<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 month of NOVEMBER 2000 (THIRD QUARTERLY REPORT 2000)
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QUEBECOR WORLD INC. (FORMERLY KNOWN AS 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
----- -----
(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 19
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PRESS RELEASES
AND
THIRD QUARTERLY REPORT
OF
QUEBECOR WORLD INC.
FILED IN THIS FORM 6-K
Documents index
1. Press Release dated November 6, 2000 (#28/00);
2. Press Release dated November 13, 2000 (#29/00);
3. Material sent to shareholders by Computershare Investors Services on
November 21, 2000:
- Quarterly Report (ending September 30, 2000)
Page 2 of 19
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NOVEMBER 6, 2000 28/00
FOR IMMEDIATE RELEASE PAGE 1 OF 2
QUEBECOR WORLD TO ACQUIRE COMMON SHARES OF
Q/MEDIA ON EXERCISE OF SPECIAL WARRANTS
MONTREAL, Canada - Quebecor World Inc. today announced that Q/Media Services
Corporation has filed a preliminary prospectus in British Columbia and Ontario
to qualify voting common shares of Q/Media to be issued upon the exercise of
special warrants held by a subsidiary of Quebecor World Inc.
The special warrants of Q/Media having an aggregate value of US$5 million were
originally issued to a subsidiary of Quebecor World Inc. on August 2, 2000 as
partial consideration for the sale by Quebecor World Inc. of its North American
CD replicating and fulfillment facilities to Vancouver-based Q/Media.
Up to 2,078,292 voting common shares of Q/Media could be issued upon the
exercise or deemed exercise of the special warrants. If the maximum number of
the voting common shares is issued, Quebecor World Inc. will own 19.99% of the
voting common shares of Q/Media. Quebecor World Inc. presently holds no voting
common shares of Q/Media.
The conversion price which will determine the exact number of voting common
shares to be issued will be determined on the earlier of the date of the final
prospectus or December 15, 2000 in accordance with a prescribed formula. In the
event that the conversion price of the special warrants would result in the
issuance of more than 2,078,292 voting common shares, the value of the balance
of the special warrants may be converted into convertible redeemable preferred
shares, series A, of Q/Media or paid in cash, at the option of Q/Media.
Aside from the voting common shares of Q/Media issuable upon the exercise or
deemed exercise of the special warrants, Quebecor World Inc. has no current
intention to acquire additional voting common shares of Q/Media.
Quebecor World Inc. (NYSE, TSE: IQW) is the largest commercial print media
services company in the world. The Company is a leader in most of its major
product categories, which include magazines, inserts and circulars, books,
catalogs, specialty printing and direct mail, directories, digital pre-media,
logistics, mail lists, technologies and other value added services. The Company
has over 43,000 employees working in more than 160 printing and related
facilities in the United States, Canada, France, the United Kingdom, Spain,
Switzerland, Austria, Sweden, Finland, Chile, Argentina, Peru, Colombia, Mexico
and India.
- 30 -
Page 3 of 19
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FOR IMMEDIATE RELEASE PAGE 2 OF 2
FOR FURTHER INFORMATION, PLEASE CONTACT:
Claire Lanctot
Vice President, Business Development
Quebecor World Inc.
(514) 877-5191
(800) 567-7070
Tony Ross
Director, Corporate Communications
Quebecor, World Inc.
(514) 877-5317
(800) 567-7070
Jeremy P. Roberts
Director, Corporate Finance and Investor Relations
Quebecor World Inc.
(514) 877-5118
(800) 567-7070
Page 4 of 19
<PAGE>
NOVEMBER 13, 2000 29/00
FOR IMMEDIATE RELEASE PAGE 1 OF 2
QUEBECOR WORLD SIGNS $142 MILLION
BRAZILIAN DIRECTORY CONTRACT WITH LISTEL
*PLANTS IN RECIFE, BRAZIL, AND LIMA, PERU, EXPANDED
*QUEBECOR WORLD'S SECOND LARGE BRAZILIAN CONTRACT
MONTREAL AND SAO PAULO - Quebecor World Inc. (NYSE,TSE: IQW) today announced
it has signed a 10-year agreement with Listel Listas Telefonicas S.A.,
Brazil's leading publisher of telephone directories. Listel is a subsidiary
of BellSouth Corporation (NYSE:BLS), a $26 billion communications services
company and one of the largest publishers of telephone directories in the U.S.
This latest agreement will allow us to expand our new facility in Brazil's
fourth largest city, Recife. The directories will serve more than 100 million
people in 152 regions and cities across the country. In all, Quebecor World
will print more than 11.8 billion directory pages a year for Listel. This
single contract is more than half of all the directory pages we print in
Canada in one year. The projected value of the contract over 10 years exceeds
US$140 million, excluding the value of paper.
"We have had a close working relationship with BellSouth for many years and are
proud to be able to support them in their role in developing the
telecommunications sector in South America. The agreement with Listel, a
BellSouth company, is a win-win situation," said Charles G. Cavell, Quebecor
World President and Chief Executive Officer. "Listel gets superior quality and
service while the security of the long-term contract allows Quebecor World to
increase its investment in the Brazilian market."
