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Annual Report
19 9 9
Providing a World of Solutions
Ta b l e o f C o n t e n t s
G e n e r a l I n f o r m a t i o n
Highlights
Message to Shareholders
New Media
Newspapers
Television Broadcasting
Books, Magazines and Music
Printing
Forest Products
Management’s Discussion and Analysis
Financial Section
List of Directors and Officers
1
2
6
12
18
20
26
32
34
44
73
Annual Meeting
Shareholders are invited to attend the Annual Meeting of Shareholders to be
held at 10:00 a.m. on Thursday, April 27, 2000 in the "Ovale" Room of the
Ritz-Carlton Montreal Hotel, 1228 Sherbrooke Street West, Montreal,
Quebec.
Stock Exchange Listings
The Class A Multiple Voting Shares and the Class B Subordinate Voting Shares
are listed on The Toronto Stock Exchange, under the ticker symbols QBR.A
and QBR.B, respectively.
Registrar and Transfer Agent
Desjardins Trust Inc. – Montreal
Co-transfer Agents
Montreal Trust Company
– Toronto
– Winnipeg
– Regina
– Calgary
– Vancouver
Harris Trust Company – New York
Auditors
KPMG LLP
Information
For further information or to obtain copies of the Annual Report and the Annual
Information Form, please contact the Department of Investor Relations and
Corporate Communications of the Company at (514) 877-5130, or address
correspondence to:
612 St. Jacques Street
Montreal, Quebec
H3C 4M8
Web Site: http://www.quebecor.com
Vous pouvez vous procurer une copie française de ce rapport annuel à l’adresse
indiquée ci-dessus.
Duplicate communications
Shareholders who receive more than one copy of a document, particularly of
the Annual Report or the quarterly reports, are requested to notify Desjardins
Trust Inc. at (514) 286-3102.
Currency
All dollar amounts appearing in this Annual Report are in Canadian dollars, except
if another currency is specifically mentioned.
Credits
Graphic Design: St. Remy Media Inc.
Printing: Imprimerie Quebecor Graphique-Couleur
Photography: Daniel Wiener, Chantal Lamarre and Laurent Gladu
ISBN : 2-922430-05-7
Legal Deposit – National Library of Quebec, 2000
Legal Deposit – National Library of Canada, 2000
Printed in Canada
Providing a World of Solutions
New Media
Canada
Ontario
Quebec
United States
Massachusetts
New York
Washington
France
Paris
Newspapers
Canada
Alberta
British Columbia
Manitoba
New Brunswick
Ontario
Quebec
Saskatchewan
United States
Florida
Television
Broadcasting
Canada
Quebec
Ontario
Books, Magazines
Music
Canada
Quebec
Printing
Canada
Alberta
British Columbia
New Brunswick
Nova Scotia
Ontario
Quebec
United States
Arizona
Arkansas
California
Colorado
Connecticut
Florida
Georgia
Illinois
Iowa
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Nebraska
Nevada
New York
North Carolina
Ohio
Oklahoma
Pennsylvania
Rhode Island
Tennessee
Texas
Vermont
Virginia
Washington State
Washington, DC
West Virginia
Wisconsin
Argentina
Buenos Aires
Chile
Santiago
Colombia
Santafe de Bogotá
Mexico
Queretaro
Perú
Lima
Austria
Salzburg
Finland
Mikkeli
France
Aubervilliers
Beaugency
Blois
Bondoufle
Claye Souilly
Hellemmes
La Loupe
Lizy-sur-Ourcq
Marne la Vallée
Mary-sur-Marne
Neuilly-sur-Seine
Pont Saint-Martin
Roissy
Strasbourg
Germany
Dortmund
Spain
Seseña
Barcelona
Sweden
Skärholmen
Jönköping
Katrineholm
Switzerland
Fribourg
United Kingdom
Corby
India
New Delhi
Forest Products
Canada
British Columbia
Ontario
Quebec
United States
California
Georgia
Illinois
Kansas
Missouri
New Jersey
Ohio
Texas
Business Offices
Quebecor Inc.
Head Office
612 St. Jacques Street
Montreal, Quebec
Canada H3C 4M8
Telephone: (514) 877-9777
Fax: (514) 877-9757
Groupe Informission Inc.
711 De La Commune West
Montreal, Quebec
Canada H3C 1X6
Telephone: (514) 392-1292
Fax: (514) 392-0911
Sun Media Corporation
Head Office
612 St. Jacques Street
Montreal, Quebec
Canada H3C 4M8
Telephone: (514) 877-9777
Fax: (514) 877-9790
Main business location
333 King Street East
Toronto, Ontario
Canada M5A 3X5
Telephone: (416) 947-3232
Fax: (416) 947-3119
TQS Inc.
Head Office
614 St. Jacques Street
Montreal, Quebec
Canada H3C 5R1
Telephone: (514) 390-6035
Fax: (514) 390-0773
Quebecor Communications Inc.
Head Office
612 St. Jacques Street
Montreal, Quebec
Canada H3C 4M8
Telephone: (514) 877-9777
Fax: (514) 878-3524
Quebecor Printing Inc.
Head Office
612 St. Jacques Street
Montreal, Quebec
Canada H3C 4M8
Telephone: (514) 954-0101
Fax: (514) 954-1426
Donohue Inc.
Head Office
500 Sherbrooke Street West
Suite 800
Montreal, Quebec
Canada H3A 3C6
Telephone: (514) 847-7700
Fax: (514) 847-7707
Highlights
Years ended December 31
Operations (in millions of dollars)
Revenues
Operating income before non-recurring items
Contribution to net income
Operations
Goodwill amortization
Non-recurring items
Net income
Cash provided by operations
Per share
Contribution to earnings per share
Operations
Goodwill amortization
Non-recurring items
Earnings per share
Dividends
Shareholders’ equity
Number of shares outstanding at year-end (in millions)
Financial position (in millions of dollars)
Working capital
Total assets
Shareholders’ equity
Employees
Return on average equity
Operations
Total
1999
1998
1997
$
10,835.2
889.7
$
8,425.2
800.2
$
7,013.3
602.6
228.4
(43.4)
296.0
481.0
188.9
(16.2)
—
172.7
1,490.1
1,073.7
$
2.89
(0.25)
—
2.64
0.44
22.00
64.7
$
$
3.53
(0.67)
4.57
7.43
0.48
26.73
64.6
471.0
14,829.5
1,726.5
$
$
609.7
9,841.4
1,424.5
$
507.4
7,885.2
1,224.1
60,000
9,000
37,000
14.5%
30.5%
14.3%
113.0%
13.3%
12.4%
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154.1
(10.8)
—
143.3
885.3
2.34
(0.16)
—
2.18
0.40
18.58
65.9
Historical quotes for Quebecor Inc. Class B Subordinate Voting Shares
$60
$50
$40
$30
$20
$10
$0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999 March 2000
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Message to Shareholders
A Complete, Global and Integrated Array of
Services for our Clients
1999 was a landmark year for Quebecor Inc. In addition to demonstrating continued
excellence in its traditional sectors of activity and making strategic acquisitions that will
have a major impact on its future, Quebecor made a foray into the field of New Media. By
consolidating existing holdings and acquiring new ones, the Company established a firm
basis for its future development in this dynamic sector.
Revenues increased by 28.6 percent, totalling $10.8 billion in 1999, compared with
$8.4 billion in the previous year. For the first time in its history, the Company’s revenues
exceeded $10 billion. This outstanding growth is largely due to two major acquisitions:
World Color Press, Inc. and Sun Media Corporation.
For the first time in its history,
the Company’s revenues
exceeded $10 billion
Earnings rose to a record $481 million,
or $7.43 per share. These results include non-
recurring items, such as gains on dilution
resulting from share issues by two sub-
sidiaries - Quebecor Printing and Sun Media
Corporation- and restructuring reserves rec-
ognized by two other subsidiaries. Excluding
these non-recurring items provides a more accurate comparison of the two years. With the
exclusion, net income in 1999 would amount to $185 million, or $2.86 per share, versus
$172.7 million, or $2.64 per share, in 1998. This represents an 8.3 percent increase in
earnings on a per-share basis.
Although Quebecor has virtually doubled in size during the past five years, the Company
remains dedicated to the entrepreneurial spirit that has proven so crucial to its success.
We are guided by the fundamental interests of our shareholders in all of our undertakings.
This principle was always as central to the philosophy of our Company’s founder as it is to
Quebecor’s managers today.
While all of our divisions and subsidiaries made important strategic decisions and launched
new endeavours, three key events occurred in 1999 and the beginning of 2000.
First, with the acquisition of World Color Press, a U.S. leader in the management and dis-
tribution of print and digital information, Quebecor Printing has become the world’s largest
commercial printer. This transaction, valued at US$2.7 billion, is the largest acquisition in
our history. It establishes Quebecor Printing as the first truly global commercial printer
with facilities in North America, Europe, South America and Asia. This transaction is the
crowning achievement of the more than 60 acquisitions we have made in the printing sector
over the course of the last decade. Beginning in the spring of 2000, our subsidiary will
operate as Quebecor World. This new corporate identity reflects the Company’s ability to
provide clients with an extended worldwide network of facilities to satisfy their needs and
demands with greater flexibility.
The second major highlight of 1999 was our decisive entry into the field of New Media.
This move greatly increased the magnitude and array of services that we can offer clients.
As early as the mid-1990s, our initial ventures in this exciting sector enabled us to use new
technology to extend the assets and expertise we had acquired in newspapers and other
publications, in commercial printing, and later, in television broadcasting. In 1999, all of the
elements of our strategy came together as a whole.
In November, a partial takeover bid enabled Quebecor to acquire a majority interest in the
new entity created by the merger of Intellia Inc. and Informission Group Inc., a publicly
traded company on the Toronto Stock Exchange, ranked first in the integrated Web-
solutions field in Canada and third in Europe. The operation was a major stock market
success, and Quebecor shareholders were the primary beneficiaries. By early March 2000,
market capitalization of the new enterprise was valued at more than $2.1 billion, com-
pared with $240 million at the time of the merger, November 1, 1999.
Over the course of 1999, we also increased our Internet properties by buying back BCE’s inter-
est in CANOE, thus becoming the sole owner, and by launching its French counterpart,
Canoë. Moreover, Quebecor New Media, a new subsidiary created in June 1999, launched
archambault.ca, a transactional site designed to increase the revenues of the largest CD-
retail outlet chain in Eastern Canada, Groupe Archambault Inc., another affiliated compo-
nent of Quebecor. Quebecor New Media also mounted the first of a series of local urban
sites, icimontreal.com, in record time.
Our shareholders have the right to ask why Quebecor has chosen to enter the field of New
Media so boldly, given the Company’s coveted position as the world’s leading commer-
cial printer and Canada’s second-largest newspaper publisher. Certainly, we do not believe
that the print medium will disappear. However, we are convinced that the Internet and
e-commerce will radically redefine commercial practices and traditional marketing strate-
gies. We believe that the best way to keep abreast of this revolution, if not to precede it,
lies in proactively defining its very parameters. We are confident that expansion into this
field will permit us to attain that goal.
While continuing to develop our core industrial operations through internal growth and
new acquisitions, we will also provide our clients with multiple, complementary channels of
communication. From this point on, our development strategy will focus on the New Media
sector in order to ensure that Quebecor enterprises are well positioned to offer their clients
a complete and distinctive range of services.
Quebecor is now able to print catalogues and inserts, orchestrate advertising campaigns
in its newspapers across the country, offer media-placement strategies on its television
network, develop Web sites and e-business solutions with Informission-Intellia, and host
transactional sites on its portals. None of our competitors is able to offer the same range of
global, integrated resources to their customers. We are the only company in Canada, the
United States, or Europe able to support clients in such a wide variety of communications
media. Our goal is to help our clients maximize their visibility and commercial impact and
capitalize on their trademarks with the help of the complete range of distribution
channels made available by Quebecor.
By coordinating its operating subsidiaries, Quebecor integrates the strengths of each
one into a wider spectrum of services to benefit its clients and the development of their
business platforms. This is how we see our future.
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Quebecor’s headquarters
at 612 St. Jacques Street,
in the heart of Montreal’s
business district.
OPPOSITE PAGE
Pierre Karl Péladeau
President and Chief
Executive Officer
Jean Neveu
Chairman of the Board
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The third significant event, made public on February 11, 2000, was our decision to sell the
interest we had held in Donohue Inc. since 1987. In the face of intense consolidation in the
pulp and paper industry, we had two alternatives: either to increase our involvement in the
sector or to reduce it. We adopted the second strategy and entered into an agreement with
Abitibi-Consolidated Inc. by which it will purchase all outstanding Donohue shares. The
transaction not only complies with our long-term development objectives, but also promises
immediate and valuable returns for Quebecor and its shareholders. First of all, it will pro-
vide the Company with sufficient liquidity to repay in full the debt recently incurred by the
parent company, Quebecor Inc. After the transaction is completed, Quebecor will remain the
major shareholder in the new entity created
out of the consolidation of the two enterprises.
Michel Desbiens, who has contributed
remarkable leadership and insight as
Donohue’s President and Chief Executive
Officer since 1994, will be appointed
Chairman of the Board to provide the company with first-rate management expertise.
Furthermore, Quebecor will have three seats on the Company’s new Board of Directors.
As of March 1, 2000, our interest in Donohue had generated a 14.5 percent return for
Quebecor shareholders over the twelve-plus years we held it. Given the current conditions
in the forest industry, and taking into account the attractive offer we received, we believe
that we made the right decision and acted in the best interest of Quebecor shareholders.
Quebecor Printing has become the
world’s leading commercial printer
A First-Rate Performance on the Part of All of Our
Subsidiaries and Divisions
All of our subsidiaries and divisions contributed to Quebecor’s success in 1999. Sun Media
Corporation posted record revenues of $827.1 million in 1999, an all-time high for Quebecor’s
newspaper sector, which had total revenues of $295.1 million the previous year. Operating
income rose to $164 million and advertising sales increased at a rate of 5 percent on a com-
parative basis. A key event in the newspaper sector was the start-up of the SUN TABS
Network, a one-stop service designed to meet the advertising needs of our clients across
Canada. Canadian advertisers now have access to a coast-to-coast tabloid network, which
covers nine major urban markets and reaches 3.2 million Canadian readers.
Our television broadcasting network continued to expand and increase its revenues in 1999.
During the final three quarters of the fiscal year, revenues grew almost twice as
quickly as operating expenses, leading to a gradual improvement in operating results
over the course of 1999. According to surveys conducted by BBM and Nielsen in the fall of
1999, TQS significantly increased its market share among all viewers, especially those
between the ages of 18 and 49, the target audience most often sought by TQS advertisers.
The book, magazine and music sectors, which are an integral part of Quebecor
Communications Inc., posted revenues of $209.2 million in 1999, compared with
$211.8 million in 1998. Excluding the impact of asset disposals, revenues for these sectors
would have risen 6 percent in 1999.
The revenues of our New Media sector, composed of Quebecor New Media and Informission-
Intellia, totalled $25.1 million in 1999, compared with $6.9 million in the previous year.
In the fourth quarter alone, revenues from this promising sector increased fivefold, from
$2.7 to $12.6 million.
Through its landmark merger with World Color in the United States and acquisitions in
Spain, Austria and Argentina, our Quebecor Printing subsidiary continued to expand in
1999, posting record revenues of $7.3 billion, a 30 percent increase over the previous year.
Profit margins improved due to the modernization of a number of our American plants and
the first-rate performance of Canadian plants. Commercial printing is still a fragmented
industry, offering unique opportunities for development. Quebecor World holds only 5 percent
of the North American commercial printing market, estimated at US$150 billion annually.
Due to its size, product and geographic diversity and international network of facilities,
Quebecor is in a better position than any of its competitors to take advantage of new oppor-
tunities for expansion through internal
growth, and thus increase the volume of
its business.
From this point on, our
development strategy
will focus on the New
Media sector
Donohue Inc., our forest products subsidiary,
posted record revenues of $2.5 billion in 1999,
a remarkable performance given that the
price of newsprint dropped an average
of US$72 per tonne over the course of the
year. With the energy and entrepreneurship we have come to associate with Donohue, it
was able to minimize the consequences of the resource’s drop in price by a 21 percent
increase in newsprint and specialty paper shipments. In 1999, the Company modernized
its operations in Texas and became the sole owner of Finlay Forest Industries Inc. of
British Columbia.
Appointments and Acknowledgments
We wish to extend our gratitude to the members of the Board of Directors, whose commit-
ment, foresight and vision have made it possible for the Company to capitalize on opportunities
for growth. In 1999, we had the privilege of welcoming the Right Honourable Brian Mulroney,
Prime Minister of Canada from 1984 to 1993, to the position of Chairman of the Board at
Sun Media Corporation, in place of Charles G. Cavell, who will now devote all his energies to
the future ventures of Quebecor Printing as President and Chief Executive Officer.
