Transcontinental Inc — Interim / Quarterly Report 2021

Sep 8, 2021

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the third quarter ended July 25, 2021

The purpose of this Management's Discussion and Analysis is to help the reader better understand the business, development strategy and future outlook of Transcontinental Inc., how we manage risk, as well as to analyze the Corporation's results and financial position for the third quarter ended July 25, 2021. It should be read in conjunction with the information in the unaudited condensed interim consolidated financial statements and the accompanying notes included in this report. Additional information relating to the Corporation, including its Annual Report and Annual Information Form, may also be obtained on SEDAR at www.sedar.com.

In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Standards (IFRS) and the term "dollar", as well as the symbol "$" designate Canadian dollars.

In addition, in this Management's Discussion and Analysis, we also use non-IFRS financial measures for which a complete definition is presented below and for which a reconciliation to financial information in accordance with IFRS is presented in Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" and in Note 3 "Segmented Information" to the unaudited condensed interim consolidated financial statements for the third quarter ended July 25, 2021. These measures should be considered as a complement to financial performance measures in accordance with IFRS. They do not substitute and are not superior to them.

Terms Used	Definitions
Adjusted revenues	Revenues before the accelerated recognition of deferred revenues. (1)
Adjusted operating earnings beforedepreciation and amortization	Operating earnings before depreciation and amortization as well as the accelerated recognition of deferredrevenues (1), restructuring and other costs (gains) and impairment of assets.
Adjusted operating earnings marginbefore depreciation and amortization	Adjusted operating earnings before depreciation and amortization divided by adjusted revenues.
Adjusted operating earnings	Operating earnings before the accelerated recognition of deferred revenues (1), restructuring and other costs(gains), impairment of assets, as well as amortization of intangible assets arising from business combinations.
Adjusted operating earnings margin	Adjusted operating earnings divided by adjusted revenues.
Adjusted income taxes	Income taxes before income taxes on the accelerated recognition of deferred revenues (1), restructuring and othercosts (gains), impairment of assets, amortization of intangible assets arising from business combinations as well asthe effect of the U.S. tax reform on deferred taxes and adjustment on additional income taxes in other jurisdictionsresulting from a prior year.
Adjusted net earnings attributable toshareholders of the Corporation	Net earnings attributable to shareholders of the Corporation before the accelerated recognition of deferredrevenues (1), restructuring and other costs (gains), impairment of assets, amortization of intangible assets arisingfrom business combinations, net of related income taxes as well as the effect of the U.S. tax reform on deferredtaxes and adjustment on additional income taxes in other jurisdictions resulting from a prior year.
Net indebtedness	Total of long-term debt, of current portion of long-term debt, of lease liabilities and of current portion of leaseliabilities, less cash.
Net indebtedness ratio	Net indebtedness divided by the last 12 months' adjusted operating earnings before depreciation and amortization.

(1) Related to the agreements signed with The Hearst Corporation. Please refer to Note 32 to the annual consolidated financial statements for the year ended October 25, 2020.

Finally, to facilitate the reading of this report, the terms "TC Transcontinental", "Transcontinental", "Corporation", "we", "our" and "us" all refer to Transcontinental Inc. together with its subsidiaries and joint ventures.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Our public communications often contain oral or written forward-looking statements which are based on the expectations of Management and inherently subject to a certain number of risks and uncertainties, known and unknown. By their very nature, forward-looking statements are derived from both general and specific assumptions. The Corporation cautions against undue reliance on such statements since actual results or events may differ materially from the expectations expressed or implied in them. These forward-looking statements include, among others, statements with respect to our medium-term objectives, our outlook, our strategies to achieve these objectives, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. The words "may", "could", "should", "would", "assumptions", "strategy", "outlook", "believe", "plan", "anticipate", "estimate", "expect", "intend", "objective", the use of the future and conditional tenses, and words and expressions of similar nature are intended to identify forward-looking statements. Such forward-looking statements may also include observations concerning the Corporation's anticipated financial results and business outlooks and the economies in which it operates. The Corporation's future performance may also be affected by a number of factors, many of which are beyond its will or control. The main risks, uncertainties and factors that could influence actual results are described in the Management's Discussion and Analysis for the year ended October 25, 2020 and in the latest Annual Information Form.

Unless otherwise indicated by the Corporation, forward-looking statements do not take into account the potential impact of non-recurring or other unusual items, nor of disposals, business combinations, mergers or acquisitions which may be announced or concluded after the date of September 8, 2021.

These forward-looking statements are made pursuant to the "safe harbour" provisions of applicable Canadian securities legislation.

The forward-looking statements in this Management's Discussion and Analysis are based on current expectations and information available as at September 8, 2021. Such forward-looking statements may also be found in other documents filed with Canadian securities regulators or in other communications. The Corporation's Management disclaims any intention or obligation to update or revise these statements unless otherwise required by the securities authorities.

PROFILE OF TC TRANSCONTINENTAL

TC Transcontinental is a leader in flexible packaging in North America, and Canada's largest printer. The Corporation is also the leading Canadian French-language educational publishing group. For over 45 years, TC Transcontinental's mission has been to create quality products and services that allow businesses to attract, reach and retain their target customers.

