Transcontinental Inc

TSX:TCL.A

Earnings Call Transcript 2018-Q3

[Operator]

[Foreign Language] Welcome to the TC Transcontinental Third Quarter 2018 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, September 6, 2018. I would like to turn the conference over to Katherine Chartrand, Senior Director, Corporate Communications. [Foreign Language] Ms. Chartrand, please go ahead.

[Katherine Chartrand, Senior Director of Corporate Communications]

Thank you, Jessa, and good afternoon. Welcome to TC Transcontinental 2018 Third Quarter Results Conference Call. The press release and MD&A with complete financial statements and related notes were issued earlier today. For those of you who are not on our distribution list, the documents are posted on our website at tc.tc.With us today are TC Transcontinental's President and Chief Executive Officer, François Olivier; and Chief Financial and Development Officer, Nelson Gentiletti. Before I turn the call over to management, I would like to specify that this conference call is intended for the financial community. Media are in a listen-only mode and should contact Nathalie St-Jean, Senior Advisor, Corporate Communications for more information or interview request. Please be reminded that some of the financial measures discussed over the course of this conference call are non-IFRS. Also, during the 3 months period ended July 29, 2018, the company has updated its definition of certain non-IFRS measures, which now include the amortization of intangible assets and a reversal of the fair value adjustment of inventories sold in connection with business combinations. Please refer to the MD&A for a complete definition and reconfirmation of such measures to IFRS financial measures. In addition, this conference call might contain forward-looking statements. Such statements based on the current expectation of management and information available as of today inherently involve numerous risks and uncertainties, known and unknown. The risks, uncertainties and other factors that could influence actual results are described in the 2017 Annual MD&A, the latest Annual Information Forms and has been updated in the MD&A for the second quarter ended April 29. Please note that this was the first quarter with Coveris Americas in our results since we completed the transaction on May 1. As we told you last quarter, you can see that we have separated our packaging and printing activities as these are now distinct sectors in our company. Moving forward, our media activities are now reported under the other categories.I would now like to turn the call over to François Olivier.

[François Olivier, President, CEO & Director]

