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TRANSCONTINENTAL

Annual Audited Consolidated Financial Statements

For the years ended October 27, 2024 and October 29, 2023

MANAGEMENT'S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements of Transcontinental Inc. are the responsibility of Management and have been approved by the Board of Directors of the Corporation. The consolidated financial statements include some amounts that are based on Management's best estimates using reasonable judgment. The consolidated financial statements have been prepared by Management in accordance with International Financial Reporting Accounting Standards ("IFRS").

In fulfilling their responsibilities, Management of Transcontinental Inc. and its subsidiaries develop and aim to improve accounting and management systems designed to provide reasonable assurance that assets are safeguarded from loss or unauthorized use and that the financial records are reliable for preparing the consolidated financial statements.

The Board of Directors of the Corporation fulfills its responsibility for the consolidated financial statements principally through its Audit Committee. The Audit Committee meets with management and the independent auditors every quarter to discuss the results of the audit, internal controls and financial reporting matters. The independent auditors appointed by the shareholders have unrestricted access to the Audit Committee, with or without the presence of management.

The consolidated financial statements have been audited by KPMG LLP, whose report is presented on the following page.

(s) Thomas Morin
President and Chief Executive Officer

(s) Donald LeCavalier
Executive Vice President and Chief Financial Officer

tc • TRANSCONTINENTAL
Consolidated financial statements

KPMG

KPMG LLP
Tour KPMG
600 de Maisonneuve Blvd West, Suite 1500
Montréal, QC H3A 0A3
Canada
Telephone 514 840 2100
Fax 514 840 2187

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Transcontinental Inc.

Opinion

We have audited the consolidated financial statements of Transcontinental Inc. (the "Entity"), which comprise:

the consolidated statements of financial position as at October 27, 2024 and October 29, 2023;
the consolidated statements of earnings for the years then ended;
the consolidated statements of comprehensive income for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended;
and notes to the consolidated financial statements, including a summary of material accounting policy information

(hereinafter referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at October 27, 2024 and October 29, 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of our auditor's report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP.

KPMG

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended October 27, 2024. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matter described below to be the key audit matter to be communicated in our auditor's report.

Assessment of the recoverable amount of groups of cash-generating units (CGUs) to which a goodwill is allocated

Description of the matter

We draw attention to notes 2 (i) and (n), 6 and 16 to the financial statements. The goodwill balance is $1,154.0 million. Goodwill acquired in a business combination is allocated to CGUs (or group of CGUs) that will benefit from the synergies of the combination.

A CGU (or group of CGUs) to which goodwill has been allocated is tested for impairment annually, or more frequently, if changes in circumstances indicate a potential impairment. An impairment loss is recognized if the carrying amount of a CGU (or group of CGUs) exceeds its estimated recoverable amount. Impairment losses are recognized in net earnings.

The recoverable amount of a CGU (or group of CGUs) is the higher of its value in use and its fair value less costs of disposal. In determining value in use, the Entity uses significant assumptions including the discount rate and estimated future cash flows. In determining fair value less costs of disposal, the Entity uses significant assumptions, including capitalization multiples and budgeted projections of operating earnings before depreciation and amortization.

Why the matter is a key audit matter

We identified the assessment of the recoverable amount of groups of CGUs as a key audit matter. This matter represented an area of significant risk of material misstatement for certain group of CGUs due to the magnitude of the goodwill and the high degree of estimation uncertainty in determining the recoverable amount. In addition, significant auditor judgment and specialized skills and knowledge were required in evaluating the results of our audit procedures due to the sensitivity of the Entity's determination of the recoverable amount of certain group of CGUs to minor changes to significant assumptions.

How the matter was addressed in the audit

The following are the primary procedures we performed to address this key audit matter.

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We evaluated the appropriateness of estimated future cash flows and budgeted projections of operating earnings before depreciation and amortization used to establish the recoverable amount of the group of CGUs by comparing them to the Entity's actual historical cash flows and operating earnings before depreciation and amortization. We took into account the changes in conditions and events affecting the group of CGUs to assess the adjustments, or lack of adjustments, made by the Entity in arriving at estimated future cash flows and budgeted projections of operating earnings before depreciation and amortization to be generated by the group of CGUs.

We compared the historical forecasts of estimated future cash flows and budgeted projections of operating earnings before depreciation and amortization with actual results to assess the Entity's ability to accurately predict estimated future cash flows and budgeted projections of operating earnings before depreciation and amortization.

We involved valuation professionals with specialized skills and knowledge, who assisted in:

evaluating the appropriateness of the discount rates by comparing them to discount rate ranges that were independently developed using publicly available market data for comparable entities.
evaluating the appropriateness of capitalization multiples by comparing them to publicly available market data for comparable entities.
evaluating the reasonableness of the estimate of the recoverable amount of all CGUs or group of CGUs of the Entity by comparing the sum of all recoverable amounts to the Entity's market capitalization, and by comparing the sum of the budgeted projections of operating earnings before depreciation and amortization multiple to published operating earnings before depreciation and amortization multiples for comparable entities.

Other Information

Management is responsible for the other information. Other information comprises:

the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions.
the information, other than the financial statements and the auditor's report thereon, included in a document likely to be entitled "2024 Annual Report".

Our opinion on the financial statements does not cover the other information and we do not, and will not, express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

KPMG

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We obtained the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor's report.

We have nothing to report in this regard.

The information, other than the financial statements and the auditor's report thereon, included in a document likely to be entitled. 2024 Annual Report is expected to be made available to us after the date of this auditor's report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

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We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Entity to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming an opinion on the group financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion.

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Determine, from the matters communicated with those charged with governance, those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor's report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this auditor's report is Dominique Hamel.

KPMG LLP

Montréal, Canada

December 11, 2024

*CPA auditor, public accountancy permit No. A119178

CONSOLIDATED STATEMENTS OF EARNINGS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

	Notes	October 27, 2024	October 29, 2023
Revenues	3	$ 2,812.9	$ 2,940.6
Operating expenses	4	2,343.5	2,494.1
Restructuring and other costs	5	33.9	21.7
Impairment of assets	13, 14 & 15	10.8	25.2
Operating earnings before depreciation and amortization		424.7	399.6
Depreciation and amortization	7	215.2	234.9
Operating earnings		209.5	164.7
Net financial expenses	8	60.0	66.3
Earnings before income taxes		149.5	98.4
Income taxes	9	27.6	12.5
Net earnings		121.9	85.9
Non-controlling interests		0.6	0.1
Net earnings attributable to shareholders of the Corporation		$ 121.3	$ 85.8
Net earnings attributable to shareholders of the Corporation per share - basic and diluted		$ 1.41	$ 0.99
Weighted average number of shares outstanding - basic and diluted (in millions)	21	86.1	86.6

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

TRANSCONTINENTAL

Consolidated financial statements - 1

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars)

	Notes	October 27, 2024	October 29, 2023
Net earnings		$ 121.9	$ 85.9
Other comprehensive income
Items that may be subsequently reclassified to net earnings
Net change related to cash flow hedges (1)
Net change in the fair value of designated derivatives - foreign exchange risk	28	0.7	1.9
Net change in the fair value of designated derivatives - interest rate risk	28	(1.4)	7.5
Reclassification of the net change in the fair value of designated derivatives recognized in net earnings during the year		1.5	1.5
Related income taxes		0.2	2.9
	23	0.6	8.0
Cumulative translation differences
Net unrealized exchange gains on the translation of the financial statements of foreign operations		15.4	33.2
Net losses on hedge of the net investment in foreign operations	28	(3.5)	(14.0)
Related income taxes (recovery)		(4.2)	0.1
	23	16.1	19.1
Items that will not be reclassified to net earnings
Changes related to defined benefit plans
Actuarial losses on defined benefit plans	26	(2.8)	(14.7)
Related income tax recovery		(0.8)	(3.9)
	23	(2.0)	(10.8)
Other comprehensive income	23	14.7	16.3
Comprehensive income		$ 136.6	$ 102.2

(1) For the year ended October 29, 2023, an amount of $2.8 million was reclassified to Net change in the fair value of designated derivatives - foreign exchange risk and Net change in the fair value of designated derivatives - interest rate risk. These amounts were previously reported under Reclassification of the net change in the fair value of designated derivatives recognized in net earnings during the year. This reclassification had no impact on comprehensive income or net earnings.

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

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Consolidated financial statements - 2

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars)

	Notes	Share capital	Contributed surplus	Retained earnings	Accumulated other comprehensive income	Total	Non-controlling interests	Total equity
Balance as at October 29, 2023		$ 636.6	$ 0.9	$ 1,226.8	$ 37.0	$ 1,901.3	$ 4.9	$ 1,906.2
Net earnings		—	—	121.3	—	121.3	0.6	121.9
Other comprehensive income	23	—	—	—	14.7	14.7	—	14.7
Shareholders' contributions and distributions to shareholders
Share repurchases and related income taxes	21	(17.4)	—	(33.2)	—	(50.6)	—	(50.6)
Dividends	21	—	—	(77.4)	—	(77.4)	—	(77.4)
Balance as at October 27, 2024		$ 619.2	$ 0.9	$ 1,237.5	$ 51.7	$ 1,909.3	$ 5.5	$ 1,914.8
Balance as at October 30, 2022		$ 636.6	$ 0.9	$ 1,219.0	$ 20.7	$ 1,877.2	$ 4.8	$ 1,882.0
Net earnings		—	—	85.8	—	85.8	0.1	85.9
Other comprehensive income	23	—	—	—	16.3	16.3	—	16.3
Shareholders' contributions and distributions to shareholders
Dividends	21	—	—	(78.0)	—	(78.0)	—	(78.0)
Balance as at October 29, 2023		$ 636.6	$ 0.9	$ 1,226.8	$ 37.0	$ 1,901.3	$ 4.9	$ 1,906.2

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

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Consolidated financial statements - 3

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars)

	Notes	As at October 27, 2024	As at October 29, 2023
Current assets
Cash		$ 185.2	$ 137.0
Accounts receivable	10	504.4	514.7
Income taxes receivable		28.7	37.0
Inventories	11	365.7	391.1
Prepaid expenses and other current assets		21.7	20.6
Assets held for sale	12	108.9	—
		1,214.6	1,100.4
Property, plant and equipment	13	751.4	796.5
Right-of-use assets	14	99.6	98.6
Intangible assets	15	354.5	447.1
Goodwill	16	1,154.0	1,194.9
Deferred taxes	9	35.9	30.4
Other assets	17	31.3	32.4
		$ 3,641.3	$ 3,700.3
Current liabilities
Accounts payable and accrued liabilities	18	$ 495.1	$ 465.5
Income taxes payable		21.1	24.8
Deferred revenues and deposits		10.9	10.4
Current portion of long-term debt	19	201.0	2.1
Current portion of lease liabilities	24	24.1	23.5
Liabilities held for sale	12	13.1	—
		765.3	526.3
Long-term debt	19	668.1	937.8
Lease liabilities	24	95.8	94.6
Deferred taxes	9	70.3	89.8
Other liabilities	20	127.0	145.6
		1,726.5	1,794.1
Equity
Share capital	21	619.2	636.6
Contributed surplus		0.9	0.9
Retained earnings		1,237.5	1,226.8
Accumulated other comprehensive income	23	51.7	37.0
Attributable to shareholders of the Corporation		1,909.3	1,901.3
Non-controlling interests		5.5	4.9
		1,914.8	1,906.2
		$ 3,641.3	$ 3,700.3

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

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Consolidated financial statements - 4

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars)

	Notes	October 27, 2024	October 29, 2023
Operating activities
Net earnings		$ 121.9	$ 85.9
Adjustments to reconcile net earnings and cash flows from operating activities:
Impairment of assets	13, 14 & 15	10.8	25.2
Depreciation and amortization	7	215.2	234.9
Financial expenses on long-term debt and lease liabilities	8	47.7	55.5
Net gains on disposal of assets		(5.1)	(8.2)
Income taxes	9	27.6	12.5
Net foreign exchange differences and other		(0.9)	4.1
Cash flows generated by operating activities before changes in non-cash operating items and income taxes paid		417.2	409.9
Changes in non-cash operating items	24	33.7	110.8
Income taxes paid		(37.2)	(48.4)
Cash flows from operating activities		413.7	472.3
Investing activities
Business combinations, net of acquired cash		—	0.3
Acquisitions of property, plant and equipment		(95.1)	(145.3)
Disposals of property, plant and equipment and other		8.9	12.0
Increase in intangible assets		(26.4)	(32.2)
Cash flows from investing activities		(112.6)	(165.2)
Financing activities
Reimbursement of long-term debt	24	(3.1)	(2.6)
Net decrease in credit facilities	24	(75.4)	(58.1)
Financial expenses paid on long-term debt and credit facilities	24	(43.3)	(49.5)
Repayment of principal on lease liabilities	24	(23.0)	(24.8)
Interest paid on lease liabilities	24	(3.5)	(3.3)
Dividends	21	(77.4)	(78.0)
Share redemptions	21	(32.3)	—
Cash flows from financing activities		(258.0)	(216.3)
Effect of exchange rate changes on cash denominated in foreign currencies		5.1	0.5
Net change in cash		48.2	91.3
Cash at beginning of year		137.0	45.7
Cash at end of year		$ 185.2	$ 137.0
Non-cash investing activities
Net change in capital asset acquisitions financed by accounts payable		$ (9.4)	$ 6.9

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

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Consolidated financial statements - 5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

1 GENERAL INFORMATION

Transcontinental Inc. (the "Corporation") is incorporated under the Canada Business Corporations Act. Its Class A Subordinate Voting Shares and Class B Shares are traded on the Toronto Stock Exchange. The Corporation's head office is located at 1 Place Ville Marie, Suite 3240, Montreal, Quebec, Canada, H3B 0G1.

The Corporation is a leader in flexible packaging in North America and in retail services in Canada and is Canada's largest printer. The Corporation mainly conducts business in Canada, the United States, Latin America and the United Kingdom in three separate sectors: the Packaging Sector, the Retail Services and Printing Sector and the Media Sector. The Corporation's main activities are described in Note 3 "Segmented Information".

The Corporation's Board of Directors approved these consolidated financial statements on December 11, 2024.

2 MATERIAL ACCOUNTING POLICIES

Basis of presentation

These consolidated financial statements were prepared in accordance with International Financial Reporting Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

The consolidated IFRS financial statements have been prepared in accordance with the following material accounting policies:

a) Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis, except for the following items:

derivative financial instruments and contingent considerations which have been measured at their fair value;
assets and liabilities held for sale are measured at the lower of carrying amount and fair value less costs to sell;
the liability related to stock-based compensation which has been measured under IFRS 2 Share-based payments;
defined benefit liabilities, which are measured at the net amount of the fair value of defined benefit plan assets and the present value of the obligations related to these plans; and
lease liabilities, which are measured at the present value of future lease payments.

b) Basis of consolidation

The consolidated financial statements include the accounts of the Corporation and its subsidiaries. The accounting policies described have been applied consistently by all the subsidiaries for all periods presented in these consolidated financial statements.

