Transcontinental Inc — Management Reports 2024

Mar 13, 2024

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Management's Discussion and Analysis For the period ended January 28, 2024

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the first quarter ended January 28, 2024

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 first quarter ended January 28, 2024. It should be read in conjunction with the information in the unaudited condensed interim consolidated financial statements and the accompanying notes. Additional information relating to the Corporation, including its Annual Report and Annual Information Form , may also be obtained on SEDAR+ at www.sedarplus.ca.

In this document, unless otherwise indicated, all financial data are prepared in accordance with International Financial Reporting Accounting 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 first quarter ended January 28, 2024. 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 operating earnings before depreciation and amortization	Operating earnings before depreciation and amortization as well as restructuring and other costs (revenues) and impairment of assets.
Adjusted operating earnings margin before depreciation and amortization	Adjusted operating earnings before depreciation and amortization divided by revenues.
Adjusted operating earnings	Operating earnings before restructuring and other costs (revenues), amortization of intangible assets arising from business combinations and impairment of assets.
Adjusted operating earnings margin	Adjusted operating earnings divided by revenues.
Adjusted income taxes	Income taxes before income taxes on restructuring and other costs (revenues), impairment of assets and amortization of intangible assets arisingfrom business combinations.
Adjusted net earnings attributable to shareholders of the Corporation	Net earnings attributable to shareholders of the Corporation before restructuring and other costs (revenues), amortization of intangible assets arising from business combinations and impairment of assets, net of related income taxes.
Net indebtedness	Total of long-term debt, of current portion of long-term debt, of lease liabilities and of current portion of lease liabilities, less cash.
Net indebtedness ratio	Net indebtedness divided by the last 12 months’ adjusted operating earnings before depreciation and amortization.

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.

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Management's Discussion and Analysis - 1

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. Forward-looking statements include, among others, statements with respect to our 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", "plan", "strategy", "outlook", "believe", "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 this Management's Discussion and Analysis for the year ended October 29, 2023 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 March 12, 2024.

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 March 12, 2024. 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 approximately 8,000 employees, the majority of which are based in Canada, the United States and Latin America. TC Transcontinental generated revenues of $2.9 billion during the fiscal year ended October 29, 2023. For more information, visit TC Transcontinental's website at www.tc.tc.

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Management's Discussion and Analysis - 2

HIGHLIGHTS

Table #1:

(in millions of dollars,exceptper share amounts)	Q1-2024	Q1-2023	Variation in %
Revenues	$680.4	$707.0	(3.8)%
Operatingearnings before depreciation and amortization	82.7	75.9	9.0
Adjusted operatingearnings before depreciation and amortization(1)	96.1	84.1	14.3
Operatingearnings	27.8	15.0	85.3
Adjusted operatingearnings(1)	59.0	41.8	41.1
Net earnings attributable to shareholders of the Corporation	13.9	1.0	N/A
Net earnings attributable to shareholders of the Corporationper share	0.16	0.01	N/A
Adjusted net earnings attributable to shareholders of the Corporation(1)	37.4	21.1	77.3
Adjusted net earnings attributable to shareholders of the Corporationper share(1)	0.43	0.24	79.2

(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.

• Growth in adjusted operating earnings before depreciation and amortization of 14.3% for the quarter, including an increase of 29.6% in the Packaging Sector.

• Revenues of $680.4 million for the quarter ended January 28, 2024; operating earnings of $27.8 million; and net earnings attributable to shareholders of the Corporation of $13.9 million ($0.16 per share).

• Adjusted operating earnings before depreciation and amortization of $96.1 million for the quarter ended January 28, 2024; adjusted operating earnings of $59.0 million; and adjusted net earnings attributable to shareholders of the Corporation of $37.4 million ($0.43 per share).

• Announced, on February 1, 2024, the closure of the Saint-Hyacinthe plant in April 2024 and the transfer of its operations to the other plants in the network.

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Management's Discussion and Analysis - 3

RECONCILIATION OF NON-IFRS FINANCIAL MEASURES

(Unaudited)

The financial information has been prepared in accordance with IFRS. However, financial measures used, namely 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 - First quarter

	Three months ended	Three months ended
	January 28,	January 29,
(in millions of dollars)	2024	2023
Operating earnings	$27.8	$15.0
Restructuring and other costs	11.3	8.2
Amortization of intangible assets arising from business combinations(1)	17.8	18.6
Impairment of assets	2.1	—
Adjusted operating earnings	$59.0	$41.8
Depreciation and amortization(2)	37.1	42.3
Adjusted operating earnings before depreciation and amortization	$96.1	$84.1

(1) Amortization of intangible assets arising from business combinations include our customer relationships, non-compete agreements, rights of first refusal and educational book titles.

