance as at November 1, 2007         $   (42.3)  $     9.2   $   (33.1)
      Net change in unrealized
       gains/losses, net of income taxes        10.5        (8.0)        2.5
    -------------------------------------------------------------------------
    Balance as at July 31, 2008            $   (31.8)  $     1.2   $   (30.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance as at November 1, 2006, as
     previously reported                   $       -   $       -   $       -
      Unrealized losses, net of income
       taxes (restated)                        (26.0)          -       (26.0)
      Financial instruments - Recognition
       and measurement                             -         3.8         3.8
    -------------------------------------------------------------------------
    Restated balance as at November 1, 2006    (26.0)        3.8       (22.2)
      Net change in unrealized
       gains/losses, net of income taxes
       (restated)                               (7.9)       (0.4)       (8.3)
    -------------------------------------------------------------------------
    Balance as at July 31, 2007            $   (33.9)  $     3.4   $   (30.5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at July 31, 2008, the amounts
     expected to be reclassified to
     net income are as follows:

                                    2008        2009        2010       Total
    -------------------------------------------------------------------------
    Gains (losses) on
     derivatives designated as
     cash flow hedges           $    1.4   $     0.6   $    (0.2)  $     1.8
    Income taxes                    (0.5)       (0.2)        0.1        (0.6)
    -------------------------------------------------------------------------
                                $    0.9   $     0.4   $    (0.1)  $     1.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. Business acquisitions

    During the nine-month period ended July 31, 2008, the Corporation made the
following acquisitions:

    Operating                                                        Date of
    sector      Acquisition                                      acquisition
    -------------------------------------------------------------------------

    Marketing   90% of the shares of ThinData Inc.,           March 11, 2008
    Products    Canada's leading permission-based email
    and         marketing services firm
    Services

    Media       100% of the shares of L'express le journal     June 13, 2008
                d'ici, a French newspaper serving the city
                of Saint-Lin-Laurentides in Quebec

                Assets of Acquizition.biz, Canada's largest      May 7, 2008
                Web-based platform for buying and selling
                businesses

                Assets of L'Autre Voix, weekly newspaper   December 21, 2007
                in the eastern Quebec City region

                Assets of Corriere Italiano, weekly        December 20, 2007
                newspaper serving the Italian community
                in Montreal area

                Assets of The Springhill-Parrsboro         November 23, 2007
                Record, weekly newspaper in Nova Scotia
    -------------------------------------------------------------------------


    During the first quarter of 2008, the Corporation acquired an additional
2% of the shares of PLM Group Ltd, for a total cash consideration of $1.9
million. The Corporation now owns 100% of the shares of PLM Group Ltd.

    During the third quarter of 2008, adjustments were made to the purchase
price allocation of PLM Group Ltd., acquired on October 16, 2007.


    (in millions of dollars)                     PLM       Other       Total
    -------------------------------------------------------------------------
    Assets acquired
      Working capital                      $     0.4   $     0.7   $     1.1
      Property, plant and equipment                -         0.6         0.6
      Goodwill (tax basis of $2.2 million)      (2.5)       20.5        18.0
      Amortizable intangible assets              3.5           -         3.5
      Future income tax assets                   0.7           -         0.7
      Other assets                                 -         0.2         0.2
    -------------------------------------------------------------------------
                                           $     2.1   $    22.0   $    24.1
    -------------------------------------------------------------------------
    Liabilities assumed
      Notes payable                        $       -   $     2.6   $     2.6
      Long-term debt                               -         0.5         0.5
      Other liabilities                          1.9           -         1.9
      Future income tax liabilities              1.1           -         1.1
      Non-controlling interest                  (1.9)          -        (1.9)
    -------------------------------------------------------------------------
                                                 1.1         3.1         4.2
    -------------------------------------------------------------------------
                                           $     1.0   $    18.9   $    19.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration
      Cash paid                            $     5.1   $    19.0   $    24.1
      Cash in acquired operations                  -        (1.8)       (1.8)
    -------------------------------------------------------------------------
                                                 5.1        17.2        22.3
    -------------------------------------------------------------------------
      Short-term liabilities (amounts paid)     (4.1)        0.2        (3.9)
      Long-term liabilities - bearing no
       interest                                    -         1.5         1.5
    -------------------------------------------------------------------------
                                           $     1.0   $    18.9   $    19.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The purchase price allocation of these acquisitions is preliminary and
could change once the valuation of the assets acquired is concluded and the
final determination of the costs related to the acquisitions has been made.

