<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 December 31, 1999
------------------------------------------------------------------
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 38
<PAGE>
PRESS RELEASE
AND
CONSOLIDATED FINANCIAL STATEMENTS
OF
QUEBECOR PRINTING INC.
FILED IN THIS FORM 6-K
----------------------
1. Press Release dated February 4, 2000 (#02/00);
2. Consolidated Financial Statements for the years ended December 31,
1999, 1998 and 1997.
PAGE 2 OF 38
<PAGE>
[LOGO]
QUEBECOR
PRINTING INC.
February 4, 2000 02/00
FOR IMMEDIATE RELEASE Page 1 of 3
QUEBECOR WORLD'S OPERATING INCOME CLOSE TO DOUBLE IN FOURTH QUARTER
MONTREAL - Quebecor World (Quebecor Printing Inc.* or the Company) released
today its fourth quarter and 1999 year-end results. For the fourth quarter ended
December 31, 1999, revenues increased by more than 70% to US $1.84 billion.
Operating income of US $187.9 million before restructuring and other charges was
nearly double the US $97.5 million recorded in the fourth quarter of 1998. Net
income before special charges was US $81.4 million or US $0.57 per share,
compared with US $53.4 million or US $0.44 per share in 1998, an improvement of
30% on a per-share basis.
"This was a spectacular quarter for us. Our operating income was almost double
in the fourth quarter, and yet to come are the efficiencies that will be
realized from the restructuring of our manufacturing platform in the US and
France," stated Mr. Charles G. Cavell, President and CEO.
"The facilities re-tooled in the past two years are setting productivity
records. We realized 4% organic growth in the quarter largely due to the
increased advertising push by Internet/New Media companies, in other words
"dot.com" demand. This is the first time in many years that we have achieved
that level of growth. When we add World Color and the potential synergies, I
like what I see," commented Mr. Cavell. The Company's Canadian operations also
continued to achieve strong performance. The acquisitions of Cayfo in Spain and
Oberndorfer Druckerei in Austria, further contributed to results.
For the year ended December 31, 1999, revenues for the year increased by 30% to
US $4.95 billion primarily as a result of acquisitions. Net income before
special charges was US $207.1 million or US $1.57 per share in 1999, compared
with US $159.6 million or US $1.29 per share in 1998.
In order to integrate the operations of World Color Press and reorganize
operations in France, the Company recorded restructuring and other charges of US
$180 million before tax (US $127 million net of tax) in the fourth quarter of
1999. After these charges, net income for the year was US $80.1 million for 1999
and earnings per share were US $0.56. "The realignment of our U.S. manufacturing
platform will result in larger, more specialized, and more efficient plants to
better serve customers and shareholders," stated Mr. Cavell.
RECORD CASH FLOW
"The cash generation ability of this business is exceptional. In 1999, we
generated free cash flow from operations of more than US $530 million, which was
largely used to pay down the acquisition debt," stated Mr. Cavell. With the
acquisition of World Color, Quebecor World temporarily increased its financial
leverage. As the Company realizes benefits from the World Color integration and
focuses free cash flow on debt reduction, management expects to be able to
return to a debt-to-equity level of one-to-one, as early as year-end 2000.
*At the Annual Meeting of Quebecor Printing Inc. on April 25, 2000, shareholders
will be asked to approve a change of legal name to Quebecor World Inc.
PAGE 3 OF 38
<PAGE>
[LOGO]
QUEBECOR
PRINTING INC.
February 4, 2000 Page 2 of 3
The Board of Directors declared a dividend of US $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 March 1, 2000 to shareholders of record at the
close of business on February 5, 2000.
Quebecor World (Quebecor Printing Inc. - NYSE: PRW, TSE: IQI) is a diversified
global commercial printing company. Following its merger with World Color Press
completed October 8, 1999, it is now the largest commercial printer 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, CD-ROM mastering and replicating and
other value added services. The Company has over 40,000 employees working in
more than 160 printing and related facilities in the United States, Canada,
France, the United Kingdom, Spain, Germany, Austria, Sweden, Finland, Chile,
Argentina, Peru, Columbia, Mexico and India.
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS
RELEASE ARE FORWARD-LOOKING AND MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS
INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES THAT MAY CAUSE THE COMPANY'S
ACTUAL RESULTS IN FUTURE PERIODS TO DIFFER MATERIALLY FROM FORECASTED RESULTS.
THOSE RISKS INCLUDE, AMONG OTHERS, CHANGES IN CUSTOMERS' DEMAND FOR THE
COMPANY'S PRODUCTS, CHANGES IN RAW MATERIAL AND EQUIPMENT COSTS AND
AVAILABILITY, SEASONAL CHANGES IN CUSTOMER ORDERS, PRICING ACTIONS BY THE
COMPANY'S COMPETITORS, AND GENERAL CHANGES IN ECONOMIC CONDITIONS. THOSE AND
OTHER RISKS ARE MORE FULLY DESCRIBED IN THE COMPANY'S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION.
- 30 -
FOR FURTHER INFORMATION:
Christian M. Paupe Charles G. Cavell
Executive Vice President President & Chief Executive Officer
Quebecor World Quebecor World
(514) 954-0101 (514) 877-5185
(800) 567-7070 (800) 567-7070
PAGE 4 OF 38
<PAGE>
QUEBECOR PRINTING INC.
