MONTREAL--July 28, 2004-- Quebecor World announces that for the second quarter 2004 the Company reported net income of $50 million or $0.31 per share, before impairment of assets, restructuring and other charges. This compares, on the same basis, to a net loss of $1 million or $0.07 per share in the second quarter of last year. On the same basis, operating income increased to $108 million compared to $39 million during the same period last year. Operating margin increased to 7% compared to 2.6% in the second quarter of 2003. Consolidated revenues for the quarter were $1.54 billion compared to $1.51 billion last year. Reported net income for the second quarter of 2004 was $15 million compared to a net loss of $62 million in 2003.
"These improved results are attributable to our stringent cost containment and cost reduction initiatives as well as our efforts to improve productivity and efficiency across our global platform," said Pierre Karl Peladeau, President and CEO, Quebecor World Inc. "It is important to note that these improved results are not limited to one or two areas of our business. Despite a challenging pricing environment, we recorded year over year improvements in operating margin in most of our business groups in all of our geographies."
For the first six months of 2004, net income was $89 million or $0.54 per share, before the impairment of assets, restructuring and other charges. This compares to $23 million or $0.04 per share for the first six months of 2003. Consolidated revenues for the first two quarters of 2004 were $3.09 billion compared to $3.05 billion during the same period last year. Reported net income for the six-month period of 2004 was $51 million from a net loss of $37 million for the same period last year.
In the quarter, the Company recorded impairment of assets, restructuring and other charges of $51.7 million. The cash portion of the new initiatives was $11.2 million which includes $10.2 million for North America, $0.5 million for Europe and $0.5 million for Latin America. The bulk of the charge is related to the Company's decision to close one of its magazine printing facilities in Effingham, Illinois and the downsizing of one of its book printing facilities in Kingsport, Tennessee. These measures are part of the Quebecor World's plan to reorganize its U.S. magazine and book platforms that will improve asset utilization and enhance customer service. The second quarter restructuring initiatives will affect 1,363 employee positions. However, it is estimated that 457 new jobs will be created at other facilities.
Quebecor World recorded specific charges of $7 million in the second quarter for various items including provisions for leases and depreciation of assets that reduced operating income. These charges were mainly in North America. This compares to specific charges of $49 million in the second quarter of 2003.
In the second quarter of 2004, selling, general and administrative expenses were $113 million compared to $141 million in the second quarter of 2003, a decrease of $28 million. Excluding specific charges of $3 million in 2004 and $15 million in 2003 and currency translation of $2 million, SG&A expenses were lower by $18 million or 14% in the second quarter compared to last year. The decrease is attributable to workforce reductions and lower travel and entertainment expenses. Financial expenses for the quarter were $32 million, a $10 million decrease compared to the same quarter in 2003. The decrease is due to the positive impact of the refinancing of a portion of the Company's long-term debt in the fourth quarter of 2003, lower interest rates and reduced foreign exchange losses compared to the second quarter of 2003.
In North America, operating income increased to $96 million in the second quarter 2004, before impairment of assets, restructuring and other charges, compared to $43 million last year. On the same basis, operating margin increased to 8% from 3.6%. Revenues were down 1% at $1.19 billion compared to $1.20 billion in 2003. Magazine revenues in the quarter increased 6% compared to 2003. While pricing is still very competitive volumes were up 4%, in line with the year over year increase in U.S. advertising pages as measured by the Publishers Information Bureau. In the catalogs group, volume for the quarter was flat and revenue decreased by 4%. In the retail group, revenues and volume increased primarily due to additional work from several large customers. In the book and directory group, revenues and volume were down but operating income and margin were higher than last year due to productivity gains and cost containment initiatives. In the commercial/direct group, revenues were down due to the difficult commercial market while pricing remained stable in the direct segment. In Canada, revenues decreased 3% but volume was up 3% due to growth in the retail and directory sectors.
In Europe, revenues in the second quarter amounted to $310 million. A negative pricing environment continues to exist in almost all countries but volume increased in the quarter due to strong performances in the retail and catalog sectors. In France, operating income and margin for the quarter showed a marked improvement over the same period last year and was close to break-even. European operating income increased to $12.4 million before impairment of assets, restructuring and other charges, compared to $1.9 million last year.
In Latin America, revenues were $44 million, essentially flat when compared to last year. Operating margin was 4.0% compared to a loss in the second quarter of 2003, before impairment of assets, restructuring and other charges. Pricing in the region is slightly lower than last year but volume for the quarter increased 4%.
The Board of Directors declared a dividend of $0.13 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 per share on Series 5 Preferred Shares. The dividends are payable on September 1st, 2004 to shareholders of record at the close of business August 13, 2004.
Quebecor World Inc. also announced today that it has filed its quarterly report for the quarter ended June 30, 2004 with the Securities and Exchange Commission.
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