    16. Financial instruments

    Credit risk

    The Corporation is exposed to credit risk with respect to trade
receivables and derivative financial instruments.
    The Corporation analyzes and reviews the financial health of its current
customers on an ongoing basis and applies rigorous evaluation procedures to
all new customers. A specific credit limit is established for each customer
and reviewed periodically by the Corporation.
    The Corporation is protected against any concentration of credit risk
through its products, clientele and geographic diversity. As at July 31, 2008,
no single customer accounts for more than 5% of its consolidated accounts
receivable, and the Corporation's 20 largest customers account for less than
20% of its consolidated accounts receivable. As at July 31, 2008, the maximum
credit risk exposure for receivables corresponds to their carrying value. The
Corporation also has a credit insurance policy covering most of its major
customers, for a maximum amount of $27 million. The policy contains the usual
clauses and limits regarding the amounts that can be claimed by event and year
of coverage. The Corporation did not file any claim against this credit
insurance policy for the nine-month period ended July 31, 2008.
    In addition, the Corporation has concluded long-term contracts with most
of its major customers. These contracts contain cost-escalation clauses
equivalent to those required by the Corporation's suppliers. The Corporation
determines past due receivables by considering the type of clients, historical
payment terms and in which sector the clients conduct business. On a quarterly
basis, allowance for doubtful accounts and past due receivables are reviewed
by management. The Corporation records impairment only on receivables for
which the recoverability is not reasonably certain.
    The Corporation is exposed to credit risk arising from derivative
financial instruments if a counterparty fails to meet its obligations;
however, it does not foresee such an occurrence since it deals only with
recognized financial institutions with superior credit ratings. As at July 31,
2008, the maximum exposure to credit risk is $2.8 million, which represents
the carrying value of the financial instruments on the balance sheet of the
Corporation.

    Past due accounts receivable
                                                                       As at
                                                                     July 31,
    (in millions of dollars)                                            2008
    -------------------------------------------------------------------------
    Not past due                                                   $   136.0
    Past due 1-60 days                                                  17.7
    Past due 61-90 days                                                  4.2
    Past due more than 90 days                                          15.5
    -------------------------------------------------------------------------
                                                                       173.4

    Allowance for doubtful accounts                                     (9.4)

    Other receivables                                                   32.8
    -------------------------------------------------------------------------
                                                                   $   196.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Allowance for doubtful accounts

    (in millions of dollars)
    -------------------------------------------------------------------------
    Balance as at November 1, 2007                                 $    10.1
    Bad debt expense                                                     2.7
    Amounts written off and recoveries                                  (3.4)
    -------------------------------------------------------------------------
    Balance as at July 31, 2008                                    $     9.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Based on the historical payment trend of the customers, the Corporation
believes that this allowance for doubtful accounts is sufficient to cover the
risk of default.

    Liquidity risk

    The Corporation has contractual obligations and financial liabilities,
thus, is exposed to liquidity risk.
    The Corporation believes that future cash flows generated by operations
and access to additional liquidity through capital and banking markets will be
adequate to meet its financial obligations.