HIGHLIGHTS
FOURTH QUARTER 1999
PERIODS ENDED DECEMBER 31
<TABLE>
<CAPTION>
(In millions of US dollars, except per share data ) 3 M O N T H S 12 M O N T H S
1999 1998 CHANGE 1999 1998 CHANGE
----------------------------- --------------------------------
SEGMENTED INFORMATION
REVENUES
<S> <C> <C> <C> <C> <C> <C>
United States .................................................... 1,243.4 548.4 126.7% 2,938.4 2,045.6 43.6%
Canada ........................................................... 279.7 246.0 13.7% 972.4 923.0 5.4%
Europe ........................................................... 284.6 254.1 12.0% 944.9 755.4 25.1%
South America .................................................... 29.6 30.5 (2.9%) 95.8 81.3 17.9%
OPERATING INCOME
United States .................................................... 124.9 29.4 324.8% 266.8 137.7 93.8%
Canada ........................................................... 27.9 33.0 (15.6%) 95.1 86.8 9.6%
Europe ........................................................... 24.3 23.3 4.0% 61.9 59.4 4.2%
South America .................................................... 2.4 4.8 (50.3%) 7.2 9.4 (23.1%)
OPERATING MARGIN
United States .................................................... 10.0% 5.4% 9.1% 6.7%
Canada ........................................................... 10.0% 13.4% 9.8% 9.4%
Europe ........................................................... 8.5% 9.2% 6.6% 7.9%
South America .................................................... 8.0% 15.7% 7.6% 11.6%
CONSOLIDATED RESULTS
Revenues ......................................................... 1,840.6 1,078.9 70.6% 4,952.5 3,808.2 30.1%
Operating income before amortization ............................. 300.3 161.6 85.8% 759.2 541.3 40.3%
Operating income ................................................. 187.9 97.5 92.8% 443.1 301.9 46.8%
Net income before restructuring and other charges ................ 81.4 53.4 52.3% 207.1 159.6 29.8%
Net income (loss) ................................................ (45.7) 53.4 80.1 159.6
Net income (loss) available for holders of equity shares ......... (48.3) 51.0 70.0 149.4
INCOME AS % OF REVENUES
Operating income before amortization ............................. 16.3% 15.0% 15.3% 14.2%
Operating income ................................................. 10.2% 9.0% 8.9% 7.9%
PER SHARE DATA ($ US)
Cash flow from operations before restructuring and other charges.. $1.58 $0.93 $4.53 $3.59
Cash flow from operations ........................................ $1.03 $0.93 $3.98 $3.59
Net income before restructuring and other charges ................ $0.57 $0.44 $1.57 $1.29
Net income (loss) ................................................ ($0.44) $0.44 $0.56 $1.29
Net income - cash basis* , before restructuring and other charges. $0.69 $0.49 $1.81 $1.43
PER SHARE DATA ($ CDN) **
Cash flow from operations before restructuring and other charges.. $2.32 $1.42 $6.72 $5.34
Cash flow from operations ........................................ $1.50 $1.42 $5.90 $5.34
Net income before restructuring and other charges ................ $0.85 $0.68 $2.33 $1.93
Net income (loss) ................................................ ($0.65) $0.68 $0.83 $1.93
Net income - cash basis* , before restructuring and other charges. $1.02 $0.73 $2.69 $2.11
REVENUES BY PRODUCT SEGMENT (%)
Magazines ........................................................ 28.4% 29.1% 29.6% 29.1%
Inserts and circulars ............................................ 20.5% 24.5% 21.0% 20.8%
Catalogs ......................................................... 16.0% 14.5% 15.6% 15.5%
Books ............................................................ 12.0% 12.5% 13.0% 13.2%
Specialty Printing and direct mailing ............................ 13.3% 9.1% 10.7% 10.0%
Directories ...................................................... 5.0% 3.9% 4.7% 4.3%
Digital, CD-ROM and Other value added services ................... 4.8% 6.4% 5.4% 7.1%
</TABLE>
* Net income excluding amortization of goodwill
** For reference only - subject to fluctuations of the exchange rate.
PAGE 5 OF 38
<PAGE>
Consolidated Financial Statements of
QUEBECOR PRINTING INC.
AND ITS SUBSIDIARIES
Years ended December 31, 1999, 1998 and 1997
PAGE 6 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Audited consolidated financial statements
<TABLE>
<CAPTION>
Page
<S> <C>
Management's Responsibility for Financial Statements...................................................... 1
Auditors' Report to the Shareholders...................................................................... 2
Consolidated Statements of Income......................................................................... 3
Consolidated Statements of Shareholders' Equity........................................................... 4
Consolidated Statements of Cash Flows..................................................................... 5
Consolidated Balance Sheets............................................................................... 6
Notes to Consolidated Financial Statements................................................................ 8
</TABLE>
PAGE 7 OF 38
<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
generally accepted accounting principles in Canada 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 of the Board Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
Montreal, Canada
January 28, 2000
PAGE 8 OF 38
<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, 1999 and 1998 and the consolidated
statements of income, shareholders' equity and cash flows for the years ended
December 31, 1999, 1998 and 1997. 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 Canadian 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, 1999
and 1998 and the results of its operations and its cash flows for the years
ended December 31, 1999, 1998 and 1997 in accordance with generally accepted
accounting principles in Canada.
/s/ KPMG LLP
Chartered Accountants
Montreal, Canada
January 28, 2000
PAGE 9 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1999, 1998 and 1997
(in thousands of US dollars, except for earnings per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ 4,952,537 $ 3,808,155 $ 3,483,199
Operating expenses:
Cost of sales 3,845,407 2,979,493 2,736,283
Selling, general and administrative (note 7) 347,893 287,374 267,741
Amortization of fixed assets and deferred charges 285,992 223,789 200,804
---------------------------------------------------------------------------------------------------------------
4,479,292 3,490,656 3,204,828
- --------------------------------------------------------------------------------------------------------------------
OPERATING INCOME BEFORE RESTRUCTURING AND OTHER CHARGES 473,245 317,499 278,371
Restructuring and other charges (note 3) 180,000 - -
- --------------------------------------------------------------------------------------------------------------------
Operating income after restructuring and other charges 293,245 317,499 278,371
Financial expenses (note 4) 122,177 64,300 66,887
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 171,068 253,199 211,484
Income taxes (note 5):
Current 57,019 43,207 40,541
Deferred (8,858) 31,621 28,567
---------------------------------------------------------------------------------------------------------------
48,161 74,828 69,108
- --------------------------------------------------------------------------------------------------------------------
Income before non-controlling interest 122,907 178,371 142,376
Non-controlling interest (note 7) 12,701 3,198 2,011
- --------------------------------------------------------------------------------------------------------------------
NET INCOME BEFORE GOODWILL AMORTIZATION 110,206 175,173 140,365
Goodwill amortization 30,150 15,613 9,925
- --------------------------------------------------------------------------------------------------------------------
NET INCOME $ 80,056 $ 159,560 $ 130,440
Net income available to holders of preferred shares 10,092 10,136 1,458
- --------------------------------------------------------------------------------------------------------------------
Net income available to holders of equity shares $ 69,964 $ 149,424 $ 128,982
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE (note 6) $ 0.56 $ 1.29 $ 1.12
EARNINGS PER SHARE BEFORE GOODWILL AMORTIZATION $ 0.80 $ 1.43 $ 1.20
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Average number of equity shares outstanding
(in thousands) 125,393 115,703 115,567
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
PAGE 10 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1999, 1998 and 1997
(in thousands of shares and of US dollars)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
1999 1998 1997
NUMBER AMOUNT Number Amount Number Amount
- --------------------------------------------------------------------------------------------------------------------
CAPITAL STOCK:
EQUITY MULTIPLE VOTING SHARES:
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year 63,985 $ 158,275 63,985 $ 158,275 63,985 $ 158,275
Conversion into Subordinate
Voting Shares (1,000) (6,002) - - - -
- --------------------------------------------------------------------------------------------------------------------
Balance, end of year 62,985 152,273 63,985 158,275 63,985 158,275
- --------------------------------------------------------------------------------------------------------------------
EQUITY SUBORDINATE VOTING SHARES:
Balance, beginning of year 51,805 527,381 51,592 525,244 51,550 524,748
Conversion of Multiple Voting Shares
into Subordinate Voting Shares 1,000 6,002 - - - -
Issuance of treasury shares
for cash (note 14) 6,500 159,143 - - - -
Shares issued in connection
with the acquisition
of World Color Press, Inc.
