May 30, 2006 -- Quebecor World Inc. (NYSE: IQW) announced their first quarter 2006 results recently. Total revenue for Quebecor World's first quarter was $1.5 billion, down 5% from $1.6 billion reported for the same period last year. This decline was primarily due to the volume decline in Europe on account of loss of one customer in UK and the sale of five French facilities and unfavorable price/mix in all segments. Net income from continuing operations fell to $6.3 million, down from $15.8 million last year. Impairment of assets, restructuring and other charges for the first quarter of fiscal 2006 were approximately $22 million, or $0.13 per share. Earnings per share fell to a loss of $0.04 from a gain of $0.05 reported last year. Contents of this Summary * Quarter Highlights * Segment Performance * Guidance * Raine Radar * Q & A Quarter Highlights • During the quarter, the company printed first issue of ESPN magazine and began the installation of three new 64-page presses. • The company announced the closure of its book facility in Wisconsin. • Quebecor World eliminated approximately 756 employee positions as a part of its restructuring initiatives. • Gross margin for the quarter, before impairment of assets, restructuring and other charges for the quarter was 15.3%, compared to 17.7% reported for the same period last year. • EBITDA, before impairment of assets, restructuring and other charges for the quarter was $128.5 million, compared to $174.7 million reported for the same period last year. • Operating margin for the quarter was 1.9%, compared to 3.6% reported last year. • SG&A expenses for the quarter were $95 million, or 6.5% of sales, down by $6 million from last year. • Free cash flow for the quarter was $4.7 million, compared to a negative of $79.9 million reported last year. • At the end of first quarter, debt to capitalization was 50:50. • Debt to adjusted EBITDA was 3.2 times, compared to 2.4 times reported last year. • Interest coverage ratio for the quarter was 5.5 times, compared to 6.6 times last year. • The board of directors declared a dividend of $0.10 per share on multiple and subordinate voting shares as well as a regular dividend on preferred shares. Segment Performance North America Quebecor World reported Q1 revenues for the segment of $1.15 billion, down 1% from $1.16 billion reported for the same period last year. Operating income for the first quarter was $42.5 million, compared to $80 million reported last year. This decline was primarily due to unfavorable changes in price and product mix. Operating margin for the quarter before impairment of assets, restructuring and other charges was 3.7%, compared to 6.9% reported last year. Europe Quebecor World reported Q1 revenues for the segment of $262 million, down 21% from $332 million reported for the same period last year. Operating income for the first quarter was $3.7 million, compared to $6.3 million reported last year. Excluding the negative impact of currency translation, revenues for the quarter were down 14% compared to last year. The company reported volume decline of 16% in the first quarter, mainly in France and in the United Kingdom. Operating margin for the quarter before impairment of assets, restructuring and other charges was 1.4%, compared to 1.9% reported last year. Latin America Quebecor World reported Q1 revenues for the segment of $57.5 million, essentially flat compared to revenues last year. Operating income for the first quarter was $2.8 million, compared to $3.0 million reported last year. Excluding the negative impact of currency translation, revenues for the quarter were up 5%, primarily due to price increases. During the quarter, volumes were down 5%, compared to the same period last year, primarily due to uncertainty around the presidential elections in Peru. Operating margin for the quarter before impairment of assets, restructuring and other charges was 4.8%, compared to 5.3% reported last year. Guidance The company did not provide any specific financial guidance for the second quarter of fiscal 2006 and for the full year. According to Pierre Karl Péladeau, president and CEO, 2006 will be a transition year for Quebecor World, and will experience contract expirations in some of its businesses. New business wins are expected in the latter half of year and in 2007. Raine Radar Quebecor World is still struggling to change the inertia of the company. They have slimmed down substantially and have plans to continue to do so. Aging equipment is finally being replaced, bringing the company up to market level. The printer behind Harry Potter has a lot of changes still on its plate, and will probably not see substantial traction until closer to 2007. Q & A 1. The company said that most CAPEX has gone to equipment that has been installed or is being installed, mostly related to presses. 2. The company said that the reduction in CAPEX was a timing issue and not a permanent reduction. 3. During the quarter, the company received $6 million related to a tax refund in Sweden. The impact on EPS was $0.03 per diluted share. 4. There were no significant customers lost in the first quarter. The company had conversations with its customers at the Kingsport facility to migrate business to Latin America. 5. The company hopes that out of 16 new presses half will be installed by the end of the year. 6. Quebecor World expects that the effective tax rate for the full fiscal 2006 would be in the mid-twenties. 7. Quebecor World didn’t see any significant changes in pricing while renewing its contracts. 8. After several negotiations with the unions, the company reduced head count by 120 in its Corby facility and 130 in the Strasburg facility. 9. The company said that the mix caused the actual results be different relatively to the expectation in respect to the market. The company said that the mix can vary from quarter to quarter especially in the book business and some of its product had less value added than usual that might come back in the next quarter. 10. Quebecor is trying to skip 48-page presses and jump from its existing 32- page platform to a new 64-page system.