François Olivier - President and CEO Nelson Gentiletti - Chief Financial and Development Officer Jennifer McCaughey - Director of IR

Adam Shine - National Bank Financial Aravinda Galappatthige - Canaccord Genuity Inc. Paul Steep - Scotia Capital

Thank you, operator. Good afternoon ladies and gentlemen and welcome to our fourth quarter and year-end 2014 results conference call.

Joining me today at our Head Office in Montreal are François Olivier, President and Chief Executive Officer and Nelson Gentiletti, Chief Financial and Development Officer. We will first conduct a prepared question-and-answer period which will highlight some hot topics and then open the lines for any remaining questions you may have.

I would like to remind you that this conference call is intended for the financial community. Media are welcome to listen, but should contact Nathalie St-Jean, Senior Advisor, Corporate Communications for more information or interview request.

For a detailed analysis of our results in addition to our press release, we issued our fiscal 2014 MD&A with complete financial statements and related notes earlier today. For those of you who are not on our distribution list, the documents are posted on our Web site at tc.tc.

Before we start, I’d like to also remind everyone that the information that will be discussed over the course of this conference call may contain forward-looking statements. Such statements based on the current expectations of management and information available as of today inherently involves numerous risks and uncertainties, known and unknown.

We caution that by their nature, all forward-looking statements are inherently uncertain and actual results may differ materially from the expectations reflected or implied in such forward-looking statements. The risks, uncertainties, and other factors that could influence actual results are described in the 2014 annual MD&A and the latest annual information form.

These documents are available on TC Transcontinental's Web site. TC Transcontinental undertakes no obligation to update publicly such forward-looking statements to reflect subsequent events or changes in the expectations, assumptions, or estimates unless otherwise required by the Securities Authorities.

Let me now begin with the prepared question-and-answer portion of the conference call. Nelson in order to set the stage can you provide a brief summary of TC Transcontinental's results for the fourth quarter and the year?

We finish the year with a strong performance. Our fourth quarter revenues were up 2%, our adjusted EBIT was up 16% and our adjusted net income was up 21%.

The contribution from acquisitions and new printing and distribution agreements coupled with the optimization of our cost structure across the organization more than offset the impact from the reduction in advertising revenues. On an annual basis, our revenues were slightly down by 1%, adjusted EBIT was up 10% and adjusted net income was up 13%.

To summarize the year, we had a slow start as advertising spending was down more than we had anticipated. However, given the initiatives we pursue throughout the year our results ramped up quarter after quarter to finish very strong.

On an operational basis, we continue to leverage our print platform which enabled us to improve our margins again this year. Furthermore, we’re very pleased that profitability growth has returned to our media sector this year.

The year was also marked by three key strategic decisions concerning our business portfolio. We entered the flexible packaging market with the acquisition of Capri Packaging for US$133 million.

This acquisition represents an important strategic move for the corporation into a new promising growth area. It is part of our strategy to ensure a future growth path through product diversification.

We also consolidated the weekly newspaper market in Quebec with the acquisition of Sun Media’s newspapers for $75 million. And finally, on November 17th, we announced the sale of our consumer magazines to TVA Group for $55.5 million subject to regulatory approval.

François, in the printing division, despite a reduction in revenues year-over-year, the operations once again increase its EBITDA and EBITDA margins. Can you provide a few highlights that enable TC Transcontinental to continue to post industry leading EBITDA margin and what should we expect from this division over the next year?

We know that print volumes for certain products would continue to be under pressure in the coming years which is why our strategy is to leverage our state-of-the-art printing platform. We can do this in two ways.

First, by adding volume to our platform, by diversifying into other areas such as in-store marketing, through additional newspaper outsourcing deals or other new printing agreements. Second, by optimizing our cost structure, and this year we continue to do just that.

In terms of additional volume, we signed new newspaper outsourcing agreements with post media to print the Calgary Herald, the Montreal Gazette and the Vancouver Sun. Given our state-of-the art platform, this new volume was and will be added through our network seamlessly and very efficiently.

These new agreements help to mitigate the reduction and volume from other newspaper customers. We see opportunities to gain additional business in the coming years as newspaper publishers are challenged to reduce their cost and an increasingly transforming advertising environment.

We also signed printing agreements with Quebecor to print some of its magazines, direct marketing materials and books. Similarly this new business helps to mitigate the reduction in volume in the base business.

In terms of in-store marketing initiative, we’re on an annualized run rate of about $35 million of sales. Currently we’re purposely put on hold our sales efforts in order to stabilize our operations which grew more quickly than what we had anticipated.