Subsidiaries are fully consolidated from the date the Corporation obtains control, and cease to be consolidated from the date that control ceases. All inter-company balances and transactions have been eliminated upon consolidation.

The Corporation holds the following main subsidiaries:

	Holding (in %)
Transcontinental Printing Inc. (Canada)	100.0
Transcontinental Printing 2007 Inc. (Quebec)	100.0
Transcontinental Printing 2005 G.P. (Quebec)	100.0
Transcontinental Printing Corporation (Delaware)	100.0
Transcontinental Media Inc. (Quebec)	100.0
Transcontinental Media G.P. (Quebec)	100.0
TC Transcontinental Packaging Inc. (Delaware)	100.0
Transcontinental Holding Corp (Delaware)	100.0
Transcontinental US LLC (Delaware)	100.0

c) Business combinations

Business combinations are accounted for using the acquisition method. The consideration transferred is the sum of the fair value of the assets acquired, equity instruments issued, liabilities incurred or assumed by the Corporation and contingent considerations on the acquisition date.

The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the identifiable assets acquired and liabilities assumed is recognized as goodwill.

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Consolidated financial statements - 6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

d) Revenue recognition

The Corporation recognizes revenues from the sale of goods or services when control over a good or service is transferred to the customer.

The Corporation has established that, for purposes of applying IFRS 15 Revenues from contracts with customers, a contract is usually a purchase order, including the related sales terms and conditions, or a combination of a purchase order and a contract. In the Retail Services and Printing Sector, certain contracts include more than one performance obligation, in particular when the contract provides for printing services as well as distribution and content solutions services. In the Packaging Sector, contracts usually include only one performance obligation, namely the sale of finished goods.

In the Packaging Sector and the Retail Services and Printing Sector, revenues are recognized as follows:

Packaging products

Revenues are recognized when control over the products is transferred to the customer, which is usually when the products are shipped or delivered in accordance with the customer agreement.

Retail services and printing

Revenues from the sale of retail services and printing are recognized when control over the products is transferred to the customer, which is usually when the products are shipped or delivered in accordance with the customer agreement.

Content solutions revenues

Content solutions revenues are recognized at a point in time, when services are provided.

For certain contracts related to the sale of packaging products and retail services and printing under which the Corporation provides custom products or services and for which it has an enforceable right to payment for performance completed, the criteria for revenue recognition over time are met and, consequently, revenues have to be recognized under that method. However, the Corporation has determined that the value of such contracts is not significant.

In the Media Sector, revenues are recognized as follows:

Advertising and book revenues

Revenues are recognized at the publication date in the case of advertising revenues, and at the time of delivery, net of a provision for returns, in the case of book revenues.

e) Inventories

Inventories are valued at the lower of cost and net realizable value. Cost is determined using the first in, first out method, and includes the acquisition costs of raw materials and manufacturing costs, such as direct labor and a portion of manufacturing overhead. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

f) Property, plant, equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Property, plant, equipment are depreciated on a straight-line basis over the following estimated useful lives:

Buildings	20-40 years
Leasehold improvements	Term of the lease
Machinery and equipment	3-15 years
Other equipment	2-5 years

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Consolidated financial statements - 7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

g) Leases

At the commencement date of a lease, the Corporation recognizes a right-of-use asset and a lease obligation. The right-of-use asset is initially measured at the cost of the corresponding lease liability, adjusted by any lease payments made at or before the commencement date, less any lease incentives received, plus if applicable, any initial direct costs incurred and an estimate of costs to be incurred for dismantling and removing the underlying asset and for restoring the site where it is located. The right-of-use asset is subsequently measured at cost less any accumulated depreciation and any accumulated impairment losses, if applicable. The right-of-use asset is depreciated on a straight-line basis from the commencement date until the end of the lease term, except if the lease transfers ownership of the underlying asset to the Corporation by the end of the lease term or if the cost of the right-to-use asset reflects that the Corporation will exercise a purchase option. In such case, the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses and adjusted for any remeasurements of the lease liability. Right-of-use assets are tested for impairment at each reporting date if there is any indication that they may be impaired.

The lease liability is initially measured at the present value of future lease payments using the Corporation's incremental borrowing rate at the inception date, except when it is possible to determine the interest rate implicit in the lease. Lease payments are discounted over the lease term, which includes the fixed term and the renewal and termination options that the Corporation is reasonably certain to exercise.

The main payments included in the initial measurement of the lease liability are fixed payments, less lease incentives receivable, and variable lease payments that depend on an index or a rate. The lease liability is subsequently measured at amortized cost using the effective rate method, which results in an increase in the carrying amount of the lease obligation to reflect interest and a reduction of the carrying amount to reflect the lease payments made.

As permitted by IFRS 16, the Corporation also elected to not recognize a right-of-use asset and a lease liability to all new short-term leases (defined as having a lease term of less than 12 months) or for new leases for which the underlying asset is of low value. These leases are recognized on a straight-line basis over the lease term with the corresponding expense reported in the Consolidated Statement of Earnings under Operating expenses when incurred.

In the Consolidated Statement of Cash Flows, cash outflows related to the interest expense on the lease liability and those related to the principal of the lease liability are presented in financing activities. Lease payments for short-term leases, leases for which the underlying asset is of low value and non-lease components are presented in operating activities.

h) Intangible assets

i) Identifiable intangible assets acquired in a business combination

Identifiable intangible assets acquired in a business combination are recorded at fair value at acquisition date, and subsequently recognized at cost less any accumulated amortization and accumulated impairment losses.

ii) Internally generated intangible assets

Internally generated intangible assets consist of book prepublication costs, technology project costs, other than configuration or customization costs in a cloud computing arrangement, and new product development and creation costs.

Subsequent to initial recognition, internally generated intangible assets are stated at cost less accumulated amortization and accumulated impairment losses.

Intangible assets with finite useful lives are amortized according to the following methods and estimated useful lives:

	Term	Method
Customer relationships	4-12 years	Straight-line
Book prepublication costs	Maximum 7 years	Based on the estimated life of the book
Educational book titles	6-9 years	Based on the estimated life of the book
Acquired printing contracts	Term of the contract	Straight-line
Right of first refusal	Term of the contract	Straight-line
Non-compete agreements	2-5 years	Straight-line
Technology project costs	3-7 years	Straight-line
Development costs	3 years	Straight-line

Intangible assets with indefinite useful lives mainly consist of trade names acquired in business combinations for book publication activities. They are not amortized and are tested for impairment annually or more frequently if changes in circumstances indicate a potential impairment.

TRANSCONTINENTAL

Consolidated financial statements - 8

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Impairment of non-financial assets

The Corporation reviews the carrying amount of its non-financial assets, other than inventories and deferred tax assets, at each reporting date in order to determine whether there is an indication of potential impairment.

Intangible assets with indefinite useful lives acquired in business combinations are allocated to cash generating units ("CGU"), and assessed for impairment annually, or more frequently if changes in circumstances indicate potential impairment.

Goodwill acquired in a business combination is allocated, beginning on the acquisition date, to the group of CGUs that will benefit from the synergies of the combination. For the purpose of impairment testing, non-financial assets that cannot be tested individually for impairment are aggregated to form the smallest group of assets that generates, through continuing use, cash flows that are largely independent of the cash flows from other assets. Each group of CGUs to which goodwill is allocated may not be larger than an operating segment, and represents the lowest level at which goodwill is monitored as part of internal management.

The recoverable amount of a CGU (or group of CGUs) is the higher of its value in use and its fair value less costs of disposal. Value in use is determined by discounting estimated future cash flows, using a discount rate that reflects current market assessments, the time value of money and the risks specific to the CGU (or group of CGUs).

The fair value less costs of disposal is determined using capitalization multiples applied to the budgeted operating earnings before depreciation and amortization (earnings before taxes, interest, depreciation and amortization - "EBITDA") for the following fiscal year for the group of CGUs concerned.

The Corporation's corporate assets do not generate separate cash inflows. They are tested for impairment at the lowest CGU aggregation level to which the corporate assets can be reasonably and consistently allocated. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU (or group of CGUs) to which the corporate asset has been allocated.

Except in the case of an impairment indicator identified earlier during the fiscal year which would require the Corporation to perform an impairment test at that date, the Corporation performs its annual test of impairment during the last quarter of its fiscal year, based on the Corporation's net carrying amount of assets as at the first day of the last quarter of each fiscal year.

An impairment loss is recognized if the carrying amount of an asset, a CGU (or group of CGUs) exceeds its estimated recoverable amount. Impairment losses are recognized in net earnings.

j) Provisions

The amount recognized as a provision is the Corporation's best estimate of the present obligation at the end of the reporting period. The Corporation's main provisions are related to restructuring costs and onerous contracts. The present value of provisions depends on certain factors that are regularly assessed using certain assumptions, including the discount rate, the cash flows expected to be needed to settle the obligation and the number of years until the settlement of the provision. Provisions are reviewed at each reporting date and any changes to estimates are reflected in the Consolidated Statement of Earnings.

k) Foreign currency translation

The consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Corporation. The functional currency is the currency of the primary economic environment in which the Corporation operates. The functional currency of the operating foreign subsidiaries is mainly the U.S. dollar.

The assets and liabilities of foreign subsidiaries whose functional currency is not the Canadian dollar are translated into Canadian dollars using the exchange rate prevailing as at the reporting date. Revenue and expense items are translated at the average exchange rate for the period.

Exchange differences are recognized in OCI under "Cumulative translation differences" and are accumulated in equity. The accumulated amount of exchange differences is reclassified to net earnings upon disposal or partial disposal of an interest in a foreign operation.

The Corporation designates certain foreign exchange forward contracts denominated in U.S. dollars and certain financial liabilities denominated in U.S. dollars as hedging instruments for an equivalent portion of its net investment in certain foreign operations that have the U.S. dollar as their functional currency. Thus, the effective portion of changes in the fair value of foreign exchange contracts as well as the foreign exchange fluctuation of financial liabilities denominated in U.S. dollars, net of related income taxes, is recognized in OCI and the ineffective portion is recognized in net earnings. Cumulative gains and losses recognized in accumulated OCI are reclassified to net earnings in the period in which the related net investment in a foreign operation is subject to a total or partial disposal.

TRANSCONTINENTAL

Consolidated financial statements - 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

I) Financial instruments

i) Classification and measurement of financial assets and financial liabilities

Financial assets and liabilities are initially recognized at fair value and their subsequent measurement depends on their classification.

Financial assets and liabilities are classified and subsequently measured as follows:

	Category	Subsequent measurement
Cash	Amortized cost	Amortized cost, at the effective interest rate
Accounts receivable	Amortized cost	Amortized cost, at the effective interest rate
Accounts payable, other accrued liabilities and other financial liabilities	Amortized cost	Amortized cost, at the effective interest rate
Contingent consideration	Fair value through profit or loss	Fair value
Long-term debt	Amortized cost	Amortized cost, at the effective interest rate
Derivative financial instruments	Fair value through profit or loss	Fair value

ii) Impairment of financial assets

The Corporation recognizes expected credit losses on financial assets, and changes in such losses, at each reporting date to reflect changes in credit risk since the initial recognition of the financial assets. For accounts receivable, the Corporation applies the simplified approach permitted by IFRS 9, under which lifetime expected credit losses must be recognized upon initial recognition. For loans classified under Accounts receivable, the Corporation measures credit risk based on the 12-month expected credit risk if there has not been a significant increase in credit risk since initial recognition.

m) Derivative financial instruments and hedge accounting

The Corporation identifies, evaluates and manages financial risks related to changes in interest rates and foreign exchange rates in order to minimize the effect on its results and financial position, using derivative financial instruments for which parameters have been defined and approved by the Board of Directors. If the Corporation did not use derivative financial instruments, exposure to market volatility would be greater.

When applying hedge accounting, the Corporation formally documents the relationship between the derivative financial instruments and the hedged items, as well as its objective and risk management strategy underlying its hedging activities, as well as the methods that will be used to assess hedge effectiveness. This process includes linking all derivative financial instruments designated as a hedge item to specific assets and liabilities, firm commitments or specific forecast transactions.

At the inception of the hedging relationship and throughout its duration, the Corporation must have reasonable assurance that the relationship will remain effective and in accordance with its risk management objective and strategy as initially documented.

For derivative financial instruments designated as cash flow hedges, the effective portion of the hedging relationship is recognized in QCI and the ineffective portion is recognized in the Consolidated Statement of Earnings. The effective portion of an interest rate risk hedging relationship is reclassified to net earnings during the period in which the hedged interest payments are recognized in net earnings. The effective portion of a currency risk hedging relationship related to foreign currency sales is reclassified to net earnings during the period in which the sales are recognized in net earnings.

Derivative financial instruments designated as a hedge of the net investment in foreign operations are accounted for similarly to cash flow hedges. For cross-currency interest rate swaps, only the spot element is included in the hedging relationship, and the change in fair value is recognized in other comprehensive income. The forward element and the foreign currency basis spread are excluded from the hedging relationship. They are recognized in other comprehensive income as a hedge-related transaction cost and are then amortized to net earnings based on the settlement of interest payments on the cross-currency interest rate swaps. The effective portion of the net investment hedging relationship is reclassified to net earnings on the disposal or partial disposal of the foreign operation.

For derivative financial instruments designated as fair value hedges, the change in fair value of hedging derivative financial instruments is recognized in the Consolidated Statements of Earnings, along with changes in the fair value of hedged assets or liabilities attributable to the hedged risk. The amount of the gain or loss attributable to the hedged risk is applied to the carrying amount of the hedged item. When the changes in the fair value of the hedging derivative financial instruments and the hedged item do not fully offset, the resulting amount, which represents the ineffective portion of the relationship, is recognized under Net financial expenses in the Consolidated Statements of Earnings.

The Corporation may also use total return swaps to hedge the market risk related to the change in the price of Class A Shares for purposes of measuring the stock-based compensation liability. In accordance with the requirements of IFRS 9, total return swaps are classified in the "Fair value through profit or loss" category with subsequent measurement at fair value.

The Corporation does not designate these derivative financial instruments as cash flow hedging instruments and, consequently, changes in fair value are recognized in the Consolidated Statement of Earnings for the period under Operating expenses against stock-based compensation expenses (gains).

TRANSCONTINENTAL

Consolidated financial statements - 10

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

m) Derivative financial instruments and hedge accounting (continued)

When hedging instruments mature before maturity, any gains or losses, revenues or expenses associated with the hedging instrument that had previously been recognized in OCI as a result of applying hedge accounting are deferred and recognized in net earnings in the period during which the hedged item affects net earnings. If the hedged item ceases to exist due to its maturity, expiry, cancellation or exercise, any gains or losses, revenues or expenses associated with the hedging instrument that had previously been recognized in OCI as a result of applying hedge accounting are recognized in the reporting period's net earnings.

