<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the months of OCTOBER, NOVEMBER AND DECEMBER , 1998
---------------------------------------------
QUEBECOR PRINTING INC.
- -------------------------------------------------------------------------------
(Translation of Registrant's Name into English)
612 SAINT-JACQUES STREET, MONTREAL, QUEBEC, CANADA H3C 4M8
- -------------------------------------------------------------------------------
(Address of Principal Executive Office
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F)
Form 20-F Form 40-F X
-------- -------
(Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
----- ------
PAGE 1 OF 31
EXHIBIT INDEX ON PAGE 30
<PAGE>
AUDITED FINANCIAL STATEMENTS
OF
QUEBECOR PRINTING INC.
FILED IN THIS FORM 6-K
Audited Financial Statements for the year 1998
PAGE 2 OF 31
<PAGE>
Consolidated Financial Statements of
QUEBECOR PRINTING INC.
AND ITS SUBSIDIARIES
Years ended December 31, 1998, 1997 and 1996
PAGE 3 OF 31
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Audited consolidated financial statements
December 31, 1998, 1997 and 1996
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
Management's Responsibility for Financial Statements..................1
Auditors' Report to the Shareholders..................................2
Consolidated Statements of Income and Retained Earnings...............3
Consolidated Statements of Changes in Financial Position..............4
Consolidated Balance Sheets...........................................5
Accompanying Notes to Consolidated Financial Statements...............7
Segment Disclosures..................................................23
</TABLE>
PAGE 4 OF 31
Page i
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Quebecor Printing Inc. and
its subsidiaries are the responsibility of management and are approved by the
Board of Directors of Quebecor Printing Inc.
These financial statements have been prepared by management in conformity with
Canadian generally accepted accounting principles and include amounts that are
based on best estimates and judgments.
Management of the Company and of its subsidiaries, in furtherance of the
integrity and objectivity of data in the financial statements, have developed
and maintain systems of internal accounting controls and support a program of
internal audit. Management believes that the systems of internal accounting
controls provide reasonable assurance that financial records are reliable and
form a proper basis for the preparation of the financial statements and that
assets are properly accounted for and safeguarded.
The Board of Directors carries out its responsibility for the financial
statements principally through its Audit Committee, consisting solely of outside
directors. The Audit Committee reviews the Company's annual consolidated
financial statements and formulates the appropriate recommendations to the Board
of Directors. The auditors appointed by the shareholders have full access to the
Audit Committee, with and without management being present.
These financial statements have been examined by the auditors appointed by the
shareholders, KPMG LLP, chartered accountants, and their report is presented
hereafter.
(Signed) Jean Neveu (Signed) Christian M. Paupe
- -------------------------- -----------------------------
Jean Neveu Christian M. Paupe
Chairman Executive Vice President and
Chief Financial Officer
Montreal, Canada
January 22, 1999
PAGE 5 OF 31
Page 1
<PAGE>
[LETTERHEAD]
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Quebecor Printing Inc. and
its subsidiaries as at December 31, 1998 and 1997 and the consolidated
statements of income and retained earnings and changes in financial position
for the years ended December 31, 1998, 1997 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December
31, 1998 and 1997 and the results of its operations and the changes in its
financial position for the years ended December 31, 1998, 1997 and 1996 in
accordance with generally accepted accounting principles in Canada.
/s/ KPMG LLP
Chartered Accountants
Montreal, Canada
January 22, 1999
PAGE 6 OF 31
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings
Years ended December 31, 1998, 1997 and 1996
(in thousands of US dollars, except for earnings per share amounts)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ 3,808,155 $ 3,483,199 $ 3,110,292
Operating expenses:
Cost of sales 2,979,245 2,736,856 2,403,118
Selling and administrative 287,622 267,168 252,507
Depreciation and amortization 239,402 210,729 194,134
-----------------------------------------------------------------------------------------------------------------
3,506,269 3,214,753 2,849,759
- ----------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 301,886 268,446 260,533
Financial expenses (note 2) 64,300 66,887 62,540
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 237,586 201,559 197,993
Income taxes (note 3):
Current 43,207 40,541 40,267
Deferred 31,621 28,567 28,816
-----------------------------------------------------------------------------------------------------------------
74,828 69,108 69,083
- ----------------------------------------------------------------------------------------------------------------------
Income before non-controlling interest 162,758 132,451 128,910
Non-controlling interest 3,198 2,011 2,615
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME 159,560 130,440 126,295
Net income available for holders of preferred shares 10,136 1,458 -
- ----------------------------------------------------------------------------------------------------------------------
Net income available for holders of equity shares $ 149,424 $ 128,982 $ 126,295
- ----------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $ 1.29 $ 1.12 $ 1.09
- ----------------------------------------------------------------------------------------------------------------------
Average number of equity shares outstanding
(in thousands) 115,703 115,567 115,519
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS, BEGINNING OF YEAR $ 508,514 $ 406,649 $ 303,458
Net income 159,560 130,440 126,295
- ----------------------------------------------------------------------------------------------------------------------
668,074 537,089 429,753
Share issue expenses (net of income
taxes of $1,701 in 1997) - 3,126 -
Dividends - on equity shares 27,774 25,449 23,104
- on preferred shares 10,704 - -
- ----------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR $ 629,596 $ 508,514 $ 406,649
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 7 OF 31
Page 3
