In the second quarter of 2013, adjusted operating income increased 1.8%, from $55.9 million to 56.9 million. This slight increase is due mainly to the synergies obtained from the acquisition of Quad/Graphics Canada, Inc., which were, however, mitigated by the factors noted above. Net income applicable to participating shares rose from a loss of $106.2 million, or $1.31 per share, to a profit of $27.5 million, or $0.35 per share. Excluding unusual items, adjusted net income applicable to participating shares was down 2.0%, from $35.5 million to $34.8 million. On a per-share basis, it remained stable at $0.44.
"I am very pleased with the synergies obtained from integrating Quad/Graphics Canada, Inc. with our printing network," said François Olivier, President and Chief Executive Officer of Transcontinental Inc. "In addition to the benefit they brought to the Printing Sector, they were realized more quickly than anticipated. Furthermore, over the course of the quarter we continued to renew several agreements with our printing clients, further proof of the quality of our state-of-the-art printing platform. However, results in this sector were partially offset by the termination of the Zellers contract due to its store closures, and by incentives granted upon the renewal of certain contracts in the second half of 2012. In the Media Sector, the difficult advertising environment created downward pressure on revenues. The lack of visibility on the recovery of the advertising market drove us to pursue the implementation of some cost-cutting measures to limit the impact on the Media Sector's profit margin. However, given our excellent financial position, our leading brands, our quality content and our multi-platform offering, we are well positioned to judiciously and efficiently continue our transformation."
Highlights of the first half
For the first half of 2013, TC Transcontinental's revenues were up 4.0%, from $1,010.0 million to $1,050.0 million. The increase stems mainly from the acquisition of Quad/Graphics Canada, Inc. and acquisitions in the Media Sector. It was partly offset by the termination of the Zellers flyer printing and distribution contract, by a difficult advertising environment and by incentives granted upon the renewal of certain contracts in the second half of 2012. Adjusted operating income grew 3.7%, from $98.9 million to $102.6 million, due to the synergies obtained from the acquisition of Quad/Graphics Canada, Inc., but this increase was partly offset by the factors noted above. Net income applicable to participating shares rose from a loss of $139.5 million, or $1.72 per share, to a profit of $45.3 million, or $0.58 per share. Excluding unusual items, adjusted net income applicable to participating shares grew 1.1%, from $62.6 million, or $0.77 per share, to $63.3 million, or $0.81 per share.
For more detailed financial information, please see Management's Discussion and Analysis for the second quarter ended April 30th, 2013 as well as the financial statements in the "Investors" section of www.tc.tc
Synergies from integration of the operations of Quad/Graphics Canada, Inc. will continue in the second half of fiscal 2013. This contribution will, however, be partially offset by the closing of Zellers stores, which slowed their activities starting in our fourth quarter of 2012. Since early in fiscal 2013, we have signed new agreements worth an annualized value of about $30 million to print flyers and marketing products. The contribution from these contracts should increase more significantly as of the third quarter of 2013.
The difficult market conditions with respect to advertising spending are still likely to affect the Media Sector, so we will continue our rationalization and efficiency measures in order to limit possible impacts on the sector's profit margin. We will also continue investing in the development of new products and services to further diversify our offering.
In fiscal 2013, the excess cash flows generated in upcoming quarters, in conjunction with our excellent financial position, will permit us to invest a maximum of $70 million in in-house projects and to make strategic acquisitions as opportunities arise.
Reconciliation of Non-IFRS Financial Measures
Financial data have been prepared in conformity with IFRS. However, certain measures used in this press release do not have any standardized meaning under IFRS and could be calculated differently by other companies. We believe that many readers analyze our results based on certain non-IFRS financial measures because such measures are more appropriate for evaluating the Corporation's operating performance. Internally, Management uses such non-IFRS 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 IFRS.
The following table reconciles IFRS financial measures to non-IFRS financial measures.
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Dividend on Participating Shares
The Corporation's Board of Directors declared a quarterly dividend of $0.145 per Class A Subordinate Voting Shares and Class B Shares. This dividend is payable on July 19, 2013 to participating shareholders of record at the close of business on June 28, 2013.
Dividend on Preferred shares
The Board declared a quarterly dividend of $0.4207 per share on cumulative 5-year rate reset first preferred shares, series D. This dividend is payable on July 15, 2013. On an annual basis, this represents a dividend of $1.6875 per preferred share.