Respect, teamwork, performance and innovation are the strong values held by the Corporation and its employees. TC Transcontinental's commitment to its stakeholders is to pursue its business activities in a responsible manner.

Transcontinental Inc. (TSX: TCL.A TCL.B), known as TC Transcontinental, has close to 8,000 employees, the majority of which are based in Canada, the United States and Latin America. TC Transcontinental had revenues of approximately C$2.6 billion for the fiscal year ended October 25, 2020. For more information, visit TC Transcontinental's website at www.tc.tc.

HIGHLIGHTS - THIRD QUARTER Table #1:

(in millions of dollars, except per share amounts)	Q3 - 2021	Q3 - 2020	Variationin %
Revenues	$621.6	$587.4	5.8
Operating earnings before depreciation and amortization	100.9	130.1	(22.4)
Adjusted operating earnings before depreciation and amortization (1)	101.7	139.3	(27.0)
Operating earnings	50.2	75.3	(33.3)
Adjusted operating earnings (1)	67.4	102.1	(34.0)
Net earnings attributable to shareholders of the Corporation	28.1	48.3	(41.8)
Net earnings attributable to shareholders of the Corporation per share	0.32	0.55	(41.8)
Adjusted net earnings attributable to shareholders of the Corporation (1)	44.2	68.2	(35.2)
Adjusted net earnings attributable to shareholders of the Corporation per share (1)	0.51	0.78	(34.6)

(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above.

Note: The above results include $9.2 million in Canada Emergency Wage Subsidy for the third quarter of 2021 compared to $35.9 million for the third quarter of 2020.

• Strong growth in revenues and solid profitability in the Printing and Media sectors.
• Revenues of $621.6 million for the quarter ended July 25, 2021; operating earnings of $50.2 million; and net earnings attributable to shareholders of the Corporation of $28.1 million ($0.32 per share).
• Adjusted operating earnings before depreciation and amortization of $101.7 million for the quarter ended July 25, 2021; adjusted operating earnings of $67.4 million; and adjusted net earnings attributable to shareholders of the Corporation of $44.2 million ($0.51 per share).
• Released a Corporate Social Responsibility Progress Report presenting innovative projects related to its commitment to the circular economy for plastic and the reduction of the Corporation's carbon footprint.
• Closed a private offering of $250 million senior unsecured notes due in July 2026 and bearing interest at 2.28%.
• Subsequent to quarter-end, extended the $400 million revolving credit facility until 2026 and added a sustainability-related component providing for a rate adjustment based on achieving targets linked to ESG factors, including diversity and reduction in greenhouse gas emissions.

PREAMBLE - IMPACT OF COVID-19

As early as the beginning of March 2020, the Corporation actively deployed its company-wide crisis management and communication plan, which enabled it to ensure employee safety while ensuring service continuity for its customers. Since then, the Corporation has been closely monitoring the developments of the COVID-19 pandemic and government recommendations and is acting quickly by adapting security measures as required.

Despite the progress of the vaccination campaign, the pandemic continues to disrupt many sectors of the global economy. In the Packaging Sector, which represents approximately half of the Corporation's revenues, the vast majority of our operations support the retail supply chain for food and everyday consumer goods, a sector that continues to experience strong demand. In the Printing Sector, revenues are still negatively impacted, even though volume continues to gradually recover and the Canada Emergency Wage Subsidy program contributes to mitigating the financial impact.

RECONCILIATION OF NON-IFRS FINANCIAL MEASURES

(unaudited)

The financial information has been prepared in accordance with IFRS. However, financial measures used, namely adjusted revenues, adjusted operating earnings before depreciation and amortization, adjusted operating earnings margin before depreciation and amortization, adjusted operating earnings, adjusted operating earnings margin, adjusted income taxes, adjusted net earnings attributable to shareholders of the Corporation, adjusted net earnings attributable to shareholders of the Corporation per share, net indebtedness and the net indebtedness ratio, for which a reconciliation is presented in the following table, do not have any standardized meaning under IFRS and could be calculated differently by other companies. We believe that many of our readers analyze the financial performance of the Corporation's activities based on these non-IFRS financial measures as such measures may allow for easier comparisons between periods. These measures should be considered as a complement to financial performance measures in accordance with IFRS. They do not substitute and are not superior to them.

The Corporation also believes that these measures are useful indicators of the performance of its operations and its ability to meet its financial obligations. Furthermore, management also uses some of these non-IFRS financial measures to assess the performance of its activities and managers.

Table #2:

Reconciliation of operating earnings - Third quarter and cumulative

	Three months ended			Nine months ended
(in millions of dollars)	July 25, 2021	July 26, 2020	July 25, 2021	July 26, 2020
Operating earnings	$50.2	$75.3	$153.3	$160.2
Restructuring and other costs	0.8	9.2	6.1	29.5
Amortization of intangible assets arising from business combinations (1)	16.4	17.6	49.2	53.0
Adjusted operating earnings	$67.4	$102.1	$208.6	$242.7
Depreciation and amortization (2)	34.3	37.2	105.8	109.9
Adjusted operating earnings before depreciation and amortization	$101.7	$139.3	$314.4	$352.6

(1) Intangible assets arising from business combinations include our customer relationships, trademarks and non-compete agreements.