Other derivative financial instruments offering economic hedging without being qualified for hedge accounting are recognized at fair value with changes in fair value recorded in net earnings. The Corporation does not use derivative financial instruments for speculative or trading purposes.

n) Critical judgments and sources of estimation uncertainty

The preparation of financial statements in accordance with IFRS requires the Corporation's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and contingent liabilities on the reporting date, and amounts of revenues and expenses for the relevant period. Although management regularly reviews its estimates, actual results may differ. The impact of changes to accounting estimates is recognized in the period during which the change occurs, and in the affected future periods, when applicable. Areas in which the estimates and assumptions are significant or which are complex, are as follows:

i) Impairment of non-financial assets

As part of assessing goodwill, property, plant and equipment and intangible assets for impairment, the recoverable amount of a CGU is determined using a complex valuation method that requires the use of a number of methods, including the discounted future cash flow method and the market-based method.

When the discounted future cash flow method is used, estimated cash flows are established based on past experience, certain economic trends as well as industry and market trends, and represent management's best estimates of future results. The recoverable amount of a CGU is also influenced by the discount rate used in the model, by the growth rate used to make the extrapolation and by the weighted average cost of capital.

When a market-based method is used, the Corporation estimates the fair value of the CGU by multiplying operating earnings before depreciation and amortization by a capitalization multiple that is based on market data.

These methods rely on numerous assumptions and estimates that may have a significant impact on the recoverable amount of a CGU, and thereby, on the amount of impairment, if any. The impact of significant changes in assumptions and the revision of estimates, if any, is recognized in net earnings in the period in which the changes occur or the estimates are revised.

ii) Income taxes

The Corporation determines its income tax expense and its income tax assets and liabilities based on its interpretation of applicable tax legislation, including tax treaties between the various countries in which it operates, as well as underlying rules and regulations. Such interpretations involve judgments and estimates that may be challenged in government tax audits, to which the Corporation is regularly subject. New information may also become available, which would cause the Corporation to change its judgment regarding the adequacy of existing income tax assets and liabilities. Any such changes will have an impact on net earnings for the period in which they occur.

In the calculation of income taxes and deferred tax assets and liabilities, estimates must be used to determine the appropriate rates and amounts, and to take into account the probability of realization of tax assets. Deferred tax assets also reflect the benefit of unused tax losses and deductions that can be carried forward to reduce current income taxes in future years. This assessment requires the Corporation to make significant estimates in determining whether or not it is probable that the deferred tax assets can be recovered from future taxable income and therefore, that they can be recognized in the Corporation's consolidated financial statements. The Corporation relies, among other things, on its past experience to make this assessment.

Once the final amounts have been determined, they may result in adjustments to current and deferred tax assets and liabilities.

iii) Employee benefits

The costs of defined benefit pension plans and the defined pension benefit assets (liabilities) are measured using actuarial methods. Actuarial valuations are based on assumptions such as discount rates, expected rates of return on assets, compensation growth rates and mortality rates. Due to the long-term nature of these obligations, these estimates are subject to significant uncertainty. Management revises these assumptions annually and the impact of the revision, if any, is recognized in the Statement of Financial Position and in comprehensive income in the period in which the estimates are revised.

iv) Assets and liabilities held for sale

As part of the measurement process for assets and liabilities held for sale, the Corporation has to make judgments mainly with respect to estimates related to the allocation of goodwill and customer relationships. Making a different judgment could lead to a different result. Assets and liabilities held for sale were reclassified during the period in which all held-for-sale criteria were met.

TRANSCONTINENTAL

Consolidated financial statements - 11

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o) Impact of new accounting standards, amendments and interpretations adopted during the year

i) Amendments to IAS 1 Presentation of Financial Statements

During the year ended October 27, 2024, the Corporation adopted the amendment to IAS 1, Disclosure of Accounting Policies. The Corporation updated the disclosure of its accounting policies to disclose those that are significant in these consolidated financial statements for the year ended October 27, 2024.

ii) Amendments to IAS 12 Income Taxes

During the year ended October 27, 2024, the Corporation adopted International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12) on the mandatory exemption to recognizing deferred taxes related to global minimum tax. The Corporation applied the temporary exemption to the requirement to recognize deferred taxes arising from the Pillar Two rules and to disclose information about them, including the tax regulations that implement qualified domestic minimum top-up taxes described in such rules. Adopting these amendments had no significant impact on the Corporation's financial statements.

p) New accounting standards, amendments and interpretations issued but not yet adopted

i) Amendments to IAS 1 Presentation of Financial Statements

In January 2020, the IASB amended IAS 1, Classification of Liabilities as Current or Non-current. The amendments clarify that the classification of liabilities as current or non-current should be based on the rights existing at the reporting date. For purposes of classifying non-current liabilities, the amendments eliminate the requirement under which the right to defer the settlement or the roll-over of a liability for at least twelve months has to be unconditional. Such right must instead be substantive and exist at the reporting date. The amendments also clarify the definition of settlement and provide situations that would be considered as a settlement of a liability. In October 2022, the IASB issued Non-current Liabilities with Covenants (Amendments to IAS 1). These additional amendments clarify how to treat the impact on classification and disclosures of covenants with which an entity must comply only after the reporting date. The amendments are effective for years beginning on or after January 1, 2024. The Corporation is assessing the impact of their adoption on its financial statements.

ii) Amendments to IFRS 7 Financial Instruments: Disclosures and IFRS 9 Financial Instruments

In May 2024, the IASB issued Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7). The amendments clarify the recognition date and derecognition date of certain financial assets and liabilities, clarify and add guidance to assess whether a financial asset meets the solely payments of principal and interest criteria, add new disclosure requirements for certain instruments with contractual terms that could change cash flows and update the disclosure requirements relating to equity instruments at fair value through other comprehensive income. The amendments are effective for years beginning on or after January 1, 2026. The Corporation is assessing the impact of their adoption on its financial statements.

iii) IFRS 18 Presentation and Disclosures in Financial Statements

In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements which will replace IAS 1 Presentation of Financial Statements. The standard introduces new required subtotals in the statement of earnings and disclosure requirements for management-defined performance measures. IFRS 18 will be applicable to the Corporation for the fiscal year beginning on November 1, 2027, with earlier application permitted. The Corporation is assessing the impact of this new standard on its consolidated financial statements.

3 SEGMENTED INFORMATION

The Corporation's operating segments are aggregated by management into three separate sectors: Packaging, Retail Services and Printing and Media.

During the year ended October 27, 2024, the Corporation decided to change the name of its Printing Sector to Retail Services and Printing Sector to reflect its evolving activities and growth opportunities in retail services.

The Packaging Sector, which specializes in extrusion, lamination, printing, and converting packaging solutions, generates revenues from the manufacturing of flexible plastic, including rollstock, labels, die cut lids, shrink films, bags and pouches and advanced coatings. Its facilities are mainly located in the United States, Canada, Latin America and the United Kingdom.

The Retail Services and Printing Sector generates revenues from an integrated retail service offering, including content solutions (also known as "premedia"), marketing and media solutions which comprises of our flyer retail printing, digital flyer solutions and retail analytics, as well as in-store marketing solutions. This sector also offers an array of innovative print solutions for newspapers, magazines and 4-colour books. Its facilities are located in Canada.

The "Other" column includes the Media Sector, certain head office costs as well as the elimination of inter-sector sales. The Media Sector generates revenues from print and digital publishing products, in French and English, of the following types: educational books, supplemental educational books and specialized publications for professionals. Inter-sector sales of the Corporation are recognized at agreed transfer prices, which approximate fair value. Transactions other than sales are recognized at carrying amount.

TRANSCONTINENTAL

Consolidated financial statements - 12

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

3 SEGMENTED INFORMATION (CONTINUED)

The following tables present the various sectorial components of the Consolidated Statements of Earnings:

For the year ended October 27, 2024	Packaging	Retail Services and Printing	Other	Consolidated results
Revenues	$ 1,643.6	$ 1,069.7	$ 99.6	$ 2,812.9
Operating expenses	1,381.4	868.7	93.4	2,343.5
Restructuring and other costs	11.2	22.1	0.6	33.9
Impairment of assets	0.6	9.1	1.1	10.8
Operating earnings before depreciation and amortization	250.4	169.8	4.5	424.7
Depreciation and amortization	135.7	51.2	28.3	215.2
Operating earnings (1)	$ 114.7	$ 118.6	$ (23.8)	$ 209.5
Adjusted operating earnings before depreciation and amortization (2)	$ 262.2	$ 201.0	$ 6.2	$ 469.4
Adjusted operating earnings (1) & (2)	187.4	153.2	(20.0)	320.6
Amortization of intangible assets arising from business combinations (2)	60.9	3.4	2.1	66.4
Acquisitions of non-current assets (3)	69.1	18.7	24.3	112.1
For the year ended October 29, 2023	Packaging	Retail Services and Printing	Other	Consolidated results
---	---	---	---	---
Revenues	$ 1,674.0	$ 1,169.7	$ 96.9	$ 2,940.6
Operating expenses	1,444.5	972.8	76.8	2,494.1
Restructuring and other costs (revenues)	11.3	11.0	(0.6)	21.7
Impairment of assets	8.8	16.4	—	25.2
Operating earnings before depreciation and amortization	209.4	169.5	20.7	399.6
Depreciation and amortization	146.6	60.7	27.6	234.9
Operating earnings (1)	$ 62.8	$ 108.8	$ (6.9)	$ 164.7
Adjusted operating earnings before depreciation and amortization (2)	$ 229.5	$ 196.9	$ 20.1	$ 446.5
Adjusted operating earnings (1) & (2)	147.0	144.0	(5.5)	285.5
Amortization of intangible assets arising from business combinations (2)	64.1	7.8	2.0	73.9
Acquisitions of non-current assets (3)	127.1	34.1	26.3	187.5

(1) Net financial expenses and income tax expense are managed on a centralized basis and, consequently, these line items are not allocated between the various sectors. As a result, the line items "Earnings before income taxes" and "Net earnings" are not presented by sector.
(2) The Corporation's officers mainly make decisions and assess sector performance based on adjusted operating earnings before depreciation and amortization. Adjusted operating earnings before depreciation and amortization and adjusted operating earnings exclude restructuring and other costs (revenues) and impairment of assets, if any. Adjusted operating earnings also excludes amortization of intangible assets arising from business combinations, which include customer relationships, non-compete agreements, right of first refusal and educational book titles.
(3) These amounts include internally generated intangible assets and acquisitions of property, plant and equipment and intangible assets, excluding those acquired in business combinations, whether they were paid or not.

TRANSCONTINENTAL

Consolidated financial statements - 13

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

3 SEGMENTED INFORMATION (CONTINUED)

Additional information on revenues

The table below presents information on revenues by sector disaggregated by type of products and geographical area:

	October 27, 2024	October 29, 2023
Packaging Products
Revenues generated from plants located in Canada	$ 148.1	$ 134.4
Revenues generated from plants located in the United States	1,202.5	1,216.0
Revenues generated from plants located outside Canada and the United States	293.0	323.6
	1,643.6	1,674.0
Retail Services and Printing (1) & (2)
Marketing and media solutions (3)	436.5	483.0
In-Store marketing solutions	207.4	192.1
Magazines and books	172.6	207.4
Specialized solutions	99.0	122.0
Newspapers	81.7	94.0
Content solutions	72.5	71.2
	1,069.7	1,169.7
Media (1)	116.8	118.1
Inter-sector Sales (4)	(17.2)	(21.2)
	$ 2,812.9	$ 2,940.6

(1) Revenues from retail services and printing and media are mainly generated in Canada.
(2) The Corporation modified the disaggregation of revenues by type of products to add greater precision for the Retail Services and Printing Sector. Comparative figures for the year ended October 29, 2023 have been reclassified to conform to the current year's presentation.
(3) Revenues from marketing and media solutions include printing services and distribution of flyers.
(4) Inter-sector sales are mostly eliminations of internal sales of the Retail Services and Printing Sector to the Media.

Assets by sector

The Corporation's total assets by sector are as follows:

	As at October 27, 2024	As at October 29, 2023
Packaging	$ 2,228.7	$ 2,399.3
Retail Services and Printing	843.6	894.5
Other (1)	569.0	406.5
	$ 3,641.3	$ 3,700.3

(1) This heading notably includes cash, income taxes receivable, assets held for sale, property, plant and equipment, intangible assets, right-of-use assets, deferred taxes and defined benefit asset not allocated to sectors.

TRANSCONTINENTAL

Consolidated financial statements - 14

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

3 SEGMENTED INFORMATION (CONTINUED)

Non-current assets

The following table presents non-current assets disaggregated by geographic area:

	As at October 27, 2024	As at October 29, 2023
Non-current assets (1)
Canada	$ 921.7	$ 975.1
United States	1,205.5	1,319.9
Other	258.2	266.1
	$ 2,385.4	$ 2,561.1

(1) These amounts include property, plant and equipment, right-of-use assets, intangible assets, goodwill and other non-current assets, and exclude derivative financial instruments, deferred taxes and defined benefit asset.

4 OPERATING EXPENSES

	October 27, 2024	October 29, 2023
Employee-related costs	$ 771.2	$ 773.6
Supply chain and logistics (1)	1,434.9	1,585.2
Other goods and services (2)	137.4	135.3
	$ 2,343.5	$ 2,494.1

(1) Includes mainly production, other than employee-related costs, and distribution costs related to external suppliers.
(2) Includes mainly promotion, advertising and telecommunications costs, office supplies, real estate expenses and professional fees.

The cost of goods sold recognized in operating expenses for the year ended October 27, 2024 was $1,827.1 million ($2,004.8 million for the year ended October 29, 2023). An amount of $6.6 million was recognized as inventory obsolescence expense for the year ended October 27, 2024 ($7.6 million for the year ended October 29, 2023).

5 RESTRUCTURING AND OTHER COSTS

	October 27, 2024	October 29, 2023
Workforce reductions (1)	$ 23.6	$ 20.8
Costs related to plant closures and restructuring (2)	10.8	6.1
Net gain on the sale of a building	(5.0)	(11.2)
Business acquisition and integration costs	—	2.8
Configuration and customization costs in cloud computing arrangements	4.3	3.6
Other elements	0.2	(0.4)
	$ 33.9	$ 21.7

(1) Includes termination payments to employees as part of workforce restructuring in the Retail Services and Printing Sector, Packaging Sector and Other.
(2) Includes related costs and gains and losses on disposal of property, plant and equipment related to plant closures and restructuring in the Retail Services and Printing Sector, Packaging Sector and Other. Gains and losses on the disposal of an item of property, plant and equipment are determined as the difference between the fair value of net disposal proceeds and the carrying amount of the item of property, plant and equipment that is disposed of.