(note 14) 25,045 591,317 - - - -
Shares issued from stock plans
(note 15) 340 5,248 213 2,137 42 496
- --------------------------------------------------------------------------------------------------------------------
Balance, end of year 84,690 1,289,091 51,805 527,381 51,592 525,244
- --------------------------------------------------------------------------------------------------------------------
FIRST PREFERRED SHARES SERIES 2:
Balance, beginning of year 12,000 212,482 12,000 212,482 - -
Shares issued for cash - - - - 12,000 212,482
- --------------------------------------------------------------------------------------------------------------------
Balance, end of year 12,000 212,482 12,000 212,482 12,000 212,482
- --------------------------------------------------------------------------------------------------------------------
TOTAL - CAPITAL STOCK 1,653,846 898,138 896,001
- --------------------------------------------------------------------------------------------------------------------
CONTRIBUTED SURPLUS 88,737 88,737 88,737
- --------------------------------------------------------------------------------------------------------------------
OTHER PAID-IN CAPITAL (note 13) 20,831 - -
- --------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS:
Balance, beginning of year 629,596 508,514 406,649
Net income 80,056 159,560 130,440
Share issue expenses
(net of income taxes
of $5,646 ($1,701 in 1997)
(note 14)) (10,484) - (3,126)
Dividends:
Equity shares (35,253) (27,774) (25,449)
Preferred shares (10,164) (10,704) -
- --------------------------------------------------------------------------------------------------------------------
Balance, end of year 653,751 629,596 508,514
- --------------------------------------------------------------------------------------------------------------------
TRANSLATION ADJUSTMENT (note 16) (96,281) (51,967) (56,912)
- --------------------------------------------------------------------------------------------------------------------
TOTAL - SHAREHOLDERS' EQUITY $ 2,320,884 $ 1,564,504 $ 1,436,340
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
PAGE 11 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(in thousands of US dollars)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 80,056 $ 159,560 $ 130,440
Non-cash items in net income:
Amortization of fixed assets 269,746 214,203 193,869
Amortization of goodwill and deferred charges 46,396 25,199 16,860
Non-cash portion of restructuring and other
charges (note 3) 111,312 - -
Imputed interest 3,181 1,048 6,570
Amortization of deferred financing costs and
exchange losses 1,642 1,187 1,958
Deferred income taxes (note 5) (8,858) 31,621 28,567
Non-controlling interest 12,701 3,198 2,011
Loss (gain) on sale of a business (note 7) 1,851 (13,492) -
Other (9,308) 2,758 (1,009)
Changes in non-cash balances related to operations:
Trade receivables 175,804 20,143 (80,321)
Inventories 34,160 28,986 (43,302)
Trade payables and accrued liabilities (43,212) (49,995) 65,063
Other current assets and liabilities 32,988 (4,735) 16,245
Other non-current assets and liabilities 1,683 (5,766) (19,701)
---------------------------------------------------------------------------------------------------------------
Cash provided from operating activities 710,142 413,915 317,250
FINANCING ACTIVITIES:
Net change in bank indebtedness (13,671) (2,343) 18,085
Net proceeds from issuance of capital stock (note 14) 153,907 2,137 208,151
Issuance of long-term debt 1,082,701 290,805 1,058,552
Repayments of long-term debt (841,914) (128,400) (935,806)
Dividends on equity shares (35,253) (27,774) (25,449)
Dividends on preferred shares (10,164) (10,704) -
Dividends to non-controlling shareholders (761) (1,503) (1,066)
---------------------------------------------------------------------------------------------------------------
Cash provided from financing activities 334,845 122,218 322,467
INVESTING ACTIVITIES:
Business acquisitions, net of cash and cash
equivalents (note 7) (923,250) (260,208) (314,627)
Sale of business (note 7) 21,911 33,395 -
Additions to fixed assets (194,708) (312,123) (325,606)
Net proceeds from disposal of assets 25,532 357 7,587
---------------------------------------------------------------------------------------------------------------
Cash used by investing activities (1,070,515) (538,579) (632,646)
Effect of exchange rate changes on cash and cash equivalents 28,832 2,375 (7,497)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 3,304 (71) (426)
Cash and cash equivalents, beginning of year 309 380 806
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 3,613 $ 309 $ 380
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
PAGE 12 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(In thousands of US dollars)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,613 $ 309
Trade receivables (note 8) 743,305 695,867
Inventories (note 9) 486,228 233,019
Prepaid expenses 27,831 25,035
----------------------------------------------------------------------------------------------------------------
1,260,977 954,230
Fixed assets (note 10) 2,881,105 2,210,964
Goodwill, net of accumulated amortization of $88,024
and $59,350 respectively 2,460,418 595,724
Other assets 153,752 81,198
- ---------------------------------------------------------------------------------------------------------------------
$ 6,756,252 $ 3,842,116
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 13 OF 38
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
<S> <C> <C>
Current liabilities:
Bank indebtedness $ 5,646 $ 15,607
Trade payables and accrued liabilities 1,099,631 601,244
Income and other taxes 38,751 42,207
Current portion of long-term debt (note 11) 77,260 51,066
---------------------------------------------------------------------------------------------------------------
1,221,288 710,124
Long-term debt (note 11) 2,582,911 1,140,941
Other liabilities (note 12) 225,146 127,859
Deferred income taxes 204,269 223,085
Convertible debentures (note 13) 179,752 58,193
Non-controlling interest 22,002 17,410
Shareholders' equity:
Capital stock (note 14) 1,653,846 898,138
Contributed surplus 88,737 88,737
Other paid-in capital (note 13) 20,831 -
Retained earnings 653,751 629,596
Translation adjustment (note 16) (96,281) (51,967)
---------------------------------------------------------------------------------------------------------------
2,320,884 1,564,504
- --------------------------------------------------------------------------------------------------------------------
$ 6,756,252 $ 3,842,116
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
On behalf of the Board:
(Signed) Jean Neveu Director
- ---------------------------------
(Signed) Charles G. Cavell Director
- ---------------------------------
PAGE 14 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(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 21.
(b) Cash and cash equivalents:
Cash and cash equivalents include highly liquid investments purchased
three months or less from maturity and are stated at cost, which
approximates market value.
(c) 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.
(d) 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 and
restructuring charges, useful lives of assets for depreciation,
amortization and evaluation of 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.
(e) Derivative financial instruments:
The Company uses various derivative financial instruments to reduce its
exposure to fluctuations in foreign currency exchange rates and
interest rates. These derivative financial instruments are accounted
for on an accrual basis. Realized and unrealized gains and losses are
deferred and recognized in income in the same period and in the same
financial statement category as the income or expense arising from the
corresponding hedged positions.