We sincerely thank our 60,000 employees, who work in no fewer than 15 countries, for
their sincere dedication to the growth and progress of the Company. We believe that our
employees’ adoption of the entrepreneurial spirit and fundamental values at the heart of
our Company is still the best guarantee of Quebecor’s success. In the future, we will
undoubtedly see the continued growth of our core activities, as well as the application of our
skills and experience in New Media and rapidly developing fields of communication.
Jean Neveu
Jean Neveu
Chairman of the Board
Pierre Karl Péladeau
Pierre Karl Péladeau
President and
Chief Executive Officer
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New Media
A Key Element in
Quebecor’s Development
The New Media sector, which Quebecor Inc. started exploring in the mid-nineties, has
rapidly gained importance in Company operations. Quebecor’s holdings in this sector
consist of Quebecor New Media, a wholly owned subsidiary, as well as a majority interest
in Informission. At the end of 1999, Informission merged with Intellia to form a new enter-
prise, Informission-Intellia, which will soon adopt a new corporate identity.
Q U E B E C O R N E W M E D I A
Concrete Accomplishments
in a Virtual World
At its inception in June 1999, Quebecor New
Media consisted solely of the CANOE portal
and the AUTONET.CA specialty site. The
subsidiary was extremely active during the
second part of 1999.
In July 1999, Quebecor New Media purchased
the shares BCE held as a minority share-
holder in CANOE. This transaction enabled
Quebecor New Media to become the sole
owner of one of the busiest portals in Canada.
Alexandre Taillefer
Executive Vice President
and Chief Strategy
Officer, Informission-
Intellia
Pierre Karl Péladeau
Chairman of the Board,
Informission-Intellia
and President, Quebecor
New Media Inc.
Jacques Topping
President and Chief
Executive Officer,
Informission-Intellia
On September 15, 1999, Quebecor New
Media launched the archambault.ca trans-
actional site, which specializes in the retail and distribution of CDs and books. A joint ini-
tiative of Quebecor New Media and Groupe Archambault Inc., the operation proved to be
an example of creative synergy between two entities of the Quebecor group. The virtual
store was immediately successful, and has already established itself as an industry stan-
dard for e-commerce in Quebec.
In September 1999, Quebecor New Media also introduced a new francophone portal, Canoë
(www.canoe.qc.ca). This site is the only one to offer non-stop local news with information
on current events, finance, sports, the arts, and lifestyle trends. Much of its content is drawn
from the Quebecor group’s electronic and press media.
The creation of CANOE and Canoë provides Quebecor New Media with two powerful
portals that cover the entire Canadian market. To be a leader in this burgeoning market, one
must act quickly. The creation of the icimontreal.com site is a case in point. This site is the
first local cultural guide to Montreal and was developed in less than 45 days through the col-
laboration of Quebecor Communications, Sun Media, Informission-Intellia and Quebecor
New Media.
In 1999, Quebecor New Media strengthened its lead and increased the number of users on
its portals. Our range of Web properties, which initially consisted of a general interest,
English-language portal, is now bilingual and has gained national stature, with a host of
specific elements enhanced with local content.
In the year 2000, Quebecor New Media will pursue acquisitions to develop the content and
services likely to encourage increased interaction with users. Quebecor New Media believes
that its unique combination of content and user popularity will turn CANOE, Canoë and
New Media’s local Canadian sites in major urban centres into must-see destinations
on the Web.
A Clear Strategy
Quebecor New Media’s strategy relies on the application of the expertise Quebecor has
gained in print media. Our two Internet portals, CANOE and its francophone counterpart
Canoë, use new electronic communication media to increase access to the vast information
resources provided by Sun Media
Corporation’s network of dailies and string
of local and regional newspapers. Quebecor’s
publications in the magazine sector are also
featured on our portals. An example
is Canoë’s Art de vivre (or "Lifestyles")
section, which targets women readers and
draws a large amount of its content from mag-
azines of Publicor, a division of Quebecor
Communications. Thus, Quebecor’s print media assets provide Quebecor New Media with
a solid foundation for its ventures. This synergy represents a major competitive edge over
most large-scale Canadian portals.
No other New Media enterprise
offers its customers such a wide
range of highly personalized
and integrated services
Quebecor’s Global Offer
Supports
Content
Paper
Donohue
Printing
Newspapers
Magazines
Television
Quebecor
Printing
Sun Media
Corporation
Publicor
TQS
Quebecor
New Media
e-commerce
Informission-Intellia
Portals
CANOE
Canoë
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Quebecor has extended
its assets into the latest
communication channels,
thanks to Quebecor New
Media with its integrated
e-commerce solutions and
national bilingual portals,
enhanced with local,
targeted and specific
contents.
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From the viewpoint of Sun Media advertisers, this offer increases advertising strategy
visibility and accuracy in two complementary media, print and electronic, rather than only
one. Since CANOE and Canoë reach the entire Canadian market in both English and French,
Quebecor New Media provides Quebecor customers with nationwide advertising and
commercial solutions. No other New Media enterprise offers its customers such a wide
range of highly targeted and integrated services.
Upcoming Projects
Quebecor New Media’s strategic plan involves the completion of several major projects.
Enhancing the depth and segmentation of content – Quebecor New Media plans to
develop its portals in partnership with Sun Media and the team of more than 1,000 journalists
employed by the chain’s newspapers and publications across Canada in order to provide
more in-depth, segmented contents. Using the www.icimontreal.com site as its model, the
subsidiary will extend its Web-site network to other major Canadian cities. As a result,
Quebecor will be able to offer Internet surfers a wealth of information, better suited to their
fields of interest and geographic locations.
New Media provides our advertisers and retailers
with precision marketing and sales tools
The Internet is a powerful tool
for customized marketing.
For instance, imagine an Internet
user who visits the CANOE site
and clicks on the "sports" sec-
tion. In addition to a wealth of
information on subjects of inter-
est to the surfer, we are also able
to provide advertisements as
well as transactional sites
designed to match the con-
sumer’s profile; for example,
hyperlinks to sporting event
ticket outlets, advertisements for
sporting goods stores, etc.
Quebecor’s New Media strategy
is to use Sun Media’s assets to
offer quality products and ser-
vices (group A). We are now
able to forward these products
to a highly segmented clientele,
determined by criteria such as
place of residence, socio-
economic profile, areas of inter-
est, etc. (group B). This infor-
mation is extremely valuable to
advertisers and
retailers,
enabling them to offer adver-
New Media
B
A
C
tisements, products and ser-
vices that are more likely to
interest consumers (group C).
At the intersection of these
three groups resides the prize
all advertisers and retailers
seek: consumers eager to buy!
The Internet offers promising
new avenues for bringing
together advertisers and poten-
tial customers. This potential
makes it an extraordinary tool
that will revolutionize the way
we do business.
Home pages of our
portals’ network:
CANOE and Canoë;
of our local portal
icimontreal.com;
and of our Web site
classifiedextra.com.
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Generating new revenues – The commercial potential of classified ads is transferable
to the Internet. We have already launched a site named classifiedextra.com, featuring all
the classified ads published in Sun Media’s Canadian dailies, and we are improving the site’s
performance. Quebecor New Media will also work more closely with the advertising sales
team of Sun Media and its new SUN TABS Network. The advertising sales team numbers
close to 1,000 representatives who have established close ties with thousands of local
and national advertisers across Canada.
Providing our client businesses with e-commerce access – Our popular, user-friendly
portals attract impressive numbers of visitors. This popularity with Web surfers prompts
advertisers to buy advertising space on our sites and enables us to recruit retailers interested
in conducting e-commerce via our portals. As they make it easier to reach Internet users with
targeted, segmented offers, our portals will quickly become functional, efficient tools for
e-commerce.
OPPOSITE PAGE
A creator at work:
designing an Internet site
for one of Informission –
Intellia’s clients.
Two journalists at work
for Canoë, a new
French-language
portal launched by
Quebecor New Media
in 1999.
I N F O R M I S S I O N - I N T E L L I A
A Leader in Integrated Web Solutions
In November 1999, Informission Group Inc., Intellia Inc., and Quebecor Communications Inc.
laid the foundation for a new partnership. Under the terms of the agreement, Informission
acquired all of Intellia’s stock, while Quebecor concurrently made a partial takeover bid to
acquire a 58.2 percent majority interest in Informission. The organization, which will soon
adopt a new corporate identity, strengthens Quebecor’s position in the New Media market,
enabling it to offer a more complete, integrated range of services for Web site
development and e-commerce solutions. Informission-Intellia thus
provides Quebecor Printing and Sun Media clients with access to
New Media and e-commerce.
Supported by a preferred supplier agreement with Quebecor, the
combined expertise of Informission and Intellia led to the creation
of an industry leader able to combine strategic planning, marketing,
Web site design and development, technology integration, as well
as creativity and business solutions based on the Internet protocol.
Acquisition of Complementary
Enterprises
Informission-Intellia
thus provides Quebecor
Printing and Sun
Media clients with
access to New Media
and e-commerce
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As of December 31, 1999, Informission-Intellia employed more than 700 people in Montreal,
Quebec, Toronto, Seattle and Paris. Three acquisitions carried out during the early weeks
of 2000 added offices in New York City, Boston and Ottawa, increasing the number of
employees to 900.
First, the organization acquired Cythère S.A., a leading Internet company in France, with
offices in Paris and New York. With 100 employees, Cythère’s revenues for 2000 should
exceed 70 million French francs (close to $16 million). The Company is active in strategic
Web consulting, e-commerce, design and development of Web sites and portals, interactive
marketing and online promotion. Cythère’s clients include large international companies
such as Danone, L'Oréal, Club Med, Michelin, Bouygues, and the FNAC.
At the end of January 2000, Informission-Intellia completed its acquisition of EntreVision
Inc., a Canadian leader in the field of e-business solutions and e-commerce. The company,
which has its head office in Toronto and another office in Boston, is recognized for its exper-
tise in new technology strategies, design and implementation. It offers coherent, innovative
solutions for integrating the Internet into the daily business practices of its clients, which
it recruits from the largest North American corporations. EntreVision estimates revenues
in excess of $20 million for the year 2000.
Finally, in March 2000, Informission–Intellia acquired digIT Interactive Inc., a specialist
in digital branding and marketing channel management. With a staff of 30 and offices in
Toronto and Ottawa, the company boasts such major clients as Nortel Networks, Research
in Motion, Clearnet and Jetform.
During the coming months, Informission-Intellia will actively pursue its business acqui-
sition strategy in North America and Europe, where the company’s best opportunities
for growth lie, always with the aim of providing the clients of Quebecor and its subsidiaries
with increasingly global, well-integrated business solutions.
Objectives Commensurate with Our Abilities
The ambitious objectives pursued by Informission-Intellia can be summed up in three points:
to be recognized as the leading Web integrator in Canada, the United States and Europe;
to offer the group’s client businesses integrated e-commerce solutions in partnership with
Quebecor; and
to be the preferred supplier of Internet solutions and information technology for Quebecor
and its various subsidiaries.
Informission-Intellia is already number one in the integrated Web solutions market in Canada
and third in Europe. Furthermore, its market share in the United States has grown sub-
stantially. In 2000, Informission-Intellia plans to strengthen its position as the integrated
Web solutions leader with medium and large-sized corporations in Canada, the United States
and Europe.
A New Name for A Promising Newcomer
In the spring of 2000, the Company will complete the merger of Informission and Intellia
by adopting a new corporate identity. A communications strategy and a series of promo-
tional activities will be used to establish the business’s reputation with its Canadian,
American and European clientele.
New Media Creates Increased Value for Quebecor Shareholder
By merging Intellia with Informission
and acquiring a controlling inter-
est, Quebecor transformed Intellia into
a publicly traded company. Capital
markets welcomed the initiative and
recognized the true value of the enter-
prise. Since the transaction was
announced, Informission–Intellia’s
price per share has increased seven-
fold, rising from $9.25 at the time of
the partial takeover bid on November
1, 1999, to trade at $65 on the Toronto
Stock Exchange on March 1, 2000.
Thus, the market value of Quebecor’s
involvement in its subsidiary rose con-
siderably, from $140 million at the
transaction’s close to approximately
$1.2 billion as of March 1, 2000,
taking into consideration the additional
shares Quebecor purchased in order
to maintain its interest at 58.2 percent.
As a result, Quebecor stock price rose
from $35.45 to $57.50 during this
period.
Eventually, depending on capital
market conditions, the Quebecor New
Media sites will possibly follow
the same route, becoming publicly
traded companies along the lines
of successful American models such
as Yahoo.com, Amazon.com and
iVillage.com.
$9.25
November 1st
March 1st
1999
2000
$65.00
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Quebecor’s leadership in commercial printing is ensured by Quebecor Printing; in print
media by Sun Media and Quebecor Communications; in television broadcasting by TQS; in
Internet portals by Quebecor New Media; and in e-commerce platforms by Informission-
Intellia. With its acquisitions, Quebecor now establishes itself as a partner capable of
offering customers a vast range of integrated solutions promoting dynamic growth and
business development.
(cid:2)
(cid:2)
(cid:2)
Newspapers
Record Profits for its Divisions
Quebecor acquired Sun Media Corporation at the beginning of 1999 and consolidated all its
dailies, as well as its community newspapers, under one company. The newly amalgamated
company, Sun Media Corporation, had an exceptional first year, with its divisions posting
record earnings. The revenues of Sun Media, the second-largest newspaper chain in Canada,
reached $827.1 million in 1999. Revenues
generated by the newspaper sector in 1998
totalled $295.1 million. On a pro-forma basis,
assuming the transaction had been com-
pleted at the beginning of 1998, the increase
in Sun Media’s revenues would have been
5.6 percent over the previous year.
Earnings before interest, taxes, depreciation
and amortization (EBITDA) were $188.6 mil-
lion, for a 22.8 percent profit margin. In 1999,
EBITDA grew by 21.1 percent compared with
the previous year. The advertising revenues
of urban dailies increased by 5.5 percent, while
their circulation revenues increased by
2.9 percent, an enviable performance given
the highly competitive market in urban centres,
especially Toronto, during 1999.
These excellent results are due to several
factors. Effective restructuring and human
resources reorganization programs were
carried out during the course of the year.
Sun Media also reviewed its corporate struc-
ture and created the Eastern Group
(Quebec City, Montreal and Ottawa dailies)
and the Western Group (Winnipeg, Calgary
and Edmonton dailies). The weeklies owned by Quebecor in Quebec and Manitoba prior
to the merger were regrouped with the Company’s other community newspapers under
Bowes Publishers. Finally, Sun Media benefitted from the marked drop in the price
of newsprint.
In 1999, the Company made a concerted effort to make its existing operations more
profitable. Sun Media pursued its expansion strategy, acquiring community newspapers that
enriched the existing network. The division now includes a total of 181 newspapers and other
publications. The Company also created the SUN TABS Network to more efficiently serve its
advertising clients across Canada through its network of dailies (see inset on page 15).
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Paul V. Godfrey
President and Chief
Executive Officer, Sun
Media Corporation
The Right Honourable
Brian Mulroney, P.C., C.C., LL.D.
Chairman of the Board,
Sun Media Corporation
Sun Media Corporation also announced a strategic alliance with Quebecor New Media, a
wholly owned subsidiary of Quebecor, to take advantage of the commercial opportunities
that New Media can offer a quality information provider such as Sun Media Corporation.
Among the highlights of the 1999 fiscal year was the important change in Sun Media
Corporation’s capital structure. Last June, Quebecor sold 30 percent of Sun Media
Corporation to Capital Communications CDPQ Inc. (a subsidiary of the Caisse de dépôt et
placement du Québec), the Ontario Municipal Employees Retirement Board (OMERS),
and Royal Bank Equity Partners Limited. Each of the three investors holds a 10-percent
interest in Sun Media, obtained at a cost of $260 million, which was used by Quebecor to
reduce its debt. We extend a warm welcome to our new financial partners and their
representatives on the Sun Media Corporation’s Board of Directors: Robert Normand,
Dale E. Richmond and Philip J. Olsson.
The Urban Dailies in 1999
Each of Sun Media’s eight major dailies, in eight of the ten most important urban markets
in Canada, posted substantial increases in revenue in 1999. All met the challenges of the
highly competitive commercial environment while keeping operating costs under control.
For Le Journal de Montréal, the flagship of the urban dailies group, 1999 was a banner year.
The leading daily in Quebec and the third most important in Canada, Le Journal de Montréal
posted the highest profits in its history and ranked first among Sun Media Corporation’s
publications in terms of profitability. This performance is the result of excellent manage-
ment combined with revenue-generating ini-
tiatives such as the publication of numerous
special interest sections which are popular
with advertisers.
