August 21, 2006 -- Quebecor World International (NYSE: IQW) announced their second quarter results recently. Total revenue for the company’s second quarter was $1.45 billion, 2.6% lower than the $1.49 billion reported for the second quarter of 2005. The decrease is mainly due to a decrease in volumes and continued price pressures. Adjusted EBIT decreased by 40.3% to $50.4 million compared to $84.4 million in the same quarter a year ago. Operating margin, on the same basis, was 3.5% for the second quarter, down from 5.7% for the same period in 2005. The company recorded a loss per share of $0.11 compared to nil diluted earnings per share in the second quarter last year. Net income for the quarter was a loss of $6.5 million compared to a net income of $9.5 million in the second quarter last year. Contents of this Summary * Quarter Highlights * Segment Performance * Guidance * Raine Radar * Q & A Quarter Highlights • Cost of sales for the second quarter decreased by 0.6% to $1.219 billion compared to $1.226 billion in Q2 2005. This decrease is largely due to a decrease in sales volume and a decrease in labor costs that were offset by higher energy costs. • Gross profit was 16% in the second quarter compared to 17.7% in the Q2 2005. • SG&A was $99.7 million, a 1.7% increase compared with $98.0 million in the same quarter a year ago. • Depreciation and amortization was $74.2 million in the Q2 2006 compared to $76.5 million last year. • Free cash flow from the second quarter amounted to $26.6 million, compared to $117.8 million for the same quarter a year ago. • In the second quarter the company invested $87.2 million in capital projects compared to $73.7 million in 2005. Segment Performance North American Segment Revenues for the second quarter of 2006 were $1.148 billion, up slightly from $1.142 billion in 2005. On a year to date basis, revenues were $2.29 billion in 2006 compared to $2.30 billion in 2005. This is due to a decrease in volume and lower pricing. Operating income and margin decreased for the segment in the second quarter. This was a result of the pricing pressures while overall volume remained more or less flat. Year over year the North American workforce was reduced by 1,403 employees, or approximately 5.7%. European Segment Revenues for the second quarter of 2006 were $251.9 million, down 11.2% from $283.9 million in 2005. On a year to date basis, revenues were $514 million in 2006, down 16.5% from $615 million in 2005. Restructuring systems and shutting down facilities in France and the UK have negatively impacted the second quarter. The operating income and margin for this segment decreased in the second quarter compared to the same period in 2005. Margin was negatively impacted by inefficiencies and decreased volume. The European workforce was reduced by 17.4% or 857 employees. Latin American Segment Revenues for the second quarter of 2006 were $51.8 million, down 21.7% from $66.2 million in 2005. On a year to date basis, revenues were $109.3 million in 2006, down 11% from $122.8 million in 2005. Prices in the second quarter increased compared to 2005 as a result of a favorable impact on export sales, but overall volume was down. Guidance The company didn’t announce any specific guidance for the third quarter, but does anticipate that they will continue to be affected by negative market and pricing conditions, inefficiencies from the retooling program, and volume reductions. Raine Radar Given the guidance from Quebecor World it looks like the company is going to have some rough quarters ahead of them. The company is having major problems with pricing pressures, volume reductions, product mix, and production inefficiencies. A plan of action to get back on track was discussed, but even that would adversely affect profit in the short term, and no timeline for when these measures would take effect was given. Anticipate troubles to continue through the balance of 2006 at the very least. Q & A 1. Quebecor’s main focus for the third quarter is to work on the capital investment program and focus on system and process improvement. 2. Revenue by print service is as follows: magazine and direct revenues for the quarter were $315.8 million, retail revenues were $205.4 million, catalog revenues were $152.7 million, books and directory revenues were $170 million, and other revenues totaled $91.4 million. 3. Non-adjusted EBITDA for the quarter was $99.2 million, down 26.8% compared to $135.6 million in the same quarter of 2005. 4. Per the 2005 plan to invest in more presses, the company has placed 20 orders for new presses. Total commitment for these presses with the press manufacturer amount to $240.6 million, of which $168.0 million has already been disbursed. 5. The closing and consolidation of facilities in North America and Europe have amounted to approximately $31.4 million, or $0.21 per share for the quarter and $53.5 million, or $0.33 per share for year to date.