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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 JULY, AUGUST AND SEPTEMBER 1999
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QUEBECOR PRINTING INC.
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(Translation of Registrant's Name into English)
612 Saint-Jacques Street, Montreal, Quebec, Canada H3C 4M8
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(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
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(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
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PAGE 1 OF 9
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THIRD QUARTERLY REPORT
OF
QUEBECOR PRINTING INC.
FILED IN THIS FORM 6-K
Material sent to shareholders by Fiducie Desjardins
Quarterly Report (ending September 30, 1999)
PAGE 2 OF 9
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Quebecor Printing Inc.
Report to Shareholders
Third Quarter 1999
[LOGO]
Head Office
Quebecor Printing Inc.
612 Saint Jacques Street
Montreal Quebec
Cananda H3C 4M8
tel: (514) 954.0101
1.800 567.7070
Fax: (514) 954.9624
www.quebecorprinting.com
[LOGO]
PAGE 3 OF 9
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Financial Highlights
Periods Ended September 30
(In millions of US dollars,
except per share data)
<TABLE>
<CAPTION>
Three months Nine months
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1999 1998 Change 1999 1998 Change
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<S> <C> <C> <C> <C> <C> <C>
SEGMENTED INFORMATION
REVENUES
United States 775.7 521.6 48.7 % 1,704.4 1,503.8 13.3 %
Canada 224.4 216.5 3.7 % 688.6 677.0 1.7 %
Europe 238.0 205.4 15.9 % 660.3 501.3 31.7 %
South America 19.6 13.4 45.7 % 60.0 44.2 36.0 %
OPERATING INCOME
United States 84.3 50.7 66.3 % 144.7 109.9 31.7 %
Canada 22.5 16.8 34.3 % 65.9 53.8 22.6 %
Europe 13.3 18.2 (27.3)% 37.6 36.1 4.3 %
South America 0.1 0.7 (92.4)% 3.4 3.1 8.5 %
OPERATING MARGIN
United States 10.9 % 9.7 % 8.5 % 7.3 %
Canada 10.0 % 7.8 % 9.6 % 7.9 %
Europe 5.6 % 8.9 % 5.7 % 7.2 %
South America 0.3 % 5.5 % 5.6 % 7.0 %
CONSOLIDATED RESULTS
Revenues 1,257.1 957.2 31.3 % 3,112.0 2,729.2 14.0 %.
Operating income before depreciation & amortization 199.6 147.6 35.2 % 459.0 379.7 20.9 %
Operating income 120.2 85.5 40.6 % 255.2 204.4 24.8 %
Net Income 55.7 46.5 19.7 % 125.8 106.1 18.5 %
Net Income available for holders of equity shares 53.1 44.0 20.7 % 118.2 98.4 20.1 %
INCOME AS % OF REVENUES
Operating income before depreciation & amortization 15.9 % 15.4 % 14.7 % 13.9 %
Operating income 9.6 % 8.9 % 8.2 % 7.5 %
PER SHARE DATA ($US)
Cash flow from operations $ 1.20 $ 1.09 $ 2.95 $ 2.66
Net Income $ 0.44 $ 0.38 $ 1.00 $ 0.85
PER SHARE DATA ($CDN)*
Cash flow from operations $ 1.80 $ 1.66 $ 4.40 $ 3.92
Net Income $ 0.65 $ 0.57 $ 1.48 $ 1.25
REVENUES BY PRODUCT SEGMENT
Magazines 30.1 % 29.6 % 30.4 % 29.2 %
Inserts and circulars 22.9 % 20.4 % 21.7 % 19.7 %
Catalogs 16.8 % 16.1 % 15.4 % 16.0 %
Books 13.2 % 14.1 % 13.6 % 13.9 %
Specialty printing and direct mail 8.5 % 10.2 % 9.2 % 10.4 %
Directories 4.1 % 3.7 % 4.6 % 4.5 %
Related Services and CD-ROM 3.7 % 4.2 % 4.3 % 4.4 %
Others 0.7 % 1.7 % 0.8 % 1.9 %
</TABLE>
* For reference only - subject to the fluctuations of the exchange rate.