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Consolidated Statements of Changes in Financial Position
Years ended December 31, 1998, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used for):
OPERATIONS:
Net income $ 159,560 $ 130,440 $ 126,295
Items not involving cash:
Fixed assets depreciation 214,203 193,869 182,039
Amortization of goodwill and deferred charges 25,199 16,860 12,095
Imputed interest 1,048 6,570 8,615
Amortization of deferred financing costs and
exchange losses 1,187 1,958 1,643
Deferred income taxes 31,621 28,567 28,816
Non-controlling interest 3,198 2,011 2,615
Gain on business disposal (note 5) (13,492) - -
Other 2,758 (1,009) (323)
-----------------------------------------------------------------------------------------------------------------
425,282 379,266 361,795
Changes in non-cash operating working
capital (note 4) 2,722 (35,123) 64,489
-----------------------------------------------------------------------------------------------------------------
428,004 344,143 426,284
FINANCING:
Net proceeds from issuance of capital stock (note 12) 2,137 208,151 416
Issuance of debt 290,805 1,058,552 199,377
Repayments of debt (128,400) (935,806) (233,671)
Dividends on equity shares (27,774) (25,449) (23,104)
Dividends on preferred shares (10,704) - -
Dividends paid to non-controlling interest (1,503) (1,066) (2,081)
Translation adjustment (4,935) (8,023) (4,567)
----------------------------------------------------------------------------------------------------------------
119,626 296,359 (63,630)
INVESTMENTS:
Business acquisitions, net of cash position (note 5) (260,208) (319,900) (56,434)
Business disposal (note 5) 33,395 - -
Additions to fixed assets (312,123) (325,606) (243,147)
Changes in other liabilities 9,571 (6,768) (4,372)
Proceeds from disposal of assets 357 7,587 9,964
Increase in other assets (15,316) (15,225) (34,187)
-----------------------------------------------------------------------------------------------------------------
(544,324) (659,912) (328,176)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash position 3,306 (19,410) 34,478
Cash position beginning of year (18,604) 806 (33,672)
- ----------------------------------------------------------------------------------------------------------------------
CASH POSITION, END OF YEAR $ (15,298) $ (18,604) $ 806
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Cash position is comprised of cash and bank indebtedness.
See accompanying notes to consolidated financial statements.
PAGE 8 OF 31
Page 4
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and 1997
(in thousands of US dollars)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 309 $ 380
Trade receivables 695,867 683,840
Inventories (note 6) 233,019 253,228
Prepaid expenses 25,035 20,907
-----------------------------------------------------------------------------------------------------------------
954,230 958,355
Fixed assets (note 7) 2,210,964 2,061,928
Goodwill (note 8) 595,724 383,801
Other assets 81,198 71,454
- ----------------------------------------------------------------------------------------------------------------------
$ 3,842,116 $ 3,475,538
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 9 OF 31
Page 5
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ 15,607 $ 18,984
Trade payables and accrued liabilities 601,244 635,050
Income and other taxes 42,207 32,993
Current portion of long-term debt and convertible debentures 51,066 52,019
-----------------------------------------------------------------------------------------------------------------
710,124 739,046
Long-term debt (note 9) 1,140,941 913,269
Other liabilities (note 10) 127,859 114,065
Deferred income taxes 223,085 195,005
Convertible debentures (note 11) 58,193 60,021
Non-controlling interest 17,410 17,792
Shareholders' equity:
Capital stock (note 12) 898,138 896,001
Contributed surplus 88,737 88,737
Retained earnings 629,596 508,514
Translation adjustment (note 13) (51,967) (56,912)
-----------------------------------------------------------------------------------------------------------------
1,564,504 1,436,340
- ----------------------------------------------------------------------------------------------------------------------
$ 3,842,116 $ 3,475,538
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Financial instruments and concentrations of credit risk (note 14)
Commitments and contingencies (note 15)
See accompanying notes to consolidated financial statements.
On behalf of the Board:
(Signed) Jean Neveu Director
- -----------------------------------
(Signed) Charles G. Cavell Director
- -----------------------------------
PAGE 10 OF 31
Page 6
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES:
a) Consolidation:
The consolidated financial statements include the accounts of
Quebecor Printing Inc. and all its subsidiaries (the "Company") and
are prepared in conformity with generally accepted accounting
principles in Canada. Significant differences between generally
accepted accounting principles in Canada and the United States are
described in note 18.
b) Foreign currency translation:
Financial statements of self-sustaining foreign operations are
translated using the current rate method. Adjustments arising from
this translation are deferred and recorded under a separate caption
of shareholders' equity and are included in income only when a
reduction in the investment in these foreign operations is realized.
Foreign currency transactions are translated using the temporal
method. Translation gains and losses are included in income, except
for unrealized gains and losses arising from the translation of
long-term monetary liabilities which are deferred and amortized over
the remaining life of the related item.
c) Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Significant areas
requiring the use of management estimates relate to the determination
of pension and other employee benefits, reserves for environmental
matters, useful lives of assets for depreciation, amortization and
evaluation of the impairment of assets, assets acquired and
liabilities assumed in a purchase combination, provision for income
taxes and the determination of fair value of financial instruments.
Financial results as determined by actual events could differ from
those estimates.
d) Financial instruments:
The Company manages its exposure to interest rate and exchange rate
fluctuations by the use of financial instruments.
Financial instruments are accounted for at the historical cost which,
unless otherwise indicated, is approximately equal to the fair value.