The Company also
created the SUN TABS
Network to more
efficiently serve its
advertising clients
across Canada
Le Journal de Montréal continues to lead
its market in terms of circulation, reader-
ship, and advertising revenue. According to
the independent firm NADbank, the news-
paper’s readership in the Metropolitan
Montreal region increased by more than
50,000 in 1999 to reach 1.17 million readers
each week. The most important increases in readership were among female readers
(+8 percent), readers with a high school diploma or higher (+5 percent), and readers with
a combined household income in excess of $75,000 (+9 percent). These improvements
demonstrate the effectiveness of the paper’s strategy to reach these target audiences.
The newspaper’s advertising sales increased by 4.1 percent overall, but the most notable
growth was in the national advertisers’ segment, which grew by 5.9 percent. Le Journal de
Montréal’s 49 percent share of the market for classified ads confirmed the newspaper’s
domination in this area.
In Toronto, the largest urban market in Canada, The Toronto Sun emerged the undisputed
winner from the trench warfare waged by the city’s major dailies. For the first time in its his-
tory, The Toronto Sun passed the one million readers a day mark, despite competing in a
market flooded daily with more than 100,000 free copies of rival newspapers. With twice the
previous number of special interest sections and a notable increase in advertisements placed
in the “Careers” section (+29 percent), The Toronto Sun’s advertising sales also increased
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by 5.3 percent. Through effective management and improved cost control, The Toronto
Sun also increased its profit margins, despite the additional marketing efforts required by
exceptionnally competitive market conditions.
The London Free Press, a Canadian institution which celebrated its 150th anniversary in
1999, also posted the highest profits in its history. Eighteen journalism awards, including the
prestigious National Newspaper Award, attested to the paper’s quality and the excellence
of its editorial content.
With record advertising revenues and rigorous cost control, The London Free Press was
able to increase its profit margin considerably. The newspaper continued its efforts to
rebuild and extend its distribution network by installing vending machines and recruiting
new retailers.
1999 was a very good year for The Edmonton Sun, which posted an increase in profits for
the third consecutive year. Advertising lineage for the year jumped over the 25 million mark,
and the daily grew to an unprecedented size with some issues containing up to 292 pages.
In terms of advertising revenues, the daily’s
market share increased by 2 percent over
the course of the year. The Edmonton Sun’s
circulation levels remained constant despite
the increased number of copies of rival news-
papers distributed free of charge or at
reduced rates. Readers of The Edmonton
Sun remained loyal to their paper, as demon-
strated by statistics published by NADbank,
Le Journal de Montréal
continues to lead the market in
terms of circulation, readership,
and advertising revenue
which show a rise in readership for every day of the week.
The healthy economy of the Calgary region had a positive impact on our daily. The Calgary
Sun closed its fiscal year with an increase in operating income for the seventh year in
a row.
Revenues from advertising increased a healthy 11.6 percent, with growth in all segments
— national, local and classified advertising. The newspaper also posted an 8 percent
increase in circulation revenues.
Le Journal de Québec also experienced the best fiscal year in its history, with an impres-
sive 4.7 percent increase in advertising revenues. Already the leader in its market, research
carried out by NADbank in 1999 showed that the daily reached close to 58 percent of
the adult population of the metropolitan Quebec area on a weekly basis — a remarkable
feat that has been repeated year after year.
In 1999, Le Journal de Québec published no fewer than 65 special interest sections,
revamped its graphic layout, enriched its editorial content, and improved the quality of
its special weekend sections. It also launched a weekly 16-page, colour fashion section
for its female readership. The loyalty of Le Journal de Québec’s readers was reflected
in the unprecedented success of promotional activities and contests sponsored by
the newspaper.
For The Winnipeg Sun, 1999 marked the adoption of both the standard logo and the formula
responsible for the success of the other Sun Media dailies. The formula paid off quickly.
A Toronto Sun distributer
fills our vending machines
at the crack of dawn.
OPPOSITE PAGE
A press operator makes
a final printing check of
Le Journal de Montréal
and reads up on the
latest news!
The Winnipeg Sun currently has the highest growth rate of any daily in Canada, posting
a 5 percent market share increase in 1999, rising from 27 to 32 percent.
Like the other group’s dailies, the newspaper registered record operating income. With its
new look and excellent coverage of important events such as the Pan-American Games
held in Winnipeg in the summer of 1999, The Winnipeg Sun saw advertising revenues
increase by 8.5 percent and circulation revenues rise by 19.7 percent.
The Ottawa Sun set new records in 1999 with the best advertising revenues, best rev-
enues from newspaper sales and the best profitability performance in its history.
Improvements in the newspaper’s content and presentation translated into increased read-
ership, which reached unprecedented levels despite a slight increase in the daily’s price.
Commercial printing activities, which had been affected by the loss of the Financial Post print-
ing contract in 1999, also finished the year on a strong note.
The SUN TABS Network Offers National and Multimarket Advertisers
Coast-to-Coast Visibility
D uring the 1999 fiscal year, Sun Media
Corporation created the SUN TABS
Network to maximize national and multi-
market advertising sales in its publications.
This advertising initiative brings together our
dailies in Edmonton, Calgary, Winnipeg,
Toronto, Ottawa, Montreal and Quebec, as
well as two newspapers published by
Southam, The Vancouver Province and The
Halifax Daily News. It is an unprecedented
example of synergy between two groups
which, although rivals, have chosen to create
a new sales force and one-stop service to
better serve Canadian national advertisers.
This initiative gives advertisers and Canadian
advertising market specialists access to the
SUN TABS Network, a unique coast-to-coast
network of tabloids that covers nine major
urban markets and boasts a readership of 3.2
million Canadians. The network is under the
exclusive representation of Sun Media
Corporation. In exchange, Sun Media’s The
London Free Press, a broadsheet newspaper,
has become a member of Southam’s ADitus
group. We believe that the SUN TABS Network
will allow advertisers to effectively penetrate
a market with more than $130 billion in pur-
chasing power.
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Sun Media Dailies
Urban Dailies
Le Journal de Montréal
Le Journal de Québec
The Ottawa Sun
The Toronto Sun
The London Free Press
The Winnipeg Sun
The Edmonton Sun
The Calgary Sun
Community Dailies
The Brockville Recorder and Times
The Stratford Beacon Herald
St. Thomas Times-Journal
Kenora Daily Miner and News
The Portage la Prairie Daily Graphic
Lloydminster Daily Times
Grande Prairie Daily Herald-Tribune
Fort McMurray Today
Province
Quebec
Quebec
Ontario
Ontario
Ontario
Manitoba
Alberta
Alberta
Ontario
Ontario
Ontario
Ontario
Manitoba
Alberta
Alberta
Alberta
Format
Tabloid
Tabloid
Tabloid
Tabloid
Broadsheet
Tabloid
Tabloid
Tabloid
Broadsheet
Broadsheet
Tabloid
Broadsheet
Broadsheet
Broadsheet
Broadsheet
Broadsheet
Web site address
www.journaldemontreal.com
www.journaldequebec.com
www.canoe.ca/OttawaSun/home.html
www.canoe.ca/TorontoSun/home.html
www.canoe.ca/LondonFreePress/home.html
www.canoe.ca/WinnipegSun/home.html
www.canoe.ca/EdmontonSun/home.html
www.canoe.ca/CalgarySun/home.html
www.recorder.ca
Under construction
www.bowesnet.com/Timesjournal
www.bowesnet.com/dailyminer
www.bowesnet.com/dailygraphic
Under construction
www.bowesnet.com/dht
www.bowesnet.com/Today
Community Newspapers: Consolidation
and Acquisitions
The community newspaper division is comprised of Bowes Publishers Limited, Sun Media’s
Quebec weeklies, Le Courrier du Sud (1998) Inc. and Florida Sun Publications. It pub-
lishes dailies, weeklies, buyers’ guides and other publications, and operates 21 printing
plants. In 1999, it maintained its solid performance, and now counts 181 newspapers and
other publications across Canada as well as in Florida. By managing operations efficiently,
while still keeping abreast of new growth opportunities, it increased its operating income
over 1998.
The division expanded in 1999 when Bowes acquired The Stratford Beacon Herald in
Ontario, the last independent daily in the province. Bowes also purchased the Lloydminster
Daily Times published in Alberta, as well as weeklies in Saskatchewan and Ontario. In
1999, Sun Media also sold The Record, a daily published in Sherbrooke, Quebec.
Bowes is the most active community newspaper group on the Internet in Canada, with all
the division’s operations participating, including the group of Quebec weeklies, accessi-
ble via Bowes’ Web site (www.bowesnet.com). The sale of classifieds, publicity banners
and Web pages is continually expanding, which bodes well for increased revenue in the
near future. The operation’s success led the weekly community newspaper associations
in Alberta and Ontario to sign agreements with Bowes to host their member newspapers
on its site.
In 1999, the revenues of the Quebec weeklies grew by 12.8 percent and the EBITDA showed
a marked increase of 39.1 percent over the previous year. The growth in revenues and
profits can be attributed primarily to the acquisition of 50 percent of Le Courrier du Sud
during the second half of 1998 and the streamlining of operations.
The Quebec regional newspapers division, which publishes 51 weekly newspapers and a
number of periodicals, is solidly established in the following regions: Abitibi, Laurentians,
Beauce, the Eastern Townships, Quebec, Saguenay–Lac-Saint-Jean, Northern Quebec, the
North Shore, Lower St. Lawrence, the Gaspé Peninsula and Montreal’s South Shore. The
Quebec weeklies group took advantage of the arrival of the year 2000 to develop a Web site
(hebdosquebecor.com) uniting its 51 weekly newspapers and periodicals. In
partnership with Bowes, the Quebec weeklies integrated their classified ads into the cross-
Canada network classEfind, the largest search engine of its kind in Canada.
The group’s American division, Florida Sun Publications, also expanded its printing instal-
lations in Bradenton, Florida. The expansion was needed to house a new eight-unit Harris
press with heat-set capacity, which the division acquired in response to the growing demand
of its commercial printing clients.
Distribution Activities: The Language of Acceleration
The Messageries Dynamiques division also contributed to Sun Media Corporation’s suc-
cess in 1999. The leading Quebec distributor of dailies, magazines and other electronic
and print media Messageries Dynamiques
reaches some 250,000 households and
15,000 retail outlets through its various
operations. The firm is also active in the
francophone markets in other Canadian
provinces as well as Florida.
Bowes is the most active
community newspaper group
on the Internet in Canada
In 1999, Messageries Dynamiques set up a
new, highly advanced computerized distribution system. The firm also obtained several
contracts with European magazine editors who chose Messageries Dynamiques as their
distributor for francophone markets in North America. The editors granted Messageries
Dynamiques the distribution rights for specialized products, notably magazines on new
technologies and the Internet.
Dynamic Press Group is held in partnership with The News Group, a division of The Jim
Pattison Group of Vancouver. Dynamic Press Group distributes English-language
printed matter to more than 600 outlets in Quebec. In 1999, the Group’s sales rose by
more than 60 percent over the previous year.
Finally, NetMedia, a division of Bowes responsible for national insert sales and door-to-door
flyer and product sample distribution had an excellent year, posting a 64 percent increase
in sales.
A Strategic Alliance in New Media
Sun Media announced at the end of 1999 an alliance with Quebecor New Media, a wholly
owned subsidiary of Quebecor. The objective is to extend Sun Media’s assets into New Media
and the Internet, where the synergistic possibilities are endless. One project is the creation
of a centralized databank for classified ads from all of our dailies across the country acces-
sible via the classifiedextra.com site. The development of local Web sites which extend
our print media to the new electronic communications media are planned for the future.
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Érik Péladeau
Chairman of the Board,
Quebecor
Communications Inc.
René Guimond
President and Chief
Executive Officer,
TQS Inc.
P. Wilbrod Gauthier
Chairman of the Board,
TQS Inc.
Television Broadcasting
TQS: The “Black Sheep” Stands Proud
Quebecor holds a majority interest of more
than 76 percent in TQS Inc., a general inter-
est French-language television network that
covers 97.5 percent of Quebec’s broadcast-
ing area through its own and affiliated sta-
tions.
In 1999, the TQS network continued its
efforts to establish the station’s image as the
“black sheep” of television. An integral part
of the network’s self-promotion, the “black sheep” proved to be an unqualified communica-
tions success in 1999. The TQS network has set itself apart in the field of Quebec television
with a signature image instantly recognizable to both the general public and advertisers
alike. Its success is the result of an imaginative, bold and timely communications strategy.
A Year of Achievement
During the 1999 fiscal year (from January 1 to December 31), TQS produced innovative
live television shows that attracted an enthusiastic public response. As per its strategy, TQS
intensified its efforts to reach television viewers between the ages of 18 and 49, the preferred
audience of the television chain’s advertising clients. The network also extended its broad-
casting hours by an average of 2 percent.
Among the highlights of 1999 was a major change in direction for the news department.
TQS launched a new formula combining news and public affairs, which led to the arrival of
journalist Jean-Luc Mongrain in the TQS fold. Mongrain has an open, direct style, and is
well respected by the public. With its new formula, TQS was able to distinguish itself in the
eyes of viewers with Le Grand Journal (the 5 p.m. edition), a daily 90-minute newscast and
public affairs magazine.
As planned, TQS moved its offices and studios into the same downtown Montreal building
as Quebecor’s headquarters, confirming its desire to become a more cosmopolitan television
station that is closer to the general public. Similarly, TQS has announced plans to move its
Quebec operations to a downtown location more in line with its broadcast image. In 1999,
TQS also launched a Web site (tqs.qc.ca), which was developed in collaboration
with Intellia.
Television network success depends on effectively controlling production costs while
carefully maintaining the quality of the products aired. TQS thus created two production
houses under Les Productions Point-Final Inc., which is owned exclusively by TQS.
Les Productions Point-Final ensures TQS greater control over the concepts and the rights
related to the programs it broadcasts.
TQS: A Network with Ratings Worth Watching!
The results of the surveys conducted
by Nielsen Media and BBM in the fall
of 1999 provide confirmation of the gains
made by TQS with the viewing public.
The following figures pertain to the same
period as the survey, from October 21 to
November 24, 1999.
According to Nielsen, the entire TQS net-
work captured a market share of 13.0
among viewers in general, and 15.4
among 18 to 49-year-olds, the most
sought-after market for TQS advertisers.
In both instances, market share showed
considerable growth compared with the
same period in the previous year.
The BBM surveys, carried out during the
same period and made public in January
2000, corroborated this trend. TQS
increased market share in all regions of
Quebec over the same period in 1998.
This was especially noticeable in the
Greater Montreal region, where TQS’
market share rose from 9.5 to 12.2
among viewers in general, for an increase
of 27 percent.
TQS Montreal also performed well in the
news slot. According to the BBM surveys,
TQS has now taken the lead over its rival
Radio-Canada. For the first time since
the arrival of its new executive team in
1997, TQS is the second-most-watched
television station in the Greater Montreal
region on weekdays during this time slot.
This is an impressive breakthrough, and
demonstrates the efficacy of Le Grand
Journal’s unique formula.
We are proud of these results and confi-
dent that TQS will continue to make
increasingly sizable gains in Quebec’s
television market.
Jean-Luc Mongrain,
Anchor, Journalist
TQS established its own marketing group in Toronto during 1999 to assume responsibility
for the sale of TQS rights and properties in this key market. Administratively, TQS also
developed more powerful management tools to enhance the network’s available commer-
cial inventory. Initiatives were effective and airtime revenues reached $48.6 million in 1999,
growing by 6.1 percent over the course of the year, a higher rate than the industry’s national
average. All agreements with major clients were extended for the year 2000 with, in most
cases, an increase in volume and rates.
This performance is the result of the combination of TQS’ steadily improving ratings (see
inset) and a complete restructuring of its sales department. The positive effects of the restruc-
turing efforts were mainly felt in the final three quarters of 1999, during which TQS posted a
12.4 percent increase in revenues, with an 18.2 percent increase in the final quarter. Revenues
increased at almost twice the rate of operating expenses during the last three quarters, which
explains the constant improvement in operating results throughout the year. The combination
of all these initiatives and ventures generated convincing financial results at the end of the
fiscal year, and placed TQS in a decidedly advantageous position for the coming years.
A Promising Future
Television is a highly competitive industry, in which there is a growing trend toward the
globalization of production and consolidation of television broadcasters, and new specialty
channels are constantly springing up. To survive in this market, TQS must work ever harder
to remain an innovative network, attentive to the needs of advertisers and able to offer the
public unique, bold, hard-hitting television. To this end, TQS will participate in the promis-
ing projects of Quebecor’s various subsidiaries and divisions, whose products and services
complement those of TQS.
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OPPOSITE PAGE
Filming on a TQS set
with Élaine Ayotte,
an information-
program host.
In the heat of the action:
a cameraman at work
in TQS’ new downtown
Montreal studios.