Under the agreement, Quebecor World will print the directories in its new
greenfield plant in Recife and in Quebecor World's Lima, Peru, facility. In
September, Quebecor World announced it was building the Recife plant after
signing a 10-year US$170 million contract with Editora Abril S.A., the
country's leading publisher of consumer magazines. Now the plant will be
significantly expanded because the Listel contract will double the amount of
production.
"This contract and our partnership with Abril allow us to build a strong
local business and give us the highest possible asset utilization of our new
Recife facility," said Mr. Cavell. "We already operate facilities in Chile,
Columbia, Argentina, Mexico and Peru. We are excited to add another major
piece to our Latin American platform in the country with the largest
population in the region. We will continue to build on these efforts and see
significant growth opportunities in one of the major economies of the future."
"This contract offers Listel enhanced heatset quality manufacturing on terms
that reflect the economics of Brazilian production," stated Listel President
Jerzy Rostworowski. "We have chosen Quebecor World because of their proven
ability to respond to our needs."
Page 5 of 19
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FOR IMMEDIATE RELEASE PAGE 2 OF 2
Listel Listas Telefonicas S.A. is Brazil's leading publisher of telephone
directories. Its territories include the State of Sao Paulo and several other
regions. Listel is a wholly owned subsidiary of BellSouth Corp., a $26 billion
communications services company. In addition to its base in the United States,
BellSouth has operations in 11 countries throughout Latin America, including
Argentina, Brazil, Chile, Columbia, Ecuador, Guatemala, Nicaragua, Panama, Peru,
Uruguay and Venezuela.
Quebecor World Inc. (NYSE, TSE: IQW) is the largest commercial print media
services company in the world. The Company is a leader in most of its major
product categories, which include magazines, inserts and circulars, books,
catalogs, specialty printing and direct mail, directories, digital pre-media,
logistics, mail lists, technologies and other value added services. The Company
has over 43,000 employees working in more than 160 printing and related
facilities in the United States, Canada, Brazil, France, the United Kingdom,
Spain, Switzerland, Austria, Sweden, Finland, Chile, Argentina, Peru, Colombia,
Mexico and India.
- 30 -
For further information:
Guy Trahan
President
Quebecor World Latin America
011-54-11-4313-7107
Jeremy Roberts
Director Corporate Finance
and Investor Relations
Quebecor World Inc.
(514) 877-5118
Tony Ross
Director Corporate Communications
Quebecor World Inc.
(514) 877-5317
Page 6 of 19
<PAGE>
Third Quarter 2000
[GRAPHIC]
The Evolution of
Print Media
[QUEBECOR WORLD LOGO]
Page 7 of 19
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QUEBECOR WORLD INC.
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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2000 1999 Change 2000 1999 Change
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<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED RESULTS
Revenues 1,633.8 1,257.1 30% 4,813.3 3,111.9 55%
Operating income before amortization 286.7 199.4 44% 774.3 458.4 69%
Operating income 202.4 126.8 60% 508.3 269.1 89%
Net income 88.7 54.7 62% 189.1 123.1 54%
Cash provided from operating activities 17.5 202.9 (91)% 307.0 436.3 (30)%
Free cash flow from operations* 0.1 180.2 206.0 343.9
Operating margin before amortization 17.5% 15.9% 16.1% 14.7%
Operating margin 12.4% 10.1% 10.6% 8.6%
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SEGMENTED INFORMATION
REVENUES
United States 1,148.3 769.6 49% 3,324.9 1,695.0 96%
Canada 252.3 228.6 10% 760.6 692.7 10%
Europe 208.9 238.0 (12)% 654.1 660.3 (1)%
Latin America 26.7 21.7 23% 78.4 66.2 18%
OPERATING INCOME
United States 148.5 87.3 70% 364.3 150.7 142%
Canada 27.4 23.9 15% 76.6 67.5 13%
Europe 13.9 14.7 (5)% 42.2 42.2 -%
Latin America 0.7 0.8 -% 3.6 5.2 (31)%
OPERATING MARGINS
United States 12.9% 11.4% 11.0% 8.9%
Canada 10.9% 10.5% 10.1% 9.7%
Europe 6.7% 6.2% 6.5% 6.4%
Latin America 2.5% 3.4% 4.6% 7.8%
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PER SHARE DATA
Cash earnings** $0.70 $0.49 43% $ 1.56 $1.11 41%
Net income $0.58 $0.43 35% $ 1.23 $0.97 27%
Dividends $0.08 $0.07 $ 0.23 $0.21
Book value $14.73 $6.53
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FINANCIAL POSITION
Working capital 306.7 328.3
Total assets 6,628.0 6,603.3
Long-term debt 2,670.0 2,929.2
Shareholders' equity 2,370.3 1,786.6
Debt-to-equity ratio 53:47 62:38
--------------------------------------------------------------------------------------------------------------
</TABLE>
* Cash provided from operating activities, less capital expenditures net of
proceeds from disposals, and preferred share dividends.
** Earnings per share before goodwill amortization.
2 Page 8 of 19
<PAGE>
Message to Shareholders
[JEAN NEVEU AND CHARLES G. CAVELL PICTURE]
For the three months ended September 30, 2000, Quebecor World Inc.'s
operating income increased 60% from the same quarter in 1999 to $202 million.