PAGE 11 OF 31
Page 7
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES: (CONT'D)
d) Financial instruments: (cont'd)
The following accounting policies are used for financial instruments:
(i) Fixed interest rate agreements:
Interest differentials created by the utilization of fixed
interest rate agreements are amortized over the duration of the
agreements.
(ii) Foreign exchange forward contracts:
The Company uses foreign exchange forward contracts as a hedge
for specific cash flows, for raw materials and equipment
purchases and for revenues from specific sales transactions in
foreign currencies. These transactions are accounted for at the
rates of the related forward contracts.
e) Inventories:
Raw materials and supplies are valued at the lower of cost, using the
first in, first out method, and replacement cost. Work in process is
valued at the lower of cost and net realizable value.
f) Fixed assets:
Fixed assets are stated at cost. Cost represents acquisition or
construction costs including preparation and testing charges and
direct financial costs incurred with respect to the fixed assets
until the beginning of commercial production.
Depreciation is provided using the straight-line basis over the
estimated useful lives as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Estimated
Assets useful lives
- -------------------------------------------------------------------------------------------------
<S> <C>
Buildings 20 to 40 years
Equipment 5 to 18 years
- -------------------------------------------------------------------------------------------------
</TABLE>
g) Goodwill:
Goodwill represents the excess of the purchase price over the fair
value of net assets of businesses acquired. Goodwill is amortized
over a period not exceeding 40 years.
The Company monitors its goodwill balances to determine whether any
impairment of these assets has occurred. Where circumstances or
events indicate a possible inability to recover the carrying amount
of goodwill related to a business acquisition, the Company evaluates,
on an undiscounted basis, the cash flows of the underlying businesses
which gave rise to the goodwill. No such events or circumstances have
occurred during the year.
PAGE 12 OF 31
Page 8
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES: (CONT'D)
h) Deferred income taxes:
Income taxes related to retained earnings of foreign subsidiaries are
not provided for by the Company, as such earnings are reinvested in
foreign operations.
i) Post-employment benefit costs other than pension costs:
The Company provides benefits other than pension benefits, such as
life and medical insurance, to certain retired employees. The costs
of these benefits are accounted for by the pay as you go method
whereby the costs are taken into account when incurred by the retired
employee and paid by the Company.
2. FINANCIAL EXPENSES:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on long-term debt and on convertible
debentures $ 67,388 $ 68,716 $ 60,468
Interest on short-term debt 5,552 2,477 2,053
Securitization fees 2,549 1,075 -
Amortization of deferred financing costs
and exchange losses 1,187 1,958 1,643
Exchange losses (gains) and other (947) (931) 1,790
- ---------------------------------------------------------------------------------------------------------------
75,729 73,295 65,954
Interest capitalized to the cost of fixed assets (11,429) (6,408) (3,414)
- ---------------------------------------------------------------------------------------------------------------
$ 64,300 $ 66,887 $ 62,540
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
3. INCOME TAXES:
The following table reconciles the statutory tax rate with the effective
tax rate:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate 31.6% 33.3% 34.3%
Depreciation and amortization of excess
cost on business acquisitions 2.7 2.8 2.7
Other (2.8) (1.8) (2.1)
- ---------------------------------------------------------------------------------------------------------------
Effective tax rate 31.5% 34.3% 34.9%
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 13 OF 31
Page 9
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
4. CHANGES IN NON-CASH OPERATING WORKING CAPITAL:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Trade receivables $ (12,027) $ (93,307) $ (12,069)
Inventories 20,209 (69,529) 41,495
Trade payables and accrued liabilities (33,806) 125,682 37,170
Other 5,086 (3,521) 4,252
- ---------------------------------------------------------------------------------------------------------------
(20,538) (40,675) 70,848
Non-cash operating working capital (deficiency)
of businesses acquired and disposed 23,260 5,552 (6,359)
- ---------------------------------------------------------------------------------------------------------------
$ 2,722 $ (35,123) $ 64,489
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
During the year, the Company concluded various agreements to sell a
portion of its trade receivables for amounts never exceeding Cdn
$125,000,000 ($80,588,000), the December 31, 1998 balance. As at December
31, 1997, the Company had securitized a portion of its trade receivables
for an amount of Cdn $110,000,000 ($76,648,000).
5. BUSINESS ACQUISITIONS AND DISPOSAL:
a) ACQUISITIONS:
The following business acquisitions were completed in 1998 and were
accounted for by the purchase method:
EUROPE
In July 1998, the Company announced its intention to proceed with a
takeover bid in view of purchasing all the shares of Tryckinvest I
Norden AB (TINA), a Swedish company, for a purchase price of 170 SEK
per share. The last shares were acquired on September 8, 1998,
increasing the interest in this company to 100%. This transaction
amounts to approximately $213,208,000 before the assumption of
liabilities amounting to $58,608,000.
The Company completed, in 1998, several business acquisitions
complementary to its operations, including the redemption of a
non-controlling interest totaling $3,665,000.
SOUTH AMERICA
In March 1998, the Company acquired a 50% controlling interest in
Societe Editorial Stella in Peru for a consideration of $11,417,000.
In May 1998, the Company paid $1,956,000 as purchase price adjustment
for Societe Editorial Antartica S.A.C.I.F.E. in Argentina.
In October 1998, the Company acquired a 60% interest in Societe
Impreandes Presencia in Colombia for a consideration of $11,840,000.