TRANSCONTINENTAL

Consolidated financial statements - 15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

6 IMPAIRMENT OF ASSETS

Goodwill and intangible assets with indefinite useful life

The Corporation performed its annual goodwill impairment test for all its groups of CGUs. In performing the annual goodwill impairment test, the carrying amount of groups of CGUs, including goodwill and intangible assets with an indefinite useful life, was compared to their recoverable amount. The Corporation concluded that the recoverable amount of groups of CGUs tested for impairment exceeded their carrying amount. As a result, no impairment charges was recognized for the year ended October 27, 2024 and the same conclusion had been reached for the impairment test performed during the year ended October 29, 2023.

The recoverable amount of groups of CGUs, established for the annual impairment test of goodwill, has been determined based on the higher of fair value less costs of disposal and value in use.

The fair value less costs of disposal was determined using capitalization multiples applied to the budgeted 2025 operating earnings before depreciation and amortization (earnings before taxes, interest, depreciation and amortization ("EBITDA")) for the group of CGUs concerned. The budget is sensitive to the main assumptions used in this model, such as expected sales volumes, the impact of inflation on operating expenses, mainly raw materials and the ability to adjust the sales prices needed to establish operating earnings before depreciation and amortization. In addition, the evolution of current economic conditions and interest rates may have an impact on capitalization multiples, which are derived from comparable companies whose activities are similar to the group of CGUs concerned. The values applied to these main assumptions are derived from a combination of external and internal factors, based on past experience, as well as management's future expectations of the Corporation's performance. There is a series of factors affecting such supply and demand, including competing products, the availability of materials and other general market conditions.

The value in use was determined using the estimated future cash flow approach, which are also determined based on budgeted EBITDA as described above, based on discounted cash flows over a five-year period and taking into account past experience, but also the business strategy and market or industry economic trends. Beyond the five-year period, cash flows were extrapolated using estimated perpetual growth or decline rates, which do not exceed those forecasted for the specific markets in which the group of CGUs operates. The assumptions used by the Corporation in the discounted expected future cash flows model are categorized within Level 3 of the fair value hierarchy, which means that they are not based on observable market data.

The discount rate used by the Corporation in calculating value in use is the weighted-average cost of capital ("WACC") of comparable companies with operations that are similar to those of the group of CGUs. The WACC is an estimated unified rate of return that holders of equity and debt securities require on their investments, and it reflects the assessment of the current market, the time value of money and the specific risk applicable to the group of CGUs.

The following table presents the main groups of CGUs subject to a goodwill impairment test, the basis used for the recoverable amount and key assumptions used as at the date of the impairment test for the year ended October 27, 2024:

	Carrying amount of goodwill	Basis used for the recoverable amount	Capitalization multiple	Perpetual growth rate	After-tax discount rate
Packaging Sector
Americas Group	$706.1	Fair value	8.7x	N/A	N/A
Coatings Group	72.4	Value in use	N/A	2.0%	12.0%
Retail Services and Printing Sector
Printing Group	289.4	Fair value	4.0x	N/A	N/A
Marketing Product Group	29.8	Fair value	5.5x	N/A	N/A

The Corporation performed a sensitivity analysis on the most significant assumptions used to determine the recoverable amount for groups of CGUs subject to the impairment test. For the groups of CGUs for which the recoverable amount was determined based on fair value less costs of disposal, a decrease in capitalization multiples of 1.0x or a decrease in operating earnings before depreciation and amortization of 10.0%, taken individually, would not change the conclusions of the impairment test.

For the Coatings Group, for which the recoverable amount was determined based on the value in use model, the sensitivity analysis shows that a 1.2% increase in the discount rate after taxes or a decrease of 8.5% of the annual projected EBITDA, taken individually, would make the recoverable amount for the Coatings group equal to the carrying amount.

The Book Publishing Group and Business Solutions Group CGUs were validated as part of the impairment test as at October 27, 2024. The carrying amount of goodwill related to these CGUs is not significant compared to the total carrying amount of the Corporation's goodwill (Note 16).

Intangible assets with an indefinite useful life

The Corporation performed its annual impairment test for intangible assets with an indefinite useful life, which mainly comprise trade names acquired in book publishing business combinations. No impairment charges were recognized for the year ended October 27, 2024 and the same conclusions had been reached for the impairment test performed during the year ended October 29, 2023.

TRANSCONTINENTAL

Consolidated financial statements - 16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

7 DEPRECIATION AND AMORTIZATION

		October 27, 2024	October 29, 2023
Property, plant and equipment	13	$ 100.9	$ 111.2
Right-of-use assets	14	21.9	24.5
Intangible assets	15	92.4	99.2
		$ 215.2	$ 234.9

8 NET FINANCIAL EXPENSES

		October 27, 2024	October 29, 2023
Financial expenses on long-term debt		$ 44.1	$ 52.2
Interest on lease liabilities	24	3.6	3.3
Net interest on defined benefit asset and liability	26	3.9	2.9
Other expenses		6.1	7.7
Net foreign exchange losses		2.3	0.2
		$ 60.0	$ 66.3

9 INCOME TAXES

The following table presents a reconciliation of income taxes at the Canadian statutory tax rate and at the effective tax rate:

	October 27, 2024	October 29, 2023
Earnings before income taxes	$ 149.5	$ 98.4
Canadian statutory tax rate (1)	26.5%	26.5%
Income taxes at the statutory tax rate	39.6	26.1
Effect of differences in tax rates and additional income taxes in other jurisdictions	(10.4)	(10.6)
Income taxes on non-deductible expenses and non-taxable revenues	1.3	0.6
Change in deferred tax assets on tax losses or temporary differences not previously recognized	0.4	4.2
Adjustment for previous years' balances	(2.2)	(6.4)
Other	(1.1)	(1.4)
Income taxes at the effective tax rate	$ 27.6	$ 12.5
Income taxes before the following items:	$ 58.6	$ 43.1
Income taxes on amortization of intangible assets arising from business combinations	(16.3)	(18.1)
Income taxes on impairment of assets	(2.7)	(6.5)
Income taxes on restructuring and other costs	(8.6)	(6.0)
Recognition of previous years tax assets of an acquired company	(3.4)	—
Income taxes at the effective tax rate	$ 27.6	$ 12.5

(1) The Corporation's applicable tax rate corresponds to the combined Canadian tax rates applicable in the provinces where the Corporation operates.

The Corporation is present in countries that have adopted the new Pillar Two model rules on global minimum tax during the fiscal year, which will be effective as of its fiscal year ending October 26, 2025. The Corporation has assessed its potential exposure based on the most recent available information and determined that the transitional safe harbour provided for in the new Pillar Two model rules applies in most jurisdictions where it operates. However, there are a limited number of jurisdictions where the transitional safe harbour does not apply and where the effective tax rate could be lower than 15.0%. Based on its interpretation of the current law, the Corporation expects that the maximal annual impact on income taxes in these jurisdictions will not exceed $10.0 million, and monitors the developments in the various jurisdictions in which it operates. In addition, the Corporation has applied the mandatory temporary exemption to recognizing deferred tax assets and liabilities related to income taxes resulting from the Pillar Two global minimum tax rules and has therefore not recognized any deferred income tax assets and liabilities that would result from such rules.

TRANSCONTINENTAL

Consolidated financial statements - 17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

9 INCOME TAXES (CONTINUED)

The following table presents components of income tax expense for the years ended:

	October 27, 2024	October 29, 2023
Current taxes
Current year	$ 45.2	$ 44.6
Adjustment for previous year's balances	(4.6)	(3.3)
	40.6	41.3
Deferred taxes
Adjustment for previous year's balances	2.4	(3.1)
Origination and reversal of temporary differences	(15.5)	(29.2)
Change in deferred tax assets on tax losses or temporary differences not previously recognized	0.4	4.2
Impact of tax rate changes	(0.3)	(0.7)
	(13.0)	(28.8)
Income taxes	$ 27.6	$ 12.5

The following table presents components of the deferred tax asset and liability:

	As at October 27, 2024		As at October 29, 2023(1)
	Asset	Liability	Asset	Liability
Property, plant and equipment	$ —	$ 79.8	$ —	$ 83.0
Right-of-use assets	—	25.8	—	25.5
Intangible assets and goodwill	—	92.8	—	113.1
Non-deductible provisions for the year	16.7	—	13.8	—
Lease liabilities	31.0	—	30.7	—
Defined benefit plans	21.0	—	19.5	—
Loss carryforwards	23.9	—	39.8	—
Interest expense	50.5	—	45.9	—
Experimental research expenditure	16.4	—	7.1	—
Other	4.5	—	5.4	—
	164.0	198.4	162.2	221.6
Offsetting of assets and liabilities	(128.1)	(128.1)	(131.8)	(131.8)
	$ 35.9	$ 70.3	$ 30.4	$ 89.8

(1) Certain comparative figures have been reclassified to conform to the presentation adopted in the current year.
Loss carryforwards included in deferred tax assets, that have an expiration date, expire between 2025 and 2044.

TRANSCONTINENTAL

Consolidated financial statements - 18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

9 INCOME TAXES (CONTINUED)

Changes in deferred tax assets and liabilities for the year ended October 27, 2024 are as follows:

	Balance as at October 29, 2023	Recognized in net earnings	Exchange rate change	Recognized in other comprehensive income	Assets held for sale	Balance as at October 27, 2024
Property, plant and equipment	$ (83.0)	$ 2.1	$ (0.2)	$ —	$ 1.3	$ (79.8)
Right-of-use assets	(25.5)	(0.1)	(0.2)	—	—	(25.8)
Intangible assets and goodwill	(113.1)	14.0	—	—	6.3	(92.8)
Non-deductible provisions for the year	13.8	2.9	—	—	—	16.7
Lease liabilities	30.7	0.2	0.1	—	—	31.0
Defined benefit plans	19.5	0.7	—	0.8	—	21.0
Loss carryforwards	39.8	(16.9)	(0.1)	1.1	—	23.9
Interest expense	45.9	4.4	0.2	—	—	50.5
Experimental research expenditure	7.1	9.1	0.2	—	—	16.4
Other	5.4	(3.4)	(0.4)	2.9	—	4.5
	$ (59.4)	$ 13.0	$ (0.4)	$ 4.8	$ 7.6	$ (34.4)

Changes in deferred tax assets and liabilities for the year ended October 29, 2023 are as follows:

	Balance as at October 29, 2022	Recognized in net earnings	Exchange rate change	Recognized in other comprehensive income	Business combinations	Balance as at October 29, 2023
Property, plant and equipment	$ (89.8)	$ 8.5	$ (1.1)	$ —	$ (0.6)	$ (83.0)
Right-of-use assets	(36.6)	11.3	(0.2)	—	—	(25.5)
Intangible assets and goodwill	(126.1)	14.4	(1.4)	—	—	(113.1)
Non-deductible provisions for the year	24.4	(11.0)	0.1	—	0.3	13.8
Lease liabilities	41.3	(10.8)	0.2	—	—	30.7
Defined benefit plans	14.8	0.6	0.2	3.9	—	19.5
Loss carryforwards	40.4	(1.3)	0.7	—	—	39.8
Interest expense	32.4	12.5	1.0	—	—	45.9
Experimental research expenditure	—	6.9	0.2	—	—	7.1
Other	10.7	(2.3)	—	(3.0)	—	5.4
	$ (88.5)	$ 28.8	$ (0.3)	$ 0.9	$ (0.3)	$ (59.4)

As at October 27, 2024, the Corporation had $4.7 million in capital losses that can be carried forward indefinitely and for which the potential benefits have not been recognized. In addition to losses for which the tax impact was recorded, the Corporation has deductible temporary differences as well as loss carryforwards in various jurisdictions for which, considering that it is unlikely that a sufficient future taxable income will be available to use a portion of those items, the Corporation has not recognized a deferred tax asset totaling $19.2 million. Loss carryforwards related to this unrecognized asset expire for the most part between 2027 and 2036.

As at October 27, 2024, no deferred tax liability was recognized for temporary differences arising from investments in subsidiaries because the Corporation controls the decisions affecting the realization of such liabilities and it is probable that the temporary differences will not reverse in the foreseeable future.

TRANSCONTINENTAL

Consolidated financial statements - 19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

10 ACCOUNTS RECEIVABLE

	As at October 27, 2024	As at October 29, 2023
Trade receivables (1)	$ 454.1	$ 451.7
Allowance account for credit losses	(5.1)	(3.8)
Other receivables	55.4	66.8
	$ 504.4	$ 514.7

(1) As at October 27, 2024, trade receivables totaling $30.5 million ($41.7 million as at October 29, 2023) had been sold under a trade receivable purchase agreement. These trade receivables were derecognized upon their sale, as substantially all the risks and rewards were transferred to the acquirer under the terms and conditions of the agreement.

11 INVENTORIES

	As at October 27, 2024	As at October 29, 2023
Raw materials	$ 202.9	$ 218.0
Work in progress and finished goods	182.0	191.9
Provision for obsolescence	(19.2)	(18.8)
	$ 365.7	$ 391.1

12 ASSETS AND LIABILITIES HELD FOR SALE

On October 28, 2024, subsequent to the year ended October 27, 2024, the Corporation concluded the sale of its industrial packaging operations, part of the Packaging Sector, to Hood Packaging Corporation. This market offers few synergies and is not core to the Packaging sector's growth strategy. This transaction was completed for a total cash consideration of $132.0 million (US$95.0 million) and should give rise to a gain of approximately $42.8 million before income taxes and cumulative translation adjustments.

During the year ended October 27, 2024, the assets and liabilities subject to the sale of the industrial packaging operations, part of the Packaging Sector, were reclassified as assets and liabilities held for sale at the date of the approval of the transaction. The buildings related to the closures of Saint-Hyacinthe plant, in Quebec, part of the Retail Services and Printing Sector, and Tomah plant, in Wisconsin, part of the Packaging Sector, were reclassified as assets held for sale when all classification criteria were met.