Thank you, Katherine, and good afternoon, everyone. First, we are satisfied with our overall results in this third quarter in what was an intense period of activity, largely due to the integration of Coveris Americas. Now let me highlight some key factors that contributed to our results. We will start with the packaging sector, which is now the largest business from a revenue standpoint of Transcontinental. Our TC packaging activities, acquired prior to Coveris, performed well both in terms of revenue growth and profitability. That being said, for the quarter, organic sales growth was 3%, which is below our stated objective of 6% on a year-over-year basis. However, excluding the previously mentioned impact of a change in legislation in one of our key markets, organic sales growth in the remaining markets would have been 6% for the quarter. We're seeing a progressive return to more normal levels for that specific market, and we have also secured additional volume and expect orders to begin later in Q4.In terms of our other markets, we saw good growth in dairy products, pet food and consumer goods products. Furthermore, Multifilm, which we acquired in March, had a good quarter posting a 5% increase in revenues. Turning to our acquisition of Coveris. It was a significant contributor to our overall results, and we are pleased with its revenue, which are in line with our expectations. During the quarter, we began our rigorous integration process. I am pleased to report that it is proceeding very efficiently, and we have already made great progress. Our primary objective post-transaction was to connect with as many Coveris' customers and employees as possible. Since the acquisition, our management team has visited all the Coveris management locations, representing over 3,000 employees, which are truly engaged and excited to have joined the TC family. We have also visited customers representing more than 40% of revenues and have had very positive reception as customers appreciate the stability and ownership and the long-term perspective that TC Transcontinental brings to the table. As I told you last quarter, we will be focusing, among other things, on strengthening the sales force in order to reignite sales growth. The process has started and will take several quarters to implement, and so we don't expect this to have any meaningful impact on fiscal 2019. In terms of profitability, Coveris profit margins were lower than anticipated in this third quarter as it was affected by a delay in the pass-through of increased and the cost of paper, resin and freight for several customer contracts.That said, our investment thesis remains unchanged. Coveris is a significant engine of growth for us and we expect it to be a contributor to our overall profit in the coming quarters. We are well positioned to begin to realize synergies at the end of the fourth quarter and accelerate them in 2019. We feel very comfortable about achieving the targets we set at the closing of the transaction.Over the next few months, we will continue to integrate our network of packaging plants to that of Coveris, execute on our revenue opportunities and cost-savings as well as leverage our strong manufacturing capabilities. We have a new organizational structure in place for the sector, with members from both Coveris and TC, which will help us deliver on these objectives. We are finalizing our operational plan for fiscal 2019, and we now have a seasoned team in place to execute it.Turning to our printing sector. We delivered good performance with our top and bottom line results in line with our plan. Excluding the impact of deferred revenues and profits from previously announced newspaper outsourcing agreements, which terminated this year, our printing sector adjusted operating earnings remained stable in the quarter. We continued to see resilient demand for our retail-related services. Our revenue in this business showed a slight decrease compared to a very solid third quarter last year, further impacted by the loss of distribution revenues from a bankruptcy of a Canadian retailer customers. We believe that our offering of printed flyers and other related services remains highly relevant to Canadian retailers in order to drive traffic to the store and demand by our customer for [ these ] use of flyer is stable.As for in-store marketing products vertical, a growth axis for us, the previously announced agreements valued at about $15 million annually went into effect late in Q3 and are ramping up very nicely with the full benefit expected in 2019. These are important contracts that bring a revenue in this new business to $75 million on a run rate business, therefore, putting us on track to achieve our goal of $100 million. We continue to pursue potential opportunities with both retailers and non-retailers. As for the rest of our non-retail-related business, volume continued to be affected by persistent adverse factors in the advertising market. Note that our revenues in the quarter benefited from the price increase for certain types of paper, with no impact on our profitability as these are passed through to customers on a timely basis. As expected, we also benefited from the previously announced closure of our Transcontinental Métropolitain newspaper printing plant. Furthermore, following the sales of our printing activities in Fremont, California, at the Hearst, the reallocation of some of our equipment to our Canadian retail printing platform is currently underway. This equipment will enable us to drive increased efficiency in our retail manufacturing platform and should contribute to reducing our costs, starting in the third quarter of 2019, with the full impact flowing in 2020. This quarter, we also benefited from our transitional service agreement with Hearst. And now a note on our media activities. The process of refocusing them towards our business and educational portfolio is essentially complete, and these activities performed as planned in Q3.In conclusion, in our packaging sector, we will continue executing on our rigorous integration plan and we will achieve our synergies that we have targeted. We remain confident on delivering on our investment thesis of the Coveris acquisition. On the printing side, measures are continuously being taken to further optimize our platform, while our teams are diligently working on adjusting our cost base to volumes. For our Media Sector, we will focus on further developing our business and educational portfolio. We expect to deliver stable results in terms of profitability.With that, I will turn it over to Nelson.

[Nelson Gentiletti, Chief Financial & Development Officer]

