Quebecor World Announces Q4: Net loss of $205 million
Quebecor World Inc. announces that for the fourth quarter 2005 the Company reported a net loss of $205 million from continuing operations compared to net income of $46 million in the fourth quarter of last year. On the same basis, loss per share in the fourth quarter was $1.64 compared to diluted earnings per share of $0.27 in 2004. Quebecor World's fourth quarter and 2005 results were negatively impacted by a previously announced non-cash goodwill impairment charge of $243 million, ($232 million after tax, or $1.77 per share), related to the Company's European operations. Consolidated revenues for the quarter were $1.7 billion compared to $1.8 billion last year.
In the fourth quarter 2005, the Company recorded impairment of assets, restructuring and other charges (IAROC) of $12 million or $0.08 per share compared to $48 million or $0.32 per share in the fourth quarter last year. Operating income before IAROC and goodwill impairment in the fourth quarter was $87 million compared to $161 million during the same period last year.
Earnings per share from continuing operations before IAROC and goodwill impairment were $0.21 compared to $0.59 in the fourth quarter of 2004.
Quebecor World's fourth quarter results were hampered by a lower pricing environment compared to last year, higher energy costs, under performing operations in France and the United Kingdom, the absence of an additional week in the quarter compared to 2004 which negatively impacted revenues in North America by approximately 7%, additional freight costs and inefficiencies related to press start-ups.
"We continue to face a very challenging environment on several fronts which is reflected in our results. Our retooling plan is underway and despite some inefficiencies in the fourth quarter, we expect this equipment to deliver as promised in the medium and long-term as it reaches full-capacity and as we replace previously lost volume," said Pierre Karl Peladeau, President and CEO, Quebecor World Inc. "In the short-term we are taking additional measures to reduce our costs by being more efficient in our energy consumption and through additional restructuring initiatives. The Company is also utilizing its distinct competitive advantages to focus on securing higher margin volume from leading publishers and retailers."
Quebecor World's three-year retooling plan is based on strategically installing state-of-the-art technology across its global platform and decommissioning older less productive equipment to enhance service, reduce costs and improve efficiencies. The previously announced plan calls for an investment of $330 million in North America and $250 million in Europe. The Company's retooling program on two continents is one of the largest ever undertaken in the printing industry and the full effect of these efforts will be realized over time.
Due to the retooling program in North America and Europe, Quebecor World recorded capital expenditures of $394 million in 2005 compared to $133 million in 2004 and generated free cash flow of $119 million in 2005 compared to $319 million in 2004.
As announced in January 2006, the European retooling program includes installing two new gravure presses in Belgium and wide-web offset presses in Austria and Spain as well as additional potential investments in the United Kingdom and France. In February 2006, the Company successfully concluded negotiations with its employees' representatives in the United Kingdom that will quickly bring the cost structure in line with the market. Similar negotiations are progressing more slowly in France. This could be a lengthy process which might negatively impact our performance.
Full-Year 2005
In 2005, net loss was $149 million or $1.43 per share compared to net income of $140 million or $0.77 per share last year. Before IAROC and goodwill impairment, diluted earnings per share in 2005 were $0.98 compared to $1.45 last year. Operating income before IAROC and goodwill impairment was $358 million in 2005 compared to $471 million last year. Consolidated revenue for 2005 were essentially flat at $6.3 billion compared to 2004.
Impairment of assets, restructuring and other charges for 2005 were $94 million compared to $116 million in 2004. Selling General and Administrative expenses were $397 million compared to $432 million last year. Excluding the unfavourable impact of currency translation, SG&A expenses were lower by $42 million compared to the previous year.
Outlook 2006
In 2006, Quebecor World anticipates its operations will continue to be affected by negative pricing pressures and previously announced volume reductions. While the Company has made significant progress in replacing this volume, many of these new agreements only come into force in the later half of 2006 and in 2007. The Company intends to address these challenges by continuing to implement cost containment measures. These measures include retooling plans for North America and Europe, additional restructuring initiatives and decommissioning of older presses resulting in a more efficient manufacturing platform. The Company will also develop projects to help reduce energy consumption. Furthermore, Quebecor World will use its distinct competitive advantages to seek higher margin business. However, as this is a long-term process and as the Company anticipates additional start-up related inefficiencies in upcoming quarters, the full effect of these efforts will be realized over time.
Discontinued Operations
Quebecor World's core printing activities involve the printing of magazines, catalogs, retail inserts, books, directories and direct mail for the world's largest publishers and retailers. As the Company has grown by acquisition certain facilities were included in those transactions that did not relate to these core businesses. Approximately a dozen facilities in North America were involved in the printing of short-run contractual work such as marketing materials, annual reports, travel and fashion brochures. These activities were different from Quebecor World's core businesses and did not benefit from the advantages and synergies of the Company's global platform. The Company completed the sale of these assets in the fourth quarter 2005. Consequently the operating results related to these activities have been presented separately in the Company's consolidated financial results as discontinued operations and comparative figures have been restated to conform to the presentation adopted for the year-ended December 31, 2005.
