Shirley Chenny - Advisor, Investor Relations François Olivier - President and Chief Executive Officer Nelson Gentiletti - Chief Financial and Development Officer

Adam Shine - National Bank Financial Mark Neville - Scotiabank David McFadgen - Cormark Securities Drew McReynolds - RBC Capital Markets

Thank you, Amanda. Good afternoon and welcome to our year end 2016 financial results conference call.

Earlier today, in addition to our press release, we issued our fiscal 2016 MD&A with complete financial statements and related notes. Please note that the corporation changes organizational structure to combine all retailer related services, which include retail and in-store marketing printing, door-to-door distribution and premedia services within the printing division.

As a result, door-to-door distribution and premedia services previously in the Media Sector have been transferred to the printing and packaging sector. Accordingly, 2015 comparative data was restated to reflect these changes.

For those of you, who are not on our distribution list, the documents are posted on our website at tc.tc. François Olivier, President and Chief Executive Officer, will begin this conference call by providing key operational highlights of the year.

Nelson Gentiletti, Chief Financial and Development Officer will then proceed with an overview of the financial results, after which the lines will be open for questions. I would like to specify that this conference call is intended for the financial community.

Media are in a listen-only mode and should contact Nathalie St-Jean, Senior Advisor, Communications, for more information or interview requests. Please be reminded that the information that will be discussed over the course of this conference call might contain forward-looking statements.

Such statements based under current expectations of management and information available as of today inherently involve numerous risks and uncertainties known and unknown. The risks, uncertainties and other factors that could influence actual results are described in the 2016 annual MD&A and in the latest annual information form.

I would now like to turn the call over to François Olivier.

Thank you, Shirley and good afternoon everyone. Once again, we had an excellent year.

We successfully carried on with the transformation of TC Transcontinental, while recording the best financial performance in terms of profitability in the corporation’s 40 years history. Our employees can be proud of their contribution to TC success and I thank them all for this.

The Printing division post solid results. We were successful in winning new business, optimizing our manufacturing platform and reducing our cost base through ongoing initiatives.

On the Packaging side, we were able to double our revenues as we made two acquisitions this year. On an annualized basis, this division already represents about 15% of our consolidated revenues.

In the Media Sector, difficult advertising market dynamics led us to implement several measures to reduce our cost structures and exit unprofitable businesses, while taking initiatives to position our digital businesses for growth. I would like to take a few minutes to comment on our full year results.

In our Printing division, flyer printing volume for our existing customers remained relatively stable in 2016 in terms of both numbers of flyers and page downs. This stability that we have experienced quarter-after-quarter indicates that retail flyers continue to be a valuable marketing tool for retailers that drive traffic to their stores and that digital alternatives still remain for now a complement to printed flyers.

In 2016, we were active in securing more than $250 million of revenues by preemptively renewing certain printing contracts and by signing new agreements with retailers. Our point of purchase printed products for retailers continued to gain traction in the marketplace and we are now generating $55 million of sales on an annualized basis.

In addition, our door-to-door flyer distribution business in Quebec performed well and the premedia flyer service business post increased results. Regarding our newspaper printing segment, volume in this business continues to be under pressure.

Earlier in the year, we conclude an agreement amending the terms and conditions of the 18-year contract to print The Globe and Mail and we received a one-time cash payment of $31 million to compensate for price reductions on future services. This gave us the flexibility to pursue other newspaper outsourcing opportunities and allowed us to successfully begin in July a 5-year agreement to print the Toronto Star, which helped mitigate the declines with our other newspaper clients.

We also continued to rationalize our footprint by closing our Saskatoon printing plant, following the sales of our newsprint in Saskatchewan. In 2017, we will continue to pursue other opportunities to onboard other newspaper publishers.

During the year, demand for book printing remained healthy, while on the magazine side the accelerating decline in advertising revenues of our customer is impacting their business and continues to pressure our. Finally, the traditional non-contractual commercial print business continued to decline at a double-digit rate.

However, the contribution of the contract to print Canada’s census forms help offset some of this decline in 2016. To mitigate some of the pressure that we experienced in this market segment, we closed our Transcontinental Quebec plant.