Thank you, François, and good afternoon. As François mentioned, there was some noise in our printing results during the quarter and I will go over that in a moment. But first, let me start by providing you with an update regarding the process of executing on our cost saving synergies related to our Coveris acquisition. We are reiterating our target of USD 20 million of cost savings to be realized over the first 24 months post-closing, of which $10 million are expected to be realized in the first 12 months on an annualized basis. While no savings were realized in our third quarter results, given the early stage of the integration, we fully expect them to ramp up and begin materializing at the end of the fourth quarter, progressively reaching their full impact at the end of Q2 of 2019. The initial synergies will be driven by procurement-related cost savings as well as prepress and plate-making insourcing. After that, we expect to see the effect of manufacturing efficiencies and film insourcing in 2020 as we benefit from the planned investment in new equipment.A note on Coveris profitability in the quarter. As François mentioned earlier, the 12% EBITDA margin was slightly lower than the 13% achieved in the prior year as the quarter was affected by a delay in the pass-through of increases in the cost of paper, resin and freight for several customer contracts. Please note that paper is used in the manufacturing of many types of bags in certain Coveris plants. Before I comment on our cash flow and provide you with more color on our expectations for the fourth quarter, let me take a few minutes to go over some of the elements that affected our profitability in the printing sector. In terms of the impact on our adjusted operating earnings in the third quarter, the negative noncash impact related to deferred revenue due to the end of the printing of the San Francisco Chronicle, La Presse and The Globe and Mail in the Maritimes accounted for $11 million of the $12 million decrease on a year-over-year basis. Recall that as part of the Hearst agreement, we recorded a one-time noncash gain in the first half of the year as we accelerated the recognition of more than $100 million in deferred revenues. As of April 1 of this year, we stopped printing the San Francisco Chronicle and, therefore, we will no longer have any deferred revenues. Regarding the end of the printing of the La Presse and The Globe and Mail in the Maritimes as you know, we had received a one-time cash payment of $31 million for each of these to compensate for the resulting reduction in revenue.For the fourth quarter, the noncash combined negative impact of the end of the printing of the San Francisco Chronicle, La Presse and of the Globe and Mail in the Maritimes compared to the same period last year will be approximately $12 million in revenues and EBITDA as well as at each EBIT level.In fiscal 2019, we will only experience the unfavorable effect from the end of the printing of the San Francisco Chronicle. Using an exchange rate of 1.3, the resulting negative impact will be approximately $37 million in revenues, $20 million at the EBIT level and $22 million at the EBITDA level. Again, the majority of the impact will be noncash and will, therefore, have minimal impact on our cash flow. You can find the supporting table in our MD&A, highlighting the impact of this element on our results. If you need further clarification on this, we can answer your questions after today's call. In 2019, please note that we will also no longer benefit from the Hearst transition revenues of USD 7 million, which will end in Q4 of 2018.Now turning to cash flow in the third quarter. Net changes in cash amounted to an outflow of $270 million, and we closed the quarter with $28 million of cash. About $77 million, which includes $7 million of tax payment came from operations. We invested $1.6 billion for the acquisition, namely for Coveris Americas and allocated $20 million to CapEx. We also distributed $18 million in dividends.At the end of the quarter, our net indebtedness was $1.5 billion. With the completion of the acquisition of Coveris Americas, we saw an increase in our consolidated debt and our net indebted [ initial ], which stood at 3.5x at quarter end.Now to our outlook. In our packaging sector, we expect our acquisition of Coveris to significantly contribute to our revenues and adjusted profitability over the next 3 quarters. We expect Coveris revenues to be comparable to those of 2017 and its profit margins to gradually improve toward our stated targets over the next few quarters as a result of manufacturing efficiency initiatives and the effective synergies, beginning at the end of the fourth quarter to reach our target of $10 million on an annualized basis at the end of Q2 of 2019. For the full year, we expect sustained organic sales growth in revenues, excluding the Coveris acquisition. In the event of an increase, raw material and freight cost could once again impact our profit margins. In our printing sector, we expect revenues from our retailer-related services, which represent the bulk of our revenues to remain relatively stable over the next 12 months when compared to last year. The remaining portion of our printing portfolio should be affected by expected volume declines due to the same trends in the advertising markets and due to lower volume in our newspaper printing vertical relating to the end of some of our newspaper outsourcing contracts. We will benefit from the transition revenues of $7 million from Hearst until the end of Q4 2018. In terms of profitability, the impact of the Hearst agreement will negatively affect our adjusted result until Q2 of 2019. Also, the printing sector will continue to benefit from the closure of the Transcontinental Métropolitain plant and other cost-saving initiatives until the end of Q1 of 2019. In the Media Sector, we expect our business and education portfolio to continue to deliver stable profitability. For the 2018 P&L, assuming the stock price at the last 5 days average, you should model for full year corporate costs at the EBITDA level up about $27 million. As a reminder, a change of $1 in our stock price impacts our results by close to $1 million. Our full year financial expenses are expected to be about to 2x higher than last year as our indebtedness has increased due to the acquisition of Coveris. Our tax rate is expected to be close to 27%. In terms of use of cash for the year, including Coveris Americas, you can assume CapEx of about $80 million and cash taxes of $45 million. To conclude, TC Transcontinental continues to execute on its growth plan towards generating profitable growth through a combination of manufacturing cost leadership, focused business verticals, strong customer relations -- relationships, focus on the integration and organic sales growth. We expect to continue to generate significant cash flows from all our operating activities, which should enable us to allocate capital toward reducing our indebtedness. On that note, we will now proceed with the question period.

[Operator]

[Operator Instructions] [Foreign Language] [Operator Instructions] Adam Shine, the National Bank Financial.

[Adam Shine]

Maybe I'll work my way backwards for some housekeeping items, starting with you, Nelson. $27 million of corporate cost at the EBITDA level, but you didn't give us the Q3 number given that you sandwich things with Media. So can you maybe just give any color on Q3?