Once completed, we will ramp up our sales efforts and expect to reach $75 million in a few years. Finally, over the past year, we renewed many retail printing agreements.

I think its worth mentioning that our retail flier volume for the year, which represent about 40% of our printing revenues was stable as it continues to be an effective marketing tool both in terms of reach and cost per reach. In terms of optimization, we benefited from the remaining Quad/Graphics Canada synergies as well as procurement initiatives.

We also reviewed our portfolio of assets and sold our Rastar operations in the U.S a below average margin business that had become non-core. In addition, more recently we announced that our Edmonton and Concord plants will close by the end of the month.

We will therefore transition from 26 plants to 24 in 2015 which will further optimize our platform. For the next year, we anticipate the printing division to continue with the same overall strategy in a market that will show similar trends to 2014.

We will benefit from the printing agreements signed in 2014 and cost optimization initiative, but will continue to be impacted by a reduction in advertising spending. Obviously, our acquisition in packaging will also contribute positively in 2015.

François, can you provide us with an update on the Capri acquisition, which has been part of your business for over six months now?

Well, Capri’s results are included in our printing and packaging sector. We have disclosed its key financials separately.

In 2014, for the six month of the year, Capri contributed $42 million to revenues and $10 million to EBITDA. This is inline with the $72 million in revenues and $70 million in EBITDA we provided as guidance on an annualized basis.

We finished our 100 day integration plan and are pleased with the results so far. We have a solid team of season manager in place, which is working to grow the business by optimizing the operations and developing a sales team.

While the sales process is long, we’re in discussion with potential customers and we’ve had a positive reception so far. In addition, we’re continuously looking for other strategic acquisitions that could increase our position in this market.

Capri has enabled us to diversify our operations by entering into a growth area where we could benefit from our core competency of manufacturing and we definitely want to build on that.

François, despite a very challenging advertising market, the media sectors profitability improved this year. Can you explain the reasons behind the increase as well as a quick update on the Sun Media acquisition and what to expect next year?

We are very pleased with the profitability improvement demonstrated by our media sector. This improvement was the results of two drivers.

First, we put in place an aggressive cost cutting program in order to better align the cost structure with the market reality. Second, we signed new distribution agreements which benefited the bottom line.

In terms of our Sun Media acquisition, the integration is progressing very well. Since we only started our synergy plan midway into our fourth quarter, we’ve only generated limited synergies so far.

As a result, we expect to generate the bulk of the $20 million in synergies in 2015. We are very pleased to have concluded this transaction, which enables us to strength our position in Quebec.

In the quarter, these newspapers contributed $30 million in revenues and a little over a $1 million in EBITDA. Going forward, we plan to enter the communities continue to receive relevant local information through more in-depth editorial content and focus on the development of our multi platform offering for our customers.

For 2015, we anticipate the profitability of the Media sector to continue to increase, fueled by the synergy from the Sun Media acquisition, the continued cost optimization initiatives, the contribution from distribution agreements signed in 2014 and the continued rollout of our local digital offering. All these actions will more than mitigate the reduction in advertising spending.

François, on November 17th TC Transcontinental announced the sale of its consumer magazines and their Web sites as well as related platforms to TVA Group for $55.5 million, subject to regulatory approval. Can you provide more details on this transaction and the financial impact on our results going forward?

Over the past year, the National advertising environment has been particularly challenging. This led us to reevaluate our long-term strategic plan for the consumer magazine publishing division.

Given the multiplication of media platforms, the migration of advertising revenues towards digital media and the buying habits of our customers which are increasingly focused on buying bundles of media platforms, we felt we did not have the asset base to be the consolidator in that industry. The consumer magazines we’re selling represent about $95 million in revenues.

We expect the transaction to be about neutral at the profitability level as we plan to implement additional cost reduction initiatives when the sales process is completed. Going forward, the media sector will focus on the low call advertising market, which we believe offers us more business opportunities to our 180 newspapers in Quebec, Ontario, Saskatchewan and the Atlantic provinces.

Furthermore, we will continue to grow our educational publishing business, public Asians and interactive marketing services.

Nelson, can you review our use of cash in 2014 and provide an overview of TC Transcontinental’s priorities for 2015?

Our objective in terms of capital allocation continues to be a multi-pronged approach. However, this year market opportunities brought us the focus, our priorities on acquisitions.

We invested over $225 million to acquire Sun -- the newspapers from Sun Media and Capri Packaging. $62 million was used for capital expenditures and $55.6 million for dividends.