We also sold most of our commercial printing line of business out of our Dartmouth plant in Nova Scotia, which also resulted in the closure of the plant. The Printing division remains a solid business and continues to be the principal driver of our free cash flow generation.

Turning to our Packaging division, we are pleased with the continued progress. We acquired Robbie Manufacturing in July and Flexstar Packaging at the end of the year.

Robbie Manufacturing specialized mostly in onsite packaging needs for grocery stores and shrink-wrap packaging of multi-pack consumer goods. Flexstar Packaging, our first plant in Canada, enables us to expand our footprint on the West Coast, builds on the capabilities that exist at our other facilities and provides us our first entry into blown film extrusion.

Our Ultra Flex acquisition completed in early October of last year continues to perform well. Their sales funnel is healthy and we are confident that the resources we deployed for new capacity should have a positive impact on our 2017 results.

Regarding Capri, the 2016 results were negatively impacted by an adjustment in volume from Capri’s largest customer and by the loss of a customer early in the year due to a change of control, which led to the shutdown of this customer’s operations. We have since qualified some SKUs with the acquiring company and have slowly ramped up our volume with this new large customer.

As I mentioned on several occasions, the sales cycle in the dairy segment is particularly long. However, we remain very positive about this facility, long-term prospects both from a manufacturing efficiency and sales standpoint.

Finally, we will remain very active in 2017 on the acquisition front and we will also continue to make inroads with new customers and anticipate better organic growth in this division. On the Media side, as I mentioned earlier, the transformation of the advertising market continues to have an impact on our activities, particularly with our local newspapers.

As a result, we joined other print media players as part of the quality on for sustainability of the newspaper industry in Quebec to request temporary, but essential government support. In 2016, we also took significant actions in order to lower our costs as well as worked on our digital product offering, which had a positive impact on our profitability.

We also sold our local newspaper in Saskatchewan as they had limited synergies with the rest of our portfolio and also sold a number of titles in Quebec. We sold or closed certain digital marketing products as they were no longer strategic for us.

Finally, regarding our portfolio of business publication and educational titles, they performed very well in 2016. In conclusion, we are pleased with our financial performance in 2016.

These results reflect the successful implementation of our strategic decisions. In addition, as we continue to execute on our acquisition strategy in flexible packaging, we were able to maintain our leverage versus last year.

Our strategy remains unchanged as we continued to focus on efficiency measures in our traditional businesses, while growing our flexible packaging business. With our solid financial position and with our significant cash flow, we remain well positioned to achieve a successful transformation and our growth ambition.

We will now turn it on our Nelson for a review of our financial results for the quarter and the fiscal year.

Thank you, François and good afternoon everyone. Revenues for the fourth quarter of 2016 were $556 million, an increase of 2.9% over Q4 of last year.

Adjusted operating earnings grew 22.3% to $107 million. Excluding the favorable effect of the decrease in the stock-based compensation expense, adjusted operating earnings would have increased 12.7%.

Adjusted net earnings attributable to shareholders of the corporation increased 26.4% to $77 million or $0.99 per share. Net earnings attributable to shareholders of the corporation went from $100 million to $58 million.

This decrease is mainly attributable to the adjustment to the deferred tax assets in the United States and the reversal of financial expenses, resulting from notices of assessments recorded in the fourth quarter of 2015. For the full year, revenues increased close to 1% to $2 billion and adjusted operating earnings went from to $277 million to $283 million.

Adjusted net earnings attributable to shareholders of the corporation increased 5.1% to $196 million or $2.53 per share. And as mentioned by François, represent a record level of profitability for TC Transcontinental.

Net earnings attributable to shareholders of the corporation went from $263 million to $146 million. This decrease is mainly due to several favorable adjustments recorded in the fourth quarter of 2015.

On the cash flow front in 2016, we generated $273 million of cash flow from continuing operations. We also generated about $11 million of cash from the sale of real estate and media assets.

In terms of use of cash, we paid $86 million for our two packaging acquisitions, invested $77 million in CapEx, including intangibles, paid $74 million in taxes and paid down debt for $58 million. We also distributed $56 million of dividend and repurchased 1.2 million shares for cancellation for $22 million.