Books, Magazines, Music
Vitality, Performance, Profitability
The Book, Magazine and Music sectors, which are part of Quebecor Communications Inc.,
a wholly owned subsidiary of Quebecor Inc., posted excellent results in 1999. Revenues
from these sectors totalled $209.2 million in 1999, as opposed to $211.8 million in 1998.
Had it not been for the disposal of certain assets, revenues from these sectors would have
grown by 6 percent in 1999.
Operating income amounted to $6.2 million
in 1999, compared with $6.6 million in 1998.
Excluding unusual gains such as a gain on
diposal of assets in 1998, operating income
made a spectacular leap from $200,000 in
1998 to $6.2 million in 1999.
The highlights of the fiscal year for the Book
sector were undoubtedly the improved earn-
ings and dynamic growth in exports. For its
part, the Book and Software Distribution sec-
tor underwent major restructuring, which
should have a positive effect on operations as
early as 2000. At Publicor, the year was marked by the Magazine sector’s best performance
ever, due primarily to the contribution made by the interior decorating magazines. The
Music sector also took advantage of the strategic direction and expansion of the
Archambault store network, as well as good results from music and video distribution
and sub-distribution operations.
BOOKS
Increased Production and Exports
A major player in the Quebec marketplace, the group of publishers associated with
Quebecor Communications leads its sector in Quebec for the number of titles published,
a total of 586 in 1999. The Book sector put in an excellent financial performance during
this past fiscal year.
St. Remy Media, a specialist in contract publishing, e-publishing and general literature, for-
merly under Quebecor Multimedia, became the newest member of the Book sector. Les
Éditions du Trécarré also completed its first fiscal year as an autonomous entity in the pub-
lishers’ group. The distributors Diffulivre Inc. and Logidisque Inc. were transferred to
Québec-Livres, another division of Quebecor Communications.
In 1999, the production of new works, new editions and reprints exceeded projections. The
publishers group was also extremely active on foreign markets, and foreign sales virtually
tripled. St. Remy Media’s production of The Art of the Grill for the American publisher
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André Rousseau
Vice President,
Book Sector,
Quebecor
Communications Inc.
Claire Syril
Vice President,
Magazine Sector,
Quebecor
Communications Inc.
Érik Péladeau
Chairman of the Board,
Quebecor
Communications Inc.
Bestsellers
O n the general literature front, the
publishers group published no
fewer than 36 Quebec bestsellers in its
areas of specialization: novels, bio-
graphies, contract publishing, textbooks
and legal texts.
Les Éditions CEC Inc. launched a new
collection of high school mathematics
textbooks, which captured more than
75 percent of the market share in
Quebec. The collection has been so
successful that it was quickly adopted
by schools in the Canton of Geneva in
Switzerland and trans-
lated to meet the needs
of the English-language
schools in Quebec.
Weber was immensely successful. The volume of European business conducted by Les
Éditions Quebecor inc. and Les Éditions Logiques inc. grew substantially, while at Les
Éditions Libre Expression ltée and Les Éditions Internationales Alain Stanké ltée, sales of
rights to foreign editors, especially in Europe, reached record levels. The legal publishing
house, Wilson & Lafleur, limitée, a Quebec institution for 90 years, issued a new canon law
collection, the product of a joint venture involving legal scholars from the University of
Ottawa, Chicago’s Midwest Theological Forum and the University of Navarra in Spain.
In 1999, the Book sector looked for ways to improve its managerial effectiveness. Les
Éditions Quebecor, Les Éditions Internationales Alain Stanké, Les Éditions du Trécarré
and Les Éditions Logiques consolidated administrative and financial services while still
retaining separate identities and independent editorial staff. The initiative was a
success, enabling us to achieve important savings during the first year of implementation.
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Ambitious Publishing Programs
The publishers’ group associated with Quebecor Communications will continue to focus on
growth in 2000. Among the most important publishing projects will be Éditions Internationales
Alain Stanké’s Encyclopédie du Canada 2000, a four-volume series for St. Remy
Media’s American client Discovery Publishing, and Les Éditions CEC’s introduction
of new collections designed to meet the requirements of Quebec’s September 2000
education reform.
As well as intensifying commercial activities in Quebec, the Book sector will
strengthen its sales potential in the French, Belgian and Swiss markets by creating
a service responsible for public relations with the media and principal retail outlets
in those countries.
Québec-Livres
Québec-Livres is one of the most important French-language book distributors in Canada
and one of the largest software distributors. The company represents Canadian and
European publishers of both books (66) and software (30). It services a network of
1,900 sales outlets.
In 1999, Québec-Livres successfully implemented a computerized inventory and order-
management system, substantially reducing delivery times. The company also reorganized
its commercial structure to improve the quality of services available to the publishers it
represents.
Québec-Livres has several projects among its priorities. In the area of distribution, Québec-
Livres plans to open up markets in new locations (such as New Brunswick) and sectors (gro-
cery stores, specialty boutiques, etc.). It will also make an effort to recruit new book publishers
and software producers, and will focus on promotional strategies designed to increase its
market share.
Contract Publishing: Strategies to Maximize Commercial Impact
P ublicor is in an excellent position
to develop and expand the contract-
publishing market. By taking advantage
of the creative strengths of Quebecor’s
different New Media businesses, Publicor
is able to offer clients printed magazines,
access to Web page development ser-
vices in collaboration with Informission-
Intellia, and the content dissemination
support provided by the CANOE Web site,
with its round-the-clock news and infor-
mation service. New Media provides ways
of increasing the visibility and impact of
our clients’ communications strategies.
We are able to offer our customers com-
bined print and electronicmedia solutions,
which will make it easier for them to meet
their objectives.
MAGAZINES, ENTERTAINMENT WEEKLY AND ALTERNATIVE NEWSPAPERS
Financial Progress
Earnings from interior decorating magazines tripled in 1999, largely due to the performance
of Décoration Chez-Soi and Les idées de ma maison. Our interior decorating sector
has now captured more than 80 percent of the market share in Quebec. The entertainment
weekly Échos Vedettes continued its growth and increased its earnings, while the alter-
native newspapers The Mirror and Ici vivre à Montréal surpassed objectives.
OPPOSITE PAGE
A fashion photo shoot
for Publicor’s popular
women magazine
Clin d’œil.
The Archambault store
at the corner of
St. Catherine and Berri
in Montreal has the
largest piano department
in Eastern Canada.
Synergy and People
O n February 13, 2000, a new
project emerged from the syn-
ergy between Publicor and TQS. Des
Décors et des Gens, a weekly tele-
vision show on TQS, draws inspira-
tion for its subject matter from the
magazine Les Idées de ma Maison.
The concept extends the use of the
editorial content of our magazines to
other communications media. With
TQS’ collaboration, the formula
could eventually be adopted by
other magazines in the Publicor
family.
In fact, Art de Vivre, a new section
on Quebecor New Media’s Canoë
portal, draws its content from the
vast information resources provid-
ed by Publicor’s various magazines.
This is another example of the pro-
ductive exchanges made possible
by meaningful dialogue between
Quebecor’s different entities.
Publicor, which publishes three women’s magazines: Clin d'oeil, Femme Plus and Filles
d'aujourd'hui, underwent major repositioning in the women’s magazine market in 1999.
The division updated its computer graphics layout and its editorial content to re-
establish itself as the leader in this field in Quebec.
The new management team brought in by Communications Gratte -
Ciel ltée to oversee operations at Ici vivre à Montréal, one of two alter-
native newspapers published by the subsidiary, showed itself to be up
to the task. Communications Gratte-Ciel produced and launched a Web
site for the alternative weekly (www.icimontreal.com) in collaboration
with Intellia.
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In the contract-publishing sector, Publicor offers all-inclusive services for corporate mag-
azines such as Les idées Réno-Dépôt, Sympatico and the Office de la langue française
du Québec’s Infolangue. The contract-publishing sector has strong growth potential,
especially given Quebecor’s advantageous positioning in the rapidly expanding field of
New Media. Publicor plans to take advantage of this strength to attract new clients and
increase the scope of its activities.
Print Media and Multimedia: A Winning Pair
For the Magazine sector, the appearance of new technologies related to the Internet and
to electronic media holds extraordinary potential for growth. The result will be many
new business opportunities. For example, the Magazine sector is developing innovative
strategies using Échos Vedettes’ impressive archives, a wealth of information gathered over
the entertainment weekly’s 38-year existence.
MUSIC
Groupe Archambault Inc.
Groupe Archambault Inc. is the largest company in the music business held by Quebec-
based interests. It consists of 12 Archambault megastores, a PolySons record store, exclu-
sive music and video distribution (Distribution Select, Musicor and Musicor Video), and
music and video sub-distribution (Distribution Trans Canada) divisions.
Major Successes
I n September 1999, a transac-
tional Web site (archambault.ca)
was launched, making it possible
for Internet customers to purchase
CDs and books online.
With its selection
of 150,000 CDs,
300,000 book titles,
and more than 45
musical selections in
MP3 file format, the site was an
immediate commercial success,
with sales amounting to double
original projections.
In February 1999, Archambault was
awarded the prize for best record
store chain by the Rencontres
Professionnelles de
l’Industrie
Québécoise du Disque et de la Radio
for the third consecutive year.
The Largest Network of Record Stores in
Eastern Canada
Archambault has the largest network of CD, book, video, newspaper and magazine, musical
instrument and sheet music retail outlets in Eastern Canada. It is also well established as
the second-largest network of French-language bookstores in Quebec.
The evolution of Archambault was shaped by two major trends in 1999. First, Archambault
continued to develop its network of megastores, a wave of the future in line with consumer
expectations, and opened a new retail outlet covering more than 22,000 square feet in Anjou,
Quebec. Archambault’s operations will be concentrated in megastores from now on.
Second, Archambault developed a state-of-the-art Web site that allows consumers to make
online purchases. The site, which was developed in collaboration with Intellia, is one of the
most sophisticated e-commerce sites in Quebec. It met with tremendous success from the
moment it was launched in September.
In 2000, Archambault plans to finish computerizing all its stores, and expand its retail
operations into new regions not yet serviced by its stores, notably in the Ottawa Valley.
The company will also relocate some Archambault stores to larger premises.
Exclusive Distribution Rights
Distribution Select, Musicor and Musicor Video form the most important independent music
and video distributor in Canada. In 1999, they joined forces with wholesaler Distribution
Trans Canada, bringing their warehouses and sales offices together in a single building of
close to 44,000 square feet in Saint Laurent,
Quebec. The move has already made it pos-
sible to save space, increase efficiency and
streamline warehousing operations.
Still more success...
In addition, Distribution Select, Musicor and
Musicor Video signed exclusive distribution
contracts with important independent
Canadian record producers in 1999. To
ensure the future growth of their operations,
the three companies restructured their mar-
keting divisions in Toronto, Vancouver,
Calgary, Winnipeg and Moncton.
A t the 1999 ADISQ Gala held in Montreal,
34 of the 54 Felix Awards went to artists,
producers, industry professionals and products
associated with Distribution Select or Musicor.
For the 14th year in a row, Distribution Select
was awarded the Felix for Distributor of
the Year. Distribution Select and Musicor dis-
tributed 29 of the 40 best-selling French-
language albums in Quebec in 1999.
The volume of business in the exclusive inde-
pendent music and video product distribution sector in Canada is growing steadily. To take
advantage of these opportunities for growth, Distribution Select, Musicor and Musicor Video
plan to increase their presence in Toronto markets by means of an in depth catalogue with
more English, ethnic and instrumental musical products.
Sub-distribution
Distribution Trans Canada is the largest wholesaler in Quebec’s record industry. The
company has a catalogue of 70,000 albums and services a network of more than
640 retail outlets.
In 1999, the division signed an exclusive agreement with the Groupe Jean Coutu (PJC)
Inc., the largest chain of pharmacies in Quebec, to act as the chain’s sole video supplier.
Under the terms of this agreement, Distribution Trans-Canada will supply videos to
180 retail outlets.
Distribution Trans Canada also consolidated its sales and warehousing activities with those
of Distribution Select, Musicor and Musicor Video. The restructuring that resulted from
this operation already offers increased possibilities for synergy between the distribution
and sub-distribution divisions. It has also permitted order processing to be accelerated and
the number of joint promotional ventures to be increased.
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Printing
A Merger of Two Industry Leaders, the
Creation of One Industry Giant
The major event of the year for Quebecor Printing Inc. was undoubtedly its merger with a
former American competitor, World Color Press, Inc. Through this merger, the most impor-
tant in the Company’s history, Quebecor Printing became the world’s largest commercial
printer. The new entity will operate under the name Quebecor World as soon as share-
holders approve its new corporate identity.
Since the late 1980s, Quebecor Printing has
actively pursued growth through acquisition
and strategic investment. The Company has
thus expanded from its Canadian roots to
become a major industry consolidator on
three continents, making more than 60 acqui-
sitions, estimated at US$5.4 billion. The
acquisition of World Color for US$2.7 billion
represents the largest transaction in the
history of commercial printing.
Record Results in 1999
The subsidiary Quebecor Printing posted
revenues of $7.4 billion in 1999, a 30 percent
increase over the previous year. This increase
is essentially due to revenues from World
Color operations during the last quarter of
the year.
Operating income before non-recurring items
totalled $703.4 million, compared to $469.3
million in the previous year. This represents
growth of almost 50 percent.
One-time restructuring and other non-
recurring charges of $267.6 million were
recognized to ensure the integration of the World Color operations and improve the
Company’s operating performance in France. The merger increased Quebecor Printing’s
financial leverage, which temporarily raised the debt to capitalization ratio above normal
levels. However, by the end of 1999, Quebecor’s total debt had dropped compared with
its level at the time of the merger. The Company plans to return to a one-to-one debt to
capitalization ratio as early as the end of year 2000.
Jean Neveu
Chairman of the Board,
Quebecor Printing Inc.
Charles G. Cavell
President and Chief
Executive Officer,
Quebecor Printing Inc.
A Year of Achievements
While the merger of Quebecor Printing and World Color stands out as the key event of 1999,
a number of other significant accomplishments also played a part in making it an
exceptional year.
Excellent rotogravure results – Profit margins from operations in the United States
rose as a result of changes enabling the rotogravure network to increase efficiency and pro-
ductivity in serving the American market for
retail inserts. This strong performance was
due largely to the success of an ambitious
modernization program carried out over the
last three years.
Revenue Progression over Five Years
($ millions)
7,362
Outstanding results in Canada – Strong
performances in each of the Company’s
Canadian divisions translated into record
revenues and profit margins. Our ability to
respond to customers’ needs with high-
quality solutions combining print and
New Media, and our implementation of
aggressive cost-cutting initiatives also had a
positive effect on results.
5,644
4,821
4,121
4,241
1995
1996
1997
1998
1999
Extending networks and conquering
new European markets – Acquisitions in Spain and Austria expanded the Company’s
geographic and product reach. Through the acquisition of Cayfo S.A., the second-largest book
publisher in Spain, Quebecor Printing gained access to the European book market. In
addition, the acquisition of Oberndorfer Druckerei, a leading Austrian web offset printer,
enabled the Company to penetrate the German market. Oberndorfer Druckerei exports
roughly 60 percent of its production to Germany.
Increased manufacturing capabilities in Latin America – The purchase of the printing
assets of Editorial Perfíl, a leading Argentinian magazine producer, enabled the Company
to gain a foothold in the Latin American rotogravure market and to expand production into
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Revenue Distribution ($ millions)
BY PRODUCT
BY REGION
2%
United States
Canada
Europe
Latin America
Total
4,367
1,446
1,405
144
7,362
19%
20%
59%
5%
5%
11%
13%
30%
15%
21%
Magazines
Inserts and circulars
Catalogs
Books
Direct mail
Digital services and other
value-added products
Directories
Total
2,176
1,547
1,146
959
789
397
348
7,362
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
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The FNAC, a Major European Client,
Takes Advantage of our Multiservice Offer
The FNAC is a major European retailer of books,
CDs, videos, CD-ROMs and software, as well as
a wide range of computer and electronic equip-
ment. For several years, Quebecor Printing has pro-
vided prepress, printing, finishing and shipping
services for print advertising targeting clients of
the chain’s sales outlets, with circulation ranging
from 175,000 to 500,000 copies. The FNAC is also
a major client of Cythère, the leading Internet
company in France, which became part of the
Informission-Intellia family in January 2000. Cythère
has served as the FNAC’s Internet-strategy consul-
tant, participating in the creation of a virtual store
(www.fnac.com) which has rapidly become one of
the most popular transactional sites in France.
With its vast geographic reach, Quebecor is able
to satisfy the needs of customers in both local and
foreign markets. Our technological expertise enables
us to provide large companies from Europe and
North and Latin America with communication solu-
tions and strategies that efficiently combine print and
New Media.
retail inserts. Through a strategic alliance with Gráfica Melhoramentos, a Brazilian
publisher and printer, Quebecor Printing gained direct access to Brazil’s commercial print
market, the largest on the continent.