The following table presents assets and liabilities held for sale as remeasured at the period end exchange rate:

	27 octobre 2024
Current assets
Accounts receivable	$7.3
Inventories	10.8
Property, plant and equipment	18.9
Intangible assets	26.4
Goodwill	44.7
Deferred taxes	0.8
Assets held for sale	$ 108.9
Current liabilities
Accounts payable and accrued liabilities	$4.7
Deferred taxes	8.4
Liabilities held for sale	$ 13.1
Assets held for sale net of liabilities held for sale	$ 95.8

TRANSCONTINENTAL

Consolidated financial statements - 20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

13 PROPERTY, PLANT AND EQUIPMENT

October 27, 2024	Land	Buildings	Leasehold improvements	Machinery and equipment	Other equipment	Assets under construction and deposits on equipment	Total
Cost
Balance, beginning of year	$ 50.7	$ 343.7	$ 51.9	$ 1,461.7	$ 88.6	$ 140.7	$ 2,137.3
Acquisitions	0.2	3.4	0.1	21.8	3.9	56.3	85.7
Made available for use	—	9.1	1.6	58.9	1.4	(71.0)	—
Disposals and retirement	(0.6)	(5.8)	(2.4)	(37.6)	(13.2)	—	(59.6)
Held for sale	(2.1)	(22.5)	—	(26.1)	(0.5)	—	(51.2)
Exchange rate change and other	0.1	0.8	—	2.3	0.1	6.9	10.2
Balance as at October 27, 2024	$ 48.3	$ 328.7	$ 51.2	$ 1,481.0	$ 80.3	$ 132.9	$ 2,122.4
Accumulated depreciation and impairment losses
Balance, beginning of year	$ —	$ (159.2)	$ (35.4)	$ (1,068.9)	$ (77.3)	$ —	$ (1,340.8)
Depreciation	—	(14.0)	(3.1)	(78.1)	(5.7)	—	(100.9)
Disposals and retirement	—	4.0	2.4	36.7	13.1	—	56.2
Impairment(1)	—	(0.7)	—	(8.8)	(0.2)	—	(9.7)
Held for sale	—	12.3	—	20.1	0.3	—	32.7
Exchange rate change and other	—	(0.3)	—	(8.2)	—	—	(8.5)
Balance as at October 27, 2024	$ —	$ (157.9)	$ (36.1)	$ (1,107.2)	$ (69.8)	$ —	$ (1,371.0)
Net carrying amount	$ 48.3	$ 170.8	$ 15.1	$ 373.8	$ 10.5	$ 132.9	$ 751.4

(1) During the year ended October 27, 2024, impairment charges of $9.7 million were recognized following the revision of estimates for the expected future economic benefits of machinery in the Retail Services and Printing and Packaging sectors as well as a result of a restructuring initiative in the Retail Services and Printing Sector.

TRANSCONTINENTAL

Consolidated financial statements - 21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

October 29, 2023	Land	Buildings	Leasehold improvements	Machinery and equipment	Other equipment	Assets under construction and deposits on equipment	Total
Cost
Balance, beginning of year	$ 50.7	$ 299.6	$ 52.3	$ 1,407.5	$ 85.4	$ 102.7	$ 1,998.2
Acquisitions	—	15.6	2.5	22.9	3.2	111.1	155.3
Made available for use	—	23.9	0.8	41.6	1.6	(67.9)	—
Business combinations	(0.5)	2.2	—	0.2	—	—	1.9
Disposals and retirement	(0.2)	(6.6)	(1.5)	(21.6)	(1.4)	—	(31.3)
Exchange rate change and other	0.7	9.0	(2.2)	11.1	(0.2)	(5.2)	13.2
Balance as at October 29, 2023	$ 50.7	$ 343.7	$ 51.9	$ 1,461.7	$ 88.6	$ 140.7	$ 2,137.3
Accumulated depreciation and impairment losses
Balance, beginning of year	$ —	$ (149.9)	$ (32.3)	$ (987.5)	$ (72.5)	$ —	$ (1,242.2)
Depreciation (1)	—	(13.9)	(3.0)	(88.0)	(6.3)	—	(111.2)
Disposals and retirement	—	6.0	1.3	18.6	1.5	—	27.4
Impairment	—	(0.2)	(0.3)	(11.4)	—	—	(11.9)
Exchange rate change and other	—	(1.2)	(1.1)	(0.6)	—	—	(2.9)
Balance as at October 29, 2023	$ —	$ (159.2)	$ (35.4)	$ (1,068.9)	$ (77.3)	$ —	$ (1,340.8)
Net carrying amount	$ 50.7	$ 184.5	$ 16.5	$ 392.8	$ 11.3	$ 140.7	$ 796.5

1) During the year ended October 29, 2023, impairment charges of $11.9 million were recognized following the revision of estimates for the expected future economic benefits of machinery in the Retail Services and Printing and Packaging sectors as well as a result of a restructuring initiative in the Packaging Sector.

Borrowing costs capitalized to property, plant and equipment

During the year ended October 27, 2024, an amount of $2.9 million was capitalized to property, plant and equipment as borrowing costs (amount of $3.1 million had been capitalized during the year ended October 29, 2023).

TRANSCONTINENTAL

Consolidated financial statements - 22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

14 LEASES

The Corporation leases real estate properties (office or warehousing spaces and buildings for plants) and other assets (production equipment, office equipment and other). Leases for real estate properties usually have a fixed term of 1 to 10 years, while other types of leases usually have a fixed term of 1 to 5 years. Leases may include extension and/or termination options that are taken into account when it is reasonably certain that the option will be exercised. Lease provisions are negotiated on an individual basis and contain a wide variety of terms and conditions.

A number of leases entered into throughout the Corporation include extension and termination options. These options are intended to provide as much flexibility as possible in managing leases. Most extension and termination options may only be exercised by the Corporation and not by the lessor.

The Consolidated Statement of Financial Position presents the following amounts related to leases for the years ended:

	October 27,					October 29,
	2024					2023
Right-of-use assets	Real estate properties	Other	Total	Real estate properties	Other	Total
Balance, beginning of year	$ 97.8	$ 0.8	$ 98.6	$ 138.9	$ 1.9	$ 140.8
Additions	—	1.9	1.9	—	0.6	0.6
Impairment(1)	(1.1)	—	(1.1)	—	—	—
Remeasurement of contracts	23.4	—	23.4	(17.8)	—	(17.8)
Depreciation	(21.2)	(0.7)	(21.9)	(22.8)	(1.7)	(24.5)
Exchange rate change and other	(1.2)	(0.1)	(1.3)	(0.5)	—	(0.5)
Balance, end of year	$ 97.7	$ 1.9	$ 99.6	$ 97.8	$ 0.8	$ 98.6

(1) During the year ended October 27, 2024, an impairment charge of $1.1 million (nil as at October 29, 2023) was recognized following the revision of estimates for the expected future economic benefits of certain leases of real estate properties.

For the years ended October 27, 2024 and October 29, 2023, the expense related to short-term leases, low-value leases and variable payments not included in lease liabilities was $11.2 million and $10.8 million, respectively.

The Corporation entered into subleasing transactions for some of its locations under leases. For the years ended October 27, 2024 and October 29, 2023, subleasing revenues amounted to $3.5 million and $3.4 million, respectively.

TRANSCONTINENTAL

Consolidated financial statements - 23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

15 INTANGIBLE ASSETS

October 27, 2024	Finite useful life			Indefinite useful life
	Customer relationships	Book prepublication costs	Technology project costs	Other (1)	Trade names and others	Total
Cost
Balance, beginning of year	$ 815.1	$ 185.4	$ 87.3	$ 35.5	$ 17.6	$ 1,140.9
Additions	—	17.0	9.3	0.1	—	26.4
Disposals and retirement	(0.2)	—	(5.4)	—	—	(5.6)
Held for sale	(47.5)	—	—	—	—	(47.5)
Exchange rate change and other	1.4	(0.3)	1.4	(0.7)	—	1.8
Balance as at October 27, 2024	$ 768.8	$ 202.1	$ 92.6	$ 34.9	$ 17.6	$ 1,116.0
Accumulated amortization and impairment losses
Balance, beginning of year	$ (476.1)	$ (137.6)	$ (53.5)	$ (26.6)	$ —	$ (693.8)
Amortization	(64.4)	(15.9)	(10.0)	(2.1)	—	(92.4)
Disposals and retirement	0.2	—	5.4	—	—	5.6
Held for sale	21.7	—	—	—	—	21.7
Exchange rate change and other	(2.2)	—	(0.4)	—	—	(2.6)
Balance as at October 27, 2024	$ (520.8)	$ (153.5)	$ (58.5)	$ (28.7)	$ —	$ (761.5)
Net carrying amount	$ 248.0	$ 48.6	$ 34.1	$ 6.2	$ 17.6	$ 354.5

(1) The "Other" category mainly comprises educational book titles, non-compete agreements, development costs, right of first refusal and acquired printing contracts.

October 29, 2023	Finite useful life			Indefinite useful life
	Customer relationships	Book prepublication costs	Technology project costs	Other (1)	Trade names and others	Total
Cost
Balance, beginning of year	$ 801.8	$ 168.7	$ 71.7	$ 34.8	$ 17.6	$ 1,094.6
Additions	—	17.1	15.1	—	—	32.2
Exchange rate change and other	13.3	(0.4)	0.5	0.7	—	14.1
Balance as at October 29, 2023	$ 815.1	$ 185.4	$ 87.3	$ 35.5	$ 17.6	$ 1,140.9
Accumulated amortization and impairment losses
Balance, beginning of year	$ (383.5)	$ (122.7)	$ (45.3)	$ (23.5)	$ —	$ (575.0)
Amortization	(71.8)	(15.7)	(8.6)	(3.1)	—	(99.2)
Impairment losses (2)	(13.0)	—	(0.3)	—	—	(13.3)
Exchange rate change and other	(7.8)	0.8	0.7	—	—	(6.3)
Balance as at October 29, 2023	$ (476.1)	$ (137.6)	$ (53.5)	$ (26.6)	$ —	$ (693.8)
Net carrying amount	$ 339.0	$ 47.8	$ 33.8	$ 8.9	$ 17.6	$ 447.1

(1) The "Other" category mainly comprises educational book titles, non-compete agreements, development costs, right of first refusal and acquired printing contracts.
(2) During the year ended October 29, 2023, an impairment charge of $13.0 million was recorded following the revision of estimates for the expected future economic benefits of customer relationships in the Retail Services and Printing Sector.

TRANSCONTINENTAL

Consolidated financial statements - 24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

16 GOODWILL

	October 27, 2024	October 29, 2023
Balance, beginning of year	$ 1,194.9	$ 1,181.7
Assets held for sale	(43.7)	—
Impact of finalizing purchase price allocation calculations	—	(2.3)
Exchange rate change	2.8	15.5
Balance, end of year	$ 1,154.0	$ 1,194.9

The carrying amount of goodwill is allocated to the groups of CGUs as follows:

Operating sectors	As at October 27, 2024	As at October 29, 2023
Packaging Sector
Americas Group	$ 706.1	$ 749.9
Coatings Group	72.4	69.5
	778.5	819.4
Retail Services and Printing Sector
Printing Group	289.4	289.4
Marketing Product Group	29.8	29.8
	319.2	319.2
Other
Book Publishing Group	50.6	50.6
Business Solutions Group	5.7	5.7
	56.3	56.3
	$ 1,154.0	$ 1,194.9

17 OTHER ASSETS

	Note	As at October 27, 2024	As at October 29, 2023
Contract acquisition costs		$ 4.7	$ 6.0
Defined benefit asset	26	1.9	2.6
Income tax credits receivable		12.7	11.0
Other		12.0	12.8
		$ 31.3	$ 32.4

TRANSCONTINENTAL

Consolidated financial statements - 25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

18 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	Notes	As at October 27, 2024	As at October 29, 2023
Accounts payable and other accruals		$ 289.1	$ 273.3
Salaries and other benefits payable		110.6	103.4
Stock-based compensation	22	17.0	8.8
Derivative financial instruments	28	23.4	11.7
Financial expenses payable		7.0	7.4
Provisions		5.1	6.4
Other		42.9	54.5
		$ 495.1	$ 465.5

19 LONG-TERM DEBT

	Effective Interest Rate as at October 27, 2024		As at October 27, 2024	As at October 29, 2023
Unsecured notes (issued in 2021)	2.41%	July 13, 2026	$ 250.0	$ 250.0
Unsecured notes (issued in 2022)	2.84%	February 3, 2025	199.0	192.2
U.S. dollar term loan (issued in 2021)	6.88%	June 14, 2028	161.3	163.1
U.S. dollar term loan (extended in 2022)	6.70%	June 30, 2027	156.3	156.0
Unified Debenture	4.84%	February 1, 2028	100.0	100.0
Credit facilities		2025-2028	—	76.3
Other loans		2026-2031	4.4	5.2
			$ 871.0	$ 942.8
Issuance costs on long-term debt at amortized cost			(1.9)	(2.9)
Total long-term debt			$ 869.1	$ 939.9
Current portion of long-term debt			$ 201.0	$ 2.1
Non-current portion of long-term debt			$ 668.1	$ 937.8

Credit facilities

The Corporation has a credit facility amounting to $400.0 million or the U.S. dollar equivalent, which matures in February 2028. The interest rate on the credit facility is based on the Corporation's credit rating. Based on the current credit rating, the applicable rate is the Canadian Overnight Repo Rate Average ("CORRA") plus 2.020% for one-month periods or plus 2.046% for three-month periods, or the Secured Overnight Financing Rate ("SOFR") plus 1.825%, or the Canadian prime rate or the U.S. prime rate plus 0.725%.

The Corporation has another credit facility with a maximum amount of US$15.0 million ($20.8 million), which matures in March 2025. The applicable interest rate for this credit facility is SOFR plus 1.450%. On February 21, 2024, this credit facility was extended for an additional year, and the maximum amount was decreased from US$25.0 million to US$15.0 million.

As at October 27, 2024, no amount was drawn on the credit facilities and the unused amount under the credit facilities was $420.8 million.

As at October 27, 2024, letters of credit amounting to $18.5 million ($22.4 million as at October 29, 2023) were issued, mainly to secure unpaid contributions with respect to the solvency deficiency of the Corporation's defined benefit plans (Note 26). The Corporation has revolving letters of credit facilities for an aggregate amount of $40.0 million, of which $16.4 million ($16.0 million as at October 29, 2023) had been issued on these facilities. Fees applicable to the issued portion of these letters of credit facilities are 0.80% annually.

The Corporation must comply with certain restrictive covenants, including maintaining certain financial ratios. During the year ended October 27, 2024, the Corporation has not been in default under any covenants.

Hedging instruments

During the year ended October 29, 2023, the Corporation entered into two interest rate swaps to hedge itself against future interest rate fluctuations on the U.S. dollar term loan (extended in 2022). The swaps have a notional amount of US$56.3 millions each and convert the floating interest rate into a fixed interest rate of 3.35% for one and 3.42% for the other. The Corporation applies cash flow hedge accounting by designating these swaps as hedging items (Note 28).

TRANSCONTINENTAL

Consolidated financial statements - 26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023
(in millions of Canadian dollars, unless otherwise indicated and per share data)

20 OTHER LIABILITIES

	Notes	As at October 27, 2024	As at October 29, 2023
Defined benefit liability	26	$ 86.2	$ 82.8
Derivative financial instruments	28	25.2	50.5
Stock-based compensation	22	13.2	8.1
Accrued liabilities and other liabilities		2.1	3.9
Long-term provisions		0.3	0.3
		$ 127.0	$ 145.6

21 SHARE CAPITAL

Class A Subordinate Voting Shares: subordinate participating voting shares carrying one vote per share, authorized in unlimited number, no par value.

Class B Shares: participating voting shares carrying 20 votes per share, convertible into Class A Subordinate Voting Shares, authorized in unlimited number, no par value.