N0TE: All dollar amounts in this report are in US dollars, unless stated
otherwise.
MESSAGE TO SHAREHOLDERS
During the third quarter ended September 30, 1999, revenues were $1.3 billion
versus $957 million for the corresponding period of last year. This 31%
increase reflects the Company's significant expansion, in particular the
recent acquisition of World Color Press, which has resulted in Quebecor
Printing becoming the largest commercial printer in the world.
Third quarter net income available for holders of equity shares reached $53
million, versus $44 million for the same three months in 1998. Earnings per
share increased 16% to $0.44 from $0.38 per share in 1998. The improved
earnings reflect strong performance of the U.S. and Canadian operations,
which was partially offset by weaker earnings in Europe. The 1999 results
include five-weeks of results from World Color Press for the period beginning
August 20, 1999 to the end of the quarter, with a minority interest
equivalent to 49.6% of the outstanding common stock of World Color.
For the nine months of 1999, net income available for holders of equity
shares rose to $118 million or $1.00 per share, compared with $98 million or
$0.85 per share in 1998. Revenues increased 14% to $3.1 billion, from $2.7
billion for the nine-month period in 1998. Free cash flow from operations was
in excess of $350 million, compared with a free cash flow deficiency for the
first nine months last year of $30 million.
The increase in profitability for the quarter was primarily due to improved
efficiency and productivity of recently retooled plants in the United States,
an exceptional performance of the Canadian operations, achieved despite the
divestiture of the cheque printing business, and the contribution from the
World Color operations.
Operating margins continued to improve during the quarter. On a consolidated
basis, the year-to-date operating margin increased to 8.2%, from 7.5% for the
same nine months last year. Year-to-date, business acquisitions were
accretive to operating income and margins, after deducting amortization of
goodwill.
In France, operations were affected by increased industry capacity and a more
competitive market, leading to lower than anticipated volume and pricing
pressures. Operations in Sweden were also affected by a lower volume of
business. In South America, earnings for the quarter declined as a result of
a difficult operating environment, precipitated largely by the impact of the
recent currency devaluation in Brazil. Significant cost reduction measures
were implemented in the Company's Chilean and Argentinian operations to
compensate for the significant reduction in exports to Brazil and resulting
intensified competition in their local markets. Operations in Peru and
Colombia continued to achieve a strong performance.
OPERATIONS OVERVIEW
On July 12, 1999, Quebecor Printing announced that it had entered into an
agreement to acquire World Color Press, Inc., the second largest commercial
printer in the United States. The acquisition was structured as a cash tender
offer to achieve ownership control, followed by a merger for a total
consideration of $2.9 billion, including the assumption of debt. The cash
tender offer was completed August 20, 1999, and resulted in Quebecor Printing
acquiring 19,180,695 common shares of World Color Press, representing a 50.4%
interest, at a price of $35.69 per share. The remaining 49.6% interest in
World Color was acquired through a merger completed October 8, 1999,
subsequent to quarter-end. During this second step, each issued share of
World Color common stock was exchanged for $8.18 in cash and 1.2685 Quebecor
Printing subordinate voting
PAGE 4 OF 9
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shares. Shares were also issued to World Color Press optionholders. As a
result of the merger, Quebecor Printing issued approximately 25 million
subordinate voting shares.
The merger with World Color has made Quebecor Printing "Number 1" in its
major business sectors: magazines, catalogs, books, retail and specialty
printing/direct mail. To appropriately represent the significance of the
joining of two industry leaders, the Company is planning to change its name
to Quebecor World Inc. at the next Annual Shareholders Meeting to be held in
April 2000.
During the quarter, Quebecor Printing completed the acquisition of
Oberndorfer Druckerei, a leading web offset printer in Austria with annual
revenues of $65 million. An agreement in principle for this acquisition had
been reached prior to the announcement of the World Color acquisition.
