Quebecor World Inc.
TSX : IQW.SV
NYSE : IQW

Quebecor World Inc.

November 01, 2005 13:34 ET

Quebecor World Announces Third Quarter Results

MONTREAL, CANADA--(CCNMatthews - Nov. 1, 2005) - Quebecor World (TSX:IQW.SV)(NYSE:IQW)



HIGHLIGHTS

- Net income from continuing operations for the third quarter of $31
million compared to $46 million
- Third quarter revenue was $1.58 billion
- Volume increases offset by lower pricing in most segments and weak
performance in France and the UK
- Operating income before impairment of assets, restructuring and
other charges (IAROC) at $97 million compared to $112 million
- Earnings per share before IAROC $0.28 compared to $0.36
- IAROC of $17 million in quarter compared to $13 million


Quebecor World (TSX:IQW.SV)(NYSE:IQW) announces that for the third quarter 2005 the Company reported net income of $31 million from continuing operations compared to $46 million in the third quarter of last year. The continuing operations do not include a previously identified group of non-core group assets slated for sale and the third quarter results for 2004 have been restated to reflect this fact. On the same basis, diluted earnings per share in the third quarter were $0.16 compared to $0.28 in 2004. Operating income before IAROC was $97 million compared to $112 million during the same period last year. Consolidated revenues for the quarter were $1.58 billion compared to $1.57 billion last year.

In the third quarter 2005, the Company recorded impairment of assets, restructuring and other charges of $17 million or $0.12 per share compared to $13 million or $0.08 per share in the third quarter last year. Before impairment of assets restructuring and other charges, earnings per share for continuing operation were $0.28 compared to $0.36 in the third quarter of 2004.

"These results are indicative of lower prices for many print products, higher energy costs and the poor performance of our operations in France and the United Kingdom," said Pierre Karl Peladeau, President and CEO, Quebecor World Inc. "We are continuing to renew existing customers, and are winning new ones. These sales successes are positioning us to realize the maximum benefits of our new equipment as we move forward with the implementation of our North American and European retooling plans."

Quebecor World is on schedule with its current equipment investment plan that will see the installation of 22 new wide-web offset presses. Five of those presses will be in operation in U.S. facilities in the fourth quarter. The remainder will come into service in 2006 and 2007.

"Not only are our new presses being installed on time but because of the strong support form our suppliers and the diligent efforts of our employees, these presses have not experienced the usual start-up delays," said Mr. Peladeau. "To date, the new equipment is performing as advertised and we expect this to continue as we move forward with our investment plan."

To address the underperformance of certain sectors of its European operations and to further strengthen the overall platform the Company expects to announce a comprehensive European investment plan in the first quarter of 2006.

"Our European investment plan will be based on the criteria we established for our North America platform. We will invest in state-of-the-art technology and locate it where it can best serve our customers" added Mr. Peladeau.

As part of its effort to improve results in Europe, restructuring initiatives in the third quarter included workforce reductions at the Helio Corbeil facility in France and other plants across the Company. The cash cost of the third quarter restructuring initiatives was $9.5 million.

Quebecor World continues to reduce costs across its global platform. In the third quarter 2005, selling, general and administrative expenses were $95 million compared to $108 million in the third quarter of 2004, a decrease of 12% or $15 million excluding the unfavourable impact of currency translation.

Year-to-date

For the first nine months of 2005, net income from continuing operations was $56 million or $0.20 per share compared to $94 million or $0.50 per share last year. Before impairment of assets, restructuring and other charges, diluted earnings per share for the first three quarters of 2005 were $0.77 compared to $0.86 last year. Operating income before IAROC was $270 million in 2005 compared to $310 million last year. Consolidated revenue for the first nine months of 2005 was $4.62 billion compared to $4.52 billion in 2004.

Impairment of assets, restructuring and other charges for nine months stands at $82 million compared to $67 million for 2004. On the cost side, for the first nine months of 2005, SG&A expenses were $294 million compared to $318 million in the first three quarters last year. Excluding the unfavourable impact of currency translation, SG&A expenses were lower by $32 million year-to-date. The savings are due to ongoing cost-containment initiatives and workforce reductions.

Discontinued Operations

Quebecor World's core printing activities involve the printing of magazines, catalogs, retail inserts, books, directories and direct mail for the world's largest publishers and retailers. As the Company has grown by acquisition certain facilities were included in those transactions that do not relate to these core businesses. Approximately a dozen facilities in North America are involved in the printing of short-run contractual work such as marketing materials, annual reports, travel and fashion brochures. These activities are different from Quebecor World's core businesses and do not benefit from the advantages and synergies of the Company's global platform. The Company has announced its intention to sell this non-core group. Consequently the operating results related to these activities have been presented separately in the Company's consolidated financial results as discontinued operations and comparative figures have been restated to conform to the presentation adopted during the quarter ended September 30, 2005.