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

Reconciliation of operating earnings - First quarter for the Packaging Sector

	Three months ended	Three months ended
	January 28,	January 29,
(in millions of dollars)	2024	2023
Operating earnings	$22.4	$4.2
Restructuring and other costs	3.6	4.0
Amortization of intangible assets arising from business combinations(1)	16.1	16.0
Impairment of assets	0.3	—
Adjusted operating earnings	$42.4	$24.2
Depreciation and amortization(2)	18.0	22.4
Adjusted operating earnings before depreciation and amortization	$60.4	$46.6

(1) Amortization of intangible assets arising from business combinations includes our customer relationships.

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

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Management's Discussion and Analysis - 4

Reconciliation of operating earnings - First quarter for the Printing Sector

	Three months ended	Three months ended
	January 28,	January 29,
(in millions of dollars)	2024	2023
Operating earnings	$17.6	$22.0
Restructuring and other costs	6.1	3.2
Amortization of intangible assets arising from business combinations(1)	1.3	2.1
Impairment of assets	1.8	—
Adjusted operating earnings	$26.8	$27.3
Depreciation and amortization(2)	12.7	13.3
Adjusted operating earnings before depreciation and amortization	$39.5	$40.6

(1) Amortization of intangible assets arising from business combinations includes our customer relationships.

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

Reconciliation of operating earnings - First quarter for the Other Sector

	Three months ended	Three months ended
	January 28,	January 29,
(in millions of dollars)	2024	2023
Operating earnings	($12.2)	($11.2)
Restructuring and other costs	1.6	1.0
Amortization of intangible assets arisingfrom business combinations(1)	0.4	0.5
Adjusted operating earnings	($10.2)	($9.7)
Depreciation and amortization(2)	6.4	6.6
Adjusted operating earnings before depreciation and amortization	($3.8)	($3.1)

(1) Amortization of intangible assets arising from business combinations includes our non-compete agreements, rights of first refusal and educational book titles.

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

Reconciliation of operating earnings - Last eight quarters

	2024	2023	2022
(in millions of dollars)	Q1	Q4 Q3 Q2 Q1	Q4 Q3 Q2
Operating earnings Restructuring and other costs (revenues) Amortization of intangible assets arising from business combinations(1) Impairment of assets	$27.8 11.3 17.8 2.1	$66.7 $39.2 $43.8 $15.0 $85.3 $52.1 $46.1 (2.9) 12.6 3.8 8.2 (4.6) 3.0 0.8 18.3 18.4 18.6 18.6 18.4 17.5 17.2 25.2 — — — — — —
Adjusted operating earnings	$59.0	$107.3 $70.2 $66.2 $41.8 $99.1 $72.6 $64.1
Depreciation and amortization(2)	37.1	38.2 37.7 42.8 42.3 42.0 40.4 39.5
Adjusted operating earnings before depreciation and amortization	$96.1	$145.5 $107.9 $109.0 $84.1$141.1 $113.0 $103.6

(1) Amortization of intangible assets arising from business combinations includes our customer relationships, non-compete agreements, rights of first refusal and educational book titles.

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

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Management's Discussion and Analysis - 5

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

	Three months ended
(in millions of dollars,exceptper share amounts)	January 28, 2024 January 29, 2023
Net earnings attributable to shareholders of the Corporation Restructuring and other costs Tax on restructuring and other costs Amortization of intangible assets arising from business combinations(1) Tax on amortization of intangible assets arising from business combinations Impairment of assets Tax on impairment of assets	$13.9 $1.0 11.3 8.2 (2.8) (2.1) 17.8 18.6 (4.4) (4.6) 2.1 — (0.5) —
Adjusted net earnings attributable to shareholders of the Corporation	$37.4 $21.1
Net earnings attributable to shareholders of the Corporationper share	$0.16 $0.01
Adjusted net earnings attributable to shareholders of the Corporationper share	$0.43 $0.24
Weighted average number of shares outstanding	86.6 86.6

(1) Amortization of intangible assets arising from business combinations includes our customer relationships, non-compete agreements, rights of first refusal and educational book titles.

