By Trevor Shackelford November 27, 2006 -- Quebecor World International (NYSE: IQW, TSX: IQW) announced their third quarter results recently. Total revenue for the company’s third quarter was $1.55 billion, 1.9% lower than the $1.58 billion reported for the third quarter of 2005. The decrease is mainly due to a decrease in volumes and continued price pressures. Adjusted EBIT decreased by 30.8% to $67.3 million compared to $97.2 million in the same quarter a year ago. Operating margin, on the same basis, was 3.6% for the third quarter, down from 5.1% for the same period in 2005. In the third quarter Quebecor had diluted earnings per share of $0.09, compared to $0.16 diluted earnings per share in the second quarter last year. Net income for the quarter was $19.2 million compared to a net income of $30.9 million in the third quarter last year. Contents of this Summary • Quarter Highlights • Segment Performance • Guidance • Raine Radar • Q & A Quarter Highlights • Quebecor World announced it is suspending its dividend to conserve cash. • Cost of sales for the third quarter decreased by 0.7% to $1.29 billion compared to $1.30 billion in Q3 2005. This decrease is largely due to a decrease in sales volume and a decrease in labor costs that were offset by high energy costs. • Gross margin was 16.2% in the third quarter compared to 17.3% in Q3 2005. • SG&A expenses were $98.5 million, a 3.2% increase compared with $95.4 million in the same quarter a year ago. • Depreciation and amortization was $76.4 million in the third quarter of 2006 compared to $74.4 million in Q3 2005. • Free cash flow from the third quarter amounted to $40.5 million, compared to $76.9 million for the same quarter a year ago. • In the third quarter the company invested $82.6 million in capital projects compared to $88.5 million in 2005. • Securitization fees totaled $8.1 million for the third quarter, which is up from the $5.7 million for the third quarter of 2005. • Quebecor expects CAPEX not to exceed $375 million for the full year of 2006. Segment Performance North American Segment Revenues for the third quarter of 2006 were $1.241 billion, down 1.0%, from $1.253 billion in 2005. On a year to date basis, revenues were $3.537 billion in 2006 compared to $3.559 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 1,793 employees, or approximately 7.0%, which should positively impact Quebecor in the future. Retail revenues for the third quarter of 2006 were up 5.9% from the same period in 2005. Catalog revenues for the third quarter of 2006 decreased by 1.8%. Combined magazine & direct revenues for the third quarter of 2006 were down 4.8% compared to the same period in 2005. European Segment Revenues for the third quarter of 2006 were $244.1 million, down 9.8% from $270.7 million in 2005. On a year to date basis, revenues were $758.1 million in 2006, down 14.5% from $886.2 million in 2005. Restructuring systems and shutting down facilities in France and the U.K. have negatively impacted the Company in the third quarter. The operating income and margin for this segment decreased in the third quarter compared to the same period in 2005. Again, the margin was negatively impacted by inefficiencies and decreased volume. The European workforce was reduced by 18.6% or 910 employees. Latin American Segment Revenues for the third quarter of 2006 were $61.2 million, down 12.6% from $54.4 million in 2005. On a year to date basis, revenues were $170.5 million in 2006, down 3.7% from $177.2 million in 2005. Prices in the third quarter decreased compared to 2005 as a result of a favorable impact on export sales, but overall volume was up. Guidance Quebecor didn’t announce any specific guidance for the third quarter, but did offer the following. They anticipate that they will continue to be affected by negative market and pricing conditions, inefficiencies from the retooling program, and volume reductions. Although the company has a transformation plan of action, they expect that they will also incur start-up costs in the upcoming quarters. Raine Radar Quebecor had a rough quarter, seeing weakness in most of its markets, especially France, where it is restructuring and installing new presses. The company simply waited too long to upgrade its equipment and is now paying the price. Likely, the company will bounce back next year after cost cutting measures and equipment upgrades are completed. Q & A 1. The company completed the shutdown of the Strasbourg, France facility on time and with the budget set. In October the company announced its decision to shut down a facility in Lille, France. 2. Paper sales decreased by 2.3% for the third quarter of 2006 compared to the same period in 2005. 3. The company's three year retooling program is on schedule and is being optimized to be completed by the end of 2007. In the third quarter, Quebecor World initiated start-ups on five new wide-web offset presses, three in its U.S. magazine platform, one in its U.S. book platform and one in Europe. Two additional presses were started in the fourth quarter, one in the magazine platform and one in Europe. 4. "We are setting goals and objectives, both financial and qualitative, that must be met as we move forward to demonstrate to all our stakeholders that we are 'making our numbers' and delivering measurable results to improving our performance," said Wes Lucas. president and CEO. "We are extensively communicating these objectives both internally and externally so that our people know what is expected of them, and our shareholders know how we are progressing. We will be making regular reports and updates on the progress of our transformation plan and setting additional targets as we move forward." 5. Quebecor has set an initial target of at least $100 million annualized cost savings and productivity improvements by the end of 2008. In the third quarter, the company kicked off a productivity and continuous improvement program based on Six Sigma and other proven approaches. This program will focus on high impact improvement areas with low capital requirements and high returns. Even though the company is only at the beginning of the process, it is already working on high-return improvement projects in such areas as reducing paper waste, improving quality, increasing press speeds, and driving working capital improvements by eliminating inventory. The program will build a continuous improvement culture throughout the organization that is fact-based, and focuses on low-capital projects to maximize cash flow and shareholder value.