The Company also achieved record revenues in the quarter, increasing 30% to
$1.6 billion. Growth in earnings per share was equally impressive, up 35% to
$0.58. Cash earnings per share reached $0.70 per share in 2000 compared to
$0.49 per share in 1999, a 43% improvement.
Quebecor World attained these record results while continuing to manage the
largest acquisition in the history of the commercial printing industry. It
was one year ago this fall we acquired World Color Press in the U.S., making
Quebecor World the global leader in its product categories. The integration
has gone better than expected since synergies and cost savings are almost
double earlier projections.
Since the World Color acquisition, Quebecor World has achieved five
consecutive quarters of record revenues and operating margins.
Quebecor World revenues for the nine months ended September 30, 2000 reached
$4.8 billion, a 55% increase over the same period last year. Net income
increased 54% to $189 million or $1.23 per share. Net income on a cash basis
reached $1.56 per share, from $1.11 per share for the corresponding period of
1999, a 41% increase.
WORLD COLOR INTEGRATION ON TARGET
We have now completed our first full year since the World Color acquisition.
We are significantly ahead of schedule with respect to the integration of
operations, which is approximately 80% complete. The synergies and cost
savings are close to double what we built into our business plan. As a result
of consolidation initiatives implemented to date, we expect to realize in the
year 2001 more than $80 million of cost savings and synergies from the
merger.
THE U.S. MARKET
This is Quebecor World's largest and strongest market. We currently generate
more than 70 per cent of our revenues from the U.S. The magazine and
catalogue business in the U.S. continues to perform very well. Ad pages in
general were strong during the third quarter and many of the largest titles
performed very well. On a consolidated basis year to date they're running
about 13 per cent ahead of last year. We now print about half of the top
consumer titles in the U.S. and 46 per cent of the top 125 titles in terms of
circulation.
Quebecor World has the finest gravure manufacturing platform in the industry.
In order to maintain and improve that platform, Michael Osesek was appointed
Senior Vice President, Group manufacturing for the Magazine/Catalogue Group
of Quebecor World. He will be based in Franklin, Kentucky and manage the
business unit's gravure platform. Mr. Osesek comes to Quebecor World after
spending 26 years in the industry.
The retail insert and Sunday magazine business performed on target for the
quarter. We are achieving solid returns with the widest, fastest and most
fully automated rotogravure presses in North America.
Books were strong during the third quarter and we expect strong buying to
continue through 2001. The Harry Potter phenomenon continued to be the major
event in the trade book business in the third quarter. Quebecor World is the
largest single printer of the Harry Potter series. To date we have printed
two thirds of the series which represents tens of millions of copies. The
world wide web is another factor helping the book business. Online retailers
are enhancing sales allowing people to buy books no matter where they live
simply by pointing and clicking.
Telephone directories in the US are doing well and we're encouraged by our
growth prospects because of increased demand from independent publishers and
because of the excellent geograhic distribution of our facilities. We print
closer to the end user thereby reducing costs.
Our direct mail business continues to lead the market in performance and
innovation. We continue to introduce exciting products ranging from
personalized cover wraps for catalogues to complex personalized publications
for certain of our automotive customers.
The logistics business is a wholly owned subsidiary that controls all of our
transportation and shipping. It is making significant improvements in savings
and efficiencies. Quebecor World is the largest single customer of the U.S.
Post Office and this provides a significant platform for growth. Our
profitability has improved substantially in 2000 and we anticipate
significant growth in 2001 to expand our network beyond its current principal
focus which is now magazines and catalogues.
EXPANDING MARKETS
Latin America continues to be a region where Quebecor World is committed to
expanding its network of facilities so it is positioned to capitalize on the
strong future growth that is anticipated as the platform of the "Americas"
takes shape. The Company is already one of the largest commercial printers in
the region operating facilities in Mexico, Argentina, Chile, Peru and
Columbia. During the quarter we announced an expansion into the largest
market, Brazil. A new facility will be built, enabled by a 10-year, $170
million dollar contract with Abril S.A. Abril is the largest magazine
publisher in Brazil, a country of over 160 million people or half of the
population of Latin America. This single contract fully supports the company
to build and operate a facility in Recife, Brazil's fourth largest city.
Page 9 of 19 3
<PAGE>
The contract covers 18 titles including VEJA, Brazil's largest weekly and the
world's fourth largest news magazine. Because the magazines will be printed
and distributed in northeastern Brazil they will be delivered faster to
subscribers and newsstands.
Because of this key strategic growth, the company will further strengthen its
infrastructure to put us in a better position to take advantage of
opportunities as we move forward. One of the measures taken this quarter was
appointing Sean Twomey to the position of Senior Vice President, Latin
America. Mr. Twomey was previously Vice President, Business Development for
Quebecor World. His appointment reflects the company's focus to further
develop its market position in Latin America.
Following the end of the quarter, Quebecor World also announced a 10-year,
$142 million dollar contract with Listel Listas Telefonicas S.A., Brazil's
leading publisher of telephone directories. Listel is a subsidiary of the
BellSouth Corporation, a $26 billion communications services company and one
of the largest publishers of telephone directories in the United States.
This agreement will cause the doubling of the facility being built for Abril
in Recife because the contract will virtually double the amount of
production. We will be able to build a strong local business, maximize the
asset utilization at our Recife plant and significantly strengthen our
critical mass in Latin America.