PAGE 14 OF 31
Page 10
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
5. BUSINESS ACQUISITIONS AND DISPOSAL: (CONT'D)
a) ACQUISITIONS: (CONT'D)
UNITED STATES
In July 1998, the Company paid $3,056,000 as purchase price
adjustment for the Franklin Division of Brown Printing Company. This
amount was accounted for as an increase to goodwill.
In October 1998, the Company acquired the remaining shares of Print
Northwest Company L.P., increasing its interest from 60.8% to 100%.
The purchase price balance of $19,698,000, including a promissory
note in the amount of $14,335,000 maturing in 2001, was allocated to
goodwill.
In December 1998, the Company acquired the assets of CR Gibson for a
consideration of $5,617,000.
In 1998, the Company proceeded to a number of acquisitions to
complement its current operations, including the payment of
contingent considerations totaling $1,230,000.
CANADA
The Company completed several business acquisitions complementary to
its operations, including the redemption of a non-controlling
interest and payment of contingent considerations totaling
$2,856,000.
SUMMARY OF ACQUISITIONS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
EDITORIAL IMPREANDES
TINA STELLA PRESENCIA OTHER
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets acquired:
Non-cash operating working capital $ 12,872 $ 3,398 $ 6,441 $ 947
Fixed assets 55,860 7,738 7,789 3,687
Goodwill 206,179 - 4,431 24,976
Other assets 3,334 508 20 1,602
Deferred income taxes - - 641 246
Liabilities assumed:
Long-term debt 58,608 - 2,125 15,200
Other liabilities 2,616 - - -
Deferred income taxes 3,813 227 - -
Non-controlling interest - - 5,357 (7,485)
- ----------------------------------------------------------------------------------------------------------
Net assets acquired for cash
consideration $ 213,208 $ 11,417 $ 11,840 $ 23,743
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 15 OF 31
Page 11
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
5. BUSINESS ACQUISITIONS AND DISPOSAL: (CONT'D)
(B) DISPOSAL:
In September 1998, the Company sold the Canada Cheques Group, Custom
Direct Inc. and BA Custom Cards to MDC Communications Corporation
(MDC) for a total consideration of $44,678,000. Proceeds of disposal
include a cash consideration of $33,395,000 and 1,250,000 subordinate
voting shares of that company. The Company realized a gain amounting
to $13,492,000, which was recorded as a reduction of selling and
administrative expenses.
6. INVENTORIES:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 144,674 $ 162,920
Work in process 88,345 90,308
- ----------------------------------------------------------------------------------------------------------------
$ 233,019 $ 253,228
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
7. FIXED ASSETS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1998
LAND $ 67,964 $ - $ 67,964
BUILDINGS 514,252 103,736 410,516
EQUIPMENT 2,482,429 909,909 1,572,520
PROJECTS UNDER DEVELOPMENT 159,964 - 159,964
- ----------------------------------------------------------------------------------------------------------------
$ 3,224,609 $ 1,013,645 $ 2,210,964
- ----------------------------------------------------------------------------------------------------------------
December 31, 1997
Land $ 65,564 $ - $ 65,564
Buildings 468,175 82,295 385,880
Equipment 2,228,857 764,026 1,464,831
Projects under development 145,653 - 145,653
- ----------------------------------------------------------------------------------------------------------------
$ 2,908,249 $ 846,321 $ 2,061,928
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
As at December 31, 1998, the cost of fixed assets included $434,531,000
(as at December 31, 1997, $400,224,000) and the corresponding accumulated
depreciation balance included an amount of $235,263,000 (as at December
31, 1997, $192,916,000) for land, buildings and equipment held under
capital leases in Europe.
PAGE 16 OF 31
Page 12
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
8. GOODWILL:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Goodwill at cost $ 655,074 $ 430,595
Less accumulated amortization 59,350 46,794
- ----------------------------------------------------------------------------------------------------------------
$ 595,724 $ 383,801
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
9. LONG-TERM DEBT:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
INTEREST RATE AS AT
DECEMBER 31, 1998 Maturity 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revolving bank credits (a) 5.79% 2000-2002 $ 662,726 $ 463,284
Debentures 10 years 7.25% 2007 150,000 150,000
Debentures 30 years (b) 6.50% 2027 150,000 150,000
Obligations under capital leases (c) 3.78% 1999-2006 105,613 121,005
Other debts (d) 4.40% 1999-2009 123,668 65,825
- ---------------------------------------------------------------------------------------------------------------
1,192,007 950,114
Less current portion 51,066 36,845
- ---------------------------------------------------------------------------------------------------------------
$ 1,140,941 $ 913,269
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) As at December 31, 1998, the Company had at its disposal long-term
revolving and reducing bank credits totalling $1,000,000,000 (as at
December 31, 1997, $1,000,000,000). The credit agreements contain
certain restrictions, including the obligation to maintain certain
financial ratios.
The revolving bank credits bear interest at variable rates based on
LIBOR or Bankers' Acceptance rates for periods varying, generally, from
one to three months.
A portion of $187,597,000 is denominated in Cdn dollars.
(b) The debentures mature on August 1, 2027 and are redeemable at the
option of the holder at their par value on August 1, 2004.
(c) Debt repayable in French francs bears interest at the PIBOR rate plus
0.5%.
(d) Other debts are totally secured by assets. A portion of $36,234,000 is
denominated in French francs, a portion of $33,463,000 in Swedish krona
and a portion of $15,280,000 in Finnish marks. The Company entered into
fixed interest rate agreements that allow to contract long-term loans
at variable rates and exchange them for loans at fixed rates to manage
its exposure to interest rate fluctuations.