Reconciliation of net earnings attributable to shareholders of the Corporation - Last eight quarters

2024	2023	2022
(in millions of dollars,exceptper share amounts) Q1	Q4 Q3 Q2 Q1	Q4 Q3 Q2
Net earnings attributable to shareholders of the Corporation $13.9 $41.7 $20.9 $22.2 $1.0 $60.4 $34.1 $28.3 Restructuring and other costs (revenues) 11.3 (2.9) 12.6 3.8 8.2 (4.6) 3.0 0.8 Tax on restructuring and other costs (revenues) (2.8) 0.3 (3.3) (0.9) (2.1) (1.3) (0.7) (0.4) Amortization of intangible assets arising from business combinations(1) 17.8 18.3 18.4 18.6 18.6 18.4 17.5 17.2 Tax on amortization of intangible assets arising from business combinations (4.4) (4.3) (4.6) (4.6) (4.6) (4.5) (4.3) (4.2) Impairment of assets 2.1 25.2 — — — — — — Tax on impairment of assets (0.5) (6.5) — — — — — —
Adjusted net earnings attributable to shareholders of the Corporation $37.4 $71.8 $44.0 $39.1 $21.1 $68.4 $49.6 $41.7
Net earnings attributable to shareholders of the Corporation per share $0.16 $0.48 $0.24 $0.26 $0.01 $0.70 $0.39 $0.33
Adjusted net earnings attributable to shareholders of the Corporationper share $0.43 $0.83 $0.51 $0.45 $0.24 $0.79 $0.57 $0.48
Weighted average number of shares outstanding 86.6 86.6 86.6 86.6 86.6 86.6 86.6 86.8

(1) Amortization of intangible assets arising from business combinations includes our customer relationships, non-compete agreements, rights of first refusal and educational book titles.

Reconciliation of net indebtedness

(in millions of dollars,except ratios)	As at January 28, 2024	As at October 29,2023
Long-term debt	$852.5	$937.8
Current portion of long-term debt	2.8	2.1
Lease liabilities	91.9	94.6
Current portion of lease liabilities	22.6	23.5
Cash	**(51.5) **	(137.0)
Net indebtedness	$918.3	$921.0
Adjusted operatingearnings before depreciation and amortization(last 12 months)	$458.5	$446.5
Net indebtedness ratio	2.00x	2.06x

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Management's Discussion and Analysis - 6

ANALYSIS OF CONSOLIDATED RESULTS - FIRST QUARTER

Revenues

Revenues decreased by $26.6 million, or 3.8%, from $707.0 million in the first quarter of 2023 to $680.4 million in the corresponding period of 2024. This decrease is mainly due to the organic decline largely caused by lower volume in the Printing Sector and, to a lesser extent, in the Packaging Sector. A more detailed analysis of revenues is presented in the section "Analysis of Sector Results - First Quarter".

Operating and Other Expenses

Operating expenses decreased by $38.6 million in the first quarter of 2024, or 6.2%, compared to the corresponding period of 2023. This decrease results mainly from lower costs of goods sold and fixed costs related to the profitability and financial position improvement program announced in December 2023, and, to a lesser extent, lower volume.

Restructuring and other costs increased by $3.1 million, from $8.2 million in the first quarter of 2023 to $11.3 million in the first quarter of 2024. This increase is mainly due to higher workforce reduction costs resulting from actions taken to adjust our cost structure, partially mitigated by the decrease in business integration costs.

During the first quarter of 2024, impairment charges of $2.1 million were recognized following the revision of estimates for the expected future economic benefits of equipment, mainly in the Printing Sector.

Operating earnings before depreciation and amortization

Operating earnings before depreciation and amortization increased by $6.8 million, or 9.0%, from $75.9 million in the first quarter of 2023 to $82.7 million in the first quarter of 2024. This increase is mainly attributable to cost reduction initiatives, partially offset by lower volume, increase in restructuring and other costs and, to a lesser extent, asset impairment charges.

Adjusted operating earnings before depreciation and amortization increased by $12.0 million, or 14.3%, from $84.1 million in the first quarter of 2023 to $96.1 million in the first quarter of 2024. The increase in adjusted operating earnings before depreciation and amortization is mainly attributable to cost reduction initiatives, partially offset by lower volume. A more detailed analysis of adjusted operating earnings is presented in the section "Analysis of Sector Results - First Quarter".

Depreciation and Amortization

Depreciation and amortization decreased by $6.0 million, from $60.9 million in the first quarter of 2023 to $54.9 million in the first quarter of 2024. This decrease is mostly attributable to the end of the depreciation period for some equipment, partially offset by acquisitions of property, plant and equipment in the Packaging Sector.