The directories will serve more than 100 million people in 152 regions and
cities across Brazil. Quebecor World will print more than 11.8 billion
directory pages a year for Listel. This single contract is more than half of
all the directory pages we print in Canada in one year.
EUROPE
The results of our European operations improved during the quarter excluding
the unfavourable effect of the Euro devaluation. This was driven inpart by
our newly strengthened management team combined with restructuring
initiatives implemented during the first half of 2000. In local currency
terms, operating income for the quarter in Europe was up 11% and the
operating margin is now closer to 7% which is where it has been historically
on a consolidated basis.
Europe continues to be an important market and as we move forward we expect
to increase our yield from multinational clients. Because of our global
reach, we are able to offer these clients a unique level of service not just
in their home countries but in different parts of the world where they do
business.
To help develop this business the Company named Vincent Bastien as Chief
Operating Officer, Europe. A new edition to the company Mr. Bastien has
extensive experience in general management and in senior marketing positions.
As an interim step, Mr. Bastien will operate as President and General
Manager, France, allowing him to transition into his new role and to improve
the company's position in its largest European market.
John Dickin, currently Managing Director U.K. will oversee the rest of
Quebecor World Europe in the newly created position of Executive
Vice-President Operations, responsible for business units in Spain, the
Nordic countries, the U.K. and Austria.
NEW MEDIA
In order to improve service to our customers by providing a link between
traditional and new media, Quebecor World took important steps this quarter
to expand the role of Que-Net Media, the company that specializes in the
creation of digital text and image management for print and internet
applications.
[QUE-NET MEDIA LOGO]
Que-Net Media now has 13 locations throughout North America. It has added
resources to better help customers with their pre-media business including
scanning, digital photography, page makeup and digital asset management.
As an example of the type of project that can be developed by Que-Net Media,
when we first entered into an agreement with Hard Rock Cafe, it was to use
digital photography to capture items in their memorabilia collection to be
mounted on their website. As the work progressed they realized their
collection had significant value and they were looking for a way to capture
and catalogue all of it. We proposed Que-Net Media's digital asset management
system that allows them to archive, repurpose and reuse images as they like.
Now we are working on creating a print catalogue product as well.
We expect this is just the tip of the iceberg in terms of the type of
relationships we can develop within the Que-Net platform.
INDUSTRY INITIATIVES
Quebecor World continues to expand its Web-enabled procurement initiative.
Based in Fribourg, Switzerland this initiative is currently being evaluated
to include additional materials and services beyond major suppliers such as
ink and paper. Quebecor World anticipates this will allow us to continue to
reduce costs and improve operating margins. Talks were initiated during the
quarter with several key suppliers to further streamline the entire value
delivery system, inclusive of the physical procurement process to improve
efficiencies for the Company and its suppliers.
4 Page 10 of 19
<PAGE>
In addition, during the quarter, discussions continued with three other major
printers examining industry wide standards for communicating with customers
and suppliers. Quebecor World continued testing XPP, an XML tool for
facilitating complex electronic transactions between printer and publisher
including Meredith Corporation, The New York Times Company Magazine Group and
The Reader's Digest Association.
Quebecor World has joined with dozens of printers, publishers and paper
suppliers worldwide in facilitating the creation of XML based document
standards for the most common transactions between buyers and sellers of
paper. Standards development work is ongoing.
These initiatives are aimed at lowering the overall cost of the value chain
for all participants and making print the low cost communications medium.
FINANCING
Quebecor World continues to be focused on paying down and refinancing bank
borrowing debt. During the quarter the Company took measures to refinance
some of its long term debt. In September, the Company issued Senior Notes of
$121 million, maturing in 2015 and 2020. This follows a placement of $250
million in July maturing in 2010 and 2012. Total proceeds have been used to
repay bank indebtedness incurred as a result of the World Color acquisition
but more importantly the term of the debt is now spread over a 20 year term
at attractive rates.
The issue received strong support from the investment community, allowing
Quebecor World to refinance more than $370 million during the third quarter.
This, combined with our focus on maximizing free cash flow, has allowed us to
reduce our acquisition bank debt to approximately $405 million, from over
$925 million last year.
One of the results of these efforts is that Dominion Bond Rating Service
removed its negative outlook on Quebecor World and confirmed all of its
ratings.
NORMAL COURSE ISSUER BID
As of September 30, the Company repurchased for cancellation under its Normal
Course Issuer Bid a total of 1,382,608 Subordinate Voting Shares for a total
of approximately CDN$46 million. The average cost per share was CDN$33.54 The
Company believes that the purchase of Subordinate Voting Shares under the
issuer bid represents an attractive investment at current trading prices, and
will continue to repurchase shares. The issuer bid is being funded with cash
proceeds from the sale of non-core assets as well as those made redundant as
a result of the restructuring of our manufacturing platform in the United
States.
DIVIDEND
The Board of Directors declared a dividend of $0.10 per share on Multiple
Voting Shares and Subordinate Voting Shares. This is an increase of 3 cents
per share from the same period last year and reflects the strong prospects of
the company. The Board also declared a dividend of CDN$0.3125 per share on
Series 2 Preferred Shares. The two dividends are payable on December 1, 2000
to shareholders of record at the close of business on November 16, 2000.
