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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
<TABLE>
<S> <C>
FOR THE QUARTERLY PERIOD ENDED JULY 1, 2000 COMMISSION FILE NUMBER 1-11802
</TABLE>
QUEBECOR WORLD (USA) INC.
(FORMERLY KNOWN AS WORLD COLOR PRESS, INC.)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 37-1167902
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
THE MILL, 340 PEMBERWICK ROAD 06831
GREENWICH, CONNECTICUT (Zip Code)
(Address of principal executive offices)
</TABLE>
203-532-4200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO / /
At August 10, 2000, ten shares of the registrant's common stock, $1.00 par
value, were outstanding.
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QUEBECOR WORLD (USA) INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 1, 2000
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets as of July 1, 2000
and December 31, 1999................................. 3
Condensed Consolidated Statements of Operations for the
Three and Six Months
Ended July 1, 2000 and June 27, 1999.................. 4
Condensed Consolidated Statements of Cash Flows for the
Six Months
Ended July 1, 2000 and June 27, 1999.................. 5
Notes to Condensed Consolidated Financial Statements.... 6-8
Management's Discussion and Analysis of Financial
Condition and
Results of Operations................................. 9-11
PART II. OTHER INFORMATION.................................. 12
</TABLE>
2
<PAGE>
QUEBECOR WORLD (USA) INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 1, 2000 AND DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JULY 1, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 27,177 $ 47,383
Accounts receivable--net.................................. 210,099 270,399
Receivables from related parties--net..................... 17,348 --
Inventories............................................... 226,503 230,716
Deferred income taxes..................................... 40,010 47,990
Other..................................................... 26,990 40,226
---------- ----------
Total current assets.................................. 548,127 636,714
Property, plant and equipment, at cost.................... 1,727,063 1,708,008
Accumulated depreciation and amortization................. (881,265) (830,010)
---------- ----------
Property, plant and equipment--net........................ 845,798 877,998
Goodwill--net............................................. 782,518 793,011
Other..................................................... 73,660 68,398
---------- ----------
TOTAL ASSETS................................................ $2,250,103 $2,376,121
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 302,570 $ 332,176
Payables to related parties--net.......................... -- 7,380
Current maturities of long-term debt...................... 6,212 6,090
---------- ----------
Total current liabilities............................. 308,782 345,646
Long-term debt............................................ 1,179,750 1,285,106
Deferred income taxes..................................... 63,587 62,687
Other long-term liabilities............................... 123,784 133,357
---------- ----------
Total liabilities..................................... 1,675,903 1,826,796
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value--3,000 shares authorized; 10
shares outstanding...................................... -- --
Additional paid-in capital................................ 701,893 701,893
Capital contribution from Printing Acquisition Inc........ 118,773 118,773
Accumulated deficit....................................... (246,466) (271,341)
---------- ----------
Total stockholders' equity............................ 574,200 549,325
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $2,250,103 $2,376,121
========== ==========
</TABLE>
Note: Derived from audited consolidated financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE>
QUEBECOR WORLD (USA) INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND SIX MONTHS ENDED JULY 1, 2000 AND JUNE 27, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
------------------- -----------------------
2000 1999 2000 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales........................................ $620,355 $566,545 $1,282,234 $1,172,388
Cost of sales.................................... 508,823 466,773 1,058,322 974,580
-------- -------- ---------- ----------
Gross profit..................................... 111,532 99,772 223,912 197,808
Selling, general and administrative expenses..... 59,525 56,749 126,439 113,284
Restructuring and other special charges.......... -- 62,410 -- 62,410
-------- -------- ---------- ----------
Operating income (loss).......................... 52,007 (19,387) 97,473 22,114
Interest expense and securitization fees......... 27,174 25,050 55,273 48,959
-------- -------- ---------- ----------
Income (loss) before income taxes, extraordinary
items and cumulative effect of change in
accounting principle........................... 24,833 (44,437) 42,200 (26,845)
Income tax provision (benefit)................... 10,201 (18,219) 17,325 (11,006)
-------- -------- ---------- ----------
Income (loss) before extraordinary items and
cumulative effect of change in accounting
principle...................................... 14,632 (26,218) 24,875 (15,839)
Extraordinary items, net of tax.................. -- -- -- (11,992)
Cumulative effect of change in accounting
principle, net of tax.......................... -- -- -- (10,513)
-------- -------- ---------- ----------