New contracts and contract renewals – Early in 2000, the Company extended its
contract with Sears Canada for a ten-year period. Under the agreement, which is valued
at more than Cdn$1 billion, Quebecor World will produce catalogues and provide prepress
and electronic file-management services. In
1999, Quebecor Printing also extended
contracts with Associated Newspapers
Limited in the United Kingdom for the
printing of newspaper supplements (seven
years,US$325 million) and with Editorial
Perfíl in Argentina for the printing of maga-
zines (ten years, US$400 million).
Through this merger, the most
important in the Company’s history,
Quebecor Printing became the
world’s largest commercial printer
Strategic investment – In 1999, Quebecor Printing invested US$195 million to grow
organically, increase shop efficiency and improve customer service. The modernization of
the rotogravure network in the U.S. is now complete and the Company is focusing on the
investment will be maintained at
integration the two amalgamated companies. Capital
approximately US$250 million in 2000. Between 1997 and 1999, Quebecor Printing and
World Color Press invested some US$1.2 billion to expand their technical capabilities.
Core business activities – The Company sold its Canadian division BA Banknote to
German banknote printer Giesecke & Devrient GmbH. This decision, like the divestiture
of cheque and credit card operations in 1998, reflects the Company’s intention to focus on
the core business activities at which it excels.
OPPOSITE PAGE
A web offset press at
the Covington plant in
Tennessee.
Printing a flyer for
Sears Canada, one
of our major clients.
A Whole Greater than the Sum of its Parts
The merger with World Color enabled Quebecor Printing to double its size in the U.S., the
world’s premier commercial print market, and benefit from several other advantages.
Synergies achieved through the integration of manufacturing, sales, head offices and dis-
tribution have already translated into greater operating efficiency. Within a few weeks of the
merger, the economies of scale initially estimated at US$50 million by the Company were
revised upwards to US$100 million.
World Color brought a highly skilled executive team, a solid U.S. presence and well
established business relationships with principal American retailers and publishers to the
A Strong Partnership with Réno-Dépôt
W ith a network of ten megastores in oper-
ation and five other megastores under
construction, Réno-Dépôt Inc. is a leading
Canadian hardware, renovation and gardening
supplies retailer. The company relies on
Quebecor for a number of services. Quebecor
Printing’s LaSalle plant produces Reno-Dépôt’s
tabloid-format circulars and catalogues, using
prepress services provided by Quebecor Printing
Graphique Couleur. In addition, Publicor pro-
vides all-inclusive contract publishing services
for the production of the magazine Les Idées
Réno-Dépôt. Réno-Dépôt also regularly adver-
tises in the special renovation supplements
published by Le Journal de Montréal and
Le Journal de Québec, as well as on the TQS
television network.
As far as electronic communication channels are
concerned, Réno-Dépôt is a highly innovative
customer, and Quebecor is able to meet its needs
every step of the way. For instance, one of the
sections on the company’s Web site is Weekend
Do It, produced by the people at St. Remy Media,
a subsidiary of Quebecor Communications. In
addition, Le Journal de Montreal’s Web site
features a hyperlink to Réno-Dépôt’s site. A
project to develop new e-commerce solutions for
the retailer is currently in the works with Quebecor
New Media’s Canoë portal.
Réno-Dépôt gets the most out of the
wide range of services Quebecor pro-
vides for all communications chan-
nels currently available. Our one-stop
source of solutions gives Réno-Dépôt
a competitive edge in increasing its
visibility with its target clientele.
The members of the Quebecor group
are proud that Réno-Dépôt has
chosen them as business partners
for all of its communication activities.
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Global Bid to a Prestige Client
U niversal Studios Recreation Group, a world
leader in the entertainment business, is a long-
time client of Quebecor Printing. Universal’s opera-
tions include theme parks in Orlando, Florida, and
Los Angeles, California. Quebecor Printing provides
prepress services and prints a wide range of publi-
cations, such as tourist brochures, hotel and travel
guides, and newspaper and magazine advertising
supplements.
In addition, Informission-Intellia has designed, devel-
oped and personalized a Web interface for Universal
Studios, in partnership with Logibro Inc., a company
that specializes in enterprise and e-commerce solu-
tions for the travel and tourism industry. Via Universal’s
transactional Web site, surfers can obtain informa-
tion about the services offered and buy theme park
passes and package deals.
This example illustrates Quebecor’s ability to bring
together a wide range of expertise and distribution
channels to provide a wide variety of products and
services that meet the needs of clients.
partnership. For its part, Quebecor Printing contributed first-rate management and a coveted
position in international markets. As a result, the new Company, Quebecor World, is greater
than the sum of its parts. Quebecor World is able to offer its clients the following advantages.
An expanded manufacturing platform – Quebecor World operates the largest network
of commercial printing plants in the world.
Highly efficient networks – With the addition of World Color assets, the Company’s
U.S. rotogravure and offset networks now extend from coast to coast.
Market leadership – The combined operations of the two companies have made Quebecor
World the foremost leader in magazines, catalogues, retail inserts and specialty printing in
the United States. The Company is also the world’s leading book publisher, as well as a
major producer in directories.
Broader technical expertise – The Company now offers a broader range of technical
services in document customization, as well as in the growing New Media sector.
The integration of Quebecor Printing and World Color began during the last quarter of 1999
with consolidation of purchasing and certain other corporate services in the United States.
The U.S. sales team was also reorganized to enhance international sales. Early in 2000, the
Company began to restructure its U.S. manufacturing platform to create a more efficient plant
network. The Company will now focus on its most productive plants and increase product
specialization.
Quebecor World, A Growing Force in New Media
Quebecor World has now expanded well beyond its traditional role as a printer. Increasingly,
we are combining print and new media to provide clients with access to a wider range of com-
munication channels and marketing strategies. This symbiosis benefits both clients and
Quebecor World alike: it enables clients to maximize their creative and strategic potential,
while permitting Quebecor World to develop new business opportunities and deepen rela-
tionships with existing clients. Our one-stop service reduces the number of intermediaries
with whom our clients must negotiate to get their messages into the marketplace and reach
their target clientele. Quebecor World is a cutting-edge innovator in process integration on
several accounts.
Maximizing information – Quebecor World can digitize information and re-use it numer-
ous times in different electronic and print products. This reduces the cost and complexity
of integrating clients’ multimedia communication and marketing plans.
Facilitating the transition to New Media – To ensure a smooth transition to elec-
tronic media, Quebecor World offers clients a line of services and digital tools such as Web
site design and hosting, archiving, data mining, and Web-enabled communications and
marketing strategies.
Capitalizing on new demand for print – Successful electronic media strategies result
in greater demand for print. Web-zines, for instance, are being republished as magazines,
while new dot-com businesses are mounting
direct mail campaigns to increase sales. Due
to its broad manufacturing capabilities,
Quebecor World is well positioned to take
advantage of the momentum of Internet
marketing activities.
Increasingly, we are combining
print and New Media to provide
clients with access to a wider
range of communication channels
and marketing strategies
Leveraging Quebecor’s client relation-
ships – Quebecor World provides its clients
with access to the broad range of services
offered by the Quebecor group, notably, to
major print and electronic distribution channels such as CANOE and Canoë, two of the
busiest Internet portals in Canada, to the resources of the Sun Media newspaper chain and
to Informission-Intellia, the foremost Web integrator in Canada and a major player in Europe.
Strong Leadership and Dedicated Personnel
More than 40,000 people, employed in a network of 160 printing and related facilities
located in 15 countries, contribute to the quality products that Quebecor World offers its
clients. In 2000, Quebecor World will focus on integrating the Company into a single
global network. The savings and synergy created by restructurating initiatives will make it
possible to increase earnings at a rate comparable to 1999. Quebecor World is confident
that it has put in place the executive team, human resources and operating capabilities
necessary to continue its growth and capitalize on its position as a global industrial force.
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Forest Products
A Strong Performance
Net sales rose to $2,484 million in 1999, com-
pared with $2,296 million in 1998 and
$1,745 million in 1997. The growth over 1998
is due to increased sales in the Company’s
three areas of activity (newsprint, market
pulp, lumber), especially in the newsprint
sector, due to the inclusion in the 1999
results of an entire year of sales for the two
Texas newsprint and specialties mills. The
higher lumber and market pulp prices that
were the consequences of the robust
American economy and the recovery of
Asian markets, also contributed to the Company’s business growth. However, average
selling prices in the newsprint and specialties group were significantly lower than in the
previous year.
In terms of profitability, the Company posted net earnings of $212.4 million, compared with
$229.2 million in 1998 and $155.5 million in 1997.
Acquisitions, Asset Disposals and Investments
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Michel Desbiens
President and Chief
Executive Officer,
Donohue Inc.
Charles-Albert Poissant
Chairman of the Board,
Donohue Inc.
A Performance-Oriented, Integrated Producer
D onohue is a Canadian inte-
grated forest products com-
pany. Its forestry exploitations sup-
ply its sawmills, which produce
lumber and wood chips. These
products are then processed in the
Company’s newsprint and specialty
mills and market pulp mills. Most
of the remaining fibre required for
paper production comes from paper
recycling centres operated by the
On August 4, 1999, Donohue acquired the remaining 50.1 percent of Finlay Forest
Industries Inc.’s capital stock not already owned by the company, of which 49.9 percent
was held by Slocan Forest Products Ltd., for cash compensation of $80 million. Finlay’s
facilities are located in Mackenzie, British
Columbia, and include a newsprint and spe-
cialties mill with an annual production
capacity of 200,000 metric tonnes, as well as
two nearby sawmills with an annual pro-
duction capacity of 360 million FBM. This
acquisition is consistent with the Company’s
global expansion strategy and will allow us
to respond more efficiently to the needs of
our customers worldwide.
Company, ensuring a high level of
fibre self-sufficiency for its pulp
and paper mills. Furthermore,
Donohue has long-term supply con-
tracts in certain regions. All of the
Company’s mills are located in
North America in the provinces
of Quebec, Ontario and British
Columbia in Canada, and in Texas
in the United States.
In December 1999, the Company also sold
its 50-percent share in the joint venture
Donohue Matane Inc., located in Matane,
Quebec. The plant produces bleached
chemi-thermomechanical pulp (BCTMP) from softwood and/or hardwood chips, with
an annual capacity of 200,000 metric tonnes. The Company’s decision was prompted by
a desire to focus on operations better suited to its business strategy.
Capital expenditures totalled $290.2 million in 1999, compared with $119.3 mil-
lion in 1998 and $86 million in 1997. Higher expenditures in 1999 were due pri-
marily to the inauguration of our program to modernize two mills in Texas.
During the first phase of the project, which got under way at the end of 1998,
a total of US$102 million will be invested in the Sheldon newsprint mill. This
phase includes improvements to three paper machines, which should be com-
pleted by the beginning of 2000, increased development of paper collection,
sorting and recycling activities in Texas and in neighbouring states, as well as
the expansion of the de-inking plant, which should start at the beginning of the
second quarter of 2000.
The second phase of our modernization program, undertaken in early 1999,
focuses on the Lufkin newsprint and specialties mill. It involves the transfor-
mation of the kraft pulp mill to comply with the new American environmental
standards, and the replacement of three paper machines with a single, more
modern one. The work, which requires an investment of US$230 million, should
be completed before the end of year 2000.
All of Donohue’s mills are equipped with modern, efficient tools, making it
one of the most cost-efficient forest product producers in North America.
A Responsible Corporate Citizen
Donohue is rigorous in the implementation of environmental policies in all of
its network facilities; it has an exemplary record in this domain, not only com-
plying with, but often exceeding environmental standards.
The Company subscribes to the principle of sustainable forest management and
has already adopted measures designed to minimize the repercussions of its
activities on the environment. In addition, it has begun the process to obtain,
as soon as possible, certification of compliance with approved standards of
forestry practices.
A Promising Future for the Industry
The recovery of the Asian economy and the strong American economy had a
positive impact on two of Donohue’s three core businesses, namely lumber and
pulp, which boasted solid performances in 1999. For its part, the newsprint
and specialties sector began to show signs of improvement toward the end of
the year. Prospects for the year 2000 are promising.
The Company successfully completed the integration of Champion’s
Texas newsprint and specialties manufacturing operations acquired in 1998.
The modernization program, which should be completed by year-end 2000, will
make the two mills highly competitive in terms of quality and cost-effectiveness.
Donohue is one of the most cost-effective producers in each of its fields of activ-
ity and its mills are among the most modern in the industry. It also maintains
extremely high quality standards. As a result, the Company is able to post
superior financial results as one of the best performing organizations in its
sector in North America.
One of Quebec’s
coniferous forests.
OPPOSITE PAGE
A load of wood at
one of the Finlay plants
in Mackenzie, British
Columbia.
Net Sales
(in $ millions)
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5
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4
2
1
,
1
0
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8
3
6
,
1
6
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4
4
7
,
1
8
.
5
9
2
,
2
2
.
4
8
4
,
2
1995 1996 1997 1998 1999
Distribution of Sales by Product
(in $ millions)
23.8 %
11.7 %
64.5 %
(cid:2) Newsprint and
specialties
(cid:2) Market pulp
(cid:2) Wood products
1,600.8
291.3
592.1
Distribution of Sales by Region
(in $ millions)
20.2 %
17.8 %
62.0 %
(cid:2) United States
(cid:2) Canada
(cid:2) Overseas
1,539.4
443.2
501.6
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Management's Discussion and Analysis
Company's Structure
Through its direct and indirect interests in several corporations, Quebecor Inc. operates in six different segments. It has
a controlling interest in three publicly held corporations, Quebecor Printing Inc., Donohue Inc. and Informission Group
Inc.; it has a majority interest in Sun Media Corporation and TQS Inc., and it is the sole shareholder of Quebecor New
Media Inc. and Quebecor Communications Inc.
Quebecor Printing Inc. is active in the printing industry. It is the world's largest commercial printer. It prints magazines,
advertising inserts and circulars, catalogues, books, specialty printing products and directories. It also owns and operates
CD-ROM mastering and duplication facilities. Quebecor Printing Inc. has plants in the United States, Canada, France, the
United Kingdom, Spain, Germany, Austria, Sweden, Finland, Chile, Argentina, Peru, Colombia, Mexico and India.
Donohue Inc. is an integrated forest products company with mills in Canada and the United States. Its woodlands
operations supply timber to its sawmills, which produce lumber and wood chips. These are then processed at its newsprint
and specialty mills and its market pulp mills. The remainder of the fibre used to produce paper comes primarily from the
company's paper recycling centres.
Sun Media Corporation publishes and distributes daily, weekly and monthly newspapers and specialty publications
throughout Canada and in Florida in the United States. It is Canada's second-largest newspaper publisher in terms of
circulation.
Quebecor Communications Inc. operates in the fields of publishing (books and magazines), distribution and retail sales
(books and records). Its operations are concentrated in the province of Quebec.
TQS Inc. operates a general-interest French-language television network in the province of Quebec.
Quebecor Inc. operates in two different niche markets in the New Media segment. Through its controlling interest in
Informission Group Inc., it operates a business in Canada, the United States and Europe that provides e-commerce
solutions combining strategy, technology integration, IP solutions and creativity on the Internet. Through its wholly
owned subsidiary Quebecor New Media Inc., Quebecor Inc. operates English-language and French-language portals
(CANOE and CANOË), as well as various specialty Web sites in Canada.
Quebecor Inc.'s share in the earnings of certain subsidiaries has varied over the past three years. At the beginning of 1997,
48.66% of Quebecor Printing Inc.'s earnings accrued to Quebecor Inc. As at December 31, 1998, this share had not
varied significantly and stood at 48.55%. However, following a public share issue, Quebecor Inc.'s share declined to
45.85% in May 1999. Following the acquisition of World Color Press, Inc., for which a portion of the consideration was
paid through the issuance of capital stock of Quebecor Printing Inc., in October 1999, Quebecor Inc.'s interest was
reduced to 38.05% and remained at that level until December 31, 1999. Quebecor Inc.'s share in the earnings of Donohue
Inc. did not vary significantly during this period. It stood at 19.78% at the beginning of 1997 and at 19.54% as at December
31, 1999. Quebecor Inc. acquired a 58.23% interest in Informission Group Inc. on November 1, 1999. It purchased all of
the outstanding shares of Sun Media Corporation on January 7, 1999. After merging its newspaper publishing and
distribution operations with those of Sun Media Corporation, Quebecor Inc. sold a 30% interest in the new Sun Media
Corporation in June 1999.
Quebecor Inc. exercises a controlling interest in two of the publicly held corporations mentioned above through Multiple
Voting Shares. As at December 31, 1999, Quebecor Inc. held 78.67% of the voting rights in Quebecor Printing Inc. and
63.11% of the voting rights in Donohue Inc.
Operating Results
The results for the year ended December 31, 1999 cover an operating period of 53 weeks whereas the results for the
years ended December 31, 1998 and 1997 cover an operating period of 52 weeks.