The following table presents changes in the Corporation's share capital for the years ended:

	As at October 27, 2024		As at October 29, 2023
	Number of shares	Amount	Number of shares	Amount
Class A Subordinate Voting Shares
Balance, beginning of year	73,259,342	$ 618.4	72,711,344	$ 617.7
Conversion of Class B Shares into Class A Subordinate Voting Shares	—	—	547,998	0.7
Class A Shares repurchased and cancelled	(2,060,217)	(17.4)	—	—
Balance, end of year	71,199,125	$ 601.0	73,259,342	$ 618.4
Class B Shares
Balance, beginning of year	13,364,828	$ 18.2	13,912,826	$ 18.9
Conversion of Class B Shares into Class A Subordinate Voting Shares	—	—	(547,998)	(0.7)
Class B Shares repurchased and cancelled	(7,000)	—	—	$ —
Balance, end of year	13,357,828	18.2	13,364,828	18.2
	84,556,953	$ 619.2	86,624,170	$ 636.6

Share redemptions

On June 12, 2024 the Corporation has been authorized to repurchase, for cancellation on the open market, or subject to the approval of any securities authority by private agreements, between June 17, 2024 and June 16, 2025, or at an earlier date if the Corporation concludes or cancels the offer, up to 3,662,967 of its Class A Subordinate Voting Shares and up to 668,241 of its Class B Shares. The repurchases are made in the normal course of business at market prices through the Toronto Stock Exchange.

During the year ended October 27, 2024, the Corporation repurchased and cancelled 2,060,217 Class A Subordinate Voting Shares at a weighted average price of $15.65 and 7,000 Class B Shares at a weighted average price of $15.66, for a total cash consideration of $32.3 million. The excess of the total consideration over the carrying amount of the shares, amounting to $14.9 million, as well as taxes payable on share repurchase, amounting to $0.7 million, were applied against retained earnings. The taxes payable on share repurchase is presented under Income taxes payable.

During the year ended October 29, 2023, the Corporation did not repurchase any of its Class A Subordinate Voting Shares or Class B Shares. The Corporation was under no obligation to repurchase its Class A Subordinate Voting Shares and Class B Shares as at October 29, 2023.

On October 16, 2024, the Corporation authorized its broker to repurchase shares between October 28, 2024 and December 13, 2024, inclusively, in accordance with parameters set by the Corporation. As at October 27, 2024, this led to the recognition of a $17.6 million liability presented under Accounts payable and accrued liabilities.

Subsequent to the end of the year ended October 27, 2024, the Corporation repurchased 413,278 Class A Subordinated Voting Shares and 2,400 Class B Shares for a total cash consideration of $7.0 million.

TC • TRANSCONTINENTAL
Consolidated financial statements - 27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

21 SHARE CAPITAL (CONTINUED)

Net earnings per share

For the years ended October 27, 2024 and October 29, 2023, there were no dilutive items.

Dividends

Dividends of $0.90 per share were declared and paid to the holders of shares for each of the years ended October 27, 2024 and October 29, 2023.

22 STOCK-BASED COMPENSATION

Share unit plans

The Corporation offers a share unit plan for certain officers and senior executives under which deferred share units ("DSUs") and restricted share units ("RSUs") are granted. Vested DSUs and RSUs will be paid, at the Corporation's discretion, in cash or with Class A Subordinate Voting Shares of the Corporation purchased on the open market.

The Corporation also offers a DSU plan for its directors. Under this plan, directors may elect to receive as compensation either cash, DSUs, or a combination of both.

The following table presents the changes in the plans' status for the years ended:

	October 27, 2024	October 29, 2023	October 27, 2024	October 29, 2023
	Number of units
	DSUs		RSUs
Balance, beginning of year	851,001	1,056,790	1,180,654	1,715,442
Units granted	115,524	88,710	560,344	667,287
Units cancelled	—	(71,513)	(138,241)	(224,438)
Units paid	(55,988)	(283,368)	(360,376)	(1,061,492)
Incentive compensation paid in units	8,986	5,465	—	—
Dividends paid in units	53,678	54,917	69,792	83,855
Balance, end of year	973,201	851,001	1,312,173	1,180,654

As at October 27, 2024, the liability related to the share unit plans was $30.2 million, of which $13.2 million was presented under Other liabilities ($16.9 million as at October 29, 2023, of which $8.1 million was presented under Other liabilities) and the remaining balance was presented under Accounts payable and accrued liabilities. Expenses recorded in the Consolidated Statements of Earnings for the years ended October 27, 2024 and October 29, 2023 were $19.0 million and $3.1 million, respectively. Amounts of $5.7 million and $22.9 million were paid under these plans for the years ended October 27, 2024 and October 29, 2023, respectively.

Total return swap

The Corporation uses total return swaps to hedge a portion of the stock-based compensation expenses (gains) that vary based on the price of the Corporation's shares. These swaps have a term of 12 months each. During the year ended October 27, 2024, the Corporation renewed, at maturity, the contract covering 900,000 units at a weighted average price of $15.12 per unit, with similar terms. During the year ended October 29, 2023, the Corporation settled, at maturity, the total return swap covering 900,000 units at a weighted average price of $15.12 per unit for a consideration paid of $5.9 million.

During the years ended October 27, 2024 and October 29, 2023, amounts recognized in the Consolidated Statements of Earnings under Operating expenses, corresponding to the change in fair value of the total return swap for hedged units, before taking into account dividends received and interest paid, were a gain of $6.2 million and an expense of $5.1 million, respectively.

TRANSCONTINENTAL

Consolidated financial statements - 28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

23 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

	Cash flow hedges	Net investment hedges	Cumulative translation differences	Actuarial gains and losses related to defined benefit plans	Accumulated other comprehensive income
Balance as at October 29, 2023	$ (3.6)	$ (25.4)	$ 99.5	$ (33.5)	$ 37.0
Net change in gains (losses), net of income taxes	0.6	0.7	15.4	(2.0)	14.7
Balance as at October 27, 2024	$ (3.0)	$ (24.7)	$ 114.9	$ (35.5)	$ 51.7
Balance as at October 30, 2022	$ (11.6)	$ (11.3)	$ 66.3	$ (22.7)	$ 20.7
Net change in gains (losses), net of income taxes	8.0	(14.1)	33.2	(10.8)	16.3
Balance as at October 29, 2023	$ (3.6)	$ (25.4)	$ 99.5	$ (33.5)	$ 37.0

As at October 27, 2024, the amounts expected to be reclassified to net earnings in future years are as follows:

	2025	2026	2027	2028	Total
Net change in the fair value of derivatives designated as cash flow hedges	$ 4.2	$ 0.8	$ (1.7)	$ 0.7	$ 4.0
Income taxes (recovery)	1.1	0.2	(0.4)	0.1	1.0
	$ 3.1	$ 0.6	$ (1.3)	$ 0.6	$ 3.0

24 SUPPLEMENTAL INFORMATION ON THE CONSOLIDATED STATEMENTS OF CASH FLOWS

Changes in non-cash operating items are as follows for the years ended:

	October 27, 2024	October 29, 2023
Accounts receivable	$ 2.6	$ 66.4
Inventories	15.3	93.8
Prepaid expenses and other current assets	3.3	0.1
Accounts payable and accrued liabilities	10.4	(50.1)
Deferred revenues and deposits	0.6	(1.5)
Defined benefit plans	1.5	2.1
	$ 33.7	$ 110.8

The following table presents changes in financial liabilities for the year ended October 27, 2024:

	Opening balance	Cash flows related to financing activities	Non-cash changes				Closing balance
			Fair value adjustments and additions(1)	Foreign exchange rate effect	Amortization of deferred financing fees	Financial expenses
Long term debts	$ 866.5	$ (3.1)	$ 6.9	$ 0.7	$ —	$ —	$ 871.0
Credit facility	76.3	(75.4)	—	(0.9)	—	—	—
Lease liabilities	118.1	(26.5)	24.5	0.2	—	3.6	119.9
Issuance costs	(2.9)	—	—	(0.2)	1.2	—	(1.9)
Accrued interest	7.4	(43.3)	—	—	—	42.9	7.0
	$ 1,065.4	$ (148.3)	$ 31.4	$ (0.2)	$ 1.2	$ 46.5	$ 996.0

(1) Additions to lease liabilities include additions resulting from signing new contracts and modifying existing contracts.

TRANSCONTINENTAL

Consolidated financial statements - 29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

25 RELATED PARTY TRANSACTIONS

Key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Corporation, directly or indirectly, including any director (whether executive or otherwise) of the Corporation.

The following table presents key management personnel compensation for the years ended:

	October 27, 2024	October 29, 2023
Salaries and other short-term benefits	$ 13.2	$ 11.3
Post-employment benefits	0.6	0.6
Stock-based compensation	13.5	(0.3)
	$ 27.3	$ 11.6

26 EMPLOYEE BENEFITS

The Corporation offers its employees various contributory and non-contributory defined benefit pension plans and other post-employment defined benefit plans, defined contribution pension plans, group registered savings plans and multi-employer pension plans. Since June 1, 2010, most of the employees participate only in the defined contribution pension plans. For the defined benefit plans, the amount of benefits is generally calculated based on the employees' years of service and salaries. Plan funding is calculated based on actuarial estimates and is subject to limitations under applicable income tax and other regulations. Actuarial estimates prepared during the year were based on assumptions related to projected employee compensation levels up to the time of retirement and the anticipated long-term rate of return on pension plan assets. Certain obligations of the Corporation under the defined benefit plans are secured by letters of credit, drawn on the Corporation's credit facilities, which are pledged as collateral for unpaid contributions with respect to the solvency deficiency of the plans. The assets of the Corporation's defined benefit pension plans are held in a trust. The Corporation recognizes the annual amounts related to its defined benefit pension plans using calculations based on various actuarial assumptions, in particular regarding discount rates, mortality rates and annual rates of return on plan assets. These estimates may vary significantly from period to period based on the return on plan assets, actuarial valuations and market conditions. The Corporation reviews its actuarial assumptions each year and revises them based on prevailing rates and current trends. The Corporation believes that the assumptions used to account for its accrued benefit obligation are reasonable based on its experience, market conditions and data provided by its external actuary and investment advisor.

For defined contribution pension plans, multi-employer pension plans and group registered savings plans, the sole obligation of the Corporation is to make the monthly employer's contribution. The contributions paid by the Corporation to defined contribution pension plans are expensed in the period in which they are earned by employees.

In the United States, the defined benefit pension plans in which the Corporation's employees participated were closed to new participants before January 1, 2014. Consequently, the calculation of final benefits under the U.S. plans represented the benefits earned under the U.S. plans as of the date these plans stopped accepting new participants. Since then, new employees of the Corporation join 401(k)-type defined contribution pension plans. The obligations of the Corporation for this type of plan are limited to making the monthly employer's contribution.

The Board of Directors of the Corporation, with assistance from the pension committee, is responsible for the oversight and governance of the pension plans. The pension committee assists the Board in fulfilling its general oversight responsibilities with respect to pension plans, especially with regards to investment decisions, contributions to defined benefit plans and the selection of investment opportunities for defined contribution plans. Pension plan assets are held in a trust, except insured annuities. The Corporation's pension plans are managed in accordance with laws applicable to pension plans, which have determined minimum and maximum funding requirements for defined benefit pension plans.

The Corporation's funding policy is to make contributions to its pension plans based on various actuarial valuation methods, as permitted by regulatory bodies for pension plans. The Corporation's contributions to its pension plans reflect the most recent actuarial valuations for investment returns, salary projections and benefits related to future services. The funding of pension plans is based on funding measurement bases that are different from the accounting basis and for which the methods and assumptions may differ from those used for accounting purposes.

Defined benefit pension plans and other post-employment plans expose the Corporation to certain risks, including investment returns, changes in the discount rate used to measure the obligation, the mortality rate for plan participants, inflation and health care costs.

The Corporation also offers other long-term employee benefit plans that provide for continued dental and health care benefits in case of long-term disability.

The most recent actuarial valuations of the Corporation's pension plans for funding purposes were done as at December 31, 2021 for plans registered in Quebec, as at December 31, 2022 for plans registered in Ontario and as at December 1, 2022 for plans registered in the United States.

TRANSCONTINENTAL

Consolidated financial statements - 30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

26 EMPLOYEE BENEFITS (CONTINUED)

The defined benefit obligation and the fair value of the plan assets are measured on the date of the annual consolidated financial statements. The following table presents the changes in the defined benefit obligation and in the fair value of plan assets for the years ended:

	Pension benefits		Other defined benefit plans		Total
	October 27, 2024	October 29, 2023	October 27, 2024	October 29, 2023	October 27, 2024	October 29, 2023
Defined benefit obligation
Balance, beginning of year	$ 555.9	$ 575.9	$ 13.9	$ 16.0	$ 569.8	$ 591.9
Current service cost (1)	—	—	1.2	1.0	1.2	1.0
Interest cost on the defined benefit obligation	30.1	29.8	0.3	0.2	30.4	30.0
Actuarial gains or losses from:
Plan experience	2.9	2.8	—	(0.4)	2.9	2.4
Changes in financial assumptions	35.4	(10.2)	2.2	(1.2)	37.6	(11.4)
Benefits paid	(47.5)	(43.9)	(1.2)	(1.8)	(48.7)	(45.7)
Exchange rate change and other	0.2	1.5	—	0.1	0.2	1.6
Balance, end of year	$ 577.0	$ 555.9	$ 16.4	$ 13.9	$ 593.4	$ 569.8
Fair value of plan assets
Balance, beginning of year	$ 491.5	$ 531.4	$ —	$ —	$ 491.5	$ 531.4
Interest income on plan assets	26.6	27.3	—	—	26.6	27.3
Actuarial losses on plan assets	36.1	(24.2)	—	—	36.1	(24.2)
Administrative costs (other than asset management costs)	(3.0)	(2.7)	—	—	(3.0)	(2.7)
Benefits paid	(47.5)	(43.9)	(1.2)	(1.8)	(48.7)	(45.7)
Employer contributions	7.2	2.5	1.2	1.8	8.4	4.3
Purchase of annuities (buy-out)	(1.7)	—	—	—	(1.7)	—
Exchange rate change and other	0.3	1.1	—	—	0.3	1.1
Balance, end of year	$ 509.5	$ 491.5	$ —	$ —	$ 509.5	$ 491.5
Plan deficit	$ (67.5)	$ (64.4)	$ (16.4)	$ (13.9)	$ (83.9)	$ (78.3)
Effect of the asset ceiling	(0.4)	(1.9)	—	—	(0.4)	(1.9)
Defined benefit liability	$ (67.9)	$ (66.3)	$ (16.4)	$ (13.9)	$ (84.3)	$ (80.2)

(1) The current service cost for the other defined benefit plans includes the net change in the long-term disability plan, consisting of current service cost and actuarial gains or losses. The past service cost for this plan, if any, is presented on a separate line.