OTHER APPOINTMENTS
Claire Lanctot, with significant experience in the mergers and acquisitions
area and as a senior finance executive, was appointed to the position of Vice
President, Business Development for Quebecor World. Prior to this appointment
Ms. Lanctot worked with Quebecor World on key projects, including the
industry exchange and the recent sale of the CD-ROM Replication Business.
OUTLOOK
Quebecor World continues to deliver record results. Through the balance of
the year the Company will complete the integration of the World Color
operations in the U.S. We are confident the print market will remain strong
during the fourth quarter. Although Quebecor World is now the largest print
media services company in the world we firmly believe our journey has just
begun.
/s/ Jean Neveu /s/ Charles G. Cavell
Jean Neveu, Charles G. Cavell,
Chairman of the Board President and Chief Executive Officer
Montreal, Canada, November 2000
Page 11 of 19 5
<PAGE>
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
RECENT DEVELOPMENTS
Quebecor World is the largest commercial printer in the world. We are a
market leader in most of our product categories, which include magazines,
retail inserts, catalogs, specialty printing and direct mail, books,
directories, pre-media, logistics and other value added services. We have
facilities in the United States, Canada, France, the United Kingdom, Spain,
Sweden, Switzerland, Finland, Austria, India, Chile, Argentina, Peru,
Colombia and Mexico.
We have completed the first full year since the World Color Press ("WCP")
acquisition and continue to focus on the integration of operations, which is
complete at approximately 80% at September 30, and on maximization of free
cash flow.
During the third quarter, we closed the sale of our North American CD
replicating and fulfillment facilities to Vancouver-based Q-Media for a total
consideration of $63 million comprised of $42 million of cash and $21 million
in special warrants and promissory notes convertible into Q-Media common and
preferred shares, respectively. This divestiture completed our program
initiated during 1998 to exit non-core operations.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1999
Consolidated revenues increased $1.7 billion or 55% to $4.8 billion in 2000
from $3.1 billion in 1999. The increase is largely due to the inclusion of
WCP operations acquired in August 1999. In addition, organic growth for the
combined operations of Quebecor World reached 3% coming principally from the
Canadian and European operations. In the United States, when compared to last
year, the revenue base was maintained despite plant closures and disposal of
non-core assets and other assets.
Cost of sales increased $1.3 billion or 53% to $3.7 billion in 2000 from $2.4
billion in 1999. Gross profit margins improved to 23% in 2000 from 22% in
1999 due to efficiencies from retooling certain plants in the United States
and net cost savings and synergies resulting from the integration of acquired
businesses.
Selling, general and administrative expenses increased 42% or $102 million to
$342 million in 2000 from $240 million in 1999. The increase was due
primarily to the acquisition of WCP. Selling, general and administrative
expenses as a percentage of revenues decreased slightly from 1999 to 2000 due
to benefits derived from cost savings initiatives such as the consolidation
of general and administrative activities in the United States.
EBITA increased $316 million to $774 million in 2000 from $458 million in
1999. The improvement in the EBITA margin from 15% in 1999 to 16% in 2000 was
due primarily to the contribution from acquisitions as well as efficiencies
in retooled plants in the United States. Operations also benefited from
organic growth in the first nine months. Operating income from Europe was
unfavorably impacted by foreign exchange translation and fixed costs related
to the shutdown of a plant during the second quarter of 2000.
Net income for the nine months ended September 30, 2000 was $189 million and
earnings per share was $1.23 compared with $123 million and $0.97
respectively for the corresponding period in 1999. On a cash basis, earnings
per share before goodwill amortization rose 41% from $1.11 to $1.56.
Amortization of fixed assets and deferred charges increased 41% to $266
million in 2000 from $189 million in 1999. The increase was primarily due to
depreciation from business acquisitions and capital spending in prior years.
Financial expenses increased $114 million to $175 million in 2000 from $61
million in 1999. The increase was a result of the debt incurred and assumed
in acquisitions as well as the increase in short-term interest rates compared
with the preceding year. In 2000, a gain on redemption of debentures of $3.9
million was recorded in reduction of financial expenses. The effective tax
rate was 28.4% for the first nine months of 2000 and 1999.
Goodwill amortization increased $32 million to $48 million in 2000 from $16
million in 1999. This increase results from additional goodwill of $1.9
billion incurred principally through the WCP acquisition, which is being
amortized over 40 years.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities in the first nine months of 2000
reached $307 million compared with $436 million in 1999. The decrease of $129
million reflected the payment of restructuring costs, the settlement of
acquisition related liabilities and a seasonal increase in working capital.
Working capital was $307 million at September 30, 2000 compared with $73
million at December 31, 1999 and $328 million at September 30, 1999. The
decrease of $21 million or 6%, when compared with September 1999, was mainly
due to additional accrued expenses generated from the review of the purchase
equation of WCP and short-term restructuring charges, partly offset by an
increase in inventory levels. The increase from December is explained by the
timing of payments related to interest, higher level of accounts receivable
and inventories due to revenue growth and seasonality as well as
disbursements for restructuring activities.