Today, we also announced that we received approval from the Toronto Stock Exchange to amend our current normal course issuer bid in order to increase the maximum number of Class A subordinate voted shares that may be repurchased. The total book available to be purchased under the program is now 1.3 million shares.

At the end of our fiscal year, our net indebtedness was $331 million with no significant debt maturities before 2019. Our debt to EBITDA ratio stands at 0.8x.

In terms of guidance, for modeling purposes and due to the reclassification from the following changes to our operational structure, supplemental segmented information on a quarterly basis is available in the Investors section of our website. Now, let me provide you with some guidance for fiscal 2017.

In our printing division, we expect stable revenues from our services to retailers, which include retail flyer printing, door-to-door distribution, pre-media and in-store marketing. The contract to print the Toronto Star, which started in July 2016, should benefit the first half of the year.

This should partially offset the expected volume decline from circulation decreases in newspapers and the negative impact of declining printed advertising spending in magazines and commercial products. Finally, as a reminder, the contract to print to Canadian census form benefited our first two quarters of 2016.

In terms of profitability, our continued efforts to optimize our operations through operational efficiency initiatives should help compensate a large part of the impact of market dynamics. In our packaging division, we will benefit from the acquisition of Robbie Manufacturing and Flexstar Packaging.

We will continue the integration of these acquisitions, which should generate additional synergies. We will maintain our disciplined acquisition approach in this promising market in order to invest in quality assets that meet our strategic criteria.

In addition, our manufacturing capacity combined with our North American sales force should drive sustained organic growth. In the media sector, we expect that our newspaper publishing activities should continue to feel the effect of the transformation of the advertising market.

However, the significant measures we have taken should continue to see – ease the impact of our profitability. For the 2017 P&L, assuming stock price at yesterday’s closing, you should model for full year corporate costs at the EBITDA level of about $25 million to $27 million.

As a reminder, a change of $1 in our stock price impacts our results by close to $1 million. Our financial expenses are expected to be in line with last year and our tax rate to be around 30%.

In terms of use of cash for the year, you can assume CapEx of around $65 million, including intangibles and cash taxes of approximately $60 million. To conclude, our sound financial position and our proven ability to generate considerable cash flow quarter-after-quarter gives us significant flexibility for our future growth.

We intend to continue our approach to capital allocation and support our growth strategy in packaging, while continuing to return capital to shareholders.

This concludes the formal part of the conference call. Operator, we are now open for questions.

Thanks a lot. Good afternoon.

Maybe I will push a little bit harder on packaging, when I read the MD&A it suggests that existing operations record a slight increase that’s related to revenues. So, just going back to earlier in the year and some of the pressures in terms of the inventory rebalancing at Capri and I guess, the reference of the fact that you lost some difference with the sale that second customer, but you are winning some of it back.

Can you maybe just speak to the fact as to whether or not that whole inventory rebalancing dynamic has run its course at Capri?

Yes, all-in-all, most of the influx we had last year that we didn’t see this year was basically mainly all in Q2 and Q3. And in Q4, I would say we are back to the regular business with that customer.

So, that’s why we have – we are getting growth in terms of revenue and profit in that division, which was not the case in Q2 and Q3 because of what we explained. And when we look next year for Capri, especially with that customer, I think they have been winning some business in their own space, in their own market.

So, we think that they will be busy next year. So yes, I think we are out of that 6-month volume decrease we suffered in that factory.

That was not only if you recall related to that customer, also related to the sale of another important customer. And in terms of that customer, I would say that we have recouped about a third of the volume with the acquirer.

So, we are not totally holding the same volume right now, but we have gained other volume with other customers, so we were positive this quarter.

It was very helpful to see the revenue numbers for packaging, which you broke out in the new re-segmentations. Without maybe pushing you too hard, what we think about the margin, the EBITDA margin for packaging, is it fair to ask or I will ask it regardless, with the margin have been for the year above 16% or below?

I think we are above.

Okay, alright. That’s what I thought.