PAGE 15 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONT'D):
(f) Securitization of trade receivables:
Where groups of trade receivables are sold under terms that transfer
the significant risks and rewards of ownership to third parties, the
transaction is recognized as a sale and the trade receivables are
accordingly removed from the consolidated balance sheets.
(g) 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.
(h) 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 they
are ready for commercial production.
Amortization 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>
(i) 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.
(j) Deferred income taxes:
The Company follows the tax deferral method of accounting for income
taxes, whereby earnings are charged with income taxes relating to
reported earnings. Differences between such taxes and taxes currently
payable are accounted for as deferred in the income statement and the
balance sheet and arise because certain items of revenue and expense
are reported in the accounts at different times than they are reported
for income tax purposes.
Income taxes related to retained earnings of foreign subsidiaries are
not provided for by the Company, as such earnings are reinvested in
foreign operations.
PAGE 16 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONT'D):
(k) 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 using the pay as you go method whereby the
costs are taken into account when incurred by the retired employee and
paid by the Company.
(l) Reclassifications:
Some 1998 and 1997 financial statement accounts have been reclassified
to conform with the presentation adopted for the year ended December
31, 1999.
2. ACCOUNTING CHANGE:
Effective in 1999, the Company adopted the new recommendations of the
Canadian Institute of Chartered Accountants with respect to the
presentation of cash flow statements. The standard requires that, among
other things, non-cash items be excluded from investing and financing
activities and disclosed elsewhere in the consolidated financial statements
in a way that provides all relevant information about investing and
financing activities. Changes in short-term borrowings, other than
overdrafts which are an integral part of the day-to-day cash management
process, are accounted for as financing activities. The standard requires
retroactive application with prior comparative information being restated.
3. RESTRUCTURING AND OTHER CHARGES:
The Company recorded $180,000,000 of restructuring and other charges in
1999:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<S> <C>
Write-down of assets $ 99,794
Restructuring charges 63,286
Other special charges 16,920
--------------------------------------------------------------------------
$ 180,000
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
The restructuring charges include principally the cost of restructuring
various operations and the write-down of certain impaired assets. The
provision includes costs related to the closing of plants and cost of
severance, benefits and other personnel-related costs. They also include
the cost of streamlining administrative management and implementation of a
salesforce reduction program. These activities are expected to be
substantially completed by June 2001.
PAGE 17 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
4. FINANCIAL EXPENSES:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on long-term debt and on convertible
debentures $ 123,519 $ 67,388 $ 68,716
Interest on short-term debt 3,216 5,552 2,477
Securitization fees and other 3,543 2,549 1,075
Amortization of deferred financing costs
and exchange losses 1,642 1,187 1,958
Exchange gains and other (3,643) (947) (931)
---------------------------------------------------------------------------------------------------------------
128,277 75,729 73,295
Interest capitalized to the cost of fixed assets (6,100) (11,429) (6,408)
---------------------------------------------------------------------------------------------------------------
$ 122,177 $ 64,300 $ 66,887
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Cash interest payments $ 110,362 $ 74,037 $ 59,487
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
5. INCOME TAXES:
The following table reconciles the statutory tax rate with the effective
tax rate:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International statutory tax rate 30.3% 31.1% 33.6%
Lower tax rate on restructuring and other charges 0.9 - -
Recovery of income taxes arising from
the use of unrecorded tax benefits (1.7) (2.3) (1.8)
Other (1.3) 0.8 0.9
---------------------------------------------------------------------------------------------------------------
Effective tax rate 28.2% 29.6% 32.7%
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Cash payments for income taxes $ 46,444 $ 44,399 $ 41,131
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
In 1999, the deferred income tax expense includes an amount of $53,755,000
of recovery related to the restructuring and other charges.
6. EARNINGS PER SHARE:
The calculation of earnings per share is based on the weighted daily
average number of shares outstanding during the year, after deduction of
dividends on the preferred shares.
PAGE 18 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
7. BUSINESS ACQUISITIONS AND DISPOSAL:
(a) ACQUISITIONS:
The following business acquisitions were completed in 1999 and were
accounted for by the purchase method:
UNITED STATES
The Company acquired World Color Press, Inc. ("WCP") for a purchase
price of $1.5 billion. The transaction took place as follows:
On July 12, 1999, the Company, through an indirect wholly-owned
subsidiary, Printing Acquisition Inc. ("Acquisition Inc.") entered into
a merger agreement with WCP. On July 16, 1999, the Company, through
Acquisition Inc., commenced a cash tender offer to acquire up to 23.5
million shares of the WCP's common shares at a price of $35.69 per
share. On August 20, 1999, the Company acquired, pursuant to the cash
tender offer, 19,2 million or 50.4% of WCP's outstanding common shares
for $684,516,000.
On October 8, 1999, Acquisition Inc. and WCP merged after approval
thereof at a special meeting of WCP's shareholders. The remaining 49.6%
of the outstanding common shares of WCP were converted into 1.2685
subordinate voting shares of the Company and $8.18 in cash per WCP
share. In addition, each 6% convertible senior subordinate note due
2007 became convertible into the number of the Company's subordinate
voting shares and cash that would have been received if such note had
been converted prior to October 8, 1999.
The cash portion of the shares purchase totalling $853,435,000 was
financed through a drawdown on the $1.25 billion acquisition facility
combined with drawdowns on the Company's existing revolving credit
facility.
The following unaudited pro forma condensed financial information
reflects the consolidated results of operations of the Company as if
the acquisition of WCP had taken place at the beginning of the
respective periods. The pro forma information includes adjustments for
interest expense that would have been incurred to finance the
acquisition and the amortization of goodwill arising from the
transaction. The pro forma results do not reflect synergies and
restructuring and other charges and, accordingly, do not account for
any potential increase in operating income, any estimated cost savings
or adjustments to conform to accounting practices. The pro forma
financial information is not necessarily indicative of the results of
the operations as they would have been, if the transaction had been
effected on the assumed dates.
PAGE 19 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
7. BUSINESS ACQUISITIONS AND DISPOSAL: (CONT'D)
(a) ACQUISITIONS: (CONT'D)
UNITED STATES: (CONT'D)
Pro forma condensed financial information:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
1999 1998
-----------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues $ 6,541,422 $ 6,165,040
Net income (1) 176,722 170,216
Earnings per share 1.13 1.08
Average number of equity shares outstanding 147,675 147,675
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excluding restructuring and other charges related to the
acquisition and the integration of WCP (note 3).
The allocation purchase price process is not completed as at December
31, 1999 and the amounts assigned to the assets and liabilities
acquired may be adjusted subsequently.
EUROPE
In March 1999, the Company acquired Cayfo S.A., a Spanish company, for
a cash consideration of $43,329,000 and a purchase price balance of
$27,024,000.