Dividend

The Board of Directors declared a dividend of $0.14 per share on Multiple Voting Shares and Subordinate Voting Shares. The Board also declared a dividend of CDN$0.3845 per share on Series 3 Preferred Shares, CDN$0.421875 per share on Series 4 Preferred Shares and CDN$0.43125 on Series 5 Preferred Shares. The dividends are payable on December 1, 2005 to shareholders of record at the close of business November 16, 2005.

Full Financial Information

Management Discussion and Analysis

Please refer to the MD&A for the reconciliation to Canadian generally accepted accounting principles of certain figures used to explain these results. The MD&A can be found on the Company's website at www.quebecorworld.com and through the SEDAR and SEC filings.

Financial statements are available on the Company's website and through the SEDAR and SEC filings.

Sedar web address: www.sedar.com

SEC web address: www.sec.gov

Conference Call

Quebecor World To Webcast Investor Conference Call on November 1, 2005

Quebecor World Inc. will broadcast its Third Quarter conference call live over the Internet on November 1, 2005 at 4:00 PM (Eastern Time).

The conference call will be webcast live and can be accessed on the Quebecor World web site:

http://www.quebecorworld.com/en/investors/webcasts/Q305

Prior to the call please ensure that you have the appropriate software. The Quebecor World web address listed above has instructions and a direct link to download the necessary software, free of charge.

Anyone unable to attend this conference call may listen to the replay tape by phoning (877) 293-8133 or (403) 266-2079 - passcode 294645#, available from November 1, 2005 to December 3, 2005.

Forward-looking statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among others, changes in customers' demand for the Company's products, changes in raw material and equipment costs and availability, seasonal changes in customer orders, pricing actions by the Company's competitors, and general changes in economic conditions.

The Company

Quebecor World Inc. (NYSE:IQW, TSX:IQW.SV) is one of the largest commercial printers in the world. It is a market leader in most of its major product categories which include magazines, inserts and circulars, books, catalogs, direct mail, directories, digital pre-media, logistics, mail list technologies and other value added services. The Company has approximately 34,000 employees working in more than 160 printing and related facilities in the United States, Canada, Argentina, Austria, Belgium, Brazil, Chile, Colombia, Finland, France, India, Mexico, Peru, Spain, Sweden, Switzerland and the United Kingdom.

Web address: www.quebecorworld.com



Quebecor World Inc.
Financial Highlights

Periods ended September 30
(In millions of US dollars, except per share data)
(Unaudited)

Three months Nine months
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2005 2004 2005 2004
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Consolidated Results
from Continuing
Operations
Revenues $1,577.2 $1,569.6 $4,619.3 $4,516.8
Operating income before
depreciation and
amortization and
before IAROC 178.7 197.4 520.8 570.3
Operating income
before IAROC 97.2 112.3 270.2 309.7
IAROC 17.2 12.8 82.3 67.2
Operating income 80.0 99.5 187.9 242.5
Net income from
continuing operations 30.9 45.8 56.2 93.6
Operating margin before
depreciation and
amortization and
before IAROC(i) 11.3% 12.6% 11.3% 12.6%
Operating margin
before IAROC(i) 6.2% 7.2% 5.8% 6.9%
Operating margin(i) 5.1% 6.3% 4.1% 5.4%
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Segmented Information from
Continuing Operations
Revenues
North America $1,253.6 $1,228.5 $3,559.4 $3,462.4
Europe 270.7 295.7 886.2 920.8
Latin America 54.4 45.0 177.2 136.2

Operating income (loss)
before IAROC
North America $100.0 $110.4 $264.3 $284.3
Europe (4.8) 9.3 (0.8) 33.6
Latin America 2.8 1.1 9.3 3.1