Dividend
The Board of Directors declared a dividend of $0.10 per share on Multiple Voting Shares and Subordinate Voting Shares. The Board also declared a dividend of CDN$0.3845 per share on Series 3 Preferred Shares, CDN$0.421875 per share on Series 4 Preferred Shares and CDN$0.43125 on Series 5 Preferred Shares.
The dividends are payable on March 1st, 2006 to shareholders of record at the close of business February 27, 2006.
In the fourth quarter 2005, the Company recorded impairment of assets, restructuring and other charges (IAROC) of $12 million or $0.08 per share compared to $48 million or $0.32 per share in the fourth quarter last year. Operating income before IAROC and goodwill impairment in the fourth quarter was $87 million compared to $161 million during the same period last year.
Earnings per share from continuing operations before IAROC and goodwill impairment were $0.21 compared to $0.59 in the fourth quarter of 2004.
Quebecor World's fourth quarter results were hampered by a lower pricing environment compared to last year, higher energy costs, under performing operations in France and the United Kingdom, the absence of an additional week in the quarter compared to 2004 which negatively impacted revenues in North America by approximately 7%, additional freight costs and inefficiencies related to press start-ups.
"We continue to face a very challenging environment on several fronts which is reflected in our results. Our retooling plan is underway and despite some inefficiencies in the fourth quarter, we expect this equipment to deliver as promised in the medium and long-term as it reaches full-capacity and as we replace previously lost volume," said Pierre Karl Peladeau, President and CEO, Quebecor World Inc. "In the short-term we are taking additional measures to reduce our costs by being more efficient in our energy consumption and through additional restructuring initiatives. The Company is also utilizing its distinct competitive advantages to focus on securing higher margin volume from leading publishers and retailers."
Quebecor World's three-year retooling plan is based on strategically installing state-of-the-art technology across its global platform and decommissioning older less productive equipment to enhance service, reduce costs and improve efficiencies. The previously announced plan calls for an investment of $330 million in North America and $250 million in Europe. The Company's retooling program on two continents is one of the largest ever undertaken in the printing industry and the full effect of these efforts will be realized over time.
Due to the retooling program in North America and Europe, Quebecor World recorded capital expenditures of $394 million in 2005 compared to $133 million in 2004 and generated free cash flow of $119 million in 2005 compared to $319 million in 2004.
As announced in January 2006, the European retooling program includes installing two new gravure presses in Belgium and wide-web offset presses in Austria and Spain as well as additional potential investments in the United Kingdom and France. In February 2006, the Company successfully concluded negotiations with its employees' representatives in the United Kingdom that will quickly bring the cost structure in line with the market. Similar negotiations are progressing more slowly in France. This could be a lengthy process which might negatively impact our performance.
Full-Year 2005
In 2005, net loss was $149 million or $1.43 per share compared to net income of $140 million or $0.77 per share last year. Before IAROC and goodwill impairment, diluted earnings per share in 2005 were $0.98 compared to $1.45 last year. Operating income before IAROC and goodwill impairment was $358 million in 2005 compared to $471 million last year. Consolidated revenue for 2005 were essentially flat at $6.3 billion compared to 2004.
Impairment of assets, restructuring and other charges for 2005 were $94 million compared to $116 million in 2004. Selling General and Administrative expenses were $397 million compared to $432 million last year. Excluding the unfavourable impact of currency translation, SG&A expenses were lower by $42 million compared to the previous year.
Outlook 2006
In 2006, Quebecor World anticipates its operations will continue to be affected by negative pricing pressures and previously announced volume reductions. While the Company has made significant progress in replacing this volume, many of these new agreements only come into force in the later half of 2006 and in 2007. The Company intends to address these challenges by continuing to implement cost containment measures. These measures include retooling plans for North America and Europe, additional restructuring initiatives and decommissioning of older presses resulting in a more efficient manufacturing platform. The Company will also develop projects to help reduce energy consumption. Furthermore, Quebecor World will use its distinct competitive advantages to seek higher margin business. However, as this is a long-term process and as the Company anticipates additional start-up related inefficiencies in upcoming quarters, the full effect of these efforts will be realized over time.
Discontinued Operations
Quebecor World's core printing activities involve the printing of magazines, catalogs, retail inserts, books, directories and direct mail for the world's largest publishers and retailers. As the Company has grown by acquisition certain facilities were included in those transactions that did not relate to these core businesses. Approximately a dozen facilities in North America were involved in the printing of short-run contractual work such as marketing materials, annual reports, travel and fashion brochures. These activities were different from Quebecor World's core businesses and did not benefit from the advantages and synergies of the Company's global platform. The Company completed the sale of these assets in the fourth quarter 2005. Consequently the operating results related to these activities have been presented separately in the Company's consolidated financial results as discontinued operations and comparative figures have been restated to conform to the presentation adopted for the year-ended December 31, 2005.
Dividend
The Board of Directors declared a dividend of $0.10 per share on Multiple Voting Shares and Subordinate Voting Shares. The Board also declared a dividend of CDN$0.3845 per share on Series 3 Preferred Shares, CDN$0.421875 per share on Series 4 Preferred Shares and CDN$0.43125 on Series 5 Preferred Shares.
The dividends are payable on March 1st, 2006 to shareholders of record at the close of business February 27, 2006.