PAGE 17 OF 31
Page 13
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
9. LONG-TERM DEBT: (CONT'D)
Principal repayments on long-term debt are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
1999 $ 51,066
2000 244,391
2001 125,299
2002 430,696
2003 11,385
2004 and thereafter 329,171
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
10. OTHER LIABILITIES:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pension liability $ 67,866 $ 52,920
Reserve for environmental matters 21,737 21,715
Workers' compensation accrual 11,617 12,223
- ----------------------------------------------------------------------------------------------------------------
101,220 86,858
Other 26,639 27,207
- ----------------------------------------------------------------------------------------------------------------
$ 127,859 $ 114,065
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
11. CONVERTIBLE DEBENTURES:
A subsidiary of the Company has issued debentures convertible into shares
of this subsidiary at the time of acquisition in 1995. The total amount of
convertible debentures outstanding as at December 31, 1998 is
FF344,033,000 ($61,135,000) (FF469,565,000 ($79,169,000) as at December
31, 1997). A portion of this amount has been discounted at an imputed rate
of 4.5% in order to reflect the fair value of the debentures at the time
the subsidiary was acquired by the Company. The Company has the right to
purchase the entirety of these debentures. A portion of FF125,532,000
($21,556,000) has been repurchased at the option of the holders in 1998
for the amount of FF125,108,000. In addition, a portion of FF172,016,000
($30,567,000) cannot be converted without prior approval by the Company.
The convertible debentures bear interest at rates varying between 1.0% and
5.0% and mature on December 31, 2001.
The Company's interest in this subsidiary would decrease from 100% to
78.5% if the debentures are converted and the Company should not exercise
its purchase rights.
PAGE 18 OF 31
Page 14
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
12. CAPITAL STOCK:
a) Authorized capital stock:
Equity shares:
Multiple Voting Shares, authorized in an unlimited number,
without par value, carrying ten votes per share, convertible at
any time into Subordinate Voting Shares on a one for one basis.
Subordinate Voting Shares, authorized in an unlimited number,
without par value, carrying one vote per share.
Preferred shares, authorized in an unlimited number, without par
value, issuable in series; the number of preferred shares in each
series and the related characteristics, rights and privileges are to
be determined by the Board of Directors prior to each issue.
The First Preferred Shares Series 2 are entitled to a fixed
cumulative preferential cash dividend of Cdn $1.25 per share per
annum, payable quarterly from March 1, 1998 to November 30, 2002, if
declared. Thereafter, the annual dividend will be a floating
adjustable cumulative preferential cash dividend based on prime rate
and payable on a monthly basis, if declared.
These preferred shares are redeemable in whole but not in part, at
the Company's option, on December 1, 2002. Thereafter, these
preferred shares may be converted into Series 3 cumulative redeemable
First Preferred Shares under certain conditions.
The Series 3 cumulative redeemable First Preferred Shares will be
entitled to a cumulative fixed dividend set by the Company for a
five-year period determined before the first initial quarterly
dividend which would begin on December 1, 2002. These shares also
will have redemption and conversion characteristics similar to the
First Preferred Shares Series 2.
b) Issued capital stock:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Shares Equity Multiple Equity Subordinate First Preferred
(in thousands) Voting Shares Voting Shares Shares Series 2
Number Amount Number Amount Number Amount
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as at December 31, 1996 63,985 $ 158,275 51,550 $ 524,748 - $ -
- -----------------------------------------------------------------------------------------------------------
Issued for cash: - - 42 496 12,000 212,482
- -----------------------------------------------------------------------------------------------------------
Balance as at December 31, 1997 63,985 158,275 51,592 525,244 12,000 212,482
- -----------------------------------------------------------------------------------------------------------
Issued for cash: - - 213 2,137 - -
- -----------------------------------------------------------------------------------------------------------
BALANCE AS AT DECEMBER 31, 1998 63,985 $ 158,275 51,805 $ 527,381 12,000 $ 212,482
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 19 OF 31
Page 15
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
12. CAPITAL STOCK: (CONT'D)
c) Stock option plans:
Under stock option plans, a total of 2,848,069 Subordinate Voting
Shares has been reserved for senior executives and other managers. As
of December 31, 1998, the number of subordinate shares related to the
stock options outstanding is 2,577,303. The subscription price is
equal to the share market price at the date the options were granted,
except for 60,000 stock options granted to a senior executive that
have a subscription price of Cdn $0.67 per share. The average
subscription price of the other stock options is $16.44 (Cdn $25.49).
The options may be exercised during a period not exceeding ten years
from the date they have been granted.
The number of stock options outstanding fluctuated as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year 1,377,195 1,150,984
Issued 1,530,151 276,007
Exercised (194,799) (42,220)
Cancelled (135,244) (7,576)
- ----------------------------------------------------------------------------------------------------------
Balance, end of year 2,577,303 1,377,195
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
13. TRANSLATION ADJUSTMENT:
The change in the translation adjustment included in shareholders' equity
is the result of the fluctuation of the exchange rate on translation of
net assets of self-sustaining foreign operations.
14. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK:
The following summary presents the book value and fair value of certain
financial instruments as at December 31, 1998 and 1997. The fair value is
calculated based on discounted cash flows using quoted market rates.