Net Financial Expenses

Net financial expenses decreased by $2.8 million, from $16.7 million in the first quarter of 2023 to $13.9 million in the first quarter of 2024. This favourable change is mainly explained by the decrease in net indebtedness and the effect of exchange rate fluctuations, partially offset by higher interest rates on floating-rate debt.

Income Taxes

Income taxes increased by $2.7 million, from a recovery of $2.9 million in the first quarter of 2023 to a recovery of $0.2 million in the first quarter of 2024. This increase is mainly attributable to higher earnings before income taxes.

Adjusted income taxes increased by $3.7 million, from $3.8 million in the first quarter of 2023, for an effective tax rate of 15.1%, to $7.5 million in the first quarter of 2024, for an effective tax rate of 16.6%. This increase in income tax expense is explained by the increase in adjusted operating earnings before income taxes and the increase in the tax rate related to the geographic distribution of earnings before income taxes.

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Management's Discussion and Analysis - 7

Net Earnings Attributable to Shareholders of the Corporation

Net earnings attributable to shareholders of the Corporation increased by $12.9 million, from $1.0 million in the first quarter of 2023 to $13.9 million in the first quarter of 2024. This increase is mainly attributable to the previously explained increase in operating earnings before depreciation and amortization and the decrease in depreciation and amortization and financial expenses, partially offset by higher income taxes. On a per share basis, net earnings attributable to shareholders of the Corporation went from $0.01 to $0.16, respectively.

Adjusted net earnings attributable to shareholders of the Corporation increased by $16.3 million, or 77.3%, from $21.1 million in the first quarter of 2023 to $37.4 million in the first quarter of 2024. This increase is mainly attributable to the previously explained increase in adjusted operating earnings before depreciation and amortization and the decrease in depreciation and amortization and financial expenses, partially offset by higher income taxes. On a per share basis, adjusted net earnings attributable to shareholders of the Corporation went from $0.24 to $0.43, respectively.

ANALYSIS OF SECTOR RESULTS - FIRST QUARTER

(Unaudited)

Table #3:

(in millions of dollars)	Packaging Printing Other Consolidated results	Packaging Printing Other Consolidated results
Revenues - First quarter of 2023 Exchange rate effect Organicgrowth(decline)	$405.7 $286.2 $15.1 $707.0 1.9 (1.3) — 0.6 (9.4) (19.8) 2.0 (27.2)
Revenues - Firstquarter of 2024	$398.2 $265.1 $17.1 $680.4
Adjusted operating earnings before depreciation and amortization(1) - First quarter of 2023 Exchange rate effect Stock-based compensation Organicgrowth(decline)	$46.6 $40.6 ($3.1) $84.1 0.5 (1.5) — (1.0) — — (0.8) (0.8) 13.3 0.4 0.1 13.8
Adjusted operating earnings before depreciation and amortization(1) - First quarter of 2024	$60.4 $39.5	($3.8) $96.1

(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.

Packaging Sector

Packaging Sector revenues decreased by $7.5 million, or 1.8%, from $405.7 million in the first quarter of 2023 to $398.2 million in the first quarter of 2024. This decrease is mainly due to lower volume caused by a slowdown in demand, in particular in the industrial and medical markets, chiefly related to the economic conditions, partially mitigated by the favourable exchange rate effect.

Adjusted operating earnings before depreciation and amortization increased by $13.8 million, or 29.6%, from $46.6 million in the first quarter of 2023 to $60.4 million in the first quarter of 2024. This increase is mainly attributable to cost reduction initiatives and a more favourable product mix, partially offset by the previously explained lower volume. The sector's adjusted operating earnings margin before depreciation and amortization increased from 11.5% in the first quarter of 2023 to 15.2% in the first quarter of 2024, mainly as a result of the above-mentioned items.

Printing Sector

Printing Sector revenues decreased by $21.1 million, or 7.4%, from $286.2 million in the first quarter of 2023 to $265.1 million in the first quarter of 2024. This decrease is mostly due to lower volume, notably in magazine and book printing activities.

Adjusted operating earnings before depreciation and amortization decreased by $1.1 million, or 2.7%, from $40.6 million in the first quarter of 2023 to $39.5 million in the first quarter of 2024. This slight decrease is mostly caused by the unfavourable exchange rate effect. The previously explained lower volume was more than mitigated by cost reduction initiatives. The sector's adjusted operating earnings margin before depreciation and amortization increased slightly from 14.2% in the first quarter of 2023 to 14.9% in the first quarter of 2024.