    Interest rate risk

    The Corporation is exposed to market risks related to interest-rate
fluctuations. In order to mitigate this risk, the Corporation aims to maintain
an adequate balance of fixed versus floating rate debt. As at July 31, 2008,
considering the effect of derivative financial instruments used to lock the
interest rate, the floating rate portion of the Corporation's long-term debt
represented 53% of the total while the fixed rate portion represented 47%.
    The Corporation is also exposed to interest rate fluctuations through its
securitization program, since the discount on the sale of accounts receivable
is based on the rate of the commercial paper issued by the trust. The trust
generally issues its commercial paper on a monthly basis.
    During the third quarter of fiscal 2008, the Corporation entered into
interest rate swap agreements on long-term debt denominated in Canadian
dollars, on a notional amount of $75 million, maturing in September 2012.
These swap agreements convert the variable interest rate, based on bankers'
acceptance rate into an average fixed interest rate of 4.49% including the
applicable margin. Hedging relationships were effective and in accordance with
the risk management objectives and strategies throughout the third quarter of
fiscal 2008.
    For the three-month and nine-month periods ended July 31, 2008, all things
being equal, an hypothetical increase of 0.5% in interest rates would have had
the following impact on net income and on other comprehensive income:

                                  Three months ended       Nine months ended
    (in millions of dollars)         July 31, 2008           July 31, 2008
    -------------------------------------------------------------------------
                                          Other com-              Other com-
                                     Net  prehensive         Net  prehensive
                                  income      income      income      income
    -------------------------------------------------------------------------
                               $    (0.5)  $     1.4   $    (1.5)  $     1.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    An hypothetical decrease of 0.5% in interest rates would have had an
opposite impact on net income and other comprehensive income.

    Foreign exchange risk

    The Corporation has operations in the United States and Mexico, exports
its products to the United States and purchases machinery and equipment in
U.S. dollars and Euros. In addition, as at July 31, 2008, the Corporation has
long-term debt in U.S. dollars for a total amount of US$336.8 million
(US$227.9 million as at October 31, 2007). The Corporation is therefore
exposed to foreign exchange risk.
    To mitigate the foreign exchange risk related to its exports to the United
States, the Corporation enters into foreign exchange forward contracts. As at
July 31, 2008, the Corporation had entered into foreign exchange forward
contracts to sell US$84 million (US$87.3 million as at October 31, 2007), of
which US$14 million, US$59 million and US$11 million will be sold in 2008,
2009 and 2010, respectively. The terms of these forward contracts range from
one month to 21 months, with rates varying from 1.0087 to 1.1643. As at
July 31, 2008, the Corporation was not party to any collar to sell U.S. dollar
(US$6 million as at October 31, 2007). Hedging relationships were effective
and in accordance with the risk management objectives and strategies
throughout the third quarter of fiscal 2008.
    During the third quarter of fiscal 2008, to mitigate the foreign exchange
risk related to purchases of machinery and equipment in Euros, the Corporation
entered into a foreign exchange forward contract. As at July 31, 2008, the
Corporation was party to a foreign exchange forward contract to purchase
(euro)1.3 million in 2008 (none in 2007). The terms of this forward contract
is three months, with a rate of 1.5747. Hedging relationships was effective
and in accordance with the risk management objectives and strategies
throughout the third quarter of fiscal 2008.
    For the three-month and nine-month periods ended July 31, 2008, all things
being equal, an hypothetical strengthening of 5.0% of the U.S. dollar, Euro
and Mexican peso against the Canadian dollar would have had the following
impact on net income and on other comprehensive income:

                                  Three months ended       Nine months ended
    (in millions of dollars)         July 31, 2008           July 31, 2008
    -------------------------------------------------------------------------
                                          Other com-              Other com-
                                     Net  prehensive         Net  prehensive
                                  income      income      income      income
    -------------------------------------------------------------------------
    U.S. dollar                $     1.8   $    (2.9)  $     6.9   $    (2.9)
    Euro                       $     n/a   $    (0.1)  $     n/a   $    (0.1)
    Mexican peso               $     0.1   $     n/a   $     0.2   $     n/a
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    An hypothetical weakening of 5.0% of the U.S. dollar, Euro and Mexican
peso against the Canadian dollar would have had an opposite impact on net
income and other comprehensive income.