(2) Depreciation and amortization excludes the amortization of intangible assets arising from business combinations.

Reconciliation of net earnings attributable to shareholders of the Corporation - Third quarter

	Three months ended
		July 25, 2021		July 26, 2020
(in millions of dollars, except per share amounts)	Total	Per share	Total	Per share
Net earnings attributable to shareholders of the Corporation	$28.1	$0.32	$48.3	$0.55
Restructuring and other costs, net of related income taxes	0.4	—	6.6	0.07
Amortization of intangible assets arising from business combinations, net of relatedincome taxes (1)	12.4	0.15	13.3	0.16
Adjustments on additional income taxes in other jurisdictions (2)	3.3	0.04	—	—
Adjusted net earnings attributable to shareholders of the Corporation	$44.2	$0.51	$68.2	$0.78

(1) Intangible assets arising from business combinations include our customer relationships, trademarks and non-compete agreements.

(2) Adjustment on additional income taxes in other jurisdictions resulting from prior year.

Reconciliation of net earnings attributable to shareholders of the Corporation - Cumulative

	Nine months ended
		July 25, 2021		July 26, 2020
(in millions of dollars, except per share amounts)	Total	Per share	Total	Per share
Net earnings attributable to shareholders of the Corporation	$91.4	$1.05	$80.4	$0.92
Restructuring and other costs, net of related income taxes	3.8	0.04	34.2	0.39
Amortization of intangible assets arising from business combinations, net of relatedincome taxes (1)	37.3	0.43	40.0	0.46
Adjustments on additional income taxes in other jurisdictions (2)	3.3	0.04	—	—
Adjusted net earnings attributable to shareholders of the Corporation	$135.8	$1.56	$154.6	$1.77

(1) Intangible assets arising from business combinations include our customer relationships, trademarks and non-compete agreements.

(2) Adjustment on additional income taxes in other jurisdictions resulting from a prior year.

Reconciliation of net indebtedness

(in millions of dollars, except ratios)	As at July 25, 2021	As at October 25, 2020
Long-term debt	$781.6	$790.4
Current portion of long-term debt	378.5	229.7
Lease liabilities	134.7	132.0
Current portion of lease liabilities	23.7	22.8
Cash	(392.0)	(241.0)
Net indebtedness	$926.5	$933.9
Adjusted operating earnings before depreciation and amortization (last 12 months)	$461.2	$499.4
Net indebtedness ratio	2.0 x	1.9x

ANALYSIS OF CONSOLIDATED RESULTS - THIRD QUARTER

Revenues

Revenues increased by $34.2 million, or 5.8%, from $587.4 million in the third quarter of 2020 to $621.6 million in the corresponding period in 2021. This increase is mainly attributable to the favourable impact of the rise in the price of resin on the Packaging Sector and higher volume in the Printing Sector resulting from the performance of most groups compared to the corresponding period of the prior year, which was severely affected by the pandemic. The increase in revenues was partially offset by the negative impact of the exchange rate variation. A more detailed analysis of revenues is presented in the section "Analysis of Sector Results - Third Quarter".

Operating and Other Expenses

Operating expenses increased by $71.8 million, or 16.0%, in the third quarter of 2021 compared to the corresponding period in 2020. This increase results mainly from the impact of the rise in the price of resin and the decrease in the Canada Emergency Wage Subsidy compared to the corresponding period of the prior year.

Restructuring and other costs decreased by $8.4 million, from an expense of $9.2 million in the third quarter of 2020 to an expense of $0.8 million in the third quarter of 2021. This favourable effect is mainly attributable to lower workforce reduction costs in the Printing Sector and lower costs related to the COVID-19 pandemic.

Depreciation and amortization decreased by $4.1 million, from $54.8 million in the third quarter of 2020 to $50.7 million in the third quarter of 2021. This decline is mostly explained by the impact of the exchange rate variation, mainly on the Packaging Sector.

Operating Earnings

Operating earnings decreased by $25.1 million, or 33.3%, from $75.3 million in the third quarter of 2020 to $50.2 million in the third quarter of 2021. The decrease in operating earnings is mainly due to the unfavourable impact of the decrease in the Canada Emergency Wage Subsidy compared to the corresponding period of the prior year and the unfavourable impact of the rise in the price of resin. These items were partially mitigated by higher volume in the Printing Sector and, to a lesser extent, due to solid operational efficiency in the Packaging sector.

Adjusted operating earnings decreased by $34.7 million, or 34.0%, from $102.1 million in the third quarter of 2020 to $67.4 million in the third quarter of 2021. A more detailed analysis of adjusted operating earnings is presented in the section "Analysis of Sector Results - Third Quarter".

Net Financial Expenses

Net financial expenses decreased by $0.9 million, from $11.0 million in the third quarter of 2020 to $10.1 million in the third quarter of 2021. This decrease is mostly attributable to a reduction in net indebtedness compared to the third quarter of 2020.

Income Taxes

Income taxes decreased by $3.6 million, from $16.0 million in the third quarter of 2020 to $12.4 million in the third quarter of 2021. This decrease is mainly attributable to lower operating earnings.