Furthermore, in order to maintain our financial flexibility, we concluded a $250 million financing of senior unsecured notes and redeemed our preferred shares for a total of $100 million. Today we announced that we extended our $400 million credit facility for two additional years at similar terms and conditions.

We remain in a strong financial position with a net debt to EBITDA ratio of 1.23 times as of October 31st. For 2015, our objective will be to maintain financial flexibility for potential acquisitions in the packaging sector.

Therefore we expect to continue to pay down debt, invest in capital expenditures and return value to shareholders in the form of dividends as we typically do. If we do not close an acquisition in the next 12 to 18 months, we will then re-visit these priorities.

Nelson, TC Transcontinental does not provide any specific guidance on profitability. But what information can you share with the financial community for 2015?

For the 2015 P&L, you should model the following. Revenues from distribution agreements signed in 2014 will positively impact our first quarter only as this new volume started in the second quarter of 2014.

Revenues from the newspaper printing agreement with The Gazette started in August 2014, and the Vancouver Sun starting in January 2015. Revenues from the printing agreement signed with Quebecor in 2014, contribution from our two recent acquisitions namely Capri and Sun Media Weekly newspapers Quebec, continued cost cutting efforts in the media sector, controllable cost at the EBITDA level in line with 2014, interest expenses close to with 2014 levels, a tax rate in the high 20s, and finally take into consideration that we continue to operate in the challenging advertising environment which will put pressure on our volumes in some our niches.

In terms of our use of cash for 2015, you should assume the following. An inflow of $55.5 million when the magazine sale is completed, a maximum of $75 million for CapEx including intangibles, and higher cash taxes as our tax loss carry forwards related to the Quad Acquisition in 2011 have been fully used.

You should model for a significant impact in the first quarter in the range of $20 million to $30 million.

Thank you, François and Nelson. This concludes the formal part of the conference call.

Operator, we are now open for questions.

Thanks. Good afternoon.

Couple of questions; Nelson in terms of the accounting for the sale of the magazines, acknowledging obviously that we’re waiting for competition, for your approval that could take a bit of time. Are we going to see restatements sort of heading into Q1?

Or will the assets of the operations remain as continuing ops [ph] until divested?

The latter would be the answer.

Okay. And with respect to all the moving pieces and acknowledging that exactly what you just said in terms of holding the assets certainly at least through the first half of the year.

The first half looks as though there is certainly top line growth as from what we saw in Q4, ’14, and then EBITDA growth should continue through the first half of 2015. And if your question is, you’re going to continue to do ongoing cost cutting efforts.

Should we expect printing margins or printing EBITDA that is to be greater in 2015? Are we going to see print growth in 2015?

Well, basically what we said in the prepared statement is that, we did just that in 2014 and we believe that we will operate in a similar market environment in ’15, and we believe that we could continue with the same strategy. So, we think, the answer is -- we think, yes.

Okay, great. I appreciate it.

Thank you.

Good afternoon. Thanks for taking my questions.

I was wondering if you can just touch on the, sort of the landscape in terms of tuck-in M&A. I know that you continue to look at sort of other packaging businesses trying to add to what you started with Capri.

Any thoughts, any updates around what's available and what the appetite is to continue to tuck-in those kinds of acquisitions?

Yes, obviously this is a new market for us. We’re right now visiting a lot of our existing customer and some potential customers who were actually learning a lot about the needs of the market and the customer.

So, we’re very active looking at the vertical we’re in, which is the food vertical especially in dairy. We’re looking at also a possible product diversification in that sort of vertical like other products that our actual customer are buying that we’re not supplying right now.

So, we’re still in a learning mode and very active at being present in a market and understanding all our customers need. So the M&A activity is right now around the packaging sector that’s for sure.

Great. Thanks for that.

And the second question is really a clarification on some of the comments you made in the outlook section. So you referred to $20 million in synergies from the Quebec Weeklies.

I wasn’t sure, are you referring to additional synergies over and above the EBITDA that you bought? I know the EBITDA was close to $20 million as well, or you’re referring to that same number there?

No, the EBITDA what we bought was nowhere near $20 million. So the net impact from where we were or where we are this year in a local business is we believe that there with the synergy of integrating the two companies together that we’re going to increase our profitability by $20 million from where we were this year.

Okay. I understand.

Thank you. And just lastly from me, I just wanted to get a sense of; I know that the restructuring expenses sort of ticked up a little bit in Q4.

I may have missed some of your comments earlier, but just wanted to get a sense of what the restructuring sort of charges would be going into ’15?