During the third quarter of 1999, the Company completed the acquisition
of Oberndorfer Druckerei in Austria for a cash consideration of
$13,068,000 and a purchase price balance amounting to $33,469,000.
OTHER
In 1999, the Company completed several business acquisitions
complementary to its operations in Canada, the United States and South
America, including the payment of contingent considerations totalling
$13,418,000.
PAGE 20 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
7. BUSINESS ACQUISITIONS AND DISPOSAL: (CONT'D)
(a) ACQUISITIONS: (CONT'D)
OTHER: (CONT'D)
Net assets acquired at fair value:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
WORLD TOTAL
COLOR EUROPE OTHER 1999
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets acquired:
Non-cash operating working
capital $ 519,688 $ 40,719 $ 2,518 $ 562,925
Fixed assets 873,246 47,955 8,193 929,394
Goodwill 1,819,569 96,654 6,002 1,922,225
Other assets 54,044 2,917 5,200 62,161
Deferred income taxes 8,041 - 204 8,245
Non-controlling interest 10,119 - - 10,119
Liabilities assumed:
Bank indebtedness - 7,113 1,338 8,451
Non-cash operating working
capital deficiency 477,953 47,547 2,165 527,665
Long-term debt 1,121,347 13,064 - 1,134,411
Other liabilities 83,087 2,103 - 85,190
Deferred income taxes - 1,518 150 1,668
Convertible debentures 136,737 - - 136,737
Non-controlling interest - 10 5,046 5,056
-----------------------------------------------------------------------------------------------------------
Net assets acquired $ 1,465,583 $ 116,890 $ 13,418 $ 1,595,891
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Consideration:
Cash $ 853,435 $ 56,397 $ 13,418 $ 923,250
Purchase price balance - 60,493 - 60,493
Equity portion of convertible notes 20,831 - - 20,831
Subordinate voting shares issued 591,317 - - 591,317
-----------------------------------------------------------------------------------------------------------
$ 1,465,583 $ 116,890 $ 13,418 $ 1,595,891
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
The results of operations of these acquired companies are included in
the consolidated statements of income since the acquisition date.
(b) DISPOSAL:
In October 1999, the Company sold the operating assets of its BA
Banknote Division for a total cash consideration of $18,031,000. The
Company realized a loss amounting to $1,851,000 which is included in
other charges.
In 1999, the Company sold its investment in Communications Quebecor
inc. for a cash consideration of Cdn $5,064,000 ($3,437,000).
In September 1998, the Company sold the check and credit card
businesses and realized a gain amounting to $13,492,000 which was
recorded as a reduction of selling, general and administrative
expenses.
PAGE 21 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
8. ASSET SECURITIZATION:
During 1999, the Company sold a portion of its trade receivables on a
revolving basis under the terms of a Canadian securitization agreement
dated March 1998 (the "Canadian Program"). The Canadian Program limit is
Cdn $125,000,000. As at December 31, 1999, the amount outstanding under the
Canadian program is Cdn $100,000,000 ($69,290,000) (Cdn $125,000,000
($80,588,000) at December 31, 1998).
In September 1999, the Company entered into an agreement to sell, on a
revolving basis, a portion of its US trade receivables up to a maximum of
$206,000,000 (the "US Program"). In December, the existing WCP
securitization program of $204,000,000 was combined with the Company's US
Program, to a new limit of $408,000,000. At December 31, 1999, the amount
outstanding under the US combined program is $400,000,000.
Securitization fees vary based on commercial paper rates in Canada and the
United States and, generally, provide a lower effective funding cost than
available under the Company's bank facilities.
9. INVENTORIES:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw material and supplies $ 250,088 $ 144,674
Work in process 236,140 88,345
---------------------------------------------------------------------------------------------------------------
$ 486,228 $ 233,019
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
10. FIXED ASSETS:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1999
LAND $ 80,062 $ - $ 80,062
BUILDINGS 777,160 122,885 654,275
EQUIPMENT 3,124,285 1,057,431 2,066,854
PROJECTS UNDER DEVELOPMENT 79,914 - 79,914
---------------------------------------------------------------------------------------------------------------
$ 4,061,421 $ 1,180,316 $ 2,881,105
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
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
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 22 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
10. FIXED ASSETS: (CONT'D)
As at December 31, 1999, the cost of fixed assets and the corresponding
accumulated depreciation balance included amounts of $315,336,000 (as at
December 31, 1998, $434,531,000) and $138,395,000 (as at December 31, 1998,
$235,263,000) respectively, for land, buildings and equipment held under
capital leases.
11. LONG-TERM DEBT:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Maturity 1999 1998
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revolving bank facility $1.0 B (a) 2003-2005 $ 358,002 $ 662,726
Commercial paper (b) 2003 229,350 -
Acquisition bank facilities $1.1 B (c) 2000-2002 925,000 -
Senior debentures 7.25% (d) 2007 150,000 150,000
Senior debentures 6.50% (e) 2027 150,000 150,000
Senior Subordinated Notes 8.375% (f) 2008 301,606 -
Senior Subordinated Notes 7.75% (g) 2009 289,310 -
Other debts and capital leases (h) 2000-2009 256,903 229,281
---------------------------------------------------------------------------------------------------------------
2,660,171 1,192,007
Less current portion 77,260 51,066
---------------------------------------------------------------------------------------------------------------
$ 2,582,911 $ 1,140,941
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) In April 1999, the Company refinanced its existing revolving credit
facility by a new revolving credit facility composed of three tranches.
The first tranche of $250,000,000 matures in 2003, and provides
liquidity back-up to the Company's $250,000,000 commercial paper
program. The second tranche of $250,000,000 matures in 2004, while the
third tranche of $500,000,000 matures in 2005. The credit agreement
contains certain restrictions, including the obligation to maintain
certain financial ratios.
The revolving bank facility bears interest at variable rates based on
LIBOR or Bankers' Acceptances rates. At December 31, 1999, the drawings
under this facility are denominated in US$ only and bear interest at
rates ranging from 6.1% to 7.1%.
(b) In April 1999, the Company initiated a Commercial paper program in
Canada with an initial limit of Cdn $250,000,000, which was
subsequently increased to $250,000,000 in November 1999. At December
31, 1999, Cdn $331,000,000 ($229,350,000) of notes are outstanding
under the program bearing interest at rates ranging from 5.1% to 5.6%.
At December 31, 1999, the Commercial paper program was classified as
long-term, since the Company has the ability and the intent to maintain
such debt on a long-term basis and has a credit facility available (see
(a) above) until 2003 to replace such debt, if necessary.