TRANSCONTINENTAL

Consolidated financial statements - 31

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

26 EMPLOYEE BENEFITS (CONTINUED)

The defined benefit asset (liability) is included as follows in the Consolidated Statements of Financial Position:

	Notes	As at October 27, 2024	As at October 29, 2023
Other assets	17	$ 1.9	$ 2.6
Other liabilities	20	(86.2)	(82.8)
		$ (84.3)	$ (80.2)

The following table presents the composition of the fair value of the pension plan assets:

	As at October 27, 2024	As at October 29, 2023
Quoted in an active market
Cash	$ 1.3	$ 1.1
Real estate fund	37.1	38.5
Fixed-income securities investment funds	250.1	253.1
Mortgage securities investment funds	17.1	16.0
Canadian and foreign equities investment funds	50.1	41.7
	355.7	350.4
Not quoted in an active market
Insured annuities	153.8	141.1
	$ 509.5	$ 491.5

For the years ended October 27, 2024 and October 29, 2023, the plan assets did not include any shares of the Corporation.

The matching strategy for the Corporation's assets and liabilities consists in minimizing risk through the purchase of insured annuities and debt securities. For the years ended October 27, 2024 and October 29, 2023, the plans invested in buy-in insured annuities. Their fair value is considered equal to the defined benefit obligation for participants targeted by the annuities purchases, calculated using assumptions applicable at the reporting date.

The following table presents the funded status of defined benefit plans:

	Pension benefits		Other defined benefit plans		Total
	As at October 27, 2024	As at October 29, 2023	As at October 27, 2024	As at October 29, 2023	As at October 27, 2024	As at October 29, 2023
Fair value of plan assets for funded or partially funded plans	$ 509.5	$ 491.5	$ —	$ —	$ 509.5	$ 491.5
Defined benefit obligation of funded or partially funded plans	557.3	537.2	—	—	557.3	537.2
Effect of the asset ceiling	(0.4)	(1.9)	—	—	(0.4)	(1.9)
Funded status of funded or partially funded plans - deficit	$ (48.2)	$ (47.6)	$ —	$ —	$ (48.2)	$ (47.6)
Defined benefit obligation of unfunded plans	(19.7)	(18.7)	(16.4)	(13.9)	(36.1)	(32.6)
Total funded status - deficit	$ (67.9)	$ (66.3)	$ (16.4)	$ (13.9)	$ (84.3)	$ (80.2)

The Corporation expects to contribute an estimated amount of $6.9 million to its defined benefit plans during the year ending October 26, 2025. The actual amount paid may differ from the estimate based on the results of the actuarial valuations, investment returns, volatility in discount rates, regulatory requirements and other factors.

TRANSCONTINENTAL

Consolidated financial statements - 32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

26 EMPLOYEE BENEFITS (CONTINUED)

The following table presents the significant assumptions used to calculate the Corporation's defined benefit obligation:

	As at October 27, 2024	As at October 29, 2023
Discount rate, end of year
Canada	4.80 %	5.60 %
United States	5.30	6.20
Weighted average rate of compensation increase
Canada	2.62	2.82

As at October 27, 2024, in Canada, the growth rate of health care costs for other post-employment defined benefit plans was estimated at 6.0%, gradually decreasing over 15 years to reach 4.5% and remain at this level afterwards.

The following table presents the impact of changes in the significant assumptions on the defined benefit obligation for the year ended October 27, 2024 and has some limitations. The sensitivities of each significant assumption have been calculated without taking into account any changes in the other assumptions. Actual results could therefore lead to changes in other assumptions simultaneously. Any change in one factor may result in changes in another factor, which could amplify or reduce the impact of changes in significant assumptions.

Increase (decrease)	Defined benefit obligation
Impact of 10 bps increase in discount rate	$ (4.8)
Impact of 10 bps decrease in discount rate	4.9
Impact of 100 bps increase in growth rate of health care costs	0.4
Impact of 100 bps decrease in growth rate of health care costs	(0.4)

The following table presents the composition of the defined benefit plan cost for the years ended:

	Pension benefits			Other defined benefit plans		Total
	Note	October 27, 2024	October 29, 2023	October 27, 2024	October 29, 2023	October 27, 2024	October 29, 2023
Current service cost		$ —	$ —	$ 1.2	$ 1.0	$ 1.2	$ 1.0
Administrative costs		3.0	2.7	—	—	3.0	2.7
Purchase of annuities (buy-out)		1.7	—	—	—	1.7	—
Plan cost recognized in net earnings		4.7	2.7	1.2	1.0	5.9	3.7
Interest cost on the defined benefit obligation		30.1	29.8	0.3	0.2	30.4	30.0
Interest income on plan assets		(26.6)	(27.3)	—	—	(26.6)	(27.3)
Interest on the effect of the asset ceiling		0.1	0.2	—	—	0.1	0.2
Net interest on the defined benefit liability	8	3.6	2.7	0.3	0.2	3.9	2.9
Defined benefit plan cost		$ 8.3	$ 5.4	$ 1.5	$ 1.2	$ 9.8	$ 6.6

TRANSCONTINENTAL

Consolidated financial statements - 33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

26 EMPLOYEE BENEFITS (CONTINUED)

The following table presents the costs recognized under Operating expenses in the Consolidated Statement of Earnings for defined contribution pension plans and state plans for the years ended:

	October 27, 2024	October 29, 2023
Defined contribution pension plans	$ 20.5	$ 20.6
State plans	16.3	16.4
	$ 36.8	$ 37.0

27 COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES

Commitments

The Corporation leases real estate properties (office or warehousing spaces and buildings for plants) and other assets (production equipment, office equipment and other). Minimum payments related to most of the Corporation's lease commitments have been recognized as lease liabilities in the Statement of Financial Position. For more details, see Note 28.

As at October 27, 2024, the Corporation had commitments with suppliers for capital expenditures totaling $22.7 million. The Corporation has commitments for rental payments under short-term leases and leases of low-value, that are not included in lease liabilities. In the normal course of business, the Corporation enters from time to time into various goods purchase agreements under which it is required to purchase annually a minimum amount or quantity of raw materials. Any failure to meet these requirements could lead to renegotiating the terms and conditions of the agreements.

Guarantees

In the normal course of business, the Corporation has provided the following significant guarantees to third parties:

a) Indemnification of third parties

Under the terms of debt agreements, the Corporation has agreed to indemnify the holders of such debt instruments against any increase in costs incurred or reduction in the amounts otherwise payable to them resulting from changes in laws and regulations. These indemnification commitments are in effect for the term of the agreements and have no limitations. Given the nature of these indemnification agreements, the Corporation is unable to estimate its maximum potential liability to third parties. Historically, the Corporation has not made any indemnification payments and, as at October 27, 2024, the Corporation had not recorded a liability associated with these indemnification agreements.

b) Business disposals

In connection with the disposal of operations or assets, the Corporation agreed to indemnify against any claims that may result from its previous activities or arise under in-force agreements at the transaction date. Given the nature of these indemnification agreements, the Corporation is unable to estimate its maximum potential liability to guaranteed parties. Historically, the Corporation has not made any significant indemnification payments and, as at October 27, 2024, the Corporation had not recorded any liability associated with these indemnification agreements.

Contingent liabilities

In the normal course of operations, the Corporation is involved in various claims and legal proceedings. Although the outcome of these pending cases as at October 27, 2024, cannot be determined with certainty, the Corporation considers that their outcome is unlikely to have a material adverse effect on its financial position and operating results, given the provisions or insurance coverage with regards to some of these claims and legal proceedings.

28 FINANCIAL INSTRUMENTS

Fair value of financial instruments

The fair value represents the amount that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date. The fair value estimates are calculated at a specific date taking into consideration assumptions regarding the amounts, the timing of estimated future cash flows and discount rates. Therefore, due to its estimated and subjective nature, the fair value must not be interpreted as being realizable in an immediate settlement of the financial instruments.

The carrying amount of cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short term maturities.

The fair value of long-term debt is determined using the discounted future cash flows method and management's estimates for market interest rates for identical or similar issuances.

TRANSCONTINENTAL

Consolidated financial statements - 34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

28 FINANCIAL INSTRUMENTS (CONTINUED)

Fair value of financial instruments (continued)

The only financial instruments of the Corporation that are measured at fair value on a recurring basis subsequent to their initial recognition are derivative financial instruments, including foreign exchange forward contracts, interest rate swaps, cross-currency interest rate swaps, total return swaps and contingent considerations payable related to business combinations, if any. The fair value of derivative financial instruments is determined using an evaluation of the estimated market value, adjusted for the credit quality of the counterparty or the Corporation. The valuation model for contingent considerations considers the present value of expected payments, discounted using a risk-adjusted discount rate. The expected payment is determined by considering various scenarios of achievement of pre-established financial performance thresholds, the amount to be paid under each scenario and the probability of occurrence of each scenario.

The Corporation presents a fair value hierarchy with three levels that reflects the significance of inputs used in determining the fair value assessments. The fair value of financial assets and liabilities classified in these three levels is evaluated as follows:

Level 1 - Unadjusted prices on active markets for identical assets or liabilities
Level 2 - Inputs other than the prices included within Level 1, that are observable for the asset or liability, directly (prices) or indirectly (derived from prices)
Level 3 - Inputs for the asset or liability that are not based on observable market data

The following table presents the fair value and the carrying amount of other financial instruments and derivative financial instruments:

	As at October 27, 2024			As at October 29, 2023
	Fair value hierarchy	Fair value	Carrying amount	Fair value	Carrying amount
Prepaid expenses and other current assets
Foreign exchange forward contracts	Level 2	$ 0.1	$ 0.1	$ 0.1	$ 0.1
Total return swap	Level 2	2.0	2.0	—	—
Other assets
Foreign exchange forward contracts	Level 2	2.1	2.1	—	—
Interest rate swaps	Level 2	1.5	1.5	5.8	5.8
Accounts payable and accrued liabilities
Cross-currency fixed interest rate swaps	Level 2	(19.2)	(19.2)	—	—
Total return swap	Level 2	—	—	(4.3)	(4.3)
Foreign exchange forward contracts	Level 2	(4.2)	(4.2)	(7.4)	(7.4)
Long-term debt
Long-term debt	Level 2	(877.4)	(869.1)	(920.5)	(939.9)
Other liabilities
Cross-currency fixed interest rate swaps	Level 2	(21.8)	(21.8)	(47.0)	(47.0)
Foreign exchange forward contract	Level 2	(3.4)	(3.4)	(3.5)	(3.5)

During the years ended October 27, 2024 and October 29, 2023, no financial instruments were transferred between Levels 1, 2 and 3.

Financial risk management

In the normal course of business, the Corporation is exposed to various financial risks: credit risk, liquidity risk and market risk (including foreign currency risk and interest rate risk).

Credit risk

Credit risk is the risk that the Corporation will incur losses arising from the failure of third parties to meet their contractual obligations. The Corporation is exposed to credit risk with regard to its accounts receivable and loans receivable, as well as through its normal activities involving cash. The Corporation's maximum exposure to credit risk for these elements is represented by their carrying amount in the Consolidated Statements of Financial Position. The Corporation is also exposed to credit risk with regard to its derivative financial instrument assets. However, the Corporation estimates this risk as low because it deals only with recognized financial institutions with investment-grade credit ratings. As at October 27, 2024, the Corporation's maximum exposure to credit risk related to derivative financial instrument assets was low.

The Corporation regularly analyzes and examines the financial position of customers and applies rigorous evaluation procedures to all new customers. The Corporation establishes a specific credit limit for each customer and periodically reviews the limits for customers that are significant or considered at risk. As well, the Corporation believes that it is protected against any concentration of risk through its products, customer base and geographic diversity.

TRANSCONTINENTAL

Consolidated financial statements - 35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

28 FINANCIAL INSTRUMENTS (CONTINUED)

Credit risk (continued)

In addition, under the terms and conditions of a trade receivable purchase agreement, the Corporation may sell on an ongoing basis the trade receivables from certain designated customers to a third party financial institution in exchange for a cash payment corresponding to the face value of the trade receivables sold less an applicable discount. The Corporation retains all responsibilities related to servicing the trade receivables, including collection, but does not retain any credit risk related to sold trade receivables. All trade receivables sold under the trade receivables purchase agreement are derecognized from the Consolidated Statements of Financial Position, as the sale of trade receivables qualifies for derecognition.

As at October 27, 2024, no single customer represented 10.0% or more of the revenues of the Corporation, or 10.0% or more of the related accounts receivable.

The Corporation determines whether receivables are past due according to the types of customers, their payment history and the industry in which they conduct business. An allowance account for credit losses is set up based on factors such as the credit risk of specific customers, historical trends and other data. The allowance account for credit losses is reviewed at each reporting date by management. Loss allowances for credit losses are set up, if needed, to reflect credit losses risks.

a) Definition of default

The Corporation considers the following items as a default for internal credit risk management purposes, as past experience indicates that financial assets meeting any of these conditions are generally not recoverable:

breaches of financial covenants by a debtor;
information prepared internally or from external sources indicating that it is unlikely that the debtor will fully repay its creditors, including the Corporation (without considering any collateral held by the Corporation).

b) Write-down policy

The Corporation writes down the value of a financial asset when information indicates that the debtor has significant financial difficulties and there are no realistic prospects of recovery, for instance at the earliest of when the debtor is in liquidation or enters into bankruptcy proceedings or, in the case of accounts receivable, when amounts more than 12 months past due. Derecognized financial assets may continue to be subject to measures under the Corporation's recovery procedures, based on legal advice, if applicable. Amounts recovered are recognized in net earnings.

Receivables are detailed as follows:

Trade receivables	As at October 27, 2024	As at October 29, 2023
Current balance	$ 352.7	$ 355.4
1 - 30 days past due	64.9	55.2
31 - 60 days past due	13.7	17.0
More than 60 days past due	22.8	24.1
	454.1	451.7
Allowance account for credit losses	(5.1)	(3.8)
	$ 449.0	$ 447.9

The change in the allowance account for credit losses is as follows for the years ended:

	October 27, 2024	October 29, 2023
Balance, beginning of year	$ 3.8	$ 3.1
Loss allowance for credit losses	2.8	0.9
Receivables recovered or written off	(1.5)	(0.2)
Balance, end of year	$ 5.1	$ 3.8

To assess whether the credit risk on a financial instrument has increased significantly since initial recognition, the Corporation compares the risk of default as at the reporting date with the risk of default as at the initial recognition date of the financial instrument. In making this assessment, the Corporation considers reasonable and supportable quantitative and qualitative information, including past experience and forward-looking information that is available without undue cost or effort. Forward-looking information considered include future prospects for the industries in which the Corporation's debtors operate from reports prepared by experts in economics, financial analysts, government agencies, relevant think tanks and other similar organizations, as well as various external sources of economic information and forecasts related to the Corporation's core operations. Based on its analysis, the Corporation is of the opinion that the allowance account for credit losses is adequate to cover risks of non-payment.