When a subsidiary of Quebecor Inc. issues shares in its capital stock, the parent company's interest in the subsidiary may
decrease. Such a decrease causes a dilution that, for accounting purposes, is considered as a disposal of the parent
company's interest in the subsidiary. Consequently, the parent company recognizes gains or losses on dilution for the
difference between the book value of the interest thus sold to third parties and the proceeds of the share issue. These gains
or losses are presented separately in the consolidated statement of income as non-recurring items. In 1999, share issues
by Quebecor Printing Inc. and Sun Media Corporation produced gains on dilution totalling $376.6 million or $5.82 per share.
Results for the year ended December 31, 1999 were impacted by certain other non-recurring items. Quebecor Printing
Inc. recorded a special charge of US$180 million (Cdn$268 million) in connection with a far-reaching rationalization
project in the United States and Europe. This charge includes a write-down of certain assets, a provision for compensation,
benefits and other personnel costs, as well as certain other non-recurring expenses. Quebecor Communications Inc.,
Quebecor New Media Inc. and the parent company also recorded non-recurring expenses totalling approximately $10 million
for the write-off and write-down of certain assets, primarily goodwill and fixed assets for which it was determined that
a permanent impairment in value has arisen. Non-recurring expenses net of income taxes and non-controlling interest
totalled $80.6 million or $1.25 per share.
Excluding the gains on dilution and the non-recurring expenses mentioned above, consolidated net income would
have attained $185.0 million or $2.86 per share in 1999, compared to $172.7 million or $2.64 per share in 1998 and
$143.3 million or $2.18 per share in 1997.
Beginning in 1999, Canadian accounting standards allow an entity to present net income and earnings per share amounts
before amortization of goodwill. In this respect, given the numerous acquisitions made by the Company in 1999 and in prior
years for which substantial goodwill was recorded, the growth in income is much higher. Excluding gains on dilution and
non-recurring expenses, net income before amortization of goodwill is as follows: $228.4 million or $3.53 per share in
1999, compared to $188.9 million or $2.89 per share in 1998 and $154.1 million or $2.34 per share in 1997. The increase
in earnings per share before amortization of goodwill was therefore 22.1% in 1999, compared to 23.5% in 1998.
The 1999 growth in earnings per share before amortization of goodwill over the prior year is a result of significantly
higher contributions from Quebecor Printing Inc. and Sun Media Corporation. Donohue Inc.'s contribution to earnings
is slightly lower than its 1998 contribution. In 1998, the growth in earnings per share before amortization of goodwill
resulted from significantly higher contributions from Quebecor Printing Inc. and Donohue Inc. Quebecor Communications
Inc.'s contribution was down from the prior year. An analysis of operating results by business segment is presented
hereafter.
Quebecor Inc.'s earnings per share are sensitive to fluctuations in the exchange rate of the Canadian dollar against the
U.S. dollar, since a large portion of its operations are related to exporting products to the U.S., especially in the case of
Donohue Inc., and to the operation of plants located in the U.S., especially in the case of Quebecor Printing Inc. and, since
1998, Donohue Inc. Every variation of Cdn$0.01 in the average exchange rate would have resulted in a variation of
approximately $0.025 in earnings per share for the year ended December 31, 1999.
Quebecor Inc.'s interest in newsprint production, through its subsidiary Donohue Inc., is partially offset by the quantity
of newsprint consumed by Sun Media Corporation. This lessens the impact of changes in the price of newsprint on
Quebecor Inc.'s earnings.
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Printing
On July 12, 1999, Quebecor Printing Inc. and World Color Press, Inc. ("World Color") announced that they had signed a
final merger agreement whereby Quebecor Printing Inc. was to purchase all of World Color's shares. World Color was the
second-largest commercial printer in the United States. That transaction, the largest ever in the printing industry, has
made the merged company, known as Quebecor World Inc., the world's largest commercial printer of magazines,
catalogues, books, inserts and circulars and specialty printing and direct-mail solicitation products.
Pursuant to a takeover bid filed on July 16, 1999, Quebecor Printing Inc. acquired 50.4% of the outstanding shares of
World Color on August 20, 1999. On October 8, 1999, World Color was amalgamated into a subsidiary of Quebecor
Printing Inc. created specifically for the purposes of the merger. The total cost of the transaction was US$2.7 billion,
including the assumption of World Color's debt and the value of the Quebecor Printing Inc. shares issued. The portion
of the consideration paid in cash amounted to US$853 million and was funded through a credit facility made available
to Quebecor Printing Inc. for this purpose.
World Color's results were included in the Company's consolidated income from August 20, 1999, with a 49.6% share
allocated to non-controlling shareholders, and were included entirely (100%) in the Company's consolidated income
from October 8, 1999.
Quebecor Printing Inc. made several other acquisitions of a more minor nature in 1999 and in the two previous fiscal years
in Europe, Canada, the United States and South America. Moreover, in October 1999, Quebecor Printing Inc. sold the assets
of its BA Banknote division that specialized in bank note printing. In September 1998, it sold its cheque printing and
credit card manufacturing division.
Quebecor Printing Inc.'s revenue and operating income before non-recurring items reached record levels in 1999.
This is the eighth consecutive year in which Quebecor Printing Inc. has recorded growth in both its revenue and
operating income.
Quebecor Printing Inc. posted increases in its revenues of $1.7 billion (30.4%) in 1999 and $822 million (17.1%) in 1998.
The businesses acquired over the past three years, in particular World Color, which was acquired in 1999, contributed
to a great extent to this growth. The relative weakness of the Canadian dollar, particularly against the U.S. dollar, also
contributed significantly to the increase in Quebecor Printing Inc.'s 1998 revenues, stated in Canadian dollars. Exchange
rate variations had a negligible impact in 1999. Magazines were Quebecor Printing Inc.'s largest market in 1999, as in 1998
and 1997. Revenue from magazine printing, as a percentage of Quebecor Printing Inc.'s total revenue, rose slightly to 30%
in 1999 from 29% in 1998. Revenue from printing inserts and circulars (21%) and catalogues (15%) remained unchanged
compared to prior year levels, while revenue from these products as a percentage of total revenue rose in 1998 as
compared to 1997. Revenue from book printing, as a percentage of Quebecor Printing Inc.'s total revenue, decreased in
1998 as a result of strong competition in book printing due to excess capacity, lower demand and publisher mergers. In
1999, revenue from book printing as a percentage of total revenue remained stable at 13%.
Quebecor Printing Inc.'s operating margin before amortization of goodwill was 9.6% in 1999, compared to 8.3% in 1998
and 8.0% in 1997. The 1999 increase was due to productivity gains in the U.S. plants as a result of the retooling of
rotogravure printing facilities, the improved performance of the Canadian plants and higher business volumes, due
mainly to the acquisition of World Color that was completed during the busiest period of the year. The increase in the
1998 operating margin was due to a number of factors, including the retooling of rotogravure printing facilities and the
reorganization of operations in the U.S. In the fourth quarter of 1998, Quebecor Printing Inc. recognized a gain of close
to $21 million from the sale of its cheque and credit card divisions. In the same quarter, it recorded expenses of
$28.9 million related to the reorganization of its operations in the U.S.
Forest Products
On February 11, 2000, Abitibi-Consolidated Inc., Donohue Inc. and Quebecor Inc. announced that they had signed
agreements whereby Abitibi-Consolidated Inc. will offer to purchase all of Donohue Inc.'s outstanding shares at an
estimated price of Cdn$42.00 per share of Donohue Inc., to be paid in cash and shares. Under the agreements,
Quebecor Inc. has irrevocably committed itself to tender all of its shares in response to Abitibi-Consolidated Inc.'s offer.
The proposed business combination has been approved by the board of directors of the three companies and it is
expected that the transaction could be finalized toward the end of the first quarter of 2000. The transaction will be
recorded as a reverse takeover of Abitibi-Consolidated Inc. by Donohue Inc., as the latter's shareholders will receive
a sufficient number of Abitibi-Consolidated Inc. shares to enable them to acquire control of this company. Quebecor
Inc. will hold an interest of approximately 11% in the new company in terms of both the number of shares and voting
rights held. Since Quebecor Inc. will not control nor exercise a significant influence over the new company, this
interest will be accounted for as a portfolio investment. Consequently, the Forest Products segment will be considered
as a discontinued operation as of the first quarter of 2000 and the comparative figures will be restated accordingly. In
the first quarter of 2000, Quebecor Inc. will recognize a gain on dilution of its interest in Donohue Inc. The amount
of the gain cannot be determined before the closing of the transaction.
On August 4, 1999, Donohue Inc. acquired the 50.1% of Finlay Forest Industries Inc. it did not already own for
$80 million. Finlay's facilities, all located in Mackenzie, British Columbia, include a newsprint and specialties mill with an
annual production capacity of 200,000 metric tonnes and two sawmills that are located near the paper mill and have a
total annual production capacity of 360 million board feet. Donohue Inc. is now the sole owner of these facilities. On
December 3, 1999, Donohue Inc. sold its 50% interest in the Donohue Matane Inc. joint venture located in Matane,
Quebec. This company's facilities included a bleached chemi-thermomechanical pulp mill (BCTMP) where pulp was
made from softwood and/or hardwood chips and that had a capacity of 200,000 metric tonnes.
The $188-million increase in revenues in 1999 over 1998 is due to higher sales volumes in the three businesses, in
particular in the paper business due to the fact that the 1999 figures include the full-year results of the two Texas
newsprint and specialty mills, compared with only seven months in 1998. Higher selling prices of lumber and market pulp
as a direct result of the strength of the U.S. economy and the economic recovery in Asian countries also contributed to
the rise in revenues. The average selling price of newsprint was, however, much lower than levels recorded in the prior
year. Despite the higher paper sales volumes, this substantial price drop caused newsprint and specialty revenues to
fall back to 64% of total forest products revenue in 1999, as compared to 68% in 1998 and 55% in 1997. The weakness
of the Canadian dollar against the U.S. dollar and the pound sterling had a positive impact on Donohue Inc.
The considerable increase in Donohue Inc.'s revenues in 1998 was due primarily to the acquisition of the two newsprint
and specialty mills, located in Texas, from Champion International Corporation. The average selling price of newsprint
and specialties was significantly higher than in 1997, also contributing to the higher revenues. On the other hand, the average
selling price of market pulp and lumber fell from the previous year as a direct result of the problems in a number of
Asian countries throughout 1998. Even without counting the newly acquired mills in Texas, shipments of all products were
up from 1997. The large drop in the exchange rate of the Canadian dollar against the U.S. dollar had a positive impact
on Donohue in 1998.
Donohue Inc.'s consolidated operating margin fell to 15.6% in 1999 from 21.3% in 1998. The operating margin of the
newsprint and specialties group fell significantly due to the large drop in average net selling prices. The weakness of
the Canadian dollar against the U.S. dollar and a slight decrease in average production costs resulting mainly from
productivity gains helped contain the fall in the group's operating margin. The increase in the average selling price of market
pulp combined with lower production costs gave the operating margin for this product a significant boost. The lumber
group's operating margin greatly improved in 1999 following an increase in the average net selling price for this product.
However, average unit production costs for lumber increased, mainly as a result of the increase in the cost of standing
trees, particularly stumpage fees, and as a result of including from August 1999 the entire production volume of the
Mackenzie sawmills, which have a higher cost structure than the Eastern Canada mills.
Donohue Inc.'s consolidated operating margin improved in 1998, rising to 21.3% from 20.0% in 1997. The operating
margin of the newsprint and specialties group increased significantly due to rising average net selling prices, the relative
weakness of the Canadian dollar against the U.S. dollar and a 2% reduction in average production costs at Donohue
Inc.'s Canadian mills, due primarily to lower prices for wood chips and used paper, and improved productivity. While
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profitable, the Texas mills acquired in 1998 had not yet generated operating margins comparable to those of the Canadian
mills. The operating margin of both the market pulp and lumber groups declined, due primarily to lower average net
selling prices. The unit production cost fell by approximately 3% at the Saint-Félicien kraft pulp mill, due to lower wood
chip prices and lower costs for chemicals; it held relatively stable at the bleached chemi-thermomechanical pulp mill in
Matane, where higher electricity rates were offset by an effective cost-cutting program. Unit production costs for lumber
were reduced by 2% in 1998 due to improved productivity and a better performance in random-length lumber, which were
partially offset by the lower selling prices of wood chips. Despite the lower production costs at the sawmills, the introduction
of value-added products in early 1998 resulted in a slight increase in costs for the wood products group as a whole.
Newspapers
The acquisition of Sun Media Corporation on January 7, 1999 had a major impact on the Newspapers segment. Quebecor
Communications Inc.'s newspaper publishing and distribution operations were merged with those of Sun Media Corporation
on February 28, 1999 to form the only national chain of tabloids and local newspapers in Canada. The acquisition cost,
net of proceeds from the sale of four broadsheets to Torstar Corporation on March 1, 1999, was $617 million, not including
the assumed net debt of $380 million on Sun Media Corporation's books as of the date of acquisition. Sun Media
Corporation's results were included in consolidated income from January 7, 1999, except for the results of the four
newspapers sold to Torstar that were not considered to be part of the acquisition.
The acquisition of Sun Media Corporation was financed with a $700 million bank credit facility made available by a
syndicate of banks, as well as through maintenance of the subordinated notes issued by Sun Media Corporation in 1997
and with a cash contribution of $260 million to the new company's capital by Quebecor Communications Inc. The latter
funded its contribution through a temporary bank credit facility of $525 million made available to it and to Quebecor Inc.
In June 1999, Quebecor Communications Inc. sold a 30% interest in Sun Media Corporation to three investors for a cash
consideration of $260 million that was used to repay the loan.
The very substantial increase in the Newspaper segment's revenues in 1999 is obviously due to the acquisition of
Sun Media Corporation. On a pro-forma basis, that is assuming the acquisition of Sun Media Corporation had been
completed on January 1, 1998, the Newspapers segment would have posted an increase in revenues of approximately
5.6%. Advertising revenues from urban dailies would have risen 5.5% due to a 4.8% increase in advertising lineage, and
urban dailies circulation revenues would have increased by 2.9% in spite of a decrease in average circulation of 0.4%.
Community newspapers revenues would have risen 12.1% as a result of the acquisition of certain newspapers in 1999
and an increase in the advertising revenues of existing newspapers.
The operating margin before depreciation and amortization was 22.8% in 1999, compared to 19.7%, on a pro-forma
basis, in 1998. This increase is due in large part to the urban dailies, but also to community newspapers, and results
from the growth in revenues, the restructuring of operations following the acquisition of Sun Media Corporation, stringent
cost-control measures and a decline in newsprint prices.
In 1998, the Quebecor Communications Inc. newspapers posted an increase in revenue of 5.3% over the prior year. The
dailies recorded a slight increase in advertising lineage which, combined with higher rates, resulted in an increase of
more than 6% in advertising revenues. The average circulation of the dailies dropped by approximately 2%. However,
increases in selling prices reduced the decline in circulation revenues during this period. Community newspapers revenues
rose, due primarily to the acquisition of Le Courrier du Sud in 1998 and Groupe de Presse Bellavance in 1997 and to
the revenue growth of existing publications.
The operating margin before amortization of Quebecor Communications Inc.'s newspaper business was 19.3% in 1998,
compared to 19.6% in 1997. Revenue increases in 1998 were not sufficient to offset the rise in production costs, in
particular the rise in newsprint prices.
Books, Magazines and Music
This segment includes mainly the Company's book publishing operations that are carried on through several publishing
houses, its book distribution operations carried on by Québec-Livres, a division of Quebecor Communications Inc., its
magazine publishing operations carried on by Publicor, another division of Quebecor Communications Inc., and the
distribution of records and retail sales of books, magazines and records by Groupe Archambault Inc., a subsidiary of
Quebecor Communications Inc. In 1998 and 1997, this segment also included Joncas Postexperts Inc., a direct marketing
and direct-mail solicitation firm that was sold to Quebecor Printing Inc. in early 1999. In addition, at the end of 1998,
Quebecor Communications Inc. sold its 50% interest in Publistar Inc. to Trustar Ltd., which held the other 50%. This joint
venture published Le Lundi magazine.
Excluding revenues generated by Joncas Postexperts Inc. in 1998 and in early 1999, the Books, Magazines and Music
segment's revenues would have risen 5.9% in 1999 over the prior year. This growth is due primarily to Groupe Archambault
Inc., which alone generates over 60% of the segment's revenues and posted an 11.6% increase in revenues in 1999
due to numerous successes under exclusive distribution agreements and the opening of new retail stores and conversion
of existing stores. Magazine publishing revenues fell as a result of the sale of the interest in Publistar and the consolidation
of the women's magazines business. Book publishing and distribution operations posted a 6.3% growth in combined
revenues.