Adjusted income taxes decreased by $9.4 million, from $22.9 million in the third quarter of 2020, for an effective tax rate of 25.1%, to $13.5 million in the third quarter of 2021, for an effective tax rate of 23.6%. This favourable decrease in adjusted income tax expense is attributable to lower adjusted operating earnings and their geographic distribution.

Net Earnings Attributable to Shareholders of the Corporation

Net earnings attributable to shareholders of the Corporation decreased by $20.2 million, from $48.3 million in the third quarter of 2020 to $28.1 million in the third quarter of 2021. This decrease is mostly due to the decline in the Canada Emergency Wage Subsidy and the rise in the price of resin. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.55 to $0.32, respectively.

Adjusted net earnings attributable to shareholders of the Corporation decreased by $24.0 million, or 35.2%, from $68.2 million in the third quarter of 2020 to $44.2 million in the third quarter of 2021. This decrease is due to the above-mentioned factors. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.78 to $0.51, respectively.

ANALYSIS OF CONSOLIDATED RESULTS - CUMULATIVE

Revenues

Revenues decreased by $50.7 million, or 2.6%, from $1,918.3 million in the first nine months of fiscal 2020 to $1,867.6 million in the corresponding period of fiscal 2021. This decline is mainly due to the unfavourable impact of the exchange rate variation on the Packaging Sector, the disposal of the paper packaging operations in January 2020 and lower printing volume in the first six months of the year caused by the pandemic. This decline was partially mitigated by the impact of the rise in the price of resin on the Packaging Sector and a higher volume in the Printing Sector in the third quarter. A more detailed analysis of revenues is presented in the "Analysis of Sector Results - Cumulative" section.

Operating and Other Expenses

Operating expenses decreased by $12.5 million in the first nine months of fiscal 2021, or 0.8%, compared to the corresponding period of fiscal 2020. This decrease results from lower volume in the Printing Sector caused by the pandemic, the sale of the paper packaging operations and measures taken by the Corporation to reduce costs and improve its operational efficiency, partially offset by the decrease in the Canada Emergency Wage Subsidy and by the impact of the rise in the price of resin.

Restructuring and other costs decreased by $23.4 million, from an expense of $29.5 million in the first nine months of fiscal 2020 to an expense of $6.1 million in the corresponding period of fiscal 2021. This favourable variance is mainly attributable to the decrease in workforce reduction costs in the Printing Sector and costs related to the sale of the paper packaging operations in the first quarter of 2020.

Depreciation and amortization decreased by $7.9 million, from $162.9 million in the first nine months of fiscal 2020 to $155.0 million in the corresponding period in fiscal 2021. This decline is mostly explained by the disposal of the paper packaging operations in 2020 as well as the impact of the exchange rate variation, mainly on the Packaging Sector.

Operating Earnings

Operating earnings decreased by $6.9 million, or 4.3%, from $160.2 million in the first nine months of fiscal 2020 to $153.3 million in the corresponding period of fiscal 2021. The decrease in operating earnings is mostly explained by the decrease in the Canada Emergency Wage Subsidy, the impact of the rise in the price of resin and by the above-mentioned lower volume, partially mitigated by a decrease in operating costs, mostly related to restructuring.

Adjusted operating earnings decreased by $34.1 million, or 14.1%, from $242.7 million in the first nine months of fiscal 2020 to $208.6 million in the corresponding period of fiscal 2021. A more detailed analysis of adjusted operating earnings is presented in the "Analysis of Sector Results - Cumulative" section.

Net Financial Expenses

Net financial expenses decreased by $6.3 million, from $36.7 million in the first nine months of fiscal 2020 to $30.4 million in the corresponding period of fiscal 2021. This change is explained by a reduction in long-term debt and a lower weighted average interest rate.

Income Taxes

Income taxes decreased by $11.1 million, from $42.9 million in the first nine months of fiscal 2020 to $31.8 million in the corresponding period in fiscal 2021. This decrease is mainly due to the income tax expense recorded on the taxable income (on a tax basis) generated by the sale of the paper packaging operations in January 2020 for an amount of $11.7 million.

Adjusted income taxes decreased from $51.2 million in the first nine months of fiscal 2020, for an effective tax rate of 24.9%, to $42.7 million in the corresponding period of fiscal 2021, for an effective tax rate of 24.0%. The favourable decrease in adjusted income tax expense is attributable to lower adjusted operating earnings and their geographic distribution.

Net Earnings Attributable to Shareholders of the Corporation

Net earnings attributable to shareholders of the Corporation increased by $11.0 million, or 13.7%, from $80.4 million in the first nine months of fiscal 2020 to $91.4 million in the corresponding period of fiscal 2021. This increase is mainly explained by lower income taxes and net financial expenses, offset by lower operating earnings. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.92 to $1.05, respectively, due to the above-mentioned items.

Adjusted net earnings attributable to shareholders of the Corporation decreased by $18.8 million, or 12.2%, from $154.6 million in the first nine months of fiscal 2020 to $135.8 million in the corresponding period in fiscal 2021, mostly as a result of the decline in adjusted operating earnings caused by various external factors highlighted in the "Analysis of Sector Results - Cumulative" section. This was partially offset by lower net financial expenses and lower adjusted income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $1.77 to $1.56, respectively.