    Commodity prices risk

    The Corporation is exposed to a financial risk related to fluctuations in
natural gas prices and manages it in order to minimize the impact on the
Corporation's results and financial position. The Corporation entered into
commodity swap agreements to manage a portion of its natural gas price
fluctuation exposure and is now committed to exchange, on a monthly basis, the
difference between a fixed price and a floating natural gas price index
calculated by reference to the notional amounts. Under this program, 30% of
the expected natural gas consumption is hedged for the next thirty six months.
Hedging relationships were effective and in accordance with the risk
management objectives and strategies of the Corporation throughout the third
quarter of fiscal 2008.
    As at July 31, 2008, the Corporation had purchased commodity swap
agreements for 550,000 Gigajoules (533,000 Gigajoules as at October 31, 2007),
of which 90,000, 335,000 and 125,000 Gigajoules will mature in 2008, 2009 and
2010, respectively. The terms of theses commodity swap agreements range from
one month to 24 months, with prices varying from $7.51 to $9.31 per Gigajoule.
    For the three-month and nine-month periods ended July 31, 2008, all things
being equal, an hypothetical strengthening of 25.0% in gas prices would have
had the following impact on net income and on other comprehensive income:

                                  Three months ended       Nine months ended
    (in millions of dollars)          July 31 2008            July 31 2008
    -------------------------------------------------------------------------
                                          Other com-              Other com-
                                     Net  prehensive         Net  prehensive
                                  income      income      income      income
    -------------------------------------------------------------------------
                               $    (0.3)  $     0.8   $    (0.6)  $     0.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    An hypothetical weakening of 25.0% in gas prices would have had an
opposite impact on net income and other comprehensive income.

    Stock-based compensation costs risk

    The Corporation is exposed to a financial risk related to stock-based
compensation costs. Potential fluctuations in its Class A Subordinate Voting
Share price would have an impact on the charge related to its share unit plan
as described in Note 12. During the first quarter of fiscal 2007, the
Corporation entered into a total return swap agreement with a financial
institution in order to minimize this financial risk. The Corporation now
receives or pays, on a quarterly basis, the difference between the fixed share
price of the total return swap and the Class A Subordinate Voting Share price,
less any amount previously received or paid. During the second quarter of
fiscal 2008, the Corporation modified the total return swap to increase the
total number of share units covered by the total return swap. As at July 31,
2008, the total return swap agreement covered 154,000 Class A Subordinate
Voting Shares at an average fixed price of $16.54. The remaining term of this
total return swap agreement is 42 months, with an option to terminate it
before its maturity date without any costs.
    The fair value of the swap agreement as at July 31 is recorded in the
Corporation's consolidated balance sheet with changes in fair value recognized
in net income.
    For the three-month and nine-month periods ended July 31, 2008, all things
being equal, an hypothetical strengthening or weakening of 5.0% of the Class A
Subordinate Voting Share price would have had a negligible impact on net
income.

    Fair value

    The book value of certain financial instruments maturing in the short-
term approximates their fair value. These financial instruments include
accounts receivable, accounts payable and accrued liabilities. The table below
shows the fair value and the book value of other financial instruments.
    The fair value of long-term debt is determined essentially by discounting
cash flows, based on actual loan rates for long-term debt with similar
characteristics, or quoted market prices. The fair value of derivative
financial instruments is approximately the amounts for which the financial
instruments could be settled between consenting parties, based on current
market data for similar instruments. As estimates must be used to determine
fair value, they must not be interpreted as being realizable in the event of
an immediate settlement of the instruments.

                                     July 31, 2008         October 31, 2007
                                    Fair        Book        Fair        Book
    (in millions of dollars)       value       value       value       value
    -------------------------------------------------------------------------
    Long-term debt             $   699.1   $   699.1     $ 539.5   $   537.5
    Foreign exchange forward
     contracts and collars     $     2.6   $     2.6     $  14.3   $    14.3
    Commodity swap agreements  $     0.2   $     0.2     $  (0.6)  $    (0.6)
    Interest rate swap
     agreements                $    (1.0)  $    (1.0)    $     -   $       -
    Total return swap
     agreement                 $       -   $       -     $     -   $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    17. Capital management

    The Corporation's primary objectives in managing capital are:

    -   Optimize leverage position by targeting a 35% to 50% net
        indebtedness/total capitalization ratio;
    -   Maintain an investment grade credit rating;
    -   Preserve its financial flexibility in order to benefit from potential
        opportunities as they arise.