Excluding the contribution of Joncas Postexperts Inc. and certain unusual items recorded in 1998, namely the gain on
disposal of the interest in Publistar Inc., the Books, Magazines and Music segment's operating income grew from $0.2 million
in 1998 to $6.2 million in 1999. This considerable improvement is due to the increased profitability of all operations and
a decrease in Quebecor Communications Inc.'s administrative expenses following the transfer of its newspapers to Sun
Media Corporation.
The Books, Magazines and Music segment's revenues increased by 3.6% in 1998 over 1997. Groupe Archambault Inc. posted
a substantial increase in revenues over 1997, due in particular to the opening of new megastores. Magazine revenues declined
slightly following the sale of Publistar Inc. Book publishing operations posted a substantial increase in revenues as a
result of the acquisition of Les Éditions Logiques Inc. and Logidisque Inc., the success of Les Éditions CEC Inc.'s new
releases and the full-year impact of the acquisition of Les Éditions Internationales Alain Stanké ltée and Diffulivre Inc.
completed in 1997.
For the year ended December 31, 1998, the Books, Magazines and Music segment's operating income was up slightly,
primarily as a result of certain unusual items. Book publishing operations recorded an increase in operating income,
however this was offset by a decrease in the book distribution group's operating income. Operating income for magazine
publishing was also down, following the sale of Publistar Inc. in late 1998. Although Groupe Archambault Inc. posted a
substantial growth in operating income over 1997, this was offset by the increase in Quebecor Communications Inc.'s
administrative expenses.
Broadcasting
TQS Inc.'s revenues rose 6.1 % in 1999 over 1998. This growth is due mainly to the increase in advertising revenues
resulting in part from the larger volume available, but mainly from a rate increase. Revenues from local advertising made
up the major portion of the increase in revenue. Since the interest in TQS Inc. was acquired only on September 1, 1997,
TQS Inc.'s revenues were included in the consolidated results for four months only in 1997.
TQS Inc.'s operating loss increased by $1 million in 1999 despite the higher revenues generated. This decline is due to
an increase in programming costs and selling and promotion expenses. However, in the fourth quarter of 1999, the loss
was only $1.2 million, compared to $2.2 million for the fourth quarter of 1998. This proves the positive impact of the
new programming and the recent improvement in ratings. TQS Inc.'s management is confident that it will be able to
forge ahead in this positive vein in the year 2000.
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New Media
On September 30, 1999, Quebecor Inc., Informission Group Inc. and Intellia Inc., a subsidiary of Quebecor Communications
Inc., announced that they had reached an agreement to develop a company that will become a leader in Canada, and
eventually in the United States and Europe, in e-commerce solutions that combine strategy, technology integration, IP
solutions and creativity on the Internet.
This agreement led to the following transactions, which were concluded on November 1, 1999. Informission Group Inc.
acquired all of the shares of Intellia Inc. in exchange for the issuance of 12,214,286 shares of Informission Group Inc. to
Intellia Inc.'s shareholders. Prior to this acquisition, Quebecor Communications Inc. made an additional contribution of
$40 million to Intellia Inc. Furthermore, Quebecor Communications Inc. made a partial takeover bid for 4,108,108 common
shares of Informission Group Inc. at $9.25 per share. Following these transactions, Quebecor Inc., through its wholly
owned subsidiary Quebecor Communications Inc., held 15,036,068 shares or 58.23% of Informission Group Inc.'s
outstanding shares.
Informission Group Inc.'s results, including those of its wholly owned subsidiary Intellia Inc., were included in consolidated
income from November 1, 1999 while the results of Intellia Inc., which was a subsidiary of Quebecor Communications
Inc. before this transaction, were included in consolidated income until October 31, 1999. Prior to 1999, Quebecor
Communications Inc. recognized only 50% of Intellia Inc.'s results, as this company was held by a limited partnership in
which Quebecor Communications Inc. had an equal ownership share with Quebecor Printing Inc. In early 1999, Quebecor
Communications Inc. purchased Quebecor Printing Inc.'s interest in this limited partnership.
Following these transactions, revenue from the New Media segment skyrocketed to $21.5 million from $6.9 million
in 1998 and $2.4 million in 1997. The operating loss was negligible in 1999, compared with $1.3 million in 1998 and
$1.9 million in 1997.
The New Media segment also includes operations of the CANOE and CANOË portals and of various specialty Web sites
through the Quebecor New Media Inc. subsidiary.
CANOE (for Canadian Online Explorer) was launched by Sun Media Corporation in 1996. When Quebecor Inc. purchased
Sun Media Corporation in early 1999, the latter had a 60% interest in CANOE and the remaining 40% interest was held
by a subsidiary of BCE Inc. In June 1999, Quebecor New Media Inc. acquired Sun Media Corporation's interest in CANOE
and in Autonet.ca Inc. and in July 1999, it acquired the interest held by BCE Inc.'s subsidiary in CANOE. In September
1999, Quebecor New Media Inc. launched CANOË, the first French-language continuous news and information site, as
well as the archambault.ca transactional site and in November 1999, it launched the cultural cyberguide icimontreal.com.
While revenues from these businesses as a whole were only $3.6 million in 1999, they have grown constantly and rapidly
throughout the year. Quebecor New Media Inc.'s management believes this growth should continue at a rapid pace
throughout the year 2000. The cost of building, operating and promoting these sites has exceeded by far the revenues
they generated in 1999 and consequently, the operating loss was over $10 million. However, Quebecor New Media Inc.'s
management views these expenses as a well-founded investment, given the revenue-generation potential of these
operations in the coming years.
General Corporate Expenses and Financial Expenses
General corporate expenses are presented net of management fees charged to the various business segments. In 1999,
management fees charged and the reversal of provisions, in particular the provision for stock options and the provision
for pension expense, exceeded the administrative expenses incurred. The increase in general corporate expenses for the
year ended December 31, 1998 is attributable to an increase in certain non-cash charges for which no management fees
were charged to the business segments, and to higher expenses related to the stock option plan.
Financial expenses increased substantially in 1999, due mainly to higher average debt levels resulting mainly from the
business acquisitions made by Quebecor Printing Inc. and Sun Media Corporation. Quebecor Printing Inc.'s financial
expenses were $181.6 million in 1999, compared with $95.3 million in 1998, while Sun Media Corporation's financial
expenses were $64.3 million in 1999. In 1998, financial expenses were up over 1997 due to business acquisitions by
Donohue Inc. in 1998 and by Quebecor Printing Inc. and Quebecor Communications Inc. in 1997.
L I Q U I D I T Y A N D C A P I TA L R E S O U R C E S
Operating Activities
The increase in cash provided by operations over the last two years is basically the result of corresponding increases in
operating income before non-recurring items and amortization, less current income taxes. For the year ended December
31, 1999, Quebecor Printing Inc. and Sun Media Corporation recorded substantial increases in cash flow from operations,
while cash flow from operations for Donohue Inc. was similar to the level for the prior year. For the year ended December
31, 1998, Quebecor Printing Inc. and Donohue Inc. posted significant increases in operating cash flows, while the other
segments, as a whole, recorded a decrease in cash flow from operations. The analysis of operating results provides the
appropriate explanation in this regard. Through its securitization of receivables program implemented in 1999, Quebecor
Printing Inc. was able to reduce its working capital and recover a considerable amount of cash flow. In 1998, Quebecor
Printing Inc. made significant investments in its working capital.
Financing Activities
The financing of two major acquisitions was the highlight of financing activities in 1999. First, Quebecor Printing Inc. obtained
financing of US$1.25 billion and refinanced its existing US$1 billion bank credit facilities in order to complete the
acquisition of World Color. In addition, financing of $700 million was secured in order to purchase Sun Media Corporation.
This latter credit facility is secured by all of the assets and issued and outstanding shares of Sun Media Corporation and
its subsidiaries. Moreover, Quebecor Inc. obtained a bank credit facility of $525 million in early 1999 in order to support
this acquisition. This bank credit facility was repaid and cancelled during the year. Quebecor Inc. secured a new bank credit
facility of $225 million in October 1999 in order to complete the reverse takeover of Informission Group Inc., among
other things. This facility was increased to $300 million in February 2000.
In 1998, Donohue Inc., through its wholly owned subsidiary Donohue Forest Products Inc., secured a bank credit facility
of US$855 million that was used to acquire Champion International Corporation's newsprint mills.
During the year ended December 31, 1999, Quebecor Inc., as part of a normal course issuer bid, redeemed 18,400 Class
A Shares (Multiple Voting Shares) and 220,600 Class B Subordinate Voting Shares for a total consideration of
$8.5 million. During the year ended December 31, 1998, Quebecor Inc. redeemed 174,600 Class A Shares (Multiple
Voting Shares) and 1,127,700 Class B Subordinate Voting Shares for a total consideration of $37.8 million. A new normal
course issuer bid was launched for 2000. The Company considers such buybacks to be beneficial to all shareholders.
Dividends paid by Quebecor Printing Inc. in 1999 totalled US$0.28 per share, compared to US$0.24 per share in 1998
and US$0.22 per share in 1997. Donohue Inc. increased its dividend to $0.44 per share in 1999, compared to $0.427 per
share in 1998 and $0.373 per share in 1997. A major portion of those dividends was paid to non-controlling shareholders
of the two subsidiaries. Dividends paid by Quebecor Inc. on its Class A and Class B shares were $0.48 per share in 1999,
compared with $0.44 per share in 1998 and $0.40 per share in 1997.
Investing Activities
In addition to the major business acquisitions mentioned previously, Quebecor Printing Inc. made several strategic
acquisitions in Spain, Argentina and Austria, while Sun Media Corporation acquired a few local papers in Canada. In
addition, the Company increased its interest in certain subsidiaries, including TQS Inc.
During the year ended December 31, 1999, Quebecor Printing Inc. completed its three-year equipment modernization
program in the U.S., particularly the modernization of its rotogravure printing facilities. In total, it invested lesser amounts
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41
for capital investments than in the two previous years. On the other hand, Donohue Inc. invested a much higher amount
in capital projects in 1999 than it did in the past two fiscal years. This increase is related to the start of work under the
modernization program undertaken at the two mills in Texas. Very little capital investment is required for the other
business segments.
In 1998, Quebecor Printing Inc. continued its equipment modernization program, with a $456-million investment, over
and above the $451-million capital investment in 1997. Moreover, in 1998, Quebecor Printing Inc. acquired Tryckinvest
i Norden AB (TINA), Scandinavia's largest printing concern. It also made two acquisitions in South America in 1998, in
Colombia and Peru, thus strengthening its network in this region, where it broke into the market in 1997 by acquiring
companies in Chile and Argentina. In June 1998, Donohue Inc. acquired two newsprint and specialty mills located in
Texas from Champion International Corporation for a consideration of US$450 million. Quebecor Communications Inc.
invested $22 million in business acquisitions in 1998, more specifically in the newspaper field.
In early 1997, Quebecor Printing Inc. became the world leader in specialty printing by acquiring the Petty Co. In addition,
during the first quarter of 1997, Quebecor Printing Inc. completed the acquisition of the assets of AmerSig Graphics, Inc.
In September 1997, Quebecor Printing Inc. acquired the assets of the Franklin, Kentucky division of Brown Printing
Company. Quebecor Printing Inc. completed its first South American acquisition in September 1997, purchasing an
interest in Editorial Antártica S.A., Chile's second largest printer, and in Editorial Antártica SACIFE, in Argentina. In
1997, Quebecor Communications Inc. invested $29 million in business acquisitions, chiefly for the purchase of a controlling
interest in the TQS television network.
Financial Position
The consolidated financial statements of Quebecor Inc. include 100% of its subsidiaries' debt, even if this debt is non-
recourse to the parent company. However, the significant interests of non-controlling shareholders in subsidiaries
are not included in the consolidated shareholders' equity. The Company therefore considers that the debt to equity
ratio does not provide an appropriate measure of its financial health. It suggests instead the use of a debt to capitalization
ratio, where capitalization includes shareholders' equity, non-controlling shareholders' interest in subsidiaries and
debentures convertible into shares of subsidiaries. As at December 31, 1999, this debt to capitalization ratio stood at
52:48, compared to 45:55 as at December 31, 1998. The higher ratio reflects higher debt, incurred to finance business
acquisitions during 1999.
Quebecor Inc.'s management, along with the management of its subsidiaries, are of the opinion that future cash flows
generated by operations will be adequate to cover capital expenditure programs, debt repayment and dividend payment.
Year 2000 Issue
The change to Year 2000 had no significant impact on the Company’s operations up to the time this annual report was
published on March 15, 2000.
Although the change in date has occurred, it is not possible to conclude that all aspects of the Year 2000 Issue that may
affect Quebecor Inc. and its subsidiaries, including those related to customers, suppliers, or other third parties, have
been fully resolved.
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42
Financial Section
Financial Section
Selected Financial Data
Management’s responsibility for the financial statements
Auditors’ report to the shareholders
Consolidated statements of income
Consolidated statements of retained earnings
Consolidated statements of cash flows
Consolidated balance sheets
Segmented information
Notes to consolidated financial statements
Dividends and stock market price
45
46
46
47
48
48
50
51
53
72
S e l e c t e d F i n a n c i a l D a t a
(in millions of Canadian dollars except per share data)
Years ended December 31
Operations
Revenues
Operating income before non-recurring items
Contribution to net income
Operations
Goodwill amortization
Non-recurring items
Net income
228.4
(43.4)
296.0
481.0
188.9
(16.2)
—
172.7
Cash provided by operations
1,490.1
1,073.7
Per share data
Contribution to net income
Operations
Goodwill amortization
Non-recurring items
Net income
Dividends
Shareholders’ equity
Average number of shares outstanding (in millions)
$ 3.53
(0.67)
4.57
7.43
0.48
26.73
64.8
$ 2.89
(0.25)
—
2.64
0.44
22.00
65.3
Financial position
$ 609.7
Working capital
3,003.5
Long-term debt
1,424.5
Shareholders’ equity
Capitalization (1)
4,122.3
9,841.4
Total assets
(1) Included in the capitalization are the shareholders’ equity, non-controlling interest and convertible debentures
$ 471.0
5,860.4
1,726.5
5,644.6
14,829.5
S e l e c t e d Q u a t e r l y F i n a n c i a l D a t a
(Unaudited, in millions of Canadian dollars except per share data)
1999
1998
1997
1996
1995
$ 10,835.2
889.7
$ 8,425.2
800.2
$ 7,013.3
602.6
$ 6,253.3
654.9
$ 5,549.0
644.3
154.1
(10.8)
—
143.3
885.3
$ 2.34
(0.16)
—
2.18
0.40
18.58
65.9
$ 507.4
2,022.6
1,224.1
3,544.8
7,885.2
151.2
(9.1)
4.7
146.8
872.9
$ 2.30
(0.14)
0.07
2.23
0.40
16.58
65.9
$ 455.4
1,956.8
1,091.5
2,938.9
6,959.4
151.3
(9.9)
45.3
186.7
609.3
$ 2.29
(0.15)
0.69
2.83
0.33
14.83
66.0
$ 564.2
1,303.2
979.5
2,478.8
5,424.8
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45
Revenues
Operating income before non-recurring items
Contribution to net income
Operations
Goodwill amortization
Non-recurring items
Net income
Contribution to earnings per share
Operations
Goodwill amortization
Non-recurring items
Earnings per share
Revenues
Operating income
Contribution to net income
Operations
Goodwill amortization
Net income
Contribution to earnings per share
Operations
Goodwill amortization
Earnings per share
March
$ 2,176.8
140.7
1999
June
$ 2,230.8
186.5
September
$ 2,728.3
235.5
December
$ 3,699.3
327.0
32.2
(8.4)
—
23.8
0.50
(0.13)
—
0.37
56.6
(8.7)
218.5
266.4
0.87
(0.13)
3.37
4.11
1998
55.7
(10.4)
—
45.3
0.86
(0.16)
—
0.70
83.9
(15.9)
77.5
145.5
1.30
(0.25)
1.20
2.25
March
$ 1,817.1
132.4
June
$ 1,939.0
186.5
September
$ 2,206.5
224.4
December
$ 2,462.6
256.9
24.1
(2.9)
21.2
0.37
(0.05)
0.32
47.2
(3.0)
44.2
0.72
(0.04)
0.68
53.1
(4.8)
48.3
0.81
(0.08)
0.73
64.5
(5.5)
59.0
0.99
(0.08)
0.91
Management’s responsibility for the financial statements
The accompanying consolidated financial statements of Quebecor Inc. and its subsidiaries, and all the information in this annual report, are the responsibility
of management and are approved by the Board of Directors of Quebecor Inc.
These financial statements have been prepared by management in conformity with generally accepted accounting principles in Canada and include amounts
that are based on best estimates and judgments. The financial information used elsewhere in the annual report is consistent with that in the financial statements.