ANALYSIS OF SECTOR RESULTS - THIRD QUARTER

(unaudited)

Table #3:

(in millions of dollars)	Packaging	Printing	Other	Consolidatedresults
Revenues - Third quarter of 2020	$348.7	$223.8	$14.9	$587.4
Acquisitions/disposals and closures	—	2.0	—	2.0
Existing operations
Exchange rate effect	(37.4)	(0.8)	—	(38.2)
Organic growth (decline)	35.7	32.2	2.5	70.4
Revenues - Third quarter of 2021	$347.0	$257.2	$17.4	$621.6
Adjusted operating earnings (1)- Third quarter of 2020	$45.6	$54.5	$2.0	$102.1
Acquisitions/disposals and closures	—	(0.2)	—	(0.2)
Existing operations
Exchange rate effect	(3.4)	0.6	(0.3)	(3.1)
Stock-based compensation	—	—	(1.2)	(1.2)
Organic growth (decline) (2)	(17.4)	(9.1)	(3.7)	(30.2)
Adjusted operating earnings (1)- Third quarter of 2021	$24.8	$45.8	($3.2)	$67.4

(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above.

(2) The above results include $9.2 million in Canada Emergency Wage Subsidy for the third quarter of 2021 compared to $35.9 million for the third quarter of 2020

Packaging Sector

Packaging Sector revenues decreased by $1.7 million, or 0.5%, from $348.7 million in the third quarter of 2020 to $347.0 million in the third quarter of 2021. This decrease is mostly due to the negative exchange rate effect, partially mitigated by organic growth. This organic growth of $35.7 million mainly results from the impact of the rise in the price of resin; excluding such rise, the sector would have posted rather stable organic growth.

Adjusted operating earnings decreased by $20.8 million, or 45.6%, from $45.6 million in the third quarter of 2020 to $24.8 million in the third quarter of 2021. This decrease is mainly due to the unfavourable impact of the significant rise in the price of resin, the exchange rate effect and lower government subsidies related to the pandemic. Excluding these items, the sector posted higher operating earnings due to the solid operating performance of certain groups. As a result, the sector's adjusted operating earnings margin went from 13.1% in the third quarter of 2020 to 7.1% in the third quarter of 2021. Excluding the impact of the rise in the price of resin, the margin would have slightly decreased due to significant volumes in 2020 that had a positive impact on the margin.

Printing Sector

Printing Sector revenues increased by $33.4 million, or 14.9%, from $223.8 million in the third quarter of 2020 to $257.2 million in the third quarter of 2021. The increase is mainly attributable to strong organic growth resulting from the progressive reopening of the economy and, to a lesser extent, to the acquisition of BGI Retail Inc.

Adjusted operating earnings decreased by $8.7 million, or 16.0%, from $54.5 million in the third quarter of 2020 to $45.8 million in the third quarter of 2021. This decrease is mainly attributable to the unfavourable change in the Canada Emergency Wage Subsidy, which was significantly lower than in the corresponding period of the prior year. Excluding this subsidy, the sector would have posted organic growth as a result of cost reduction initiatives undertaken by the sector and higher revenues. The sector's adjusted operating earnings margin decreased from 24.4% in the third quarter of 2020 to 17.8% in the third quarter of 2021. Excluding the Canada Emergency Wage Subsidy, margins would have been 11.3% in the third quarter of 2020 and 14.3% in the third quarter of 2021.

Other

Revenues increased by $2.5 million, from $14.9 million in the third quarter of 2020 to $17.4 million in the third quarter of 2021. This increase is mostly attributable to higher volume in the Media Sector.

Adjusted operating earnings decreased by $5.2 million, from $2.0 million in the third quarter of 2020 to $(3.2) million in the third quarter of 2021, mainly due to the unfavourable change in the Canada Emergency Wage Subsidy and the stock-based compensation expense. This change was partially mitigated by the increase in adjusted operating earnings in the Media Sector as a result of higher volume.

ANALYSIS OF SECTOR RESULTS - CUMULATIVE

(unaudited)

Table #4:

(in millions of dollars)	Packaging	Printing	Other	Consolidatedresults
Revenues - Nine months ended July 26, 2020	$1,074.5	$814.6	$29.2	$1,918.3
Acquisitions/disposals and closures	(52.4)	8.5	—	(43.9)
Existing operations
Exchange rate effect	(63.8)	(1.5)	—	(65.3)
Organic growth (decline)	74.0	(21.7)	6.2	58.5
Revenues - Nine months ended July 25, 2021	$1,032.3	$799.9	$35.4	$1,867.6
Adjusted operating earnings (1)- Nine months ended July 26, 2020	$111.4	$145.7	$(14.4)	$242.7
Acquisitions/disposals and closures	(0.7)	(0.4)	—	(1.1)
Existing operations
Exchange rate effect	(6.8)	0.8	(0.5)	(6.5)
Stock-based compensation	—	—	(6.2)	(6.2)
Organic growth (decline) (2)	(17.2)	(0.5)	(2.6)	(20.3)
Adjusted operating earnings (1)- Nine months ended July 25, 2021	$86.7	$145.6	($23.7)	$208.6

(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above.