TRANSCONTINENTAL

Consolidated financial statements - 36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

28 FINANCIAL INSTRUMENTS (CONTINUED)

Liquidity risk

Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they mature. The Corporation is exposed to liquidity risk with regard to its accounts payable, long-term debt, lease liabilities, derivative financial instrument liabilities and contractual obligations. The Corporation manages liquidity risk by analyzing on an ongoing basis current and projected cash flows. The Board of Directors reviews and approves the Corporation's operating and investment budgets as well as all material transactions that are not carried out in the normal course of business.

The following table presents the contractual maturities of financial liabilities as at October 27, 2024:

	Carrying amount	Contractual cash flows	Less than 1 year	1-3 years	3-5 years	Over 5 years
Non-derivative financial liabilities
Accounts payable and accrued liabilities	$ 464.7	$ 464.7	$ 464.7	$ —	$ —	$ —
Long-term debt	869.1	969.1	236.5	466.0	110.3	156.2
Lease liabilities	119.9	133.7	27.4	43.6	34.5	28.2
Other monetary liabilities	13.2	13.2	—	13.2	—	—
	$ 1,466.9	$ 1,580.7	$ 728.6	$ 522.8	$ 144.8	$ 184.4
Derivative financial instruments in liabilities
Cross-currency interest rate swaps	$ 41.0	$ 50.6	$ 22.2	$ 28.4	$ —	$ —
Foreign exchange forward contracts in liabilities	7.6	7.6	4.2	3.4	—	—
	$ 1,515.5	$ 1,638.9	$ 755.0	$ 554.6	$ 144.8	$ 184.4

Market risk

The market risk is the risk that the Corporation will incur losses arising from adverse changes in underlying market factors, including interest and exchange rates.

a) Interest rate risk

The Corporation is exposed to market risk related to interest rate fluctuations because a portion of its long-term debt bears interest at floating rates. The Corporation manages this risk by maintaining a mix of fixed and floating rate borrowings in accordance with the Corporation's policies and by entering into interest rate swaps.

For the year ended October 27, 2024, all other things being equal, if interest rates had increased or decreased by 50 basis points, the Corporation's net earnings would have decreased or increased by $1.9 million.

b) Foreign currency risk

The Corporation operates in various countries and is exposed to foreign currency risk resulting from transactions in different foreign currencies. Foreign currency risk arises mainly from future business transactions denominated in currencies other than the functional currency of the Corporation's entity that is party to the transaction, from the recognition of assets and liabilities in currencies other than the functional currency of the Corporation and from investments in foreign operations. The Corporation manages foreign currency risk by entering into various foreign exchange contracts related to future transactions, among other things. The Corporation also manages foreign currency risk by entering into various cross-currency interest rate swaps that are designated as hedges of its net investment in foreign operations having the U.S. dollar as functional currency. In addition to the derivative financial instruments described above, the Corporation may designate a portion of its term loans and credit facilities denominated in U.S. dollars as hedging instruments for its net investment in foreign operations, thereby enabling it to limit its foreign currency risk.

For the year ended October 27, 2024, all other things being equal, a hypothetical 10% appreciation of the U.S. dollar against the Canadian dollar would have increased the Corporation's net earnings by $17.3 million and increased the Corporation's other comprehensive income by $0.2 million. A hypothetical 10% depreciation of the U.S. dollar against the Canadian dollar would have the opposite effect on net earnings and other comprehensive income.

TRANSCONTINENTAL

Consolidated financial statements - 37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

28 FINANCIAL INSTRUMENTS (CONTINUED)

Hedging relationships

To mitigate the market risks described above, the Corporation uses various derivative financial instruments that are designated as hedging instruments in hedging relationships, in particular interest rate swaps that are detailed as follows:

Derivative financial instruments	Receivable interest rate	Payable interest rate	Maturity date	Notional amount	Carrying amount	Carrying amount
Floating-to-fixed interest rate swap (1)	SOFR 1 month	3.350%	June 30, 2027	US$ 56.3	$ 0.8	$ 2.9
Floating-to-fixed interest rate swap (1)	SOFR 1 month	3.420%	June 30, 2027	US$ 56.3	0.7	2.9
Cross-currency fixed interest rate swaps (2)	2.280%	2.055%	July 13, 2026	$ 250.0	(21.8)	(21.4)
Cross-currency fixed-to-floating interest rate swaps (3)	2.667%	SOFR + 1.088%	February 3, 2025	$ 200.0	(19.2)	(25.6)
					$ (39.5)	$ (41.2)

(1) These floating-to-fixed interest rate swaps have been designated as hedging instruments in cash flow hedging relationships to mitigate interest rate risk.
(2) These cross-currency fixed interest rate swaps (CAD/USD) amounting to $250.0 million (US$200.4 million) have been designated as hedging instruments in net investment hedging relationships to mitigate foreign currency risk.
(3) The fixed CAD/variable CAD portion of these cross-currency interest rate swaps amounting to $200.0 million (US$157.1 million) has been designated as a hedging instrument to hedge the change in fair value of unsecured notes (issued in 2021) resulting from fluctuations in the benchmark rate. The floating CAD/floating USD portion of these cross-currency interest rate swaps amounting to $200.0 million (US$157.1 million) has been designated in a net investment hedging relationship to mitigate foreign currency risk.

In addition to interest rate swaps, the Corporation may designate a portion of its existing term loans and credit facilities denominated in U.S. dollars as a hedging instrument for its net investment in foreign operations. As at October 27, 2024, the Corporation had designated an amount of $194.2 million (US$139.8 million) of existing term loans and credit facilities denominated in U.S. dollars as net investment hedge.

In addition, the Corporation uses various derivative financial instruments that are designated as hedging instruments in cash flow hedging relationships, in particular foreign exchange forward contracts that are detailed as follows:

October 27, 2024	Maturity	Payable notional amount	Receivable notional amount	Average exchange rate	Carrying amount
Derivative financial instruments in assets
Foreign exchange contracts	November 2024 - July 2028	US$ 70.5	$ 97.4	1.382	$ 2.1
Derivative financial instruments in liabilities
Foreign exchange contracts	October 2024 - October 2028	US$ 195.9	$ 265.1	1.353	(7.6)
					$ (5.5)
October 29, 2023	Maturity	Payable notional amount	Receivable notional amount	Average exchange rate	Carrying amount
---	---	---	---	---	---
Derivative financial instruments in assets
Foreign exchange contracts	November 2023 - April 2024	US$ 1.5	$ 1.9	1.286	$ —
Foreign exchange contracts	November 2023 - January 2024	£ 0.2	US$ 0.3	1.348	—
Derivative financial instruments in liabilities
Foreign exchange contracts	October 2023 - August 2026	US$ 188.3	$ 249.8	1.327	(10.6)
Foreign exchange contracts	March 2024	US$ 1.6	€ 1.5	0.922	—
					$ (10.6)

TRANSCONTINENTAL

Consolidated financial statements - 38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023

(in millions of Canadian dollars, unless otherwise indicated and per share data)

28 FINANCIAL INSTRUMENTS (CONTINUED)

Impact of cash flow hedging relationships

The following table summarizes the impact of, and gains (losses) on cash flow hedges on the consolidated financial statements:

Cash flow hedges	Interest rate risk	October 27, 2024 Foreign currency risk	Interest rate risk	October 29, 2023 (1) Foreign currency risk
Balance, beginning of year	$ 5.8	$ (10.6)	$ (0.1)	$ (15.6)
Change in fair value recognized in other comprehensive income (loss)	(1.4)	0.7	7.5	1.9
Amounts from the cash flow hedge reserve recognized in net financial expenses	(2.9)	4.4	(1.6)	3.1
Balance, end of year	$ 1.5	$ (5.5)	$ 5.8	$ (10.6)

(1) For the year ended October 29, 2023, an amount of $3.4 million was reclassified between the change in fair value recognized in other comprehensive income (loss) and the amounts from the cash flow hedge reserve recognized in net financial expenses for interest rate risk. An amount of $6.2 million was also reclassified between the same two line items for foreign exchange risk. These reclassifications had no impact on comprehensive income and net earnings.

For the years ended October 27, 2024 and October 29, 2023, no expenses related to the ineffectiveness of the hedging relationships presented above were recognized in net earnings.

Impact of net investment hedging relationships

The following table summarizes the impact of and gains (losses) on net investment hedges on the consolidated financial statements:

October 27, 2024	Net investment hedge reserve	Cost of hedging reserve	Total
Balance, beginning of year	$ (23.8)	$ 2.7	$ (21.1)
Change in fair value recognized in other comprehensive income	(5.7)	(1.7)	(7.4)
Amounts from the cost of hedging reserve recognized in net financial expenses	—	3.9	3.9
Balance, end of year	$ (29.5)	$ 4.9	$ (24.6)

The following table summarizes the impact of and gains (losses) on net investment hedges on the consolidated financial statements:

October 29, 2023	Net investment hedge reserve (1)	Cost of hedging reserve (1)	Total
Balance, beginning of year	$ (13.2)	$ 6.1	$ (7.1)
Change in fair value recognized in other comprehensive income	(10.6)	(6.6)	(17.2)
Amounts from the cost of hedging reserve recognized in net financial expenses	—	3.2	3.2
Balance, end of year	$ (23.8)	$ 2.7	$ (21.1)

(1) Certain comparative figures have been reclassified to conform to the presentation adopted in the current year.

Gains of $0.1 million have been recognized in net earnings as hedging relationships ineffectiveness for each of the years ended October 27, 2024 and October 29, 2023.

Impact of fair value hedging relationships

As at October 27, 2024, the carrying amount of the hedged item, namely a portion of long-term debt, was $199.0 million ($192.2 million as at October 29, 2023) (Note 19). This amount included a cumulative fair value hedge adjustment of $1.0 million ($7.8 million as at October 29, 2023) to the carrying amount of the hedged item. For the years ended October 27, 2024 and October 29, 2023 the amounts recognized in net earnings as hedging relationships ineffectiveness were a gain of nil and a gain of $0.1 million, respectively.

TRANSCONTINENTAL

Consolidated financial statements - 39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 27, 2024 and October 29, 2023
(in millions of Canadian dollars, unless otherwise indicated and per share data)

29 CAPITAL MANAGEMENT

The Corporation's main capital management objectives are as follows:

Optimize the financial structure by targeting a ratio of net debt to operating earnings before depreciation and amortization excluding restructuring and other costs (revenues) and impairment of assets ("adjusted operating earnings before depreciation and amortization") in order to maintain a high credit rating;
Preserve its financial flexibility in order to seize strategic investment opportunities.

The Corporation relies on the ratio of net indebtedness to adjusted operating earnings before depreciation and amortization as the main indicator of financial leverage. The net indebtedness ratio is as follows for the years ended:

	October 27, 2024	October 29, 2023
Long-term debt	$ 668.1	$ 937.8
Lease liabilities	95.8	94.6
Current portion of long-term debt	201.0	2.1
Current portion of lease liabilities	24.1	23.5
Cash	(185.2)	(137.0)
Net indebtedness	$ 803.8	$ 921.0
Adjusted operating earnings before depreciation and amortization	$ 469.4	$ 446.5
Net indebtedness ratio	1.71x	2.06x

30 SUBSEQUENT EVENTS

Labour Conflict at Canada Post

On November 15, 2024, the Canadian Union of Postal Workers initiated a national strike. As of December 11, 2024, this labour conflict at Canada Post, which remain unresolved, is disrupting the distribution services of flyers, including the raddar™ leaflet. As a result, the Corporation is incurring revenue losses in regions where raddar™ is not distributed through alternative networks, as well as additional costs, including the printing costs of undistributed flyers and the establishment of alternative distribution networks in certain regions of Quebec. As of December 11, 2024, the revenue losses, and consequently the profit losses, along with the additional costs, are estimated at approximately $7.0 million.

TC • TRANSCONTINENTAL
Consolidated financial statements - 40

AI assistant

Transcontinental Inc — Audit Report / Information 2024

42516_rns_2024-12-12_d5664293-04a1-42fd-859f-081c01796063.pdf

MANAGEMENT'S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS

INDEPENDENT AUDITOR'S REPORT

Opinion

Basis for Opinion

Key Audit Matters

Assessment of the recoverable amount of groups of cash-generating units (CGUs) to which a goodwill is allocated

Description of the matter

Why the matter is a key audit matter

How the matter was addressed in the audit

Other Information

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Auditor's Responsibilities for the Audit of the Financial Statements

CONSOLIDATED STATEMENTS OF EARNINGS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONSOLIDATED STATEMENTS OF CASH FLOWS

1 GENERAL INFORMATION

2 MATERIAL ACCOUNTING POLICIES

Basis of presentation

a) Basis of measurement

b) Basis of consolidation

c) Business combinations

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

d) Revenue recognition

e) Inventories

f) Property, plant, equipment

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

g) Leases

h) Intangible assets

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Impairment of non-financial assets

j) Provisions

k) Foreign currency translation

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

I) Financial instruments

m) Derivative financial instruments and hedge accounting

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

m) Derivative financial instruments and hedge accounting (continued)

n) Critical judgments and sources of estimation uncertainty

i) Impairment of non-financial assets

ii) Income taxes

iii) Employee benefits

iv) Assets and liabilities held for sale

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o) Impact of new accounting standards, amendments and interpretations adopted during the year

i) Amendments to IAS 1 Presentation of Financial Statements

ii) Amendments to IAS 12 Income Taxes

p) New accounting standards, amendments and interpretations issued but not yet adopted

i) Amendments to IAS 1 Presentation of Financial Statements

ii) Amendments to IFRS 7 Financial Instruments: Disclosures and IFRS 9 Financial Instruments

iii) IFRS 18 Presentation and Disclosures in Financial Statements

3 SEGMENTED INFORMATION

3 SEGMENTED INFORMATION (CONTINUED)

3 SEGMENTED INFORMATION (CONTINUED)

Additional information on revenues

Assets by sector

3 SEGMENTED INFORMATION (CONTINUED)

Non-current assets

4 OPERATING EXPENSES

5 RESTRUCTURING AND OTHER COSTS

6 IMPAIRMENT OF ASSETS

Goodwill and intangible assets with indefinite useful life

Intangible assets with an indefinite useful life

7 DEPRECIATION AND AMORTIZATION

8 NET FINANCIAL EXPENSES

9 INCOME TAXES

9 INCOME TAXES (CONTINUED)

9 INCOME TAXES (CONTINUED)

10 ACCOUNTS RECEIVABLE

11 INVENTORIES

12 ASSETS AND LIABILITIES HELD FOR SALE

13 PROPERTY, PLANT AND EQUIPMENT

13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Borrowing costs capitalized to property, plant and equipment

14 LEASES

15 INTANGIBLE ASSETS

Transcontinental Inc Audit Report / Information 2024