[Nelson Gentiletti, Chief Financial & Development Officer]

Yes. I can give that to you. Hold on 1 second.

[Adam Shine]

Okay. Maybe in the meantime just for François.

[Nelson Gentiletti, Chief Financial & Development Officer]

Yes, ask another question.

[Adam Shine]

Yes, exactly, so just for François. The context of Coveris and sort of stable results, it looks like the results in Q3 were maybe a little bit shy of stable. So is that something that we should think about at least for the next quarter or 2 with progression to manifest itself sort of into the later part of 2019? How exactly should we think about that?

[François Olivier, President, CEO & Director]

Yes. Well, first of all, as you know, if you look, I got our margin and packaging from quarter-to-quarter of a little bit more variability than in the print sector. So like -- when we acquired Coveris, the average EBITDA was at around 13%, but not all quarter are equal, so that was the annual. So we came in at 12.24% for this quarter. So it's a little bit shy, but we expect to be on our way to the 13% soon. But I think you should, in packaging, look at these quarter-by-quarter with a little bit of more cautious because we could be up 14% 1 quarter and 12% in another. But we believe that we will have no problem sustaining the 13% in the future quarters.

[Adam Shine]

Okay. I appreciate that color. I was talking more, François, in regards to the top line where I thought you came in a little bit shy of that sort of stable content, not much, of course, but just a little.

[François Olivier, President, CEO & Director]

Yes, the top line was [ about ] in line with our expectation and with our plan that we did in the due diligence. And overall, with Coveris for the first year, we want to make sure we build a strong sales force, a strong sales funnel, and we have enough -- a lot of verticals. So in some verticals, we have a lot of very strong funnel, a good sales force and are going to execute on that. On some other vertical, we need to reinvest in the sales force, and the sales funnel is not as healthy. So when you look at all that, the vertical where we're -- we have a good 12 month ahead of us that was well prepared by Coveris prior to us acquiring and the one that are kind of less well -- the funnel is more empty. When you look at all that, our expectation is that sales for next year are pretty -- going to be pretty much flat, we think. And it's important for us to build the sales funnels so that in 2020, we start to have some -- enjoy some growth. And as you know, rebuilding in some vertical the sales force and executing on some of those vertical that have a long sales cycle, we should be realistic about the Coveris portfolio growing a lot in '19. We think it's going to be pretty much stable and that's what we saw in this first quarter. Again, we know the -- we know a little bit of the variability quarter-to-quarter. And we think that from a revenue standpoint, Q3 came in exactly where we thought it was going to came in -- come in.

[Adam Shine]

Perfect. And just maybe one last question. Just in regards to the vertical in the other parts of the business, which was a Q1 issue and then the impression, I guess, was that it resolved with some real strong organic growth in the Q2 seems to have sort of recurred again. Is that something that could be a bit of a more volatile issue moving forward? Or do we think that's largely behind you guys in F'18?

[François Olivier, President, CEO & Director]

No, it was -- this vertical was really badly affected in Q1 like we told you. As you recall, Q2 was a very strong organic growth for the TC packaging business about 9%. This vertical had contributed in Q2 a little bit, but the bulk of the contribution came from other market. And this issue in this vertical is about legislation, about the labeling on the package. And the initial signal that we asked is, was that a lot of customer were sitting on a lot of inventory. And they were -- we thought we're not going to be able to reuse some of their inventory, that they were going to need to throw that away and start reordering in Q3, and that's what we had communicated to you. But fortunately, for them, which is a good thing, there are our customer, but unfortunately, for our volume, they came up to some kind of agreement with the government to not throw away all that packaging and do something to use them, which kind of delayed the coming back of that business. It's starting now and it's going to be very healthy in Q4. And what I said in my prepared remarks, while we had those discussion with our customer in that vertical, we managed to lock in additional business that also going to start in Q4. So it's coming back, but it's coming back kind of 3 or 4 months later what we had anticipated. And that's why, in this quarter, we're at 3%. But if you factor out this vertical, which is only 3 customer, and you look at the rest of the TC portfolio and all the other vertical, we performed in Q3 up 6%. So we expect again a good Q4 organic growth on our legacy TC packaging portfolio.