    The Corporation manages the capital structure and makes adjustments to it
in light of changes in economic conditions and the risk characteristics of the
underlying assets.
    The Corporation monitors capital on the basis of net indebtedness/total
capitalization ratio. For calculation purposes, net indebtedness refers to
long term debt, current portion of long term debt plus bank overdraft, less
cash and cash equivalents. Total capitalization comprises net indebtedness as
just described and shareholders' equity.
    As at July 31, 2008, the net indebtedness/total capitalization ratio was
35%. As at October 31, 2007, the net indebtedness/total capitalization ratio
was 29%. The variation of this ratio was mainly the result of the increase in
net indebtedness related to the purchase of property, plant and equipment and
the redemption of shares. Capital management objectives, policies and
procedures were unchanged since the last period.
    For the nine-month periods ended July 31, 2008, the Corporation has not
been in default under any of its obligations regarding the term revolving
credit facility, the securitization program and other financial obligations.

    18. Commitments

    Machinery and equipment

    The Corporation is committed to acquire machinery and equipment. As at
July 31, 2008, these commitments represented $58.4 million, including
US$47.5 million, CHF0.5 million, (euro)1.5 million and C$7.3 million. Minimum
payments required in 2008 and 2009 are the equivalent of $23.2 million and
$35.2 million, respectively.

    19. Segmented information

    Comparative figures of Printing Products and Services and Marketing
Products and Services sectors have been reclassified to reflect the transfer
of the Boucherville plant from the Commercial Products Group, in the Printing
Products and Services sector, to the Catalogue and Magazine Group, in the
Marketing Products and Services sector as of November 1, 2007.
    Sales between sectors of the Corporation are measured at fair value.
Transactions, other than sales, are measured at carrying value.


                                  Three months ended       Nine months ended
                                         July 31                 July 31
    -------------------------------------------------------------------------
    (in millions of dollars)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenues
      Printing Products and
       Services                 $  154.3    $  149.5    $  454.8    $  471.0
      Marketing Products and
       Services                    291.9       266.4       920.5       845.9
      Media                        159.1       156.5       464.3       454.6
      Other activities and
       unallocated amounts           2.8         3.2        11.1        11.0
      Inter-segment sales
        Printing Products and
         Services                  (12.7)      (13.9)      (38.8)      (40.1)
        Marketing Products and
         Services                   (5.1)       (5.5)      (21.0)      (22.0)
        Media                       (5.4)       (5.1)      (14.9)      (12.4)
    -------------------------------------------------------------------------
        Total inter-segment sales  (23.2)      (24.5)      (74.7)      (74.5)
    -------------------------------------------------------------------------
                                $  584.9    $  551.1    $1,776.0    $1,708.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating income before
     amortization, impairment of
     assets and restructuring
     costs
      Printing Products and
       Services                 $   26.7    $   24.0    $   82.8    $   83.5
      Marketing Products and
       Services                     30.3        29.2       110.1        98.4
      Media                         32.7        34.0        82.5        84.5
      Other activities and
       unallocated amounts          (7.0)       (5.9)      (19.6)      (16.6)
    -------------------------------------------------------------------------
                                $   82.7    $   81.3    $  255.8    $  249.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating income
      Printing Products and
       Services                 $   18.7    $   15.2    $   56.9    $   55.1
      Marketing Products and
       Services                     12.1        13.0        55.6        44.0
      Media                         28.8        30.1        66.8        72.4
      Other activities and
       unallocated amounts          (8.8)       (7.2)      (24.2)      (20.6)
    -------------------------------------------------------------------------
                                $   50.8    $   51.1    $  155.1    $  150.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Acquisitions of property,
     plant and equipment(1)
      Printing Products and
       Services                 $   32.9    $   16.9    $  106.7    $   33.2
      Marketing Products and
       Services                     29.1         8.7        47.8        45.1
      Media                          3.8         0.1         8.0         3.0
      Other activities and
       unallocated amounts           1.2         1.4         2.6         4.1
    -------------------------------------------------------------------------
                                $   67.0    $   27.1    $  165.1    $   85.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Amortization of property,
     plant and equipment,
     intangible assets and
     deferred charges
      Printing Products and
       Services                 $    8.0    $    8.4    $   25.6    $   25.7
      Marketing Products and
       Services                     18.1        15.7        54.3        48.8
      Media                          3.8         3.8        11.8        11.7
      Other activities and
       unallocated amounts           1.9         1.4         4.6         4.0
    -------------------------------------------------------------------------
                                $   31.8    $   29.3    $   96.3    $   90.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) These amounts represent total expenditures for additions to property,
        plant and equipment, whether they are paid or not.