Net income (loss)................................ $ 14,632 $(26,218) $ 24,875 $ (38,344)
======== ======== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
QUEBECOR WORLD (USA) INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JULY 1, 2000 AND JUNE 27, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
-------------------
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $ 24,875 $(38,344)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 75,427 77,372
Restructuring and other special charges................. -- 62,410
Extraordinary items, net of tax......................... -- 11,992
Cumulative effect of change in accounting principle, net
of tax................................................ -- 10,513
Deferred income tax provision (benefit)................. 8,880 (20,609)
Changes in operating assets and liabilities:
Accounts receivable--net.............................. 60,300 106,693
Inventories........................................... 4,213 23,368
Accounts payable and accrued expenses................. (29,606) (73,428)
Other assets and liabilities--net..................... (22,241) (34,820)
-------- --------
Net cash provided by operating activities........... 121,848 125,147
-------- --------
INVESTING ACTIVITIES:
Additions to property, plant and equipment--net........... (36,820) (60,565)
Acquisitions of businesses, net of cash acquired.......... -- (114,110)
-------- --------
Net cash used in investing activities............... (36,820) (174,675)
-------- --------
FINANCING ACTIVITIES:
Net payments on debt...................................... (105,234) (69,210)
Premium paid on debt extinguishment....................... -- (6,840)
Proceeds from issuance of common stock.................... -- 5,349
Repurchases of common stock............................... -- (30,558)
-------- --------
Net cash used in financing activities............... (105,234) (101,259)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS....................... (20,206) (150,787)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 47,383 199,932
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 27,177 $ 49,145
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
QUEBECOR WORLD (USA) INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated interim financial statements have
been prepared by Quebecor World (USA) Inc., formerly known as World Color
Press, Inc., (along with its subsidiaries, the "Company" or "World") pursuant to
the rules and regulations of the Securities and Exchange Commission and reflect
normal and recurring adjustments, which are, in the opinion of the Company,
considered necessary for a fair presentation. As permitted by these regulations,
these statements do not include all information required by generally accepted
accounting principles to be included in an annual set of financial statements,
however, the Company believes that the disclosures made are adequate to make the
information presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K.
2. ACQUISITION BY QUEBECOR WORLD INC.
On July 12, 1999, the Company entered into an Agreement and Plan of Merger
with Quebecor Printing Inc. (subsequently renamed Quebecor World Inc. "QWI") and
its indirect wholly owned subsidiary, Printing Acquisition Inc.
("Acquisition Inc."), which provided for the acquisition of the Company (the
"Merger"). On July 16, 1999, QWI, through Acquisition Inc., commenced a tender
offer to acquire up to 23,500,000 shares of the Company's common stock at a
price of $35.69 per share. On August 20, 1999, QWI acquired, through
Acquisition Inc., 19,179,495, or approximately 50.4%, of the Company's
outstanding shares.
On October 8, 1999, the Company and Acquisition Inc. completed the Merger
following receipt of approval from the Company's stockholders. As a result, the
Company became an indirect wholly owned subsidiary of QWI and at that time was
renamed Quebecor World (USA) Inc. The remaining outstanding shares of World's
common stock (other than shares purchased by QWI in the tender offer) were
converted into the right to receive 1.2685 subordinate voting shares of QWI and
$8.18 in cash per share. In addition, each 6% Convertible Senior Subordinated
Note due 2007 outstanding at the Merger became convertible into the number of
QWI subordinate voting shares and cash that would have been received had the
convertible note been converted immediately prior to October 8, 1999. The
Company's new capital structure consists of 3,000 authorized shares of common
stock, par value $1.00 per share. At July 1, 2000, 10 common shares were
outstanding.
3. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JULY 1, DECEMBER 31,
2000 1999
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<S> <C> <C>
Work-in-process....................................... $134,646 $135,543
Raw materials......................................... 91,857 95,173
-------- --------
Total............................................... $226,503 $230,716
======== ========
</TABLE>
4. MERGER RELATED COSTS
In connection with the Merger, the Company developed an integration strategy
for the combined entities that requires the redeployment and/or disposal of
assets and the shutdown or relocation of certain
6
<PAGE>
QUEBECOR WORLD (USA) INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. MERGER RELATED COSTS (CONTINUED)
of the Company's plant locations and sales offices. This revised strategic
initiative resulted in fourth quarter 1999 charges of $144,544. In the first six
months of 2000, the Company paid approximately $12,000 related to these charges.
The Company anticipates remaining payments for these charges to be approximately
$16,000.