[Adam Shine]

Great. I appreciate.

[Nelson Gentiletti, Chief Financial & Development Officer]

Just on your first question, Adam, we'd given you a total of $27 million of corporate cost for the year. So it'd be $10 million would be for Q3. And for Q4, assuming the same stock price should be about around the same number.

[Operator]

[Foreign Language] Mark Neville, the Scotiabank.

[Mark Neville, Analyst]

Just on the delay in the pass-through, on the input cost and on freights. I guess just first, I'm just curious sort of how much of an impact or the -- if you can quantify that?

[François Olivier, President, CEO & Director]

Well, we're not going to quantify that. We work on something else in our 3, 4 months of integration, but obviously, we read all the contract. And obviously, those pass-through are different per customer. Some have 30 days, some have 60 days, some have 90 days, some have twice a year. And obviously, when the price goes down, whatever the delay is, we take a hit. And then, you see that with company and packaging when the material prices going up usually, our margin goes down. And when the material price starts to go down, the same delay apply and then you see our margins going up. And so we will not quantify the exact number, but from 12.2% to 13%. The main reason is the paper price industry is very tight right now and the price are rising. And that resin is also not as tight, but rising a little bit as well. And the freight cost, there is a very tight supply of trucking in North America and the price are high. And then when we incur these increased revenue, we suffered whatever delay we have in our contractual agreement with customers, and that's what happened in Q3.

[Mark Neville, Analyst]

Okay. I guess, just broadly speaking, is this sort of a 100% of your contract? I know that's too high, but like what percentage of this is hedged? Or sort of what percentage of your contracts roughly would have these price escalation or mechanisms in the contract?

[François Olivier, President, CEO & Director]

I would say about 2/3 and about 1/3. We have to talk to the customer either way, and 2/3 is like -- it's in the mechanics of the contract, I would say would be a fair number.

[Mark Neville, Analyst]

Okay. I just want to make sure I'm understanding the legacy packaging. I think it was about 2.5%, 3% growth in the quarter. But again, you sort of explained the reasoning in the inventory situation or if you want to call it that. Again, it sort of like a 3 or 4 month sort of impact. So Q4, again, it sounds like your sort of guiding back to that 6% range. Is that -- am I reading that right?

[François Olivier, President, CEO & Director]

Well, we -- yes, basically, what I said is that in Q3, we were at 3%, but because of the impact in that vertical and the rest of the business is at 6%. And we think some of that situation is going to resume in Q4. So are we going to finish the quarter at 6%, at 4%, at 5%, but our expectation is to finish with a good organic growth of fourth quarter. And yes, that's what I see.

[Mark Neville, Analyst]

Yes, okay. That's right. That's okay. And just on the margin, I guess, on packaging, if it's 13% roughly Coveris, I think the legacy was close to 13%. But when I think about this business, and this layering on the synergies and some of the growth, I guess, we sort of think about it maybe or eventually migrating towards 15% EBITDA. Again, I know you don't give longer-term targets or guidance, but is that sort of the way you're thinking about it? Or is it more sort of hold the line on the margin with the synergies? I'm just sort of curious as your thoughts on this?

[François Olivier, President, CEO & Director]

Yes, but right now, our focus is to understanding all the assets and understanding and getting to know our business and the customer and that's what we basically did in the first quarter. Now we put the team in place, and we're going to start to execute on our plan. Now for me, it's important to stabilize the business and position the business well for long-term growth with the right investment, with the right strategy and the right asset and the right vertical. Obviously, we're looking forward to bring EBITDA margin from 13% to 15%. But I would say that we are more interested in the first year of acquiring Coveris, positioning the assets for long-term growth. And if it means staying at 13% for a year, we want to make sure that we do the right move early on in terms of making strategic decision on verticals that we're in, where are we playing, for which product, and acquiring the right assets, to position the platform, to have growth in the future, and to get to that 15%. But right now, we're more focused on making the right decision for the long run than trying to prove to you guys that we could be at 14% in Q4 and Q1 next year. There'll be time for that. I think we've proved that, that team when it's about maximizing margin and working on costs and all that, but we are at the beginning of this, and what is a very strategically important for us is to position the platform for long-term sustainable growth and that's what we intend to do in the first year. And I think it's important, Mark, as well we didn't say it in our prepared statements, but when you look at the model, is that when we split the 2 -- when we split the 2 businesses, print and packaging, and the way we disclose them, as you can imagine, when on a combined basis, we were charging management fees to the different businesses. So when we split those businesses, obviously, we've carved out a portion of those management fees and have put them into the packaging segment. And so that's roughly $6.5 million on an annualized basis. So the quarter is $1.6 million. So in the quarter, if you wanted to guess kind of a comparative margin to last year on the legacy business, you'd have to add back $1.6 million of management fees. And in our reporting actually, we've actually adjusted the comparative numbers retroactively to the beginning of the year. So if you go back to our year-to-date Q3, well, you've got 3/4 of the $6.5 million in those numbers of management fees.