Oberndorfer Druckerei is strategically located near Salzburg and the German
border. The acquisition expands Quebecor Printing's operations to 15
countries worldwide and provides strategic access to a large customer base in
Germany, Austria and surrounding countries. Approximately 60% of the revenues
of Oberndorfer are from German clients. Oberndorfer Druckerei is located in
an area that is contiguous to Quebecor Printing's network of facilities
serving clients in Continental Europe.
The closing of the sale of BA Banknote took place on October 20, 1999.
Proceeds from this divestiture were applied to the reduction of bank
indebtedness. This divestiture emphasizes Quebecor Printing's continuing
strategy to focus on core printing businesses and to generate free cash flow
to reduce debt. BA Banknote represented less than 1% of Quebecor Printing's
revenues.
YEAR 2000 TRANSITION
The Year 2000 (Y2K) issue, which affects virtually all corporations, arises
due to the inability of certain computer software, hardware and embedded
chips found in manufacturing and other equipment to properly recognize dates
beyond 1999. This inability may cause errors in information and/or system
failures.
At this time, the Company has substantially completed its Y2K readiness
program. Information technology systems have been evaluated; vendor and
customer Y2K issues have been monitored and addressed; and remedial measures
have been substantially implemented as necessary. As part of our readiness
program, we have communicated with our major customers and vendors to assess
such parties' respective efforts to identify and remediate their own Year
2000 issues in a timely and comprehensive manner. The Company's Y2K program
has also included the development of contingency plans addressing potential
business interruptions arising from Y2K-related disruptions. Such plans
include assessing the movement of work among facilities. In the fourth
quarter of 1999, the Company will further hone its contingency plans, taking
into account, among other things, the state of readiness of its vendors,
including utility suppliers, as well as major customers.
The costs incurred to date solely related to the Company's Y2K efforts have
been within forecast and covered out of operating budgets. Based on current
estimates, the total cost of the Company's Y2K readiness program is not
expected to have a material impact on operating results or financial
condition.
MANAGEMENT TEAM
During the quarter, two significant management appointments were made. Mr.
Marc L. Reisch, formerly President of World Color Press, was appointed to the
position of Chief Executive Officer of our North American operations and Mr.
Christopher H. Rudge assumed the position of President, International
operations. Mr. Rudge retains responsibility for the Company's Canadian
operations.
As announced last July with the signing of a merger agreement with World
Color Press, the Corporation has established an Office of the CEO. This
Office is comprised of Charles G. Cavell, President and Chief Executive
Officer, Pierre Karl Peladeau, Vice Chairman of the Company, Marc L. Reisch,
Christian M. Paupe, Executive Vice President, and Christopher H. Rudge. All
matters relating to the Company's strategic direction and long-term
development, including the integration of the World Color operations, will be
reviewed and approved by this Office.
DIVIDEND
The Board of Directors declared a dividend of $0.07 per share on the Multiple
Voting Shares and Subordinate Voting Shares. The Board of Directors also
declared a dividend of CDN $0.3125 per share on Series 2 Preferred Shares.
The two dividends are payable on December 1, 1999 to shareholders of record
at the close of business on November 10, 1999.
OUTLOOK
The third quarter marks the starting point of the integration of the World
Color operations. Synergies realized in the month of September alone were in
excess of $2 million, or close to $25 million annualized. The Company's
objective is to realize annual cost savings in excess of $50 million.
Management is confident that its objective will be achieved in the year 2000.