As a result of the Merger integration plan, the Company anticipates
incurring additional charges of approximately $26,000 in the remainder of 2000.
5. RESTRUCTURING AND OTHER SPECIAL CHARGES
In 1999, prior to the Merger, the Company recorded restructuring and other
special charges of $62,410 and $12,397, net of tax, in the second and third
quarters, respectively, to eliminate redundant and less efficient capacity
resulting from its ongoing acquisition strategy. The restructuring and other
special charges included the costs to exit and consolidate certain facilities
and sales offices, write down impaired assets and eliminate certain
administrative positions. Cash payments related to this charge in the first six
months of 2000 were not material.
6. RELATED PARTY TRANSACTIONS
At the time of the Merger, certain wholly owned subsidiaries of QWI provided
the Company with $511,500, which was borrowed on the Company's behalf from the
subsidiaries' external long-term credit facilities. The borrowings bear interest
at rates based on LIBOR plus 2% per annum, adjusted quarterly. Interest on the
borrowings ranged from 8.07% to 8.72% in the first six months of 2000. The
outstanding balance on these notes at July 1, 2000 was $420,000. Payment on the
remaining balance is not required prior to July 2, 2001. In the three and six
month periods ended July 1, 2000, the Company incurred $8,990 and $18,167 of
interest expense, respectively, of which $2,028 was included in net receivables
from related parties in the consolidated balance sheet at July 1, 2000.
Throughout the first six months of 2000, certain wholly owned subsidiaries
of QWI provided the Company with amounts borrowed under notes payable on demand.
These borrowings bear interest at rates based on prime plus 1% per annum. At
July 1, 2000, there were no amounts payable under these notes. Certain wholly
owned subsidiaries of QWI also provided the Company with amounts borrowed under
longer term promissory notes. These borrowings bear interest at rates based on
LIBOR plus 1.55% per annum, adjusted quarterly, which was approximately 8.35% in
the first six months of 2000. These notes mature between October 2007 and
December 2008. The outstanding balance at July 1, 2000 was $34,776. Interest
expense incurred on the demand and promissory notes for the three and six months
ending July 1, 2000 was $1,249 and $1,349, respectively, of which $958 was
included in net receivables from related parties in the consolidated balance
sheet at July 1, 2000.
At July 1, 2000, the Company had amounts payable to a wholly owned
subsidiary of QWI of approximately $6,333 for the purchase of raw materials.
This payable was included in net receivables from related parties in the
consolidated balance sheet at July 1, 2000.
The Company had transactions in the normal course of business with QWI and
affiliated companies that resulted in a net receivable of $26,667 which was
included in net receivables from related parties in the consolidated balance
sheet at July 1, 2000.
7
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QUEBECOR WORLD (USA) INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company incurred fees of $1,275 in the first quarter of 2000 for
corporate administrative services provided by QWI.
7. DEBT ISSUANCE AND EXTINGUISHMENT
During the second quarter of 2000, amounts borrowed from certain
subsidiaries of QWI were utilized to repay $36,250 of the 8.375% Senior
Subordinated Notes due 2008. In addition, in the first six months of 2000, the
Company redeemed $9,300 of Convertible Notes due 2007. The gains on
extinguishment of the notes were not material.
On December 28, 1998, the Company redeemed all of its outstanding 9.125%
Senior Subordinated Notes due 2003 in an aggregate principal amount of $150,000.
The notes were redeemed for approximately $160,800, including the redemption
premium of $6,840 and accrued interest. In the first quarter of 1999, the early
extinguishment of debt generated an extraordinary charge of $5,946, net of taxes
of $4,132, for the redemption premium and write-off of deferred financing costs.
In 1999, the Company repaid certain indebtedness under the Second Amended
and Restated Credit Agreement dated June 6, 1996, as amended (the "Credit
Agreement") and amended the Credit Agreement resulting in, among other
modifications, a $95,000 permanent reduction in borrowings and commitments. This
amendment and related permanent reduction in total borrowings and commitments
resulted in a substantial modification of the terms under the Credit Agreement.
Accordingly, in the first quarter of 1999 the Company recognized an
extraordinary charge for the early extinguishment of debt of $6,046, net of
taxes of $4,201, for the write-off of deferred financing costs. Subsequent to
the Merger, the Company repaid all of its outstanding debt incurred under the
Credit Agreement, effectively canceling all available commitments.
On August 20, 1999, the Company entered into a credit agreement with a third
party lender with a maximum commitment of $100,000. Interest is payable at a
variable floating rate based on LIBOR or prime rate. At July 1, 2000, no amounts
were outstanding under this credit agreement.
8. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities and
organization costs to be expensed as incurred. The Company adopted this SOP in
the first quarter of fiscal year 1999, which resulted in a charge of $10,513,
net of taxes of $7,305, as the cumulative effect of a change in accounting
principle for the non-recurring write-off of deferred start-up costs. The
adoption of this SOP did not have a material effect on operating income on a
continuing basis.
8
<PAGE>
QUEBECOR WORLD (USA) INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GENERAL
On July 12, 1999, we entered into an Agreement and Plan of Merger with
Quebecor Printing Inc. (subsequently renamed Quebecor World Inc. "QWI") and its
indirect wholly owned subsidiary, Printing Acquisition Inc.
("Acquisition Inc."), which provided for the acquisition of World Color (the
"Merger"). On July 16, 1999, QWI, through Acquisition Inc., commenced a tender
offer to acquire up to 23,500,000 shares of our common stock at a price of
$35.69 per share. On August 20, 1999, QWI acquired, through Acquisition Inc.,
19,179,495, or approximately 50.4%, of our outstanding shares.
On October 8, 1999, World Color and Acquisition Inc. completed the Merger
following receipt of approval from our stockholders. As a result, World Color
became an indirect wholly owned subsidiary of QWI and at that time was renamed
Quebecor World (USA) Inc. The remaining outstanding shares of our common stock
(other than shares purchased by QWI in the tender offer) were converted into the
right to receive 1.2685 subordinate voting shares of QWI and $8.18 in cash per
share. In addition, each 6% Convertible Senior Subordinated Note due 2007
outstanding at the Merger became convertible into the number of QWI subordinate
voting shares and cash that would have been received had the convertible note
been converted immediately prior to October 8, 1999. Our new capital structure
consists of 3,000 authorized shares of common stock, par value $1.00 per share.
At July 1, 2000, 10 common shares were outstanding.
In connection with the Merger, we have developed an integration strategy for
the combined entities that requires the redeployment and/or disposal of assets
and the shutdown or relocation of certain of our plant locations and sales
offices. This revised strategic outlook resulted in fourth quarter 1999 charges
of $144,544. We paid approximately $12,000 in 2000 related to these charges. We
anticipate remaining payments for these charges to be approximately $16,000.
As a result of the Merger integration plan, we anticipate incurring
additional charges of approximately $26,000 in the remainder of 2000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 1, 2000 COMPARED TO THREE MONTHS ENDED JUNE 27, 1999
Net sales increased $53,810 or 9.5% to $620,355 in 2000 from $566,545 in
1999. The increase was due to increased paper prices and improved sales in our
base business.
Gross profit increased $11,760 or 11.8% to $111,532 in 2000 from $99,772 in
1999. The gross profit margin increased to 18.0% in 2000 from 17.6% in 1999 due
to the effect of the Merger integration strategy and certain cost reduction
initiatives.
Selling, general and administrative expenses decreased $59,634 or 50.0% to
$59,525 in 2000 from $119,159 in 1999. In 1999, selling, general and
administrative expenses included restructuring and other special charges of
$62,410. Excluding these charges there was an increase in expenses of $2,776 or
4.9%.
Interest expense and securitization fees increased $2,124 or 8.5% to $27,174
in 2000 from $25,050 in 1999. The increase was due to higher average cost of
funds.
The effective tax rate, primarily composed of the combined federal and state
statutory rates, was 41% for 2000 and 1999.
9
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QUEBECOR WORLD (USA) INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED JULY 1, 2000 COMPARED TO SIX MONTHS ENDED JUNE 27, 1999
Net sales increased $109,846 or 9.4% to $1,282,234 in 2000 from $1,172,388
in 1999. The increase was due to the inclusion of sales from the 1999
acquisitions for the entire 2000 period, increased paper prices and improved
sales in our base business.
Gross profit increased $26,104 or 13.2% to $223,912 in 2000 from $197,808 in
1999. The gross profit margin increased to 17.5% in 2000 from 16.9% in 1999 due
to the effect of the Merger integration strategy and certain cost reduction
initiatives and synergies resulting from the integration of the 1999 acquired
businesses.