(2) The above results include $25.7 million in Canada Emergency Wage Subsidy for the third quarter of 2021 compared to $44.0 million for the third quarter of 2020

Packaging Sector

Packaging Sector revenues decreased by $42.2 million, from $1,074.5 million in the first nine months of fiscal 2020 to $1,032.3 million in the corresponding period of fiscal 2021. This decrease is mainly due to the unfavourable exchange rate effect of $63.8 million and the $52.4 million impact of the sale of the paper packaging operations in January 2020. The organic growth of $74.0 million results from the rise in the price of resin as well as higher volume in several segments that support the retail supply chain for food and everyday consumer products.

Adjusted operating earnings decreased by $24.7 million, from $111.4 million in the first nine months of fiscal 2020 to $86.7 million in the corresponding period of fiscal 2021. This decrease is mainly due to the unfavourable impact of the rise in the price of resin and the unfavourable exchange rate effect. Besides these two items, and due to operational efficiency initiatives and the above-mentioned increase in volume, the sector posted positive organic growth. The sector's adjusted operating earnings margin decreased from 10.4% in the first nine months of fiscal 2020 to 8.4% in the corresponding period of 2021. Excluding the unfavourable impact of the price of resin, the margin would have been rather stable.

Printing Sector

Printing Sector revenues decreased by $14.7 million, from $814.6 million in the first nine months of fiscal 2020 to $799.9 million in the corresponding period of fiscal 2021. The organic decline of $21.7 million is mostly explained by a decrease in volume caused by the impact of the COVID-19 pandemic since April 2020, which affected most of the segments during the first six months of the fiscal year. This decline was partially mitigated by the acquisitions within our in-store marketing activities.

Adjusted operating earnings decreased by $0.1 million, from $145.7 million in the first nine months of fiscal 2020 to $145.6 million in the corresponding period of fiscal 2021. Despite the solid performance of the sector and cost reduction initiatives, the unfavourable impact of the Canada Emergency Wage Subsidy mitigated the organic growth. The sector's adjusted operating earnings margin went from 17.9% in the first nine months of fiscal 2020 to 18.2% in the corresponding period of fiscal 2021. Excluding the Canada Emergency Wage Subsidy, margins would have been 13.5% in the first nine months of fiscal 2020 and 15.1% in the corresponding period in 2021 due to cost reduction initiatives.

Other

Revenues increased by $6.2 million, from $29.2 million in the first nine months of fiscal 2020 to $35.4 million in the corresponding period of fiscal 2021. This increase is attributable to higher volume in the Media Sector.

Adjusted operating earnings decreased by $9.3 million, from $(14.4) million in the first nine months of fiscal 2020 to $(23.7) million in the corresponding period of fiscal 2021. This decrease is mainly due to the stock-based compensation expense and the decrease in the Canada Emergency Wage Subsidy. The increase in operating income in the media sector partially offset this decline.

SUMMARY OF QUARTERLY RESULTS

(unaudited)

Table #5 summarizes selected consolidated financial information derived from the Corporation's unaudited condensed interim consolidated financial statements and some non-IFRS financial measures for each of the last eight quarters.

Table #5:

	2021				2020							2019
(in millions of dollars, except per share amounts)	Q3		Q2		Q1		Q4		Q3		Q2		Q1		Q4
Revenues	$621.6		$623.3		$622.7		$655.7		$587.4		$625.1		$705.8		$790.9
Adjusted revenues (1)	621.6		623.3		622.7		655.7		587.4		625.1		705.8		779.2
Operating earnings before depreciation and amortization (2)	100.9		106.5		100.9		134.9		130.1		97.3		95.7		206.9
Adjusted operating earnings before depreciation andamortization (1) (2)	101.7		107.0		105.7		146.8		139.3		104.3		109.0		139.1
Adjusted operating earnings margin before depreciation andamortization (1) (2)	16.4	%	17.2	%	17.0	%	22.4	%	23.7	%	16.7	%	15.4	%	17.9	%
Operating earnings(2)	$50.2		$55.9		$47.2		$81.2		$75.3		$44.1		$40.8		$156.2
Adjusted operating earnings (1) (2)	67.4		72.6		68.6		110.1		102.1		68.5		72.1		106.8
Adjusted operating earnings margin (1) (2)	10.8	%	11.6	%	11.0	%	16.8	%	17.4	%	11.0	%	10.2	%	13.7	%
Net earnings attributable to shareholders of the Corporation (2)	$28.1		$35.6		$27.7		$51.3		$48.3		$25.7		$6.4		$112.3
Net earnings attributable to shareholders of the Corporation pershare (2)	0.32		0.41		0.32		0.59		0.55		0.30		0.07		1.28
Adjusted net earnings attributable to shareholders of theCorporation (1) (2)	44.2		47.8		43.8		72.4		68.2		43.6		42.8		69.9
Adjusted net earnings attributable to shareholders of theCorporation per share (1) (2)	0.51		0.55		0.50		0.83		0.78		0.50		0.49		0.80
% of fiscal year	—	%	—	%	—	%	32	%	30	%	19	%	19	%	31	%

(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above. (2) The results reflect the impact of the adoption of the new IFRS 16 accounting standard, which applies to the Corporation for its fiscal year beginning October 28, 2019. The Corporation adopted the new standard using the modified retrospective transition method, whereby the cumulative impact of initial application has been reflected in opening retained earnings as at October 28, 2019, without restatement of comparative figures. Consequently, prior quarters to this date have not been modified.