On July 12, 2000, Quebecor World issued Senior Notes for a principal amount
of $250 million comprised of two tranches. The first tranche of $175 million
bearing interest rate of 8.42% matures on July 15, 2010, while the second
tranche of $75 million bearing interest rate of 8.52% matures on July 15,
2012. A second private placement took place on September 13, 2000 for a
principal amount of $121 million comprised of two tranches. The first
tranche of $91 million bears interest at 8.54% and matures on September 15,
2015, while the second tranche of $30 million bearing interest at 8.69%
matures on September 15, 2020. Net proceeds
6 Page 12 of 19
<PAGE>
from the Notes were used to refinance bank borrowings related to the
acquisition of WCP. The key objectives of these private placements are to
extend maturities of our long-term debt as well as diversify funding sources.
As of September 30, 2000, we have repurchased for cancellation, under the
Normal Course Issuer Bid announced on April 4, 2000, a total of 1,382,608
Subordinate Voting Shares for a total amount of approximately CDN$46 million,
at an average cost per share of CDN$33.54. We have committed to repurchase a
total of 775,000 shares at an average price per share of CDN$36 in the first
quarter of 2001. The issuer bid was funded with cash proceeds, totaling $68
million for the first nine months of 2000, from the sale of non-core assets
such as the MDC shares sold in the first quarter of 2000, the operating
assets of our North American CD-ROM replication business sold in the third
quarter of 2000 and other assets made redundant as a result of the
restructuring.
Capital expenditures totaled $161 million and $112 million in the first nine
months of 2000 and 1999, respectively. These capital expenditures reflect the
purchase of additional pre-media, press and bindery equipment which are part
of an ongoing program to grow our business through incremental manufacturing
capacity, support customer requirements, maintain modern, efficient plants,
and continually increase productivity. Under this program, we currently
expect that we will invest approximately $250 million in 2000 including $130
million on new equipment and $55 million on replacement of existing equipment
and environmental compliance. The balance will be focused on redeployment of
equipment from facilities being shut down to those where increased
productivity and cost efficiencies can be achieved.
We believe that our liquidity, capital resources and cash flow from
operations are sufficient to fund planned capital expenditures, working
capital requirements and interest and principal payments for the foreseeable
future.
FINANCIAL POSITION
On September 30, 2000 and 1999, our total debt was $2.7 billion and $2.9
billion respectively, including convertible debentures. Our debt to equity
ratio decreased to 53:47 from 55:45 at December 31, 1999 and 62:38 on
September 30, 1999. In the nine month period ending September 30, 2000, free
cash flow from operations, net of capital expenditures and preferred share
dividends, reached $206 million and was largely used to pay down bank
borrowings. In 1999, we generated $344 million of free cash flow from
operations. Our securitization program amounted to $478 million as of
September 30, 2000 compared with $454 million as of September 30, 1999 and
$492 million as of December 31, 1999.
RISKS AND UNCERTAINTIES
In the normal course of business, we are exposed to changes in interest
rates. However, we manage this exposure by having a balanced variety of debt
maturities as well as a combination of fixed and variable rate obligations.
In addition, we have entered into interest rate swap agreements and
cross-currency interest rate swap agreements to manage both our interest rate
and foreign exchange exposure. These agreements did not have a material
impact on the financial statements for the periods presented. We have also
entered into foreign exchange forward contracts and cross-currency interest
rate swaps to hedge the settlement of raw materials and equipment purchases,
to set the exchange rate for cross-border sales and to manage our foreign
exchange exposure on certain liabilities.
While the counterparties of these agreements expose us to credit loss in the
event of non-performance, we believe that the possibility of incurring such a
loss is remote due to the creditworthiness of the counterparties. We do not
hold or issue any derivative financial instruments for trading purposes.
Concentrations of credit risk with respect to trade receivables are limited
due to our diverse operations and large customer base. As of September 30,
2000, we had no significant concentrations of credit risk.
ACCOUNTING POLICIES
In 1998 and 1999, the Accounting Standards Board of the Canadian Institute of
Chartered Accountants published new requirements related to the accounting
for employee future benefits and future income taxes with the possibility of
adoption in the year 2000. In the first quarter of this year, we adopted
these new accounting guidelines and applied the recommendations
retroactively, restating comparative periods. The cumulative effect of these
changes is discussed in Note 1 of the Quarterly Financial Statements.
SEASONALITY
The operations of our business are seasonal, with approximately two-thirds of
historical operating income recognized in the second half of the fiscal year,
primarily due to the higher number of magazine pages, new product launches
and back-to-school, retail and holiday catalog promotions.
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the statements in this
document 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, which may cause
our actual results in future periods to differ materially from forecasted
results. Those risks include, among others, changes in customers' demand for
our products, changes in raw material and equipment costs and availability,
seasonal changes in customer orders, pricing actions by our competitors and
general changes in economic conditions.