Well, I think -- the big things that we have going on in ’15, I think François talked about which is the closure of the Concord and Edmonton facility. Those restructuring charges have been taken in our October 31 numbers, that’s why the numbers are so big, because we announced those restructurings before, as well all of the restructurings associated with the QMI closure of newspapers and the initiation of the synergy plant, those synergies were taken, those restructuring costs were taken as well in October on the October, 31 financial statements.

So, as we look forward for the 2015 period, we don’t have any significant that we’re aware of yet. But as we look obviously throughout the course of the year, and if we identify some catalysts where we think we can get a good return, if there are such synergies then we’ll look at it, but there’s nothing significant planned right now.

Okay, thanks. Thanks a lot.

I’ll pass the line.

Thank you.

Great. Thanks.

François, maybe just on Capri, could you talk a little bit. I think at the time you bought the asset from Schreiber, you talked about I believe a six month sort of on-boarding period where you really weren’t going to try to do anything.

It sounds like that’s gone well. Is it fair to say you’re now at a point where you could actually run sort of pilot or tests for possible clients through some of the facility in sort of a limited fashion or is that -- am I sort of ahead of myself in terms of where you might be?

No, you’re not ahead yourself. Our first -- where we had an impact first is on, I guess, the productivity of the factory or the cost space of the factory.

So, we in the first six month already implemented some of our best practice in manufacturing which translate into cost reduction and we’re preparing to ramp up this factory for additional volume. Yes, we have some discussion with some customer, and we are in trial with some customer right now, but it is a long sales cycle.

You got to do the food safety trial. Then you have to do the runnability on their machine and their factory.

Then you need to on-board the customer, and if it’s a large customer it’s almost factory-per-factory where they produce the food. So you’re looking at a kind of 12 month on-boarding process if you want to do it right.

But like I said before, once its done it’s becoming a little bit, your competitive advantage because it’s a long sales cycle process. So, we are at the beginning of that process.

So we have started to do that in the last three months as we feel that we understand the business enough to be in there and talking to customers.

Good. And then maybe to either one of you; what would the overall comfort level be in terms of leverage, were you to consider an additional transaction.

I’m assuming, in that sense we’re talking about a separate acquisition more so than let’s call it sort of an outsourcing contract that these contracts seem to look more like?

Yes, basically first of all we start from a very, very solid base. I mean, with the transaction that we’ve done this year and the share -- the preferred share that we bought back we’re already at 1.2, and if we don’t do anything in terms of M&A we’ll be -- again be a little, 1 pretty soon.

So we start from a very solid balance sheet. We have renewed some more financial instrument and the maturity are being pushed back to 2019 and 2020, and basically we said that we feel that we could grow this sector remaining investment grade as a company, and that’s, our plans call forth for that.

Right now we have not seen anything yet on the market place that would take us away from that strategy.

But I think if you model, Paul and I think François said we’re at 1.2, if we don’t do an acquisition we get to below 1, and we have told -- have been telling people that, we feel very comfortable with the leverage ratio of 1 to 2. So I mean, if you assume you go below 1, at one term that’s $300 million in change.

So if you did a $300 million deal, you’d essentially be at two times, still well within our comfort level in terms of leverage.

Perfect. Just related to that; is it fair to say, I think you’ve been very clear, the firm is saying packaging is possibly one of the future options here and you’re investing heavily.

Any other verticals that you’d consider at this point or is it strictly focus on packaging and get that tied down before you look beyond packaging?

We’re focused in packaging as we feel there is a lot of opportunity there and we’re just in certain vertical. There is many vertical in packaging, so we feel that we have enough opportunity there.

And for the next year we don’t intend to diversify anything else than plastic flexible packaging.

Great. And just one clean up one for me.

François, you’re very clear upfront about the renewals of the retail book of business. Can you just give us a sense of sort of the aging of what that looks like in terms of, when the bulk of it might come due, it is at ’15, ’16.

’17 or is it sort of -- are we out three years? Or is there some coming, I know there’ll be a little bit every year?

Yes, we don’t always share that, because some of our customers don’t want to disclose that. But we’ve renewed some important one, and I would say that, the next two years are normal.

But maybe on the light side in terms of renewal, and we’ve pushed most of our large book of business to 2019 and 2020. So we have a pretty long run to wait in our contractual business, and I think from that standpoint we are very well protected in terms of what contribute the bulk of our business.

And I would say that the bulk of the business that is not declining are under these long-term contracts.

Perfect. Thank you.

Thank you everyone for joining us today, and we’ll speak to you in March during our Q1 conference call. Thank you.