The variability of financial information for interim periods is influenced by many factors, such as:

• The impact of acquisitions, disposals and closures completed in line with our transformation;
• The exchange rate effect;
• The interest rates;
• The impact of the change in the share price on the stock-based compensation expense;
• The price of raw materials, including resin and paper;
• The impact of the Canada Emergency Wage Subsidy, which is related to the pandemic.

Excluding the impact of the above-mentioned items, we can note a slight organic growth in revenues and an increase in profitability.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL STRUCTURE

(unaudited)

Table #6:

		Three months ended
(in millions of dollars)		July 25,2021	July 26,2020
Operating activities
Cash flows generated by operating activities before changes in non-cash operating items and income taxes paid		$101.4	$131.9
Changes in non-cash operating items		(36.5)	9.7
Income taxes		(10.3)	5.0
Cash flows from operating activities		$54.6	$146.6
Investing activities
Business combinations, net of cash acquired		($44.0)	$0.0
Acquisitions of property, plant and equipment		($39.5)	($13.6)
Disposals of property, plant and equipment		0.6	—
Increase in intangible assets		(5.8)	(4.3)
Cash flows from investing activities		($88.7)	($17.9)
Financing activities
Increase in long-term debt, net of issuance costs		$394.0	$—
Reimbursement of long-term debt		($138.4)	($0.1)
Financial expenses paid on long-term debt		(6.6)	(8.4)
Repayment of principal on lease liabilities		(6.1)	(5.5)
Interest paid on lease liabilities		(0.8)	(0.8)
Dividends		(19.5)	(19.6)
Cash flows from financing activities		$222.6	($34.4)
Effect of exchange rate changes on cash denominated in foreign currencies		$3.9	($1.6)
Net change in cash		$192.4	$92.7
Financial position	As at July 25, 2021		As at October 25, 2020
Net indebtedness (1)	$926.5		$933.9
Net indebtedness ratio (1)	2.0 x		1.9 x
Credit rating
DBRS	BBB (low)		BBB (low)
Outlook (2)	Stable		Negative
Standard and Poor's	BBB-		BBB-
Outlook (3)	Stable		Negative
Consolidated Statements of Financial Position	As at July 25, 2021		As at October 25, 2020
Current assets	$1,198.4		$1,024.7
Current liabilities	813.0		677.5
Total assets	3,720.6		3,598.4

(1) Please refer to Table #2 in the section entitled "Reconciliation of Non-IFRS Financial Measures" in this Management's Discussion and Analysis for adjusted data presented above.

Total liabilities 1,971.9 1,859.8

(2) On May 3, 2021, the DBRS Limited rating agency (DBRS Morningstar) revised the Corporation's credit rating outlook from negative to stable.

(3) On February 9, 2021, the Standard & Poor's rating agency (S&P Global Ratings) revised the Corporation's credit rating outlook from negative to stable.

ANALYSIS OF FINANCIAL POSITION - THIRD QUARTER

Cash Flows from Operating Activities

Cash flows from operating activities decreased by $92.0 million, from $146.6 million in the third quarter of 2020 to $54.6 million in the third quarter of 2021. This decrease is mostly due to the change in working capital, which is largely explained by higher inventory in the Packaging Sector. It is also due to the decline in operating earnings, as well as, an increase in income taxes paid due to the deferral of Canadian income tax installments as a result of the pandemic during the third quarter of 2020.

Cash Flows from Investing Activities

Cash flows from investing activities went from a cash outflow of $17.9 million in the third quarter of 2020 to a cash outflow of $88.7 million in the third quarter of 2021. This change is mainly explained by the acquisition of BGI Retail Inc. and, to a lesser extent, an increase in capital expenditures in the Packaging Sector.

Cash Flows from Financing Activities

Cash flows from financing activities went from a cash outflow of $34.4 million in the third quarter of 2020 to a cash inflow of $222.6 million in the third quarter of 2021. This variation is mostly explained by the increase in long-term debt resulting from the issuance of a U.S. dollar term loan amounting to US$120.0 million ($150.8 million). The Corporation also issued unsecured notes amounting to $250.0 million, and made a repayment of US$112.5 million ($138.1 million) of tranche B of the U.S. term loans.

Debt Instruments

As at July 25, 2021, no amount had been drawn on the credit facilities and the availability under the credit facilities was $431.4 million. Net indebtedness decreased from $933.9 million as at October 25, 2020 to $926.5 million as at July 25, 2021. This stability is explained by the use of our excess cash flows to make acquisitions and strategic investments. As a result of this and the decrease in operating earnings before depreciation and amortization since October 2020, our net indebtedness ratio stood at 2.0x as at July 25, 2021 compared to 1.9x as at October 25, 2020.