Page 13 of 19 7
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Periods ended September 30
(In thousands of U.S. dollars, except for earnings per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months Nine months
-----------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------
(Restated) (Restated)
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
REVENUES $1,633,766 $1,257,143 $4,813,258 $3,111,981
Operating expenses:
Cost of sales 1,246,014 967,433 3,697,088 2,413,350
Selling, general and administrative 101,082 90,298 341,874 240,227
Amortization of fixed assets and deferred charges 84,326 72,584 266,014 189,310
--------------------------------------------------------------------------------------------------------
1,431,422 1,130,315 4,304,976 2,842,887
-----------------------------------------------------------------------------------------------------------
OPERATING INCOME 202,344 126,828 508,282 269,094
Financial expenses 59,507 27,574 175,066 61,247
-----------------------------------------------------------------------------------------------------------
Income before income taxes 142,837 99,254 333,216 207,847
Income taxes:
Current 19,682 15,090 40,605 33,125
Future 18,256 13,098 53,876 25,903
--------------------------------------------------------------------------------------------------------
37,938 28,188 94,481 59,028
-----------------------------------------------------------------------------------------------------------
Income before non-controlling interest 104,899 71,066 238,735 148,819
Non-controlling interest 501 9,212 1,616 9,973
-----------------------------------------------------------------------------------------------------------
NET INCOME BEFORE GOODWILL AMORTIZATION 104,398 61,854 237,119 138,846
Goodwill amortization 15,699 7,195 48,039 15,738
-----------------------------------------------------------------------------------------------------------
NET INCOME $ 88,699 $ 54,659 $ 189,080 $ 123,108
Net income available to holders of preferred shares 2,531 2,523 7,646 7,544
-----------------------------------------------------------------------------------------------------------
Net income available to holders of equity shares $ 86,168 $ 52,136 $ 181,434 $ 115,564
-----------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $ 0.58 $ 0.43 $ 1.23 $ 0.97
EARNINGS PER SHARE BEFORE GOODWILL AMORTIZATION $ 0.70 $ 0.49 $ 1.56 $ 1.11
-----------------------------------------------------------------------------------------------------------
Average number of equity shares outstanding
(in thousands) 146,591 122,596 147,321 118,680
-----------------------------------------------------------------------------------------------------------
</TABLE>
8 Page 14 of 19
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Periods ended September 30
(In thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine months
-----------------------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------------------
(Restated)
(Note 1)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 189,080 $123,108
Non-cash items in net income:
Amortization of fixed assets 249,228 181,807
Amortization of goodwill and deferred charges 64,825 23,242
Amortization of deferred financing costs 6,267 734
Future income taxes 53,876 25,903
Other (7,210) 2,762
Changes in non-cash balances related to operations:
Trade receivables (9,283) 158,367
Inventories (84,194) (10,290)
Trade payables and accrued liabilities (152,315) (93,131)
Other current assets and liabilities 839 28,128
Other non-current assets and liabilities (4,111) (4,297)
--------------------------------------------------------------------------------------
Cash provided from operating activities 307,002 436,333
FINANCING ACTIVITIES
Net change in bank indebtedness (1,616) (21,445)
Net proceeds from issuance of capital stock 1,992 159,498
Shares repurchased under a Normal Course Issuer Bid (33,228) -
Net issuance (repayments) of long-term debt (141,021) 302,510
Dividends on equity shares (33,881) (24,917)
Dividends on preferred shares (7,615) (7,615)
Dividends to non-controlling interest (36) (713)
--------------------------------------------------------------------------------------
Cash provided (used) by financing activities (215,405) 407,318
INVESTING ACTIVITIES
Business acquisitions, net of cash and cash equivalents (5,344) (772,165)
Additions to fixed assets (160,985) (112,159)
Net proceeds from disposal of non-core assets and other assets 67,552 27,298
Investment in an affiliated company (16,901) -
--------------------------------------------------------------------------------------
Cash used by investing activities (115,678) (857,026)
Effect of exchange rate changes on cash and cash equivalents 23,700 16,871
-----------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (381) 3,496
Cash and cash equivalents, beginning of period 3,613 309
-----------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 3,232 $ 3,805
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
</TABLE>
Page 15 of 19 9
<PAGE>
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
<TABLE>
<CAPTION>
September 30 December 31 September 30
(Unaudited) (Audited) (Unaudited)
----------------------------------------------------------------------------------------
2000 1999 1999
----------------------------------------------------------------------------------------
(Restated) (Restated)
(Note 1) (Note 1)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,232 $ 3,613 $ 3,805
Trade receivables 712,282 743,305 747,126
Inventories 550,186 486,228 564,922
Future income taxes 41,130 36,385 36,385
Prepaid expenses 28,580 27,831 39,882
-------------------------------------------------------------------------------------
1,335,410 1,297,362 1,392,120
Fixed assets, net of accumulated
amortization of $1,302,678, $1,180,316
and $1,166,802 respectively 2,671,640 2,895,307 3,080,643
Goodwill 2,464,778 2,526,707 1,990,509
Other assets 156,175 153,752 140,044
----------------------------------------------------------------------------------------
$6,628,003 $6,873,128 $6,603,316
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ 3,723 $ 5,646 $ 4,397
Trade payables and accrued liabilities 945,858 1,103,171 997,367
Income and other taxes 40,977 38,751 21,435
Current portion of long-term debt 38,115 77,260 40,628
-------------------------------------------------------------------------------------
1,028,673 1,224,828 1,063,827
Long-term debt 2,480,708 2,582,911 2,683,814
Other liabilities 331,033 290,203 260,938
Future income taxes 246,160 255,000 328,375
Convertible debentures 151,178 179,752 204,727
Non-controlling interest 19,915 22,002 275,048
Shareholders' equity:
Capital stock 1,635,727 1,653,846 1,061,994
Contributed surplus 88,737 88,737 88,737
Other paid-in capital 14,525 20,831 -
Retained earnings 783,921 650,155 714,804
Translation adjustment (152,574) (95,137) (78,948)
-------------------------------------------------------------------------------------
2,370,336 2,318,432 1,786,587
----------------------------------------------------------------------------------------
$6,628,003 $6,873,128 $6,603,316
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
10 Page 16 of 19
<PAGE>
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars, except per share data)
(Unaudited)
1. ACCOUNTING CHANGE:
Effective January 1, 2000, the Canadian Institute of Chartered
Accountants ("CICA") changed the accounting standards relating to the
acccounting for income taxes and the accounting for employee future
benefits, including pension and non-pension postretirement benefits.