Financial instruments having a fair value different from their book value
as at December 31 are the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
1998 1997
BOOK VALUE FAIR VALUE Book Value Fair Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed interest rate agreements $ (2,775) $ (2,957) $ (2,071) $ (3,865)
Long-term debt (1) (1,192,007) (1,192,636) (950,114) (956,990)
Convertible debendures (1) (58,193) (67,357) (75,195) (81,370)
Foreign exchange forward contracts - (1,515) - 8,993
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Including current portion
The Company enters into foreign exchange forward contracts to hedge for
the settlement of raw materials and equipment purchases and to set the
amount of sales or intercompany transactions, which are generally for a
duration of less than a year. The amounts of outstanding contracts at
year-end, presented by currency, are included in the following table.
PAGE 20 OF 31
Page 16
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
14. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK: (CONT'D)
These amounts represent the global monetary value on which each contract
is based and not the financial risk nor the debt related to the Company's
assets and therefore are not included in the financial statements.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Currencies Notional principal amount (1) Year of
(sold / bought) DECEMBER 31, 1998 December 31, 1997 Maturity
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GBP / FF $ 12,229 $ - 1999
FF / $ Cdn 16,130 35,087 1999-2000
FF / $ 91,183 36,924 1999
$ / $ Cdn 194,586 - 1999-2001
OTHER 24,768 75,431 1999
- ---------------------------------------------------------------------------------------------------------------
$ 338,896 $ 147,442
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Transactions in foreign currencies translated into dollars using the
closing exchange rate as at December 31, 1998.
The Company is exposed to credit losses resulting from defaults by
counterparties when using financial instruments.
When the Company enters in foreign exchange contracts and fixed interest
rate agreements, the counterparties are international and Canadian banks
having a minimum credit rating of A- by Standard & Poor's or of A3 by
Moody's. The Company does not foresee any failure by the counterparties in
meeting their obligations.
The Company, in the normal course of business, continuously monitors the
financial condition of its customers and reviews the credit history of
each new customer. No customer balance exceeds 5% of the Company's
consolidated trade receivables. The Company establishes an allowance for
doubtful accounts that corresponds to the specific credit risk of its
customers, historical trends and other information on the state of the
economy.
The Company believes that the product and geographical diversity of its
customer base are instrumental in reducing the impact on the Company of
dramatic fluctuations in local market or product-line demand and its
credit risk. The Company has long term contracts with most of its major
customers. These contracts include price adjustment clauses based on the
cost of paper, ink and labor. The Company does not believe that it is
exposed to an unusual level of customer credit risk.
15. COMMITMENTS AND CONTINGENCIES:
a) Leases:
The Company rents premises and equipment under operating leases which
expire at various dates up to 2010 and for which minimum lease
payments total $205,877,000.
PAGE 21 OF 31
Page 17
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
15. COMMITMENTS AND CONTINGENCIES: (CONT'D)
a) Leases: (cont'd)
Annual minimum payments under these leases for each of the next five
years are as follows:
<TABLE>
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
<S> <C>
1999 $ 52,082
2000 40,476
2001 32,931
2002 21,537
2003 14,689
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
b) Fixed assets:
As at December 31, 1998 the Company had commitments to purchase fixed
assets for a total value of approximately $37,962,000.
c) Environment:
The Company is subject to various laws, regulations and government
policies principally in North America and Europe, relating to health
and safety, to the generation, storage, transportation, disposal and
environment emissions of various substances, and to environment
protection in general. The Company believes it is in compliance with
such laws, regulations and government policies, in all material
respects. Furthermore, the Company does not anticipate that the
compliance with such environmental statutes will have a material
adverse effect upon the Company's competitive or consolidated
financial position.
16. RELATED PARTY TRANSACTIONS:
The Company entered into the following transactions, at prices and
conditions prevailing on the market, with related parties:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 15,006 $ 14,289 $ 15,525
Expenses:
Purchases 26,037 24,321 30,330
Interest expense 28 406 1,160
Management fees paid to the parent company,
Quebecor Inc. 1,807 1,810 1,726
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
As at December 31, 1998, the Company had amounts receivable from
affiliated companies amounting to $2,376,000 ($1,688,000 as at December
31, 1997).
PAGE 22 OF 31
Page 18
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
17. PENSION PLANS:
The Company maintains defined benefit pension plans for its employees. The
Company's policy is to maintain its contribution at a level sufficient to
cover benefits. An actuarial valuation of the Company's various pension
plans was performed during the last three years. The net pension expense
is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net pension expense $ 16,822 $ 12,627 $ 15,582
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The financial position of the pension plans is summarized as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fair market value of pension fund assets $ 353,047 $ 340,020 $ 311,129
Actuarial present value of accrued pension benefits 385,370 366,627 329,240
- -----------------------------------------------------------------------------------------------------------------
Deficit $ 32,323 $ 26,607 $ 18,111
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Interest on the actuarial present value of accrued pension benefits was
computed using rates varying from 5.50% to 8.50%. The average compensation
increase was established at rates varying from 3.0% to 5.25%. The assumed
long-term rate of return of pension funds assets was estimated at rates
varying from 8.5% to 9.25%.
18. SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP") IN CANADA AND THE UNITED STATES:
The Company's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") in
Canada, which differ in some respects from those applicable in the United
States. The following are the significant differences in accounting
principles as they pertain to the consolidated statements.