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Management's Discussion and Analysis - 8

Other

Revenues increased by $2.0 million, from $15.1 million in the first quarter of 2023 to $17.1 million in the first quarter of 2024, mostly as a result of a decrease in inter-sector eliminations and higher volume in the Media Sector.

Adjusted operating earnings before depreciation and amortization decreased by $0.7 million, from $-3.1 million in the first quarter of 2023 to $-3.8 million in the first quarter of 2024, mainly as a result of the unfavourable impact of the stock-based compensation expense.

SUMMARY OF QUARTERLY RESULTS

(Unaudited)

Table #4 summarizes selected consolidated financial information derived from the Corporation’s audited annual consolidated financial statements and some non-IFRS financial measures for each of the last eight quarters.

Table #4:

2024	2023	2022
(in millions of dollars, unless otherwise indicated and per share amounts) Q1	Q4 Q3 Q2 Q1	Q4 Q3 Q2
Revenues $ 680.4 $ 779.7 $ 706.7 $ 747.2 $ 707.0 $ 802.2 $ 747.8 $715.5 Operating earnings before depreciation and amortization 82.7 123.2 95.3 105.2 75.9 145.7 110.0 102.8 Adjusted operating earnings before depreciation and amortization(1) 96.1 145.5 107.9 109.0 84.1 141.1 113.0 103.6 Adjusted operating earnings margin before depreciation and amortization(1) 14.1% 18.7% 15.3% 14.6% 11.9% 17.6% 15.1% 14.5% Operating earnings $ 27.8 $ 66.7 $ 39.2 $ 43.8 $ 15.0 $ 85.3 $ 52.1 $ 46.1 Adjusted operating earnings(1) 59.0 107.3 70.2 66.2 41.8 99.1 72.6 64.1 Adjusted operating earnings margin(1) 8.7% 13.8% 9.9% 8.9% 5.9% 12.4% 9.7% 9.0% Net earnings attributable to shareholders of the Corporation $ 13.9 $ 41.7 $ 20.9 $ 22.2 $ 1.0 $ 60.4 $ 34.1 $ 28.3 Net earnings attributable to shareholders of the Corporation per share 0.16 0.48 0.24 0.26 0.01 0.70 0.39 0.33 Adjusted net earnings attributable to shareholders of the Corporation(1) 37.4 71.8 44.0 39.1 21.1 68.4 49.6 41.7 Adjusted net earnings attributable to shareholders of the Corporation per share(1) 0.43 0.83 0.51 0.45 0.24 0.79 0.57 0.48 % of fiscalyear —% 41% 25% 22% 12% 36% 26% 22%

(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.

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

• The impact of acquisitions;

• The effect of exchange rate fluctuations;

• The effect of interest rate fluctuations;

• The impact of the change in the share price on the stock-based compensation expense;

• The impact of changes in price of raw materials, including resin and paper; and

• The impact of inflation on costs.

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Management's Discussion and Analysis - 9

FINANCIAL POSITION, LIQUIDITY AND CAPITAL STRUCTURE

(Unaudited)

Table #5:

		Three months ended
(in millions of dollars)		January 28, 2024 January 29, 2023
Operating activities Cash flows generated by operating activities before changes in non-cash operating items and income taxes paid Changes in non-cash operating items Income taxespaid		$83.5 $76.4 (20.0) (51.8) (6.1) (12.6)
Cash flows from operatingactivities		$57.4 $12.0
Investing activities Business combinations, net of acquired cash Acquisitions of property, plant and equipment Disposals of property, plant and equipment and other Increase in intangible assets		$— $(0.3) (30.1) (43.9) 1.4 — (6.5) (7.3)
Cash flows from investingactivities		$(35.2) $(51.5)
Financing activities Reimbursement of long-term debt Net (decrease) increase in credit facilities Financial expenses paid on long-term debt and credit facilities Repayment of principal on lease liabilities Interest paid on lease liabilities Dividends		$(1.2) $(0.7) (75.4) 55.4 (7.4) (9.4) (5.9) (6.1) (0.8) (0.8) (19.5) (19.5)
Cash flows from financingactivities		$(110.2) $18.9
Effect of exchange rate changes on cash denominated in foreign currencies		$2.5 $0.1
Net change in cash		$(85.5) $(20.5)
Financialposition	As at January 28, 2024 As at October 29,2023
Net indebtedness(1) Net indebtedness ratio(1) Credit rating DBRS Outlook Standard and Poor’s Outlook	$918.3 $921.0 2.00x 2.06x BBB (low) BBB (low) Stable Stable BBB- BBB- Stable Stable
Consolidated Statements of Financial Position	As at January 28, 2024 As at October 29,2023
Current assets Current liabilities Total assets Total liabilities	$947.1 $1,100.4 437.5 526.3 3,468.2 3,700.3 1,591.5 1,794.1

(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.