Just want to double check. Any particular timing issues worth noting maybe for you François or for Nelson.

Obviously, the Q4 upside was very strong, ended the year on a very high note. Sometimes we see some timing issues, maybe some Q1 work coming into the Q4.

There is that element to it. And then the other question maybe more specifically for Nelson relates to working capital, which was obviously turning negative, which we don’t usually see in the Q4?

Thanks.

I think the year played out like we explained it. I think our results were a little bit softer in print in Q2.

And we basically said our recipe has been the same for the last 5 years. We gained new business and we work with our customer and our supplier and within our operation to take us out of the whole supply chain.

And we have said that Q3 was going to be better and Q4 was going to be better, because we knew which business we won and we knew which initiative we have done with our customer internally and with our supplier to take cost out of the system. So, I guess the year unfolds pretty much like all the other years, but maybe not the timing as smooth as the other year.

But at the end of the day, Q4 was very strong for the print division, but it was a similar year as the year before. So, I think we try to explain that after Q2.

And basically, what we said happened.

Okay. And on your other point, Adam, I mean, you are right, because we had a use of working capital in the quarter.

And really two items, I mean, none of them overly alarming. One of the big elements is we have a big timing on accounts receivable related to a large customer that was doing a system migration, which basically delayed them making payments, but that will be all corrected in Q1.

And on the payable side, bear in mind that you have got obviously a $7 million to $8 million hit on share-based compensation, which actually because it’s recorded in liabilities. When you reduce the liability, it looks like you have a use of funds of $8 million.

So, if you take those two items, those would represent almost the totality of the use of working capital in the quarter.

Great. Thanks a lot.

Good quarter. I will queue up again.

Thank you.

Hi, good afternoon guys. You have increased the authorization of buybacks.

I mean, is the approach there is to remain opportunistic or are you planning a little more aggressive?

I think we want to remain opportunistic. Obviously, our number one use of cash we said will be to make acquisition.

That’s our number one goal. And we are hopeful that we are going to do other acquisition in 2017, but we are just going to do the right one.

And we feel it’s the time to act. And as you know, we generate significant amount of free cash flow and we will have a lot of debt.

So, if we are patient or have to wait on the acquisition front, we would certainly be maybe more active on the share buyback front. And also like we discussed with Adam, it doesn’t take a big blip on our print results for people to plan for the worse.

And then usually the stock is very volatile and we have been active when that’s the case. So, I think you should see us continue to do what we have done this year.

It’s not to be more aggressive. It’s to be ready to act according to what’s happening in the market and what’s happening with our M&A opportunity, because we only have 1 million shares authorized.

And we obviously as we mentioned in the comments, we have used and acquired 700,000 shares already. So, we only had 300,000 shares available under the program.

So, we didn’t want to be in a position where if we had to be opportunistic we then have enough room to acquire more shares, which is why we asked the board to obviously approve the additional 1 million shares.

That’s fair. Just looking at Media, you did $10 million of I think adjusted EBIT in the quarter, but there is only $5 million for the year.

For that business sort of going forward, I know it’s small, but I mean, is that a mid single-digit EBIT margin business or could it be double-digits just – maybe just some ballpark numbers if you could?

I mean, I think for modeling purposes, in fact and you will probably have to speak to Shirley and IR, because I think it will help you when you do quarter-by-quarter. But I think in that business you will be in the low double-digit, high single-digit probably type margins.

But I think for modeling purpose, it will be important for you to get a good understanding of how that evolves quarter-by-quarter. Because as you just mentioned the big chunk of the profitability, in fact, almost the totality of the probability is in Q4, but you have to make with the new business segments that you get the right allocation by quarter.

Okay. So is the low double-digit, high double-digit also ensure those EBITs or EBITDA?

EBITDA?

EBITDA, okay. Maybe just one last question.

Just on the FX impacts in the quarter on EBIT that was pretty large $5.9 million, but on a year-over-year basis, there was much change in the currencies. I am just trying to understand what happened there?

Yes, I mean, there is actually two elements. One, obviously, we have hedge positions on our program.