PAGE 23 OF 31
Page 19
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
18. SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES ("GAAP") IN CANADA AND THE UNITED STATES: (CONT'D)
The application of GAAP in the United States would have the following
effects on net income as reported:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME, AS REPORTED IN THE CONSOLIDATED
STATEMENTS OF INCOME PER GAAP IN CANADA $ 159,560 $ 130,440 $ 126,295
Adjustments, net of applicable income taxes
Post-employment benefit costs other than
pension costs (a) (618) (418) 511
Foreign currency translation (b) - 455 352
Business process reengineering costs (c) 1,015 (2,059) -
Accounting for income taxes (d) 708 962 (7)
-------------------------------------------------------------------------------------------------------------
1,105 (1,060) 856
- -----------------------------------------------------------------------------------------------------------------
NET INCOME, AS ADJUSTED, PER GAAP
IN THE UNITED STATES $ 160,665 $ 129,380 $ 127,151
- -----------------------------------------------------------------------------------------------------------------
PER SHARE DATA
NET INCOME, AS REPORTED PER GAAP IN CANADA $ 1.29 $ 1.12 $ 1.09
Effect of adjustments, net of
applicable income taxes 0.01 (0.01) 0.01
- -----------------------------------------------------------------------------------------------------------------
NET INCOME, AS ADJUSTED PER GAAP
IN THE UNITED STATES $ 1.30 $ 1.11 $ 1.10
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
EFFECT ON CONSOLIDATED BALANCE SHEETS
The application of GAAP in the United States would have the following
effects on the consolidated balance sheets, as reported:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
1998 1997
CANADA UNITED STATES Canada United States
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets (d) $ 954,230 $ 963,652 $ 958,355 $ 967,671
Fixed assets (c) (d) 2,210,964 2,221,964 2,061,928 2,072,128
Goodwill (a) (d) 595,724 639,467 383,801 430,639
Other assets (b) (c) 81,198 79,525 71,454 68,954
Current liabilities (a) (d) 710,124 715,320 739,046 744,073
Other liabilities (a) (d) 127,859 155,657 114,065 145,621
Deferred income taxes (a) (b) (c) (d) 223,085 254,613 195,005 224,950
Retained earnings (a) (b) (c) (d) 629,596 627,547 508,514 505,360
Translation adjustment (a) (b) (c) (51,967) (51,948) (56,912) (56,432)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 24 OF 31
Page 20
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
18. SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP") IN CANADA AND THE UNITED STATES: (CONT'D)
EFFECT ON CONSOLIDATED BALANCE SHEETS (CONT'D)
(a) Post-employment benefit costs other than pension costs have been
recognized as incurred by the retirees and paid by the Company, as
allowed by GAAP in Canada. Under GAAP in the United States, the cost
of these benefits would have been recognized as the services were
rendered and, consequently, would have been allocated throughout the
years during which these services were rendered by the employees
concerned.
(b) Under GAAP in Canada, unrealized exchange losses arising from the
translation of long-term debt denominated in foreign currencies are
deferred. Amounts so deferred are amortized over the remaining life
of the related debt. Under GAAP in the United States, these losses
would have been charged to income and, consequently, no amount would
have been deferred in the consolidated balance sheets under the item
"Other assets".
(c) Under GAAP in Canada, certain costs incurred in connection with a
consulting contract or an internal project that combines business
process reengineering and information technology transformation have
been deferred in the consolidated balance sheets under the items
"Other assets" or "Fixed assets" and amortized over periods varying
from three to five years. Under GAAP in the United States effective
in 1997, these costs should be expensed as incurred. The effect of
the application of GAAP in the United States in 1997 includes the
write-off of the unamortized balance from previous years.
(d) Under GAAP in Canada, deferred income taxes in the consolidated
balance sheets are not adjusted to reflect subsequent changes in tax
rates. In addition, tax benefits arising from losses carried forward
not recognized at the time of business acquisitions, are accounted
for as income in the year the benefit is realized. Under GAAP in the
United States, deferred income taxes in the consolidated balance
sheets must be adjusted to reflect subsequent changes in tax rates
and the tax benefits related to business acquisitions from previous
years are recorded in reduction of goodwill when they are realized.
Inaddition, some differences that are considered of a permanent
nature under GAAP in Canada are rather considered as temporary
differences under GAAP in the United States.
EFFECT ON CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
Under GAAP in Canada, the cash position in the statement of changes in
financial position includes cash and bank indebtedness. Under GAAP in the
United States, bank indebtedness is excluded from the cash position
calculation and the following items would have been disclosed in the
statements of changes in financial position:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financing sub-total $ 116,249 $ 315,343 $ (97,302)
Cash position, end of year 309 380 806
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 25 OF 31
Page 21
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(Tabular amounts are expressed in thousands of US dollars,
except for earnings per share amounts)
- -------------------------------------------------------------------------------
18. SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP") IN CANADA AND THE UNITED STATES: (CONT'D)
COMPREHENSIVE INCOME
Moreover, the application of GAAP in the United States requires the
disclosure of comprehensive income in a separate financial statement,
which includes the net income as well as revenues, charges, gains and
losses recorded directly to equity.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income, as adjusted per GAAP
in the United States $ 160,665 $ 129,380 $ 127,151
Currency translation adjustment (1) 4,484 (33,225) (8,548)
- ---------------------------------------------------------------------------------------------------------------
Comprehensive income as per GAAP
in the United States $ 165,149 $ 96,155 $ 118,603
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Change for the year.
19. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations.