a) INCOME TAXES
In December 1997, the Accounting Standards Board issued Section 3465
of the CICA Handbook, "Income Taxes". Under the asset and liability
method of Section 3465, future income tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases.
Future income tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. The effect on future income
tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Future income
tax assets are recognized and if realization is not considered "more
likely than not", a valuation allowance is provided.
The Company has adopted in 2000 the new recommendations of the CICA
and has applied the provisions of Section 3465 retroactively to
January 1989 when the Company was created. The cumulative effect of
this change in accounting for income taxes is reported as a
restatement to increase the opening balance of retained earnings as
of January 1, 2000 by $7,119 (an increase of $8,690 as of January 1,
1999).
Accordingly, the financial statements for the nine months ended
September 30, 1999 have been restated to comply with the provisions
of Section 3465. In addition to restating the future income tax
accounts, an allocation between short- and long-term portions is now
presented in the consolidated balance sheets.
b) EMPLOYEE FUTURE BENEFITS
In March 1999, the Accounting Standards Board issued Section 3461 of
the CICA Handbook, "Employee future benefits". Under Section 3461,
the Company is required to accrue, during employees' active service
period, the estimated cost of pension, retiree benefit payment other
than pensions, and workers' compensation. The Company previously
expensed the cost of postretirement benefits other than pension,
which are principally health care, as claims were incurred by the
employees and paid by the Company. In addition, the Company will now
use the corridor method to amortize actuarial gains or losses (such
as changes in actuarial assumptions and experience gains or losses).
Under the corridor method, amortization is recorded only if the
accumulated net actuarial gains or losses exceed 10% of the greater
of accrued pension benefit obligation and the value of the plan
assets. Previously, actuarial gains and losses were amortized on a
straight-line basis over the average remaining service life of the
employees.
The Company has elected to recognize this change in accounting on
the immediate recognition basis retroactively to January 1, 1992.
The cumulative effect of this change in accounting for pension and
other postretirement benefits is reported as a restatement to
decrease the opening balance of retained earnings as of January 1,
2000 by $10,715 (a decrease of $9,694 as of January 1, 1999).
c) SUMMARY EFFECT
The following summarizes the impact of applying Sections 3465 and
3461 on net income, retained earnings, and earnings per share for
the quarter and the nine months ended September 30, 1999. The
presentation of fixed assets, goodwill, future income taxes and
other liabilities are also affected by these changes.
<TABLE>
<CAPTION>
Three months Nine months
---------------------------------------------------------------------------------------------------------
Earnings Earnings Retained
Net income per share Net income per share earnings
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
As previously reported $55,650 $ 0.44 $125,763 $ 1.00 $718,463
Effect of Section 3465 (722) (0.01) (1,849) (0.02) 6,841
Effect of Section 3461, net of taxes (269) - (806) (0.01) (10,500)
----------------------------------------------------------------------------------------------------------
As restated $54,659 $ 0.43 $123,108 $ 0.97 $714,804
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>
Page 17 of 19 11
<PAGE>
Quebecor World Inc.
BREAKDOWN OF REVENUES
NINE MONTHS
[GRAPHIC--PERFORMANCE PIE] [GRAPHIC--PERFORMANCE PIE]
BY PRODUCT BY GEOGRAPHIC SEGMENT
---------- ---------------------
29% Magazines 74% United States
18% Retail inserts 10% Canada
16% Catalogs 14% Europe
14% Specialty Printing 2% Latin America
and Direct Mail
12% Books
5% Directories
6% Pre-media and
other value-
added services
OPERATING MARGINS EARNINGS PER SHARE CASH EARNINGS PER SHARE
NINE MONTHS NINE MONTHS NINE MONTHS
7.5% 7.9% 8.6% 10.6% $0.72 $0.85 $0.97 $1.23 $0.79 $0.95 $1.11 $1.56
1997 1998 1999 2000 1997 1998 1999 2000 1997 1998 1999 2000
[QUEBECOR WORLD LOGO]
QUEBECOR WORLD INC. HEAD OFFICE
612 Saint Jacques Street, Montreal, Quebec, Canada H3C 4M8
Tel.: (514) 954-0101 (800) 567-7070 Fax: (514) 954-9624
www.quebecorworld.com
Page 18 of 19
<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 WORLD INC.
By: /s/ CLAUDINE TREMBLAY
-----------------------
Name: Claudine Tremblay
Title: Assistant Secretary
Date: November 21, 2000
Page 19 of 19