On April 30, 2021, the Corporation repaid the balance of US$112.5 million ($138.1 million) of tranche B of the U.S. dollar term loans maturing on that date.

On May 3, 2021, the DBRS Limited rating agency (DBRS Morningstar) revised the Corporation's credit rating from BBB- / negative outlook to BBB- / stable outlook.

On June 4, 2021, the Corporation secured a new financing amounting to US$120.0 million ($150.8 million).The amount borrowed bears interest at the U.S. base rate or LIBOR plus an applicable margin of 0.85% to 1.85% and is repayable in June 2028.

During the third quarter of 2021, the Corporation also issued unsecured notes bearing interest at a fixed rate of 2.28%, amounting to $250.0 million and maturing in July 2026.

Share Capital Table #7:

Shares Issued and Outstanding	As at July 25, 2021	As at August 31, 2021
Class A (Subordinate Voting Shares)	73,111,944	73,111,944
Class B (Multiple Voting Shares)	13,913,226	13,913,226
Total Class A and Class B	87,025,170	87,025,170

In September 2020, the Corporation was authorized to repurchase, for cancellation on the open market, or subject to the approval of any securities authority by private agreements, between October 1, 2020 and September 30, 2021, or at an earlier date if the Corporation concludes or cancels the offer, up to 1,000,000 of its Class A Subordinate Voting Shares and up to 191,320 of its Class B Shares, representing approximately 1.37% of the 73,049,344 Class A Subordinated Voting Shares issued and outstanding and of the 13,975,826 Class B Shares issued and outstanding as at September 18, 2020.

No shares were repurchased during the quarter ended July 25, 2021. The Corporation has not repurchased any shares since February 2020.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control. The purpose of internal control over financial reporting ("ICFR") is to provide reasonable assurance regarding the reliability of the Corporation's financial reporting and the preparation of condensed interim consolidated financial statements in accordance with IFRS. Management certifies disclosures in annual and interim filings under Regulation 52-109 using the internal control framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

As at July 25, 2021, the Corporation's Management excluded BGI Retail Inc. ("BGI") from its evaluation of internal control over financial reporting, this exclusion is accepted by the Autorité des marchés financiers ("AMF") during the first year after the acquisition of a business, to give a corporation time to integrate the acquisition

BGI is a full-service design and in-store solutions provider for retailers and leading global brands located in Paris, Ontario. Acquired June 1, 2021, BGI has generated 2.0 million of revenue in the first nine months of 2021, or 0.1% of the Corporation's consolidated results

Additional information about this acquisition is presented in Table #8.

Table #8:

(unaudited)

(in millions of dollars)	BGI Retail Inc
Statement of financial position	As at July 25, 2021
Current assets	10.5
Non-current assets	75.7
Current liabilities	10.9
Non-current liabilities	31.8
Statement of earnings	Nine months ended July 25, 2021
Revenues	2.0
Operating earnings before depreciation and amortization	0.2
Operating earnings	(0.8)

During the third quarter ended July 25, 2021, except for the information provided above, no change that has materially affected or is reasonably likely to affect the ICFR was brought to the attention of Management, including the President and Chief Executive Officer and the Chief Financial Officer of the Corporation.

SUBSEQUENT EVENTS

REIMBURSEMENT OF DEBT

On August 3, 2021, the Corporation repaid the balance of $188.5 million (US$150.0 million) of tranche C of the U.S. term loans.

CREDIT FACILITY

On August 31, 2021, the Corporation amended its $400 million revolving credit facility to add a sustainable development-related loan structure allowing for a rate adjustment based on the achievement of targets related to environmental, social and governance (ESG) factors, including diversity and greenhouse gas emission reductions. In addition, it extended the maturity of its credit facility by one year, until February 2026, on the same terms.

OUTLOOK

In the Packaging Sector, as a result of signing new contracts and introducing new products on the market, and despite weaker than anticipated organic growth in the third quarter, we continue to expect organic volume growth in the fourth quarter of fiscal 2021 and in fiscal 2022. However, the impact of contractual lags in passing through the rise in the price of resin to customers and the appreciation of the Canadian dollar against the U.S. dollar should continue to have a negative impact on the sector's profitability for the fourth quarter, but to a lesser extent. Excluding the impacts of the price of resin and the appreciation of the Canadian dollar, we expect to post an increase in operating earnings for fiscal 2021 compared to the prior fiscal year, as a result of our operational efficiency initiatives and the anticipated organic growth in revenues.

In the Printing Sector, we expect a continued gradual recovery in printing volume. This anticipated recovery, combined with growth in our instore marketing activities, gives us confidence about the outlook for revenue growth for the quarters to come.

As fiscal 2021 comprises 53 weeks, the fourth quarter will include an additional week of results compared to the prior year. This additional week will have a favourable impact on the Packaging and Printing Sectors' revenues and operating earnings.

Finally, we expect to continue generating significant cash flows. This should enable us to reduce our net indebtedness, while providing us with the flexibility needed to pursue our investment strategy focused on organic growth as well as strategic and targeted acquisitions.

On behalf of Management,

(s) Donald LeCavalier Chief Financial Officer

September 8, 2021