[Operator]

[Foreign Language] David McFadgen, Cormark Securities.

[David John McFadgen, Director of Institutional Equity Research]

Maybe a couple of questions for Nelson. Just, I guess, a clarification. First of all, you talked about the impact in 2019 from the San Francisco Chronicle. I think you said the impact was $37 million of revenue versus 2018. I'm just trying to reconcile that with table 4 in your MD&A. If you can provide any clarity that would be helpful?

[Nelson Gentiletti, Chief Financial & Development Officer]

Yes. So you're trying to reconcile what the -- which number are you trying to reconcile?

[David John McFadgen, Director of Institutional Equity Research]

What is the revenue impact? Or is the revenue impact in 2019 expected to be $37 million from Chronicle versus 2018?

[Nelson Gentiletti, Chief Financial & Development Officer]

Yes, but I mean but this table doesn't have the revenues. So if you looked at the table and you look at the bottom, you kind of add up the quarters you'll get to those numbers, right. If you look up here.

[David John McFadgen, Director of Institutional Equity Research]

Okay. Maybe we can take that offline, I guess. So François you said that maybe some of the sales funnels at Coveris aren't as robust as you'd like. Can you give us an idea of what industries those sales funnels are targeting?

[François Olivier, President, CEO & Director]

I can give you an example, like, in some vertical, where there is a very strong sales funnel, very good sales force and a very good growth plan that will deliver solid organic sales growth next year. But in some other vertical, their strategy was to try to go for the home run and run after a large piece of business and large customers and try to go for the big win which is very tough to execute. And our strategy in TC Packaging was more to go for the smaller Tier 2 customer that tend to grow by the faster rate, and we tend to be able to make deals with them maybe a little bit faster. So in some vertical, we are refocusing the strategy from very large customer to midsize or small size customer. And obviously, if you do that and you want to have the same type of sales that you need to target more customer, so you need more feet on the street. So in some vertical we don't have enough feet on the street for the change of strategy that we want to execute. So we need to hire reps, build a sales force and build a plan to go with our new strategy. So in some of vertical we are going from chasing very large piece of business to try to chase a smaller piece of business, we think it's going to be more successful for us. And that's what I meant by rebuilding the sales funnel and investing in the sales force.

[David John McFadgen, Director of Institutional Equity Research]

Okay. And what are the potential revenue synergies from sort of integrating Coveris with the rest of the packaging business, are there many revenue synergies there?

[François Olivier, President, CEO & Director]

There are some. I think in some verticals -- I think in verticals where TC Packaging prior to Coveris was not present, there might be a little bit less synergies. But where we were both present and those vertical and you put the 2 offering and the 2 asset base together, our offering in those vertical are much stronger and it enable us to have a conversation with the customer where they feel a lot at ease to give us more business because we have more scale, more backup, more product offering and in some verticals we're the market leaders. So that's been a very positive conversation with a lot of customers so far in the vertical where we added a combined offering. And we think that there will be some positive outcome from -- in those verticals. But like I said, in some other verticals, the Coveris sales funnel was pretty poor. And we need to rebuild that in the next year or so. So when you're factoring the place where we feel we're going to enjoy some good organic growth and the place where we feel we're not going to grow our expectation for next year is, we think that we're not going to show a lot of organic sales growth on the Coveris portfolio. On our TC portfolio from what I can see right now is we expect another solid year of organic sales growth in 2020. And you're right, some of that it's been -- it's going to be helped because we have acquired Coveris.

[David John McFadgen, Director of Institutional Equity Research]

Okay. And then just one final question for Nelson. In the MD&A, you give the financial leverage of 3.5x, that's not a pro forma number. Do you have the pro forma number that you could share with us?