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Management's Discussion and Analysis - 10

ANALYSIS OF FINANCIAL POSITION AND LIQUIDITY - FIRST QUARTER

Cash Flows from Operating Activities

Cash flows from operating activities increased from $12.0 million in the first quarter of 2023 to $57.4 million in the first quarter of 2024. This increase is explained by favourable changes in non-cash operating items, which are mainly attributable to a favourable change in timing of accounts payable and accrued liabilities, higher operating earnings before depreciation and amortization as well as lower income taxes paid during the period.

Cash Flows from Investing Activities

Cash flows from investing activities went from a cash outflow of $51.5 million in the first quarter of 2023 to a cash outflow of $35.2 million in the first quarter of 2024. This change is mainly attributable to a decrease in investments in property, plant and equipment.

Cash Flows from Financing Activities

Cash flows from financing activities went from a cash inflow of $18.9 million in the first quarter of 2023 to a cash outflow of $110.2 million in the first quarter of 2024. This change is mainly due to repayments on the credit facilities.

Debt Instruments

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 bankers' acceptance rate plus 1.675%, or Secured Overnight Financing Rate ("SOFR") plus 1.775%, or the Canadian prime rate or the U.S. prime rate plus 0.675%.

The Corporation has another credit facility with a maximum amount of US$25.0 million ($33.6 million), which matures in March 2024. The applicable interest rate for this credit facility is SOFR plus 1.05%. On February 21, 2024, this credit facility was extended for an additional year, until March 2025, for a maximum amount of US$15.0 million ($20.2 million), and will bear interest at SOFR plus 1.45%.

As at January 28, 2024, no amount was drawn on the credit facilities, and the unused amount under the credit facilities was $433.6 million.

As at January 28, 2024, the floating-rate portion of the Corporation's long-term debt represented approximately 41.0% of total debt.

Net Indebtedness

Net indebtedness remained relatively stable, from $921.0 million as at October 29, 2023 to $918.3 million as at January 28, 2024. The net indebtedness ratio stood at 2.00x as at January 28, 2024 compared to 2.06x as at October 29, 2023, as a result of higher adjusted operating earnings before depreciation and amortization.

CAPITAL STRUCTURE

Share Capital Table #6:
Shares Issued and Outstanding	As at January 28, 2024	As at February 29, 2024
Class A(Subordinate VotingShares)	73,259,342	73,259,342
Class B(Multiple VotingShares)	13,364,828	13,364,828
Total Class A and Class B	86,624,170	86,624,170

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Management's Discussion and Analysis - 11

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").

During the first quarter ended January 28, 2024, 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 Executive Vice President and Chief Financial Officer of the Corporation.

SUBSEQUENT EVENT

On February 1, 2024, the Corporation announced that it will be phasing out operations at its Saint-Hyacinthe, Quebec, printing plant in anticipation of the complete closure of the facility in April 2024. Operations will gradually be transferred to other Printing Sector plants to optimize the return on its assets, reduce its costs and improve operational efficiency.

In connection with this initiative, additional expenses of approximately $9.0 million, resulting mainly from workforce reductions, will be recognized in the second quarter or 2024.

OUTLOOK

In the Packaging Sector, our investments in sustainable packaging solutions position us well for the future and should be a key driver of our long-term growth. The economic environment should however continue to affect short-term demand. In terms of profitability, despite the pressure on volume, we expect an increase in adjusted operating earnings before depreciation and amortization for fiscal 2024 compared to fiscal 2023.

In the Printing Sector, we expect lower volume in our traditional activities. This anticipated volume reduction should result in lower adjusted operating earnings before depreciation and amortization for fiscal 2024 compared to fiscal 2023. We expect this decrease to be mostly offset by cost reduction initiatives and the continued roll-out of raddar[TM] .

Finally, given the economic environment and the early impact of our profitability and financial position improvement program, we expect consolidated adjusted operating earnings before depreciation and amortization to remain at the very least stable for fiscal 2024 compared to fiscal 2023. In addition, we expect to continue generating significant cash flows from operating activities, which will enable us to reduce our net indebtedness while continuing our strategic investments.

On behalf of Management,

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

March 12, 2024

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Management's Discussion and Analysis - 12