Montréal, Quebec, Canada, 12 August 2008 – In the second quarter, Quebecor World Inc. (TSX: IQW) made steady progress in its efforts to exit creditor protection in the United States and Canada as a strong player in its industry. The company continued to renew existing customer contracts and secure new business across all its business groups.
In the quarter, Quebecor World completed the sale of its European operations to a Netherlands-based investment group. The company used the net cash proceeds to repay a portion of the Debtor-In-Possession (DIP) financing. In the second quarter, Quebecor World announced a customer-focused streamlining of its U.S. operations to better serve its customer base, improve efficiency, and reduce costs.
Also in the quarter, the company presented its business plan to the creditors’ committees. The plan reflects the company’s expectation of future operating performance during and after the CCAA and Chapter 11 processes and is an important part of developing an eventual plan of arrangement to exit creditor protection.
Since the initial filing on 21 January 2008, the company received the final order for its CAD 1 billion DIP financing from the U.S. and Canadian courts. The company has received several extensions to the stay of proceedings, the most recent of which is to 30 September 2008 under CCAA in Canada and through to July of 2009 under Chapter 11 in the United States. As stated in the Monitor’s report of 14 July 2008, the company had an unrestricted cash balance of CAD 140 million at 06 July 2008 and continues to have access to the Revolving Loan Facility of up to CAD 400M.
Quebecor World’s results in the second quarter 2008 are based on continuing operations. In the second quarter, the company generated consolidated revenues from continuing operations of CAD 976 million compared to CAD 1.1 billion in 2007. Operating income before impairment of assets, restructuring, and other charges (IAROC) in the second quarter was CAD 27.8 million compared to operating income of CAD 48.0 million in the second quarter of 2007. Adjusted EBITDA was CAD 92.7 million in the second quarter of 2008 compared to CAD 113.2 million in the second quarter of 2007. The lower adjusted EBITDA in 2008 is due to decreased volumes and continued price pressures as well as significant costs associated with the reorganization and restructuring. The sale of the European operations generated cash proceeds of CAD 82 million, of which CAD 75 million was applied to partial repayment of the DIP loan and a loss on disposal of CAD 653 million.
The company’s adjusted EBITDA results in the second quarter and year-to-date continue to be in line with management’s expectations and slightly ahead of projections for the DIP financing.
“We have made important progress in the last six months to preserve the long-term sustainable profitability of our company while working through a process to ensure fair and equitable consideration for all stakeholders. The sale of our European operations was one such step which will allow us to focus on our core business in the Americas,” said Jacques Mallette president and CEO of Quebecor World Inc. “Since January, we successfully signed new agreements with many of our customers whose work was due to be renewed despite a challenging economic environment and the unfavorable perception created by our filing. We have restructured our U.S. operations towards a more customer-focused approach and we continue to introduce new products to enhance our full-service offerings to help our customers better reach or serve their customers”.
Since its filing for creditor protection, Quebecor World has renewed business with major publishers and retailers. This includes recently announced long-term agreements with Reader’s Digest, Local Insight Media, Dex Media, and Canada Wide Publishing. These and other agreements benefit from the company’s customer-focused U.S. reorganization, which now comprises three divisions instead of six, resulting in greater synergies, shared resources, and faster decision making, with a focus on delivering complete value-added solutions to two principle customer bases: multi-channel marketers and publishers. This is supported by the previously announced integration of the Logistics and Premedia divisions under one operating structure providing enhanced before and after print value-added services. Quebecor World continues to introduce new products and build new alliances through its Integrated Multi-Channel Solutions (IMCS) offering.
In the second quarter, Quebecor World reported a net loss of CAD 77.7 million or (CAD 0.44) per share compared to a net income of CAD 10.8 million or CAD 0.05 per share in the second quarter of last year. Second quarter results included IAROC net of income taxes of CAD 7.5 million or CAD 0.04 per share, compared to CAD 19.1 million or CAD 0.14 per share in the same period in 2007. Excluding IAROC, the adjusted operating income was CAD 27.8 million in the second quarter of 2008 compared to adjusted operating income of CAD 48.0 million for the second quarter of last year.
For the first six months of 2008, Quebecor World reported a net loss from continuing operations of CAD 226.3 million or (CAD 1.41) per share, compared to a net income from continuing operations of CAD 20.5 million or CAD 0.06 per share for the same period in 2007. The results for the first six months of 2008 incorporate IAROC net of taxes of CAD 42.7 million or CAD 0.26 per share compared to CAD 30.5 million or CAD 0.24 per share in 2007. Excluding IAROC, adjusted diluted loss per share from continuing operations was CAD 1.15 for the first six months of 2008 compared to adjusted diluted earnings per share of CAD 0.30 in the same period of 2007. On the same basis, adjusted operating income in the first six months of 2008 was CAD 37.0 million compared to CAD 86.5 million in 2007. Consolidated revenues for the first half of 2008 were CAD 2.0 billion compared to CAD 2.3 billion in the same period of 2007. The lower revenue is due to the lower paper sales, decreased volume, and continued price pressures. In addition, the company’s quarterly and year-to-date financial results have been affected by significantly higher professional fees and higher financial expenses related to the DIP financing and the creditor protection process.
Note: The company is currently subject to Court protection under the companies' Creditors Arrangement Act (Canada) (CCAA), and various U.S. subsidiaries have filed petitions under Chapter 11 of the U.S. Bankruptcy Code. In light of the CCAA and Chapter 11 Proceedings, it is unlikely that the company’s existing Multiple Voting Shares, Redeemable First Preferred Shares, and Subordinate Voting Shares will have any material value following the approval of a final plan of arrangement.
About Quebecor World
Quebecor World Inc. (TSX: IQW) is a world leader in providing high-value, complete marketing and advertising solutions to leading retailers, catalogers, branded-goods companies, and other businesses with marketing and advertising activities, as well as complete, full-service print solutions for publishers. The company is a market leader in most of its major product categories, which include advertising inserts and circulars, catalogs, direct mail products, magazines, books, directories, digital premedia, logistics, mail list technologies, and other value-added services. Quebecor World has approximately 24,000 employees working in more than 100 printing and related facilities in the United States, Canada, Argentina, Brazil, Chile, Colombia, India, Mexico, and Peru.
Web address: www.quebecorworld.com