[Nelson Gentiletti, Chief Financial & Development Officer]

I mean, the pro forma number would be close in line with what we disclosed when we announced the acquisition.

[David John McFadgen, Director of Institutional Equity Research]

Okay. Can you remind me what that was, sorry?

[Nelson Gentiletti, Chief Financial & Development Officer]

2.7x.

[Operator]

[Foreign Language] [Operator Instructions] .Drew McReynolds, RBC.

[Drew McReynolds, Analyst]

First for you, Nelson. On the segmented information just want to make sure I haven't missed it any of the quarterly restatements for prior quarters. Have you put that out in a supplementary, anywhere?

[Nelson Gentiletti, Chief Financial & Development Officer]

Yes, it will be online.

[Drew McReynolds, Analyst]

Okay. Like as of today at some point?

[Nelson Gentiletti, Chief Financial & Development Officer]

Yes. Yes.

[Drew McReynolds, Analyst]

Okay. That's great. And for you, François, on Coveris more qualitatively because I think you've covered off the rest. Just in terms of some of the surprises either positive or negative at quarter end here looking at the platform. Anything you want to flag on it either positive or negative? That would be helpful.

[François Olivier, President, CEO & Director]

No, we -- I think we did a very diligent work on looking at that acquisition for about 9 months and did a lot of plant visits and even talk to customer trying to acquiring. So we had built ourselves a thesis and a model and after 3 months what we were expecting to be great is great. What we were expecting to need a little bit of work, need a little bit of work. I cannot say, Drew, as -- this is exactly what we thought it was. And so we are executing on the plan because what we've seen -- no, I would like to report to you some very pleasant surprise, there's some positive things but we had seen them and they are there. And what we knew we needed to work on is exactly that. So it is exactly what we thought it was, which also help us in terms of the plan that we had anticipated to put in place is the plan that we're starting to execute now. We have choose the people who are managing the corporation, we have split the corporation in terms of how we want to organize the various business units, we have announced that last week and now we're going start to execute our plans. So we took a good 3 months to make sure that our thesis all we met, all the large customer and all the customers that we needed to see. We visit all the plants and we have a good idea of the asset base that we have acquired. We visit all the factory. We have a very good feeling for the tone of the people, which is very positive and they are very motivated. And then we have a lot of people who worked in the last 3 months are creating a solid plan. And now we have the team in place, and the plan is ready, and we're starting to execute that diligently. But like I said, for the long run. But no surprise to report either way, it's exactly what we thought it was.

[Drew McReynolds, Analyst]

Okay, that's great. Two others maybe for you, Nelson. First, in terms of the media portfolio as it sits here today, I think at some point you were kind of looking at about $100 million in revenues with a margin profile of roughly kind of low to mid-20s. Is that what you kind of see looking out to kind of over the next or on a run rate, I guess.

[François Olivier, President, CEO & Director]

Yes, I mean, I think -- I mean, if -- obviously, we're not going to extend to 3, 4 years for now. But I mean, if you're looking for kind of views for your modeling for kind of the rest of this year and for next year, I think that would be a good assumption.

[Drew McReynolds, Analyst]

Okay. And also, Nelson, on CapEx wouldn't expect specific guidance looking outside of fiscal '18. You did mention previously with respect to the CapEx profile Coveris that it would stay relatively stable given the investment that was put into it for, I guess, a few years at least. Is that still something that holds true from your perspective?

[Nelson Gentiletti, Chief Financial & Development Officer]

I think as a base case it still holds -- it still holds true. What can make that CapEx vary is some of the projects that we're looking at to enhance the margins. Part of them are to drive potentially incremental synergies. And part of them are maybe to eventually improve efficiency and optimize platform to enhance margins and so on and so forth. So there could be additional capital associated to that, but if there is a -- if there is higher capital, this would be capital that would have very, very quick high returns on that capital, but it should not move the needle dramatically.

[François Olivier, President, CEO & Director]

My view, like, what I see going forward the $75 million to $80 million, I think we're good with that.

[Operator]

[Foreign Language] Ms. Chartrand, there are no further questions at this time. Please continue.

[Katherine Chartrand, Senior Director of Corporate Communications]

Well, thank you, everyone. We'll talk to you in December.

[Operator]

[Foreign Language] Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.