PAGE 33 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
11. LONG-TERM DEBT: (CONT'D)
(c) The Company has negotiated and obtained two additional credit
facilities for which the total limit was initially $1,250,000,000 to
finance the acquisition of WCP. One of these is a revolving credit
facility of $450,000,000 maturing in August 2002. This facility can
also be used for general corporate purposes. The other facility is a
term loan of $800,000,000 divided in two tranches. On the first tranche
of $650,000,000, a segment of $350,000,000 matures in August 2000 and
the remaining balance of $300,000,000 can be extended until August
2001. The second tranche of $150,000,000 was cancelled in December 1999
at the Company's request. These facilities bear interest at variable
rates based on LIBOR. At December 31, 1999, the drawings under these
facilities bear interest at rates ranging from 7.1% to 7.2%. The credit
agreements contain certain restrictions, including the obligation to
maintain certain financial ratios.
(d) The debentures mature on January 15, 2007.
(e) The debentures mature on August 1, 2027 and are redeemable at the
option of the holder at their par value on August 1, 2004.
(f) The subordinated notes mature on November 15, 2008. The aggregate
principal amount of the notes is $300,000,000 and the notes are
redeemable at the option of the Company at a decreasing premium between
November 2003 and November 2006, and thereafter at par value until
their final maturity. The notes were issued by WCP and revalued in
order to reflect their fair value at the time WCP was acquired, based
on the Company's borrowing rate for similar financial instruments. The
notes contain certain restrictions on WCP, including limitations on its
ability to incur additional indebtedness.
(g) The subordinated notes mature on February 15, 2009. The aggregate
principal amount of the notes is $300,000,000 and the notes are
redeemable at the option of the Company at a decreasing premium between
February 2004 and February 2007, and thereafter at par value until
their final maturity. The notes were issued by WCP and revalued in
order to reflect their fair value at the time WCP was acquired based on
the Company's borrowing rate for similar financial instruments. The
notes contain certain restrictions on WCP including limitations on its
ability to incur additional indebtedness.
(h)Other debts and capital leases are partially secured by assets. A
portion of $184,125,000 is denominated in Euro currencies and a portion
of $9,296,000 in Swedish krona. At December 31, 1999, these debts and
capital leases bear interest at rates ranging from 0.0% to 19.7%.
Principal repayments on long-term debt are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<S> <C>
2000 $ 77,260
2001 133,255
2002 508,874
2003 265,040
2004 262,130
2005 and thereafter 1,413,612
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
PAGE 24 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
12. OTHER LIABILITIES:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pension liability $ 81,046 $ 67,866
Reserve for unfavourable leases acquired 57,563 7,711
Reserve for environmental matters 18,759 21,737
Workers' compensation accrual 17,184 11,617
---------------------------------------------------------------------------------------------------------------
174,552 108,931
Other 50,594 18,928
---------------------------------------------------------------------------------------------------------------
$ 225,146 $ 127,859
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
13. CONVERTIBLE DEBENTURES:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Maturity 1999 1998
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Convertible Senior Subordinated Notes 6.00% (a) 2007 $ 128,806 $ -
French Convertible Debentures (b) 2001 50,946 58,193
---------------------------------------------------------------------------------------------------------------
$ 179,752 $ 58,193
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The convertible senior subordinated notes mature on October 1, 2007.
The notes were issued by WCP and revalued in order to reflect their
fair value at the time WCP was acquired based on the Company's
borrowing rate for similar financial instruments. The portion of the
notes which can be converted into equity shares of the Company was
valued at the date of acquisition and classified as other paid-in
capital. Since the acquisition of WCP by the Company, each $1,000
tranche is convertible into 30.5884 Subordinate Voting Shares of the
Company which corresponds to a price of $26.24 per share and $197.25 in
cash. The notes are convertible at the option of the holder at any
time, and redeemable at the option of the Company at a decreasing
premium from October 2000 to the final maturity. Certain conditions
apply to a redemption between October 2000 and October 2002. Pursuant
to the terms of the convertible notes, the Company made a par tender
offer for 100% of the face value of $151,800,000 of the notes during
the course of 1999, and subsequently repurchased $7,621,000 thereof.
The aggregate principal amount of the notes, as at December 31, 1999,
is $144,179,000. The number of equity shares to be issued upon
conversion of the convertible notes would amount to 4,410,200.
PAGE 25 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
13. CONVERTIBLE DEBENTURES: (CONT'D)
(b) A French subsidiary of the Company issued at the time of its
acquisition in 1995 debentures convertible into shares of this
subsidiary. The total amount of convertible debentures outstanding as
at December 31, 1999 is FF 344,033,000 ($52,671,000) (FF344,033,000
($61,135,000) as at December 31, 1998). 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 redeem these debentures. In
addition, a portion of FF 172,016,000 ($26,336,000) 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 were converted and the Company did not
exercise its redemption rights.
14. 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.
PAGE 26 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- -------------------------------------------------------------------------------
14. CAPITAL STOCK: (CONT'D)
(b) Issued and outstanding subordinate voting shares:
In 1999, the Company issued 6,500,000 subordinate voting shares for a
cash consideration of Cdn$234,000,000 ($159,143,400) before share issue
expenses of Cdn$9,860,000 ($6,705,800) recorded as a reduction of
retained earnings.
Pursuant to the acquisition of WCP (note 7), the Company issued
25,045,200 subordinate voting shares for a value determined at $23.61
per share based on an average market price before and after the date of
the transaction. Share issue expenses of $9,424,000 were recorded as a
reduction of retained earnings.
15. STOCK PLANS:
(a) Employee share plan:
Effective September 1, 1998, an Employee Share Investment Plan (ESIP)
was implemented giving eligible employees in Canada the opportunity to
subscribe for up to 4% of their gross salaries to purchase shares of
the Company's capital stock on the open market and to have the Company
invest, on the employee's behalf, a further 20% of the amount invested
by the employee. Participation at December 31, 1999 was 1,822 employees
(1,462 at December 31, 1998). The total number of ESIP shares purchased
on behalf of employees, including the Company's contribution, was
87,270 in 1999 and 18,220 in 1998.
(b) Stock option plans:
Under stock option plans, a total of 4,595,273 Subordinate Voting
Shares has been reserved for senior executives and other employees. As
of December 31, 1999, the number of Subordinate Voting Shares related
to the stock options outstanding is 4,127,254. The subscription price
is equal to the share market price at the date the options were
granted, except for 30,000 stock options granted to a senior executive
(in November 1991) that have a subscription price of Cdn $0.67 per
share. 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>
-----------------------------------------------------------------------
-----------------------------------------------------------------------
1999 1998
-----------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year 2,577,303 1,377,195
Issued 1,812,669 1,530,151
Exercised (252,796) (194,799)
Cancelled (9,922) (135,244)
-----------------------------------------------------------------------
4,127,254 2,577,303
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
PAGE 27 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- -------------------------------------------------------------------------------
15. STOCK PLANS: (CONT'D)
(b) Stock option plans: (cont'd)
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Options outstanding Options exercisable
-------------------------------------------- ----------------------------
Weighted-
average
Number remaining Weighted- Number Weighted-
outstanding contractual average exercisable average
Range of exercise prices (thousands) life (in years) exercise price (thousands) exercise price
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.46 30 1.9 $ 0.46 30 $ 0.46
$10 - $13 411 4.6 11.21 363 11.26
$13 - $16 417 7.6 15.46 53 13.21
$16 - $19 819 7.8 18.25 115 17.37
$19 - $22 424 8.9 21.33 5 19.28
$22 - $25 2,026 9.6 23.07 - -
-----------------------------------------------------------------------------------------------------------
4,127 8.4 $ 19.82 566 $ 12.21
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
16. TRANSLATION ADJUSTMENT:
The charge 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.
17. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK:
(a) Fair value of financial instruments:
The carrying values of cash and cash equivalents, trade receivables,
bank indebtedness, and trade payables and accrued liabilities
approximate their fair values because of the short-term nature of these
items.
The following table summarizes the book value and fair value at
December 31, 1999 and 1998 of those financial instruments having a fair
value different from their book value as at December 31. The fair
values of the financial liabilities are estimated based on discounted
cash flows using year-end market yields. The fair values of the
derivative financial instruments are estimated using year-end market
rates, and reflect the amount that the Company would receive or pay if
the instruments were closed out at these dates.
PAGE 28 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
17. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK: (CONT'D)
(a) Fair value of financial instruments: (cont'd)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
1999 1998
BOOK VALUE FAIR VALUE Book Value Fair Value
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial liabilities
Long-term debt (1) $ (2,660,171) $ (2,632,833) $ (1,192,007) $ (1,192,636)
Convertible debentures (1) (179,752) (178,579) (58,193) (67,357)
Derivative financial instruments
Interest rate swap agreements - (755) - (2,957)
Foreign exchange forward
contracts - 8,739 - (1,515)
Cross currency interest rate
swaps - 1,621 - -
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Including current portion
(b) Foreign exchange risk management:
The Company enters 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 its foreign exchange exposure on certain
liabilities. The amounts of outstanding contracts at year-end,
presented by currency, are included in the table below:
These amounts represent the notional value on which each contract is
based.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Currencies Notional principal amount (1)
(sold / bought) 1999 1998
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ / Cdn $
Less than 1 year $ 108,135 $ 95,307
Between 1 and 3 years 78,245 99,278
Euro / $
Less than 1 year 117,262 93,598
Between 1 and 3 years 15,366 6,155
SEK / $
Less than 1 year 35,397 -
Between 1 and 3 years 18,371 -
GBP / Euro
Less than 1 year 13,865 12,229
Other
Less than 1 year 29,232 16,198
Between 1 and 3 years - 16,131
-----------------------------------------------------------------------------------------------------------
$ 415,873 $ 338,896
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Transactions in foreign currencies translated into dollars using
the closing exchange rate as at December 31, 1999.
PAGE 29 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- -------------------------------------------------------------------------------
17. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK: (CONT'D)
(c) Interest rate risk management:
The Company has entered into interest rate swaps to manage its interest
rate exposure on an amount of $45,930,000 in Euro. These agreements
will expire between December 2000 and March 2003.
The Company also entered into cross currency interest rate swaps to
manage both its foreign exchange and interest rate exposure on an
amount of $26,056,000 in Euro. The currency impacts are reflected in
the table in (b). These agreements will expire between December 2000
and November 2001.
(d) Credit risk:
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. At December 31, 1999, no customer balance
represents a significant portion 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 geographic diversity of its
customer base is instrumental in reducing its credit risk, as well as
the impact on the Company of fluctuations in local market or
product-line demand. The Company has long-term contracts with most of
its largest 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.
18. 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 $586,731,000.
Annual minimum payments under these leases for each of the next five
years are as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
----------------------------------------------------------------------
<S> <C>
2000 $ 102,386
2001 90,277
2002 74,528
2003 53,609
2004 44,717
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
PAGE 30 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- -------------------------------------------------------------------------------
18. COMMITMENTS AND CONTINGENCIES: (CONT'D)
(b) Fixed assets:
As at December 31, 1999, the Company had commitments to purchase fixed
assets for a total value of approximately $29,150,000.
(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
environmental 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 maintaining
compliance with such environmental statutes will have a material
adverse effect upon the Company's competitive or consolidated financial
position.
19. RELATED PARTY TRANSACTIONS:
The Company entered into the following transactions, at prices and
conditions prevailing on the market, with related parties and were
accounted for at the exchange value:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 17,293 $ 15,006 $ 14,289
Purchases 24,423 26,037 24,321
Interest expense (income) (138) 28 406
Fees paid to the parent company, Quebecor Inc. 8,499 1,807 1,810
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
Fees paid to the parent company include an amount of $6,500,000 in
connection with the acquisition of WCP and the related issuance of equity
as well as management fees paid in the normal course of business.
As at December 31, 1999, the Company had amounts payable from affiliated
companies amounting to $273,000 ($2,376,000 receivable as at December 31,
1998).
20. 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>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net pension expense $ 20,558 $ 16,822 $ 12,627
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 31 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- --------------------------------------------------------------------------------
20. PENSION PLANS: (CONT'D)
The financial position of the pension plans is summarized as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fair market value of pension fund assets $ 581,707 $ 353,047 $ 340,020
Actuarial present value of accrued pension benefits 577,323 385,370 366,627
---------------------------------------------------------------------------------------------------------------
Surplus (deficit) $ 4,384 $ (32,323) $ (26,607)
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
Interest on the actuarial present value of accrued pension benefits was
computed using rates varying from 5.5% to 8.5%. The average compensation
increase was established at rates varying from 3.0% to 5.5%. The assumed
long-term rate of return of pension funds assets was estimated at rates
varying from 7.25% to 10.25%.
At December 31, 1999, the fair market value of pension fund assets and the
actuarial present value of accrued pension benefits related to pension
funds of WCP, amount to $190,458,000 and $186,150,000 respectively.
21. 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 32 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- -------------------------------------------------------------------------------
21. SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP") IN CANADA AND THE UNITED STATES: (CONT'D)
(a) RECONCILIATION OF NET INCOME AND EARNINGS PER SHARE:
The application of GAAP in the United States would have the following
effects on net income as reported:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME, AS REPORTED IN THE CONSOLIDATED
STATEMENTS OF INCOME PER GAAP IN CANADA $ 80,056 $ 159,560 $ 130,440
Adjustments, net of applicable income taxes
Post-employment benefit costs other than
pension costs (i) (1,020) (618) (418)
Foreign currency translation (ii) - - 455
Business process reegineering costs (iii) 1,044 1,015 (2,059)
Accounting for income taxes (iv) (1,571) 708 962
------------------------------------------------------------------------------------------------------
(1,547) 1,105 (1,060)
-----------------------------------------------------------------------------------------------------------
NET INCOME, AS ADJUSTED, PER GAAP
IN THE UNITED STATES $ 78,509 $ 160,665 $ 129,380
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
PER SHARE DATA
NET INCOME, AS REPORTED PER GAAP IN CANADA $ 0.56 $ 1.29 $ 1.12
Effect of adjustments, net of
applicable income taxes (0.01) 0.01 (0.01)
-----------------------------------------------------------------------------------------------------------
NET INCOME, AS ADJUSTED PER GAAP
IN THE UNITED STATES $ 0.55 $ 1.30 $ 1.11
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
(i) POST-EMPLOYMENT BENEFIT COSTS OTHER THAN PENSION COSTS
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.