/s/ Jean Neveu /s/ Charles G. Cavell
Jean Neveu Charles G. Cavell
Chairman of the Board President and
Chief Executive Officer
Montreal, Canada, November 1999
PAGE 5 OF 9
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CONSOLIDATED STATEMENTS OF INCOME
Periods ended September 30
(In thousands of US dollars, except for earnings per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months Nine months
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1999 1998 1999 1998
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<S> <C> <C> <C> <C>
REVENUES $ 1,257,143 $ 957,174 $ 3,111,981 $ 2,729,224
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Operating expenses:
Operating costs 1,057,537 809,546 2,652,995 2,349,502
Depreciation and amortization 79,373 62,137 203,832 175,290
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1,136,910 871,683 2,856,827 2,524,792
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OPERATING INCOME 120,233 85,491 255,154 204,432
Financial expenses 27,574 16,063 61,247 46,475
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92,659 69,428 193,907 157,957
Income taxes 27,797 21,871 58,171 49,757
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64,862 47,557 135,736 108,200
Non-controlling interest 9,212 1,072 9,973 2,078
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NET INCOME 55,650 46,485 125,763 106,122
Net income available for holders
of preferred shares 2,523 2,481 7,544 7,702
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NET INCOME AVAILABLE FOR HOLDERS
OF EQUITY SHARES $ 53,127 $ 44,004 $ 118,219 $ 98,420
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EARNINGS PER SHARE $ 0.44 $ 0.38 $ 1.00 $ 0.85
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Average number of equity shares
outstanding (in thousands) 122,596 115,736 118,680 115,678
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</TABLE>
PAGE 6 OF 9
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Periods ended September 30
(In thousands of US dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine months
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1999 1998
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<S> <C> <C>
Cash flows provided by (used for):
OPERATIONS:
Net income $ 125,763 $ 106,122
Non-cash items in income:
Depreciation and amortization 203,832 175,290
Deferred income taxes 25,046 30,903
Non-controlling interest 9,973 2,078
Other (6,477) 1,428
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358,137 315,821
Changes in non-cash operating working capital 91,831 (83,583)
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449,968 232,238
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FINANCING:
Net proceeds from issuance of capital stock 159,498 1,655
Net increase of long-term debt 304,433 285,997
Decrease in bank indebtedness (11,210) (2,788)
Dividends on equity shares (24,917) (20,828)
Dividends paid to preferred shareholders (7,615) (8,277)
Dividends paid to non-controlling shareholders (713) (1,467)
Translation adjusment 8,335 (1,558)
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427,811 252,734
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INVESTMENTS:
Business acquisitions, net of cash position (785,781) (242,645)
Additions to fixed assets (112,159) (255,397)
Proceeds from disposal of assets 27,298 1,779
Increase in other assets (6,870) (3,628)
Other 3,173 16,536
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(874,339) (483,355)
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Effect of exchange rate variations on cash 56 (80)
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INCREASE IN CASH 3,496 1,537
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Cash at beginning 309 380
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CASH AT END $ 3,805 $ 1,917
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</TABLE>
PAGE 7 OF 9
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CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars)
<TABLE>
<CAPTION>
September 30 December 31 September 30
(Unaudited) (Audited) (Unaudited)
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1999 1998 1998
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<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 3,805 $ 309 $ 1,917
Trade receivables 747,126 695,867 678,512
Inventories 564,922 233,019 262,930
Prepaid expenses 39,882 25,035 26,460
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1,355,735 954,230 969,819
Fixed assets 4,233,243 3,224,609 3,206,579
less accumulated depreciation 1,166,802 1,013,645 987,460
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3,066,441 2,210,964 2,219,119
Goodwill 1,923,622 595,724 597,742
Other assets 140,044 81,198 71,017
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$ 6,485,842 $ 3,842,116 $ 3,857,697
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ 4,397 $ 15,607 $ 16,196
Trade payables and accrued liabilities 993,827 601,244 561,796
Income and other taxes 21,435 42,207 25,412
Current portion of long-term debt and convertible debentures 40,628 51,066 43,813
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1,060,287 710,124 647,217
Long-term debt 2,683,814 1,140,941 1,254,126
Other liabilities 195,879 127,859 123,602
Deferred income taxes 276,982 223,085 233,037
Convertible debentures 204,727 58,193 62,591
Non-controlling interest 275,048 17,410 16,363
Shareholders' equity:
Capital stock 1,061,994 898,138 897,656
Contributed surplus 88,737 88,737 88,737
Retained earnings 718,463 629,596 585,531
Translation adjustment (80,089) (51,967) (51,163)
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1,789,105 1,564,504 1,520,761
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$ 6,485,842 $ 3,842,116 $ 3,857,697
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</TABLE>
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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) CLAUDINE TREMBLAY
----------------------------------
Name: Claudine Tremblay
Title: Assistant Secretary
DATE: NOVEMBER 23, 1999
PAGE 9 OF 9