Selling, general and administrative expenses decreased $49,255 or 28.0% to
$126,439 in 2000 from $175,694 in 1999. In 1999, selling, general and
administrative expenses included restructuring and other special charges of
$62,410. Excluding these charges, there was an increase in expenses of $13,155
or 11.6% in 2000. The increase was due to $1,275 of charges for corporate
administrative services from QWI and the effect of acquisitions in 1999 for the
entire 2000 period, including the related additional amortization expense for
goodwill, partially offset by benefits derived from the Merger integration
strategy and cost saving initiatives.
Interest expense and securitization fees increased $6,314 or 12.9% to
$55,273 in 2000 from $48,959 in 1999. The increase was due to higher average
cost of funds.
The effective tax rate, primarily composed of the combined federal and state
statutory rates, was 41.0% for the first six months of fiscal year 2000 and
1999.
LIQUIDITY AND CAPITAL RESOURCES
We have historically met our liquidity and capital investment needs with
internally generated funds and external borrowings. Net income before
one-time-charges, plus depreciation and amortization and deferred income taxes
was $109,182 and $103,334 for the six months ended July 1, 2000 and June 27,
1999, respectively. Our outstanding indebtedness less cash decreased $85,028
from December 31, 1999 to July 1, 2000. At July 1, 2000, our debt including
current maturities was composed of approximately 38% of amounts borrowed by
certain wholly owned subsidiaries of QWI on our behalf. Working capital was
$239,345 at July 1, 2000 and $239,630 at June 27, 1999.
During the second quarter of 2000, amounts borrowed from certain
subsidiaries of QWI were utilized to repay $36,250 of the 8.375% Senior
Subordinated Notes due 2008. In addition, in the first six months of 2000, we
redeemed $9,300 of Convertible Notes due 2007. The gains on extinguishment of
the notes were not material.
Capital expenditures totaled $36,820 and $60,565 in the first six months of
2000 and 1999, respectively. These capital expenditures reflect the purchase of
additional press and bindery equipment and are part of our ongoing program to
maintain modern, efficient plants and continually increase productivity. As a
result of the Merger, we have continued to strategically redeploy assets to
optimize efficiency.
Concentrations of credit risk with respect to accounts receivable are
limited due to our diverse operations and large customer base. As of July 1,
2000, we had no significant concentrations of credit risk.
10
<PAGE>
QUEBECOR WORLD (USA) INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
We believe that our liquidity, capital resources and cash flows from
operations are sufficient to fund planned capital expenditures, working capital
requirements and interest and principal payments for the foreseeable future.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires companies to
recognize all derivatives as either assets or liabilities and measure those
instruments at fair value. We would account for gains or losses resulting from
changes in the values of those derivatives depending on the use of the
derivative and whether it qualifies for hedge accounting. We will adopt SFAS
No. 133 in the first quarter of fiscal year 2001. We do not expect the adoption
of SFAS No. 133 to have a material impact on our consolidated financial
statements.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements," which provides additional
guidance in applying generally accepted accounting principles to revenue
recognition in the financial statements. We do not anticipate SAB 101 to have a
material effect on our financial statements.
YEAR 2000
We did not experience any material adverse impact with regard to software or
hardware failure or malfunction as a result of the year 2000 transition. The
costs incurred to date related to the year 2000 efforts have not been material,
nor are they expected to be material for the remainder of 2000. We will continue
to monitor our systems for effects of the year 2000 transition going forward.
SEASONALITY
Results of operations for this interim period are not necessarily indicative
of results for the full year. Our operations are seasonal. Historically,
approximately two-thirds of our operating income has been generated in the
second half of the fiscal year, primarily due to the higher number of magazine
pages, new product launches and back-to-school and holiday catalog promotions.
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the statements in this
document are forward-looking and made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve known and unknown risks and uncertainties, which may cause our actual
results in future periods to differ materially from forecasted results. Those
risks include, among others, changes in customers' demand for our products,
changes in raw material and equipment costs and availability, seasonal changes
in customer orders, pricing actions by our competitors and general changes in
economic condition.
11
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QUEBECOR WORLD (USA) INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits required in accordance with Item 601 of Regulation S-K are
incorporated by reference herein as filed with registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, dated March 30, 2000.
In addition, the Company has filed herewith the following exhibits:
27.0 Financial Data Schedule for the period ended July 1, 2000 (filed in
electronic form only).
(b) Reports on Form 8-K
None
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.
<TABLE>
<S> <C> <C>
QUEBECOR WORLD (USA) INC.
By: /s/ MICHEL P. SALBAING
-----------------------------------------
Michel P. Salbaing
Senior Vice President, Chief Financial
Date: August 14, 2000 Officer
</TABLE>
12