                                                           As at       As at
                                                            July     October
    (in millions of dollars)                            31, 2008    31, 2007
    -------------------------------------------------------------------------
    Assets
      Printing Products and Services                    $  610.1    $  512.4
      Marketing Products and Services                    1,024.7       995.0
      Media                                                809.0       773.4
      Other activities and unallocated amounts              70.9       121.1
    -------------------------------------------------------------------------
                                                        $2,514.7    $2,401.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
      Printing Products and Services                    $   93.6    $   93.3
      Marketing Products and Services                      364.0       336.8
      Media                                                507.4       504.3
      Other activities and unallocated amounts               0.8         0.2
    -------------------------------------------------------------------------
                                                        $  965.8    $  934.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    20. Subsequent events

    Interest rate swaps

    On August 14, 2008, the Corporation entered into interest rate swap
agreements on long-term debt denominated in Canadian dollars, on a notional
amount of $50 million, maturing in September 2012. These swaps convert the
variable interest rate, based on bankers' acceptance rate, into an average
fixed interest rate of 3.92%, including the applicable margin.

    Business acquisition

    On September 4, 2008, the Corporation acquired 100% of the outstanding
shares of Rastar, Inc., a U.S.-based direct marketing company that specializes
in interactive database marketing and variable data digital printing. The
company has approximately US$50M in revenues and 350 employees.

    21. Effect of new accounting standards not yet implemented

    a) Inventories

    In March 2007, the CICA issued Section 3031, Inventories, replacing
Section 3030, Inventories. This Section applies to interim and annual
financial statements for fiscal years beginning on or after January 1, 2008.
The Section prescribes the accounting treatment for inventories such as
measurement of inventories at the lower of cost and net realizable value. It
provides guidance on the determination of cost and its subsequent recognition
as an expense, including any write-downs to net realizable value and reversal
of previous write-downs of inventories arising from an increase in net
realizable value. It also provides guidance on the cost methodologies that are
used to assign costs to inventories and it describes the required disclosures
on the carrying amount of inventories, the amount of inventories recognized as
an expense and the amount of write-downs or reversal of write-downs of
inventories.

    b) General standards of financial statement presentation

    In June 2007, Section 1400, General standards of financial statement
presentation, has been amended to include requirements to assess and disclose
an entity's ability to continue as a going concern. The new requirements are
effective for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2008.

    c) Goodwill and intangible assets

    In February 2008, the CICA issued Section 3064, Goodwill and intangible
assets, which supersedes Section 3062, Goodwill and other intangible assets
and Section 3450, Research and development costs. This Section applies to
interim and annual financial statements for fiscal years beginning on or after
October 1, 2008. The Section establishes standards for the recognition,
measurement and disclosure of goodwill and intangible assets.
    The Corporation is currently evaluating the impact of the adoption of the
above standards on the consolidated financial statements.

    22. Comparative figures

    Certain prior period figures have been reclassified to conform with the
current period presentation.
    




For further information:

For further information: Media: Nessa Prendergast, Director, Media
Relations, Transcontinental Inc., (514) 954-2809,
nessa.prendergast@transcontinental.ca, www.transcontinental.com; Financial
Community: Jennifer F. McCaughey, Director, Investor Relations,
Transcontinental Inc., (514) 954-2821, jennifer.mccaughey@transcontinental.ca

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