Management of the Company and that of its subsidiaries, in furtherance of the integrity and objectivity of the data in the financial statements, have developed
and maintain systems of internal accounting controls and support programs of internal audit. Management believes that these systems of internal accounting
controls provide reasonable assurances that financial records are reliable and form a proper basis for the preparation of the financial statements and that assets
are properly accounted for and safeguarded.
The Board of Directors carries out its responsibility for the financial statements principally through its Audit Committee, consisting solely of outside directors.
The Audit Committee reviews the Company's annual consolidated financial statements and formulates the appropriate recommendations to the Board of
Directors. The auditors appointed by the shareholders have full access to the Audit Committee, with and without management being present.
These financial statements have been examined by the auditors appointed by the shareholders, KPMG LLP, chartered accountants, and their report is presented hereafter.
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François R. Roy
François R. Roy
Executive Vice President and
Chief Financial Officer
46
January 28, 2000
Auditors’ report to the shareholders
We have audited the consolidated balance sheets of Quebecor Inc. and its subsidiaries as at December 31, 1999 and 1998 and the consolidated statements
of income, retained earnings and cash flows for the years ended December 31, 1999, 1998 and 1997. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in Canada. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1999
and 1998 and the results of its operations and its cash flows for the years ended December 31, 1999, 1998 and 1997 in accordance with generally accepted
accounting principles in Canada.
KMPG LLP
Chartered Accountants
Montreal, Canada
January 28, 2000
Consolidated statements of income
(In millions of Canadian dollars, except earnings per share data)
1999
Years ended December 31
1998
1997
REVENUES
$ 10,835.2
$
8,425.2
$
7,013.3
OPERATING EXPENSES
Cost of sales
Selling and administrative
Amortization
Financial expenses (note 1)
OPERATING INCOME
BEFORE NON-RECURRING ITEMS
Gains on dilution resulting from issuance of capital
stock by subsidiaries
Reserve for restructuring of operations and other
non-recurring items (note 2)
OPERATING INCOME
Income taxes (note 3)
Current
Deferred
Dividends on preferred shares of subsidiaries
Non-controlling interest
NET INCOME BEFORE GOODWILL AMORTIZATION
Goodwill amortization, net of non-controlling interest
8,164.1
748.1
681.7
351.6
9,945.5
6,242.0
641.1
545.4
196.5
7,625.0
5,214.0
558.2
460.5
178.0
6,410.7
889.7
800.2
602.6
376.6
(278.0)
988.3
148.0
16.2
164.2
824.1
(15.1)
(284.6)
524.4
(43.4)
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—
—
—
—
800.2
602.6
228.0
42.0
270.0
530.2
(15.3)
(326.0)
188.9
(16.2)
140.8
72.8
213.6
389.0
—
(234.9)
154.1
(10.8)
NET INCOME
$
481.0
$
172.7
$
143.3
EARNINGS PER SHARE BEFORE
GOODWILL AMORTIZATION
EARNINGS PER SHARE
AVERAGE NUMBER OF SHARES OUTSTANDING (in millions)
See accompanying Notes to consolidated financial statements.
$
$
8.10
7.43
64.8
$
$
2.89
2.64
65.3
$
$
2.34
2.18
65.9
Consolidated statements of retained earnings
(In millions of Canadian dollars)
Balance at beginning
Net income
Premium paid on redemption of shares
Dividends
Balance at end
Years ended December 31
1999
1998
1997
$
944.4
$ 828.4
$
711.4
481.0
1,425.4
(6.6)
(31.1)
172.7
1,001.1
(28.0)
(28.7)
143.3
854.7
—
(26.3)
$ 1,387.7
$ 944.4
$
828.4
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Consolidated statements of cash flows
(In millions of Canadian dollars)
CASH FLOWS RELATED TO OPERATIONS:
Net income
Adjustments for:
Depreciation of fixed assets
Amortization of goodwill and deferred charges
Deferred income taxes
Gain on disposal of assets
Non-controlling interest
Gains on dilution resulting from issuance of capital stock
by subsidiaries
Reserve for restructuring of operations and other non-recurring items
Other
Changes in non-cash balances related to operations
(net of the effect of business acquisitions)
Cash provided by operations
See accompanying Notes to consolidated financial statements.
Years ended December 31
1999
1998
1997
$
481.0
$ 172.7
$
143.3
656.0
98.3
16.2
(26.3)
255.4
(376.6)
175.9
14.7
1,294.6
195.5
1,490.1
529.5
44.0
42.0
(22.0)
314.1
—
—
23.1
1,103.4
(29.7)
1,073.7
446.6
31.8
72.8
—
227.8
—
—
21.7
944.0
(58.7)
885.3
Consolidated statements of cash flows (Continued)
(In millions of Canadian dollars)
CASH FLOWS RELATED TO FINANCING ACTIVITIES:
Increase (decrease) in bank indebtedness
Net proceeds from issuance of capital stock
Redemption of capital stock for cancellation
Issuance of long-term debt
Repayment of long-term debt
Increase in the interest of non-controlling shareholders
Dividends
Dividends paid to non-controlling shareholders
Other
Cash provided by financing activities
CASH FLOWS RELATED TO INVESTING ACTIVITIES:
Business acquisitions, net of cash and cash equivalents acquired (note 4)
Additions to fixed assets
Proceeds from disposal of assets
Other
Cash used by investing activities
Net increase (decrease) in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
denominated in foreign currencies
Cash and cash equivalents at beginning
Cash and cash equivalents at end
Changes in non-cash balances related to operations
(net of the effect of business acquisitions)
Accounts receivable
Inventories
Accounts payable and accrued liabilities
Other short-term and long-term items
Cash interest payments
Cash payments for income taxes
See accompanying Notes to consolidated financial statements.
1999
Years ended December 31
1998
1997
$
(110.4)
0.9
(8.5)
2,902.8
(2,080.4)
522.3
(31.1)
(96.1)
(4.5)
1,095.0
(2,065.9)
(623.9)
66.4
(13.5)
(2,636.9)
(51.8)
(7.4)
112.0
52.8
312.6
31.3
(94.4)
(54.0)
195.5
333.2
233.0
$
$
$
$
$
$
$
$
$
$
$
69.2
0.5
(37.8)
1,285.9
(566.4)
10.7
(28.7)
(83.5)
(0.6)
649.3
(1,079.3)
(586.4)
58.7
(42.3)
(1,649.3)
73.7
—
38.3
112.0
(136.1)
10.7
128.8
(33.1)
(29.7)
186.1
199.6
$
$
$
$
$
$
(12.5)
0.5
—
1,765.2
(1,895.3)
300.8
(26.3)
(68.8)
—
63.6
(458.5)
(550.2)
15.3
(1.9)
(995.3)
(46.4)
(59.2)
143.9
38.3
(85.8)
(60.1)
65.6
21.6
(58.7)
165.2
119.8
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Consolidated balance sheets
(In millions of Canadian dollars)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable (note 5)
Inventories (note 6)
Prepaid expenses
FIXED ASSETS (note 7)
GOODWILL
OTHER ASSETS
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LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Bank indebtedness
Accounts payable and accrued liabilities
Income and other taxes
Current portion of long-term debt (note 8)
LONG-TERM DEBT (note 8)
OTHER LIABILITIES (note 9)
DEFERRED INCOME TAXES
CONVERTIBLE DEBENTURES (note 10)
NON-CONTROLLING INTEREST (note 11)
SHAREHOLDERS’ EQUITY
Capital stock (note 12)
Retained earnings
Translation adjustment (note 13)
December 31
1999
1998
$
52.8
1,600.9
1,174.5
82.2
2,910.4
$
112.0
1,518.6
795.4
74.8
2,500.8
7,060.7
6,037.9
4,535.5
1,049.5
322.9
253.2
$ 14,829.5
$
9,841.4
$
21.8
2,155.3
57.7
204.6
2,439.4
5,860.4
339.4
545.7
259.4
3,658.7
347.6
1,387.7
(8.8)
1,726.5
$
134.2
1,451.3
131.4
174.2
1,891.1
3,003.5
227.3
597.2
90.3
2,607.5
348.6
944.4
131.5
1,424.5
$ 14,829.5
$
9,841.4
Commitments and contingencies (note 14)
See accompanying Notes to consolidated financial statements.
ON BEHALF OF THE BOARD OF DIRECTORS:
Jean Neveu
Jean Neveu, Director
Claire Léger
Claire Léger, Director
Segmented information
The Company operates in the following industry segments: Printing, Forest Products, Newspapers, Broadcasting, New Media and a segment that combines magazine
and book publishing as well as book and music distribution and which has operations solely in Canada. The Printing segment includes the printing of magazines,
inserts, flyers, catalogues, books, specialty printing and directories, and the mastering and replicating of CD-ROMs. This segment operates in the United States,
Canada, Europe, South America, Mexico and India. The Forest Products segment operates an integrated forest products business. Its operations are held in Canada
and the United States. Woodlands operations provide logs for the sawmills which produce lumber and wood chips. The chips are then processed by the newsprint
and market pulp mills. The Newspapers segment includes the publishing and distribution of daily and weekly newspapers, principally in Canada but also in the
State of Florida in the United States. The Broadcasting segment operates a general-interest French-language television network in Canada. The New Media segment
includes a business offering e-commerce solutions through a combination of strategy, technology integration, IP solutions and creativity on the Internet which
is active in Canada, the United States and Europe as well as an on-line services business including French-language and English-language portals and specialized
sites, all active solely in Canada.
Segment income includes income from sales to third-parties and inter-segment sales. These sales are accounted for at prices similar to those prevailing on the
open market.
(In millions of Canadian dollars)
INDUSTRY SEGMENTS
Revenues
Printing
Forest Products
Newspapers
Books, Magazines and Music
Broadcasting
New Media
Inter-segment
Printing
Forest Products
Other
Operating income before non-recurring items
Printing
Forest Products
Newspapers
Books, Magazines and Music
Broadcasting
New Media
General corporate expenses
Financial expenses
Amortization
Printing
Forest Products
Newspapers
Books, Magazines and Music
Broadcasting
New Media
Head Office
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1999
Years ended December 31
1998
1997
$
$
$
$
$
$
7,361.5
2,484.2
827.1
209.2
48.6
25.1
(25.7)
(89.3)
(5.5)
10,835.2
703.4
386.8
164.0
6.2
(10.3)
(11.3)
1,238.8
2.5
(351.6)
889.7
425.1
224.2
24.6
3.7
2.5
1.5
0.1
681.7
$
$
$
$
$
$
5,643.7
2,295.8
295.1
211.8
45.8
6.9
(22.2)
(44.1)
(7.6)
8,425.2
469.3
487.9
50.6
6.6
(9.3)
(1.3)
1,003.8
(7.1)
(196.5)
800.2
331.8
199.8
6.5
4.5
2.0
0.3
0.5
545.4
$
$
$
$
$
$
4,821.4
1,744.6
280.3
204.5
20.6
2.4
(19.8)
(34.8)
(5.9)
7,013.3
383.8
348.6
49.3
6.4
(3.4)
(1.9)
782.8
(2.2)
(178.0)
602.6
278.0
172.4
5.5
3.0
0.6
0.2
0.8
460.5
Segmented information (Continued)
(In millions of Canadian dollars)
INDUSTRY SEGMENTS (Continued)
Additions to fixed assets
Printing
Forest Products
Newspapers
Books, Magazines and Music
Broadcasting
New Media
Head Office
Assets
Printing
Forest Products
Newspapers
Books, Magazines and Music
Broadcasting
New Media
Head Office
GEOGRAPHIC SEGMENTS
Revenues generated by:
Canadian operations
Revenues from Canada
Revenues from the United States
Revenues from Europe and other
United States operations
European operations
Other
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Operating income before non-recurring items
Canada
United States
Europe
Other
General corporate expenses
Financial expenses
Assets
Canada
United States
Europe
Other
Head Office
1999
Years ended December 31
1998
1997
$
$
$
$
$
$
$
$
$
$
289.4
290.2
13.9
6.2
9.0
5.1
10.1
623.9
9,748.1
3,519.0
1,164.5
116.4
89.1
167.3
25.1
14,829.5
2,656.1
1,228.4
402.0
4,286.5
4,999.7
1,406.6
142.4
10,835.2
679.1
429.3
101.3
29.1
1,238.8
2.5
(351.6)
889.7
4,901.6
8,046.3
1,604.6
251.9
25.1
14,829.5
$
$
$
$
$
$
$
$
$
$
455.7
119.3
4.9
4.8
1.4
0.3
—
586.4
5,956.2
3,493.0
105.1
169.5
77.5
4.4
35.7
9,841.4
1,779.8
1,369.1
381.7
3,530.6
3,644.5
1,129.1
121.0
8,425.2
598.2
283.5
97.5
24.6
1,003.8
(7.1)
(196.5)
800.2
3,753.9
4,226.1
1,625.9
199.8
35.7
9,841.4
$
$
$
$
$
$
$
$
$
$
450.7
86.0
7.0
5.5
0.5
0.2
0.3
550.2
4,985.7
2,572.9
93.7
122.0
75.9
2.7
32.3
7,885.2
1,662.1
1,284.3
348.2
3,294.6
2,822.8
849.0
46.9
7,013.3
489.4
221.8
64.9
6.7
782.8
(2.2)
(178.0)
602.6
3,639.9
3,050.6
1,068.5
93.9
32.3
7,885.2
Notes to consolidated financial statements
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
Years ended December 31, 1999, 1998 and 1997
Quebecor Inc. is incorporated under the laws of Quebec.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Change in accounting policy
Effective in 1999, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants with respect to the presentation of the
Statement of Cash Flows. The standard requires, among other things, that non-cash items be excluded from financing and investing activities and disclosed
elsewhere in the financial statements in a way that provides all relevant information regarding financing and investing activities. Changes in short-term borrowings,
other than overdrafts which are an integral part of the day-to-day cash management process, are accounted for as financing activities. The standard requires
retroactive application with prior-periods comparative information being restated.
Consolidation and long-term investments
The consolidated financial statements include the accounts of Quebecor Inc. and all its subsidiaries (the "Company") and are prepared in conformity with
generally accepted accounting principles in Canada. The material differences between generally accepted accounting principles in Canada and in the United
States are described in note 18.
Investments in joint ventures are accounted for using the proportionate consolidation method. Joint ventures represent a negligible portion of the Company's
operations. Investments in companies subject to significant influence are accounted for by the equity method. Investments in other affiliated companies are
accounted for by the cost method.
Foreign currency translation
Net assets of self-sustaining foreign operations are translated using the current rate method. Adjustments arising from this translation are deferred and recorded
as a separate item under shareholders' equity and are included in income only when a reduction in the investment in these foreign operations is realized. Gains
or losses on foreign currency balances or transactions that are designated as hedges of a net investment in self-sustaining foreign operations are offset against
exchange losses or gains included in the separate item under shareholders' equity.
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As of the moment they are identified as a hedge for long-term monetary liabilities, exchange gains or losses realized on a foreign currency future revenue stream
are offset against the corresponding losses or gains on the hedged items.
Other foreign currency transactions entered into by the Company are translated using the temporal method. Translation gains and losses are included in income
except for unrealized gains and losses arising from the translation of long-term monetary assets and liabilities which are deferred and amortized on the straight-
line basis over the remaining life of the related items.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, related amounts of revenues and expenses and disclosure of contingent assets and liabilities. Significant
areas requiring the use of management estimates relate to the determination of pension and other employee benefits, reserves for environmental matters and
for the restructuring of operations, the useful life of assets for amortization and evaluation of net recoverable amount, the determination of fair value of assets
acquired and liabilities assumed in business combinations, provisions for income taxes and the determination of fair value of financial instruments. Consequently,
actual results could differ from those estimates.
Derivative financial instruments
The Company uses various derivative financial instruments to reduce its exposure to fluctuations in interest rates and foreign currency exchange rates. These
instruments are accounted for on an accrual basis. Realized and unrealized gains and losses on these financial instruments are deferred and recognized in income
in the same period and in the same financial statement category as the income or expense arising from the corresponding hedged positions.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments purchased three months or less from maturity and are stated at cost, which approximates market
value.
Securitization of trade receivables
Where groups of trade receivables are sold under terms that transfer the significant risks and rewards of ownership to third-parties, the transaction is recognized
as a sale and the trade receivables are accordingly removed from the consolidated balance sheets.
Inventories
Inventories are valued at the lower of cost or market value. Cost is determined using the average cost method for inventories of the Forest Products segment
and using the first in, first out method for inventories of other segments. Market value is net realizable value for all inventories, except for raw materials and
supplies for which market value is replacement cost.
Fixed assets
Fixed assets are stated at cost, net of government grants and investment tax credits which are accounted for when qualified expenditures are incurred. Cost includes
financial expenses directly related to the fixed asset until it is ready for productive use.
Amortization is provided on the straight-line basis over the following estimated useful lives:
Assets
Buildings and hydroelectric power plant
Machinery and equipment
Life