Obviously, we hedge out, obviously it’s far back. So that’s part of it.

Another one is we had an embedded hedge in the supplier contact and part of that crystallized in Q4 and we ran that through foreign exchange.

Okay, thanks a lot. Good quarter guys.

Thank you.

Yes, hi. Thank you.

A couple of questions. So, when you talked about the packaging revenue being stable in the fourth quarter, so that was inclusive of the fact that was one of Capri’s customers really backup to one-third of the volume, is that correct?

Yes. I think for the overall volume, obviously we were up because of the acquisition.

But when you look organically, same-store sales, we were up and that includes the fact that we have not recouped 100% of the customer that sold this business to another company.

Okay. And do you expect in 2017 to get back to potentially 100% of the volume that you used to have from that customer?

I guess we are not going to zero in only on that customer, because like the shortfall is probably about $2.5 million to $3 million. So we are hoping for a lot more organic growth than this in that division.

As you are aware, we invested about $25 million of capital in that into factory this year. And this year, we have been installing new equipment and incurring the expense to get that going.

Almost all of those equipment are commercial and ready to go. So our expectation for next year in terms of organic growth is way beyond that customer.

We are looking for probably double digit GDP growth that these businesses have naturally with our P&L next year. So we have been very active this year, securing some businesses.

And we hope that’s going to translate into good organic growth revenue this year, which is quite different from the year we have this year, which was in Q2 and Q3 like we mentioned to Adam, was negative organic growth.

So in the – I think it was in the press release, you talked about the fact that packaging revenue is now 15% of the total business on an annualized basis, can I take the 1755 you reported or the 15% of total, it’s inclusive of media, is that correct, just a clarification there?

Yes. The run rate of that business right now with the acquisition we made in July and September or October is the best $300 million roughly, if you take 15% of $2 billion.

That’s the run rate of our packaging.

Right, okay. That’s kind of what I thought it was going to be.

Okay. And then you talked about the working capital outperform in the fourth quarter, part of that was due to the timing with the large customer and accounts receivable, can you quantify the impact there?

I am not going to give you the specific impact. But I mean if you look at the movement on the working capital it’s roughly I think up $35 million, $40 million, so a large part of the amount is associated with that customer.

So in 2017, what would be your expectation for working capital changes?

We typically work on the basis that working capital is the changes are relatively flat, right. So you would expect that the negative that we have now should turnaround in the next quarter or so.

Okay. And then on the dividend, do you anticipate or expect that the dividend will be raised when you report your Q1 results in March, when you have your AGM?

I think what we have always said is, we review the dividend once a year. And it’s when – and typically when we have our Board meeting in March to report Q1.

So at that time as we do every year we will speak to the Board and we will advise the shareholders and at that time when we report Q1. Since many, many years we have been raising it every year.

And our situation has not really changed. So I think for you is the expectation that we should do the same.

Yes, that’s what I was thinking. I was just looking for that particularly given the free cash flow of the business and the fact that now you are saying CapEx is probably going to be a bit lower in 2017, what would be the reason for the drop in CapEx going forward?

Really, if you go back in time, our media business was consuming, because we have the digital business sometimes north of $50 million of capital. And as we have mentioned, we have exited that business.

And so the capital that we need to now reinvest even though we have the packaging business when you combine everything together. We expected to be slightly less than $70 million to $75 million that we have been guiding to in the past.

Okay. And then just one final one, just help us on the FX, can you give us what the packaging business in the U.S.

is on a run rate basis in terms of the U.S. revenue?

Well, I mean certainly for the numbers that we have reported, it’s basically 100% right, because for the packaging business, because Flexstar we only had for no essentially two weeks. And if you look going forward, we said our businesses – we got revenues about $300 million and I think when we announced the Flexstar acquisition, we said Flexstar was roughly $35 million.

So we got about 10% of revenues, which are in Canadian dollars, so it’s essentially a U.S. denominated business.

Yes. What would be the exchange rate you are using to get to that $300 million?

In the current rate 1.30, 1.31.

1.30, okay. Alright, that’s helpful.

Alright, thanks a lot.

Yes. Thanks very much.