Operating margins
before IAROC(i)
North America 8.0% 9.0% 7.4% 8.2%
Europe (1.8)% 3.1% (0.1)% 3.6%
Latin America 5.1% 2.5% 5.2% 2.3%
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Financial Position
Cash provided by
operating activities $6.5 $41.4 $191.2 $106.9
Free cash flow (outflow)
from operations(ii) $(80.1) $(0.1) $(43.2) $(18.3)
Working capital $142.6 $92.8
Total assets $6,122.4 $6,281.0
Long-term debt
(including convertible notes) $2,003.6 $2,162.2
Shareholders' equity $2,499.4 $2,529.9
Debt-to-capitalization 44:56 46:54
Debt-to-EBITDA
ratio (times)(iii) 2.6 2.9
EBITDA interest coverage
ratio (times)(iii) 6.3 5.0
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Per Share Data
Earnings from
continuing operations
Diluted $0.16 $0.28 $0.20 $0.50
Diluted before IAROC $0.28 $0.36 $0.77 $0.86
Dividends on equity shares $0.14 $0.13 $0.42 $0.39
Book value $15.62 $15.65
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IAROC: Impairment of assets, restructuring and other charges.

Debt-to-EBITDA ratio: Total debt divided by operating income before
depreciation and amortization and before IAROC.

EBITDA interest coverage ratio: Operating income before depreciation
and amortization and before IAROC divided by financial expenses.

(i) Margins calculated on revenues.
(ii) Cash provided by operating activities, less capital
expenditures net of proceeds from disposals, and preferred
share dividends.
(iii) Calculations based on a rolling twelve-month period for
continuing operations.


APPENDIX - SEGMENTED RESULTS

North America

In the third quarter, revenues from North American operations were $1.25 billion compared to $1.23 billion in 2004. Year-to-date revenues were $3.56 billion compared to $3.46 billion last year. Operating income in the third quarter before impairment of assets restructuring and other charges was $100 million compared to $110 million and operating margin on the same basis was 8.0% compared to 9.0%. In the third quarter, increases in revenue and volume in several product groups were offset by continuing negative price pressure and lower volume in some groups.

Magazine/Direct

In the Magazine and Direct group, volume increased 5% in the Direct Mail segment but was offset by a 3% volume decrease in magazines. To improve productivity and customer service, two new 48 page presses in the magazine platform will be operational in the fourth quarter.

Retail/Catalog

In the Retail group, net volume increased 4% in the quarter due to new customers and additional work from existing ones as well as by the addition of an offset printing facility in Pittsburg, CA. In Catalogs, volume increased 2% but excluding the positive impact of paper sales, revenues were lower. Also, as part of the North American investment plan, a new 64-page press will be in operation in the fourth quarter to serve catalog customers in the Company's Jonesboro facility.

Book/Directory

In the Book and Directory group, revenues and volume decreased in the quarter compared to the same period last year. Two new 64 page presses will be operating in the fourth quarter to serve book publishers. In the quarter, the Company announced a major long-term contract with one of North America's largest directory publishers which will significantly increase volumes starting in 2007.

Canada

In Canada, volume increased slightly in the quarter mainly due to increases in the retail sector. Pricing impact was compensated by cost containment and operational efficiency. In the third quarter, Quebecor World announced an investment in new presses in partnership with Quebecor Inc.'s subsidiary Quebecor Media. The investment includes a new printing facility in the Toronto area to print newspapers and directories.

Europe

In Europe, revenues in the third quarter were $271 million compared to $296 million in the third quarter of 2004. Excluding the positive impact of currency translation, revenues for the quarter were down 8%. Volume in Europe decreased 14% in the third quarter. The decrease was largely due to the loss of a major customer in the United Kingdom and lower volume in the French magazine market. In the third quarter, operations in Europe recorded a negative operating margin due to lower volume and pricing. This was due to the poor performance of the French platform and the first full quarter without volume from a major customer at the UK facility. Some of this volume has been replaced but at lower margins. Operating income and margin increased in the third quarter and year-to-date in Spain, Finland and Austria.

Latin America

In Latin America, revenues in the third quarter increased 21% to $54 million compared to $45 million in the same period last year. Excluding the positive impact of currency translation and paper sales, revenues in the quarter increased 5%. Volume in the quarter decreased 13% compared to the same period last year. The volume decrease is specifically related to the timing of the production of certain directories. Operating income and margin increased due to operational efficiency, an increase in prices in certain segments and a favourable product mix. The Latin American operations are continuing to benefit from an earlier initiative that positioned these assets as a low-cost alternative to publishers who are having products produced in Asia. This initiative is attracting increased interest and sales from North American and European publishers.

Contact Information

  • Quebecor World Inc.
    Tony Ross
    Director, Communications
    (514) 877-5317
    (800) 567-7070
    or
    Quebecor World Inc.
    Philippe Cloutier
    Director, Finance and Investor Relations
    (514) 877-5147
    (800) 567-7070