(ii) FOREIGN CURRENCY TRANSLATION
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 Sates, 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".
PAGE 33 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- -------------------------------------------------------------------------------
21. SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP") IN CANADA AND THE UNITED STATES: (CONT'D)
(a) RECONCILIATION OF NET INCOME AND EARNINGS PER SHARE: (CONT'D)
(iii) BUSINESS PROCESS REENGINEERING COSTS
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.
(iv) INCOME TAXES
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. In addition, 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.
(v) PRESENTATION OF RESTRUCTURING AND OTHER CHARGES
United States GAAP requires that restructuring and other charges
be included in the determination of operating income and does not
permit the disclosure of a subtotal of the amount of operating
income before these restructuring and other charges. Canadian GAAP
permits the disclosure of a subtotal of the amount of operating
income before restructuring and other charges referred to above.
(vi) PRESENTATION OF GOODWILL AMORTIZATION
Under GAAP in Canada, goodwill amortization is presented, net of
related income taxes, and is excluded of the calculation of
operating income before net income. Under GAAP in United States,
goodwill amortization is included in the computation of operating
income and is presented as an operating expense.
(vii) EQUITY PORTION OF CONVERTIBLE NOTES
Under GAAP in Canada, the equity portion of the convertible notes
is recorded under shareholders' equity as other paid-in capital.
Under GAAP in the United States, no such allocation is required.
PAGE 34 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- -------------------------------------------------------------------------------
21. SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP") IN CANADA AND THE UNITED STATES (CONT'D):
(b) 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>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
1999 1998
CANADA UNITED STATES Canada United States
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets (iv) $ 1,260,977 $ 1,297,362 $ 954,230 $ 963,652
Fixed assets (iv) 2,881,105 2,895,307 2,210,964 2,221,964
Goodwill (i) (iv) 2,460,418 2,526,707 595,724 639,467
Other assets (ii) (iii) 153,752 153,752 81,198 79,525
Current liabilities (i) (iv) 1,221,288 1,224,828 710,124 715,320
Other liabilities (i) (iv) 225,146 290,203 127,859 155,657
Deferred income taxes (i) (ii) (iii) (iv) 204,269 255,000 223,085 254,613
Convertible debentures (vii) 179,752 200,583 58,193 58,193
Other paid-in capital (vii) 20,831 - - -
Retained earnings (i) (ii) (iii) (iv) 653,751 650,155 629,596 627,547
Translation adjustment (i) (ii) (96,281) (95,137) (51,967) (51,948)
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
(c) 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>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income, as adjusted per GAAP
in the United States $ 78,509 $ 160,665 $ 129,380
Currency translation adjustment (43,189) 4,484 (33,225)
-----------------------------------------------------------------------------------------------------------
Comprehensive income as per GAAP
in the United States $ 35,320 $ 165,149 $ 96,155
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 35 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- -------------------------------------------------------------------------------
22. 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
market 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
1999 $ 2,938,396 $ 972,420 $ 944,914 $ 95,804 $ - $ 1,003 $ 4,952,537
1998 2,045,622 922,979 755,360 81,266 4,393 (1,465) 3,808,155
1997 1,927,878 902,353 613,509 33,521 6,354 (416) 3,483,199
AMORTIZATION OF FIXED ASSETS AND DEFERRED CHARGES
1999 179,492 46,086 53,036 5,887 1,491 - 285,992
1998 124,580 45,270 48,856 4,305 778 - 223,789
1997 113,804 43,820 40,649 1,762 769 - 200,804
OPERATING INCOME BEFORE RESTRUCTURING AND OTHER CHARGES
1999 289,490 96,020 68,137 7,580 12,018 - 473,245
1998 145,305 87,999 65,761 9,662 8,772 - 317,499
1997 140,337 73,940 47,299 4,696 12,099 - 278,371
GOODWILL AMORTIZATION
1999 22,632 922 6,262 334 - - 30,150
1998 7,576 1,230 6,388 254 165 - 15,613
1997 6,351 1,305 1,976 103 190 - 9,925
ADDITIONS TO FIXED ASSETS
1999 97,954 45,442 46,327 4,405 580 - 194,708
1998 246,634 30,217 21,457 6,826 6,989 - 312,123
1997 213,305 47,723 58,987 4,891 700 - 325,606
ASSETS
1999 4,923,561 553,562 1,104,598 134,930 39,601 - 6,756,252
1998 2,122,685 536,966 1,048,162 107,357 26,946 - 3,842,116
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The American segment includes a business unit in Germany.
(2) The Canadian segment includes three business units in the Unites States
and one in India.
(3) The European segment includes business units located in Austria,
Finland, France, Spain, Sweden and the United Kingdom.
(4) The South American segment includes business units located in
Argentina, Chile, Colombia, Mexico and Peru.
PAGE 36 OF 38
<PAGE>
QUEBECOR PRINTING INC. AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Tabular amounts are expressed in thousands of US dollars, except for earnings
per share amounts)
- -------------------------------------------------------------------------------
22. 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 and direct mail, directories, digital,
CD-ROM and others.
Revenues per product are as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Magazines $ 1,463,937 29.6% $ 1,108,274 29.1% $ 991,382 28.5%
Inserts and circulars 1,041,478 21.0 793,356 20.8 684,140 19.6
Catalogs 770,522 15.6 589,356 15.5 500,304 14.4
Books 644,461 13.0 503,221 13.2 508,749 14.6
Specialty printing and
direct mail 530,709 10.7 380,226 10.0 369,930 10.6
Directories 234,392 4.7 164,234 4.3 156,444 4.5
Digital, CD-ROM
and others 267,038 5.4 269,488 7.1 272,250 7.8
---------------------------------------------------------------------------------------------------------------
$ 4,952,537 100.0% $ 3,808,155 100.0% $ 3,483,199 100.0%
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>
23. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:
Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect the entity,
including those related to customers, suppliers, or other third parties,
have been fully resolved.
PAGE 37 OF 38
<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: (SIGNED) CLAUDINE TREMBLAY
---------------------------------------
Name: Claudine Tremblay
Title: Assistant Secretary
Date: FEBRUARY 4, 2000
PAGE 38 OF 38