Good afternoon. On the packaging side of the business, thanks for the additional disclosure.

Just wondering Nelson, is there a point in time, where you just begin to disclose the segment as a standalone?

I think when you look forward, I mean a lot of the regions of course, one I think the segment was smaller. As the segment is getting bigger, I mean we haven’t decided when we are going to do it.

But I think if we make a couple of other acquisitions during the year we will probably be in the zone of having to disclose. I mean you could well appreciate that because of the nature of the business we had.

And we had several large, large customers. That form part of our business, I mean disclosing it obviously is very sensitive, because you also give the information actually you give the business that you are doing with very specific customers.

So I think for this year, we don’t anticipate splitting that out. But I think if we do a couple of other transactions during the year, I think that’s something we are going to seriously consider at the end of the year.

Thanks for that. And on the Toronto Star contract, can you give us any sense of the revenue contribution in the quarter on that one?

Revenue contribution not factoring the paper, which is the pass-through, we said it’s around $50 million a year for us roughly give and take a couple of million depending on volume and all that.

Okay, that’s fine. So no change on that?

No.

And just my last question, just for Nelson, just on the media business, the way you have restructured it and what it is right now, can you just speak to the kind of long-term kind of strategic outlook for it is, how this kind of remains core to the broader kind of printing and packaging business?

I don’t think is it that core. We are about – it’s about 10% of the revenue of the corporation and less than 10% of the process of the corporation.

So these are assets that we distribute that we print. We have been owning for a long time.

But it is not – we are going to make or break this corporation, that we are very successful or not. But we think that the assets that we own in publishing play an important role in society.

We have been active talking to [indiscernible] about helping some of these publications that are very local in nature. And I think the industry needs a little bit of help to do the transition that needs to be done.

So we are active and active participant in the industry to try to fix that. But it is less important than it used to be in terms of size and relevance of importance to TC profitability in long-term growth prospect.

Okay, thanks François for that.

Hi. I just had a follow-up on the packaging business.

You said about – you are doing about $300 million of pro forma sales there. But I am just curious if you have got an estimate roughly pro forma with all the investments you made in the business capacity and equipment wise sort of where or what your sales capacity is currently or the potential work to go?

We have about 10% to 15% capacity and $30 million to $40 million of capacity that we have. So, we could easily sustain a 10% to 15% organic growth in 2017.

So, that’s the capacity we had. We will see how much we delivered in ‘15.

I think it’s – we always put a little bit of more capacity than what we feel we could sell, but certainly this business depending on which vertical you talk about is the GDP plus business 2% to 3% and we are very hopeful that we could probably double that. So, we are looking to do a 5%, 6%, 7% organic growth next year based on the various vertical we are in.

So, that’s what we are hoping for and we have plenty of capacity to take on that work that is already installed and basically all running at this stage.

That’s helpful. So, I guess now I look at the footprints, I mean, you have done I guess four acquisitions, five acquisitions last few years.

You have got sort of coast-to-coast manufacturing. You have got some extrusion capabilities.

You have mentioned synergies in the MD&A, so just sort of curious where you sort of see the easiest opportunities or maybe some of the low hanging fruit synergy wise across the network now?

I think the most obvious one is in the raw material as we get bigger in buying raw material, I think we could have more synergy there. So, I guess the next couple of acquisition will benefit from more synergy than the past one.

But at this stage, for us it’s really a growth plate more than a cross plate for sure. If we could save a couple of million dollar on synergy in every deals we make that makes the payback better for us, but at this stage we are looking more at buying the right assets, buying the right team.

And then we start to have a good team around that business. So, we would be willing at this stage to do the similar types of acquisition we have made.

But if something bigger would become available, we feel more secure at this point where we have a better understanding of that marketplace. And most importantly, we start to have a good team who has been together for some of them 2 years, some of them just joined, but this is more what we are excited about while acquiring the right company and acquiring the right team and then the synergies come, but we are not at this point driven so much by synergies.

Okay. Well, that helps.

Thank you.

Thank you very much.

Thank you for joining us today. And we wish everybody a happy holiday season and talk to you next year.