Consequently, it is not possible to be certain that all aspects of the
Year 2000 Issue affecting the entity, including those related to the
efforts of customers, suppliers, or other third parties, will be fully
resolved.
20. RECLASSIFICATIONS:
Some 1997 and 1996 financial statement accounts have been reclassified to
conform with the presentation adopted for the year ended December 31,
1998.
PAGE 26 OF 31
Page 22
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(in thousands of US dollars)
- -------------------------------------------------------------------------------
SEGMENT DISCLOSURES
The Company operates in the printing industry. Its business units are
located in four main segments: the United States, Canada, Europe and South
America.
These segments are managed separately since they all require specific marketing
strategies. The Company assesses the performance of each segment based on
operating income.
Accounting policies relating to each segment are identical to those used for the
purposes of the consolidated financial statements. Intersegment sales are made
at fair market values, which approximate those prevailing on the markets
serviced. Management of financial expenses and income tax expense is centralized
and, consequently, these expenses are not allocated among operating groups.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
UNITED STATES CANADA EUROPE SOUTH INTER-
(1) (2) (3) AMERICA (4) OTHER SEGMENT TOTAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
1998 $ 2,053,789 $ 922,979 $ 755,360 $ 73,075 $ 4,393 $ (1,441) $ 3,808,155
1997 1,937,120 902,353 613,509 24,279 6,354 (416) 3,483,199
1996 1,564,259 889,889 657,619 - 4,995 (6,470) 3,110,292
DEPRECIATION AND AMORTIZATION
1998 132,439 46,500 55,244 4,276 943 - 239,402
1997 120,354 45,125 42,625 1,666 959 - 210,729
1996 97,957 42,377 52,767 - 1,033 - 194,134
OPERATING INCOME
1998 139,574 86,769 59,372 7,564 8,607 - 301,886
1997 135,818 72,635 45,323 2,762 11,908 - 268,446
1996 130,114 72,882 51,586 - 5,951 - 260,533
ADDITIONS TO FIXED ASSETS
1998 247,382 30,217 21,457 6,078 6,989 - 312,123
1997 216,148 47,723 58,987 2,048 700 - 325,606
1996 118,806 57,246 66,349 - 746 - 243,147
ASSETS
1998 2,128,183 536,966 1,048,162 101,859 26,946 - 3,842,116
1997 2,034,983 631,267 738,505 55,532 15,251 - 3,475,538
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The American segment includes a business unit in Mexico and another in
Germany.
(2) The Canadian segment includes two business units in the United States and
one in India.
(3) The European segment includes business units located in Finland, France,
Spain, Sweden and the United Kingdom.
(4) The South American segment includes business units located in Argentina,
Chile, Colombia and Peru.
PAGE 27 OF 31
Page 23
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1998, 1997 and 1996
(in thousands of US dollars)
- -------------------------------------------------------------------------------
SEGMENT DISCLOSURES (CONT'D)
The Company carries out international commercial printing operations, and offers
to its customers a broad range of printed products and related communications
services, such as magazines, inserts and circulars, catalogs, books, specialty
printing, directories, related services and CD-ROM, cheques, bonds and
banknotes.
Revenues per product are allocated as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Magazines $ 1,111,963 29.2% $ 991,617 28.5% $ 904,658 29.1%
Inserts and Circulars 805,194 21.1 696,429 19.9 700,738 22.6
Catalogs 592,936 15.6 500,378 14.4 405,190 13.0
Books 519,701 13.6 531,265 15.3 523,531 16.8
Specialty Printing 382,796 10.1 372,056 10.7 203,424 6.5
Directories 164,234 4.3 156,444 4.5 136,190 4.4
Related Services and CD-ROM 167,598 4.4 165,014 4.7 150,476 4.8
Cheques, Bonds and Banknotes 63,733 1.7 69,996 2.0 86,085 2.8
- ----------------------------------------------------------------------------------------------------------------------
$ 3,808,155 100,0% $ 3 483 199 100,0% $ 3 110 292 100,0%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 28 OF 31
Page 24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
QUEBECOR PRINTING INC.
By: /s/ PHILIPPE MONTEL
--------------------------------------
Name: Philippe Montel
Title: Vice President, Legal
Affairs and Secretary
Date: FEBRUARY 8, 1999
PAGE 29 OF 31
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT PAGE NO.
- ----------- -------- --------
<S> <C> <C>
23.1 Consent of KPMG 31 of 31
</TABLE>
PAGE 30 OF 31
<PAGE>
[LOGO]
[LETTERHEAD]
Quebecor Printing Inc.
612 St-Jacques Street
Montreal, Quebec H3C 4M8
Canada
Quebecor Printing Capital Corporation
c/o Delaware Trust Capital Management
900 Market Street
Wilmington, Delaware 19801
USA
January 28, 1999
Ladies and Gentlemen:
We hereby consent to (i) the inclusion in a Report of Form 6-K for the month of
January 1999 of Quebecor Printing Inc. (the "Company") and (ii) the
incorporation by reference into the combined Registration Statement of the
Company and Quebecor Printing Capital Corporation on Form F-9 and F-3
(Registration Nos. 333-6266 and 333-6268) and the Company's Registration
Statement of Form S-8 (Registration No. 333-1662), of our report dated
January 22, 1999 on the audited Financial Statements of the Company as at
December 31, 1998 and 1997 and for the years ended December 31, 1998, 1997 and
1996.
Yours very truly,
/s/ KPMG LLP
Chartered Accountants
[LOGO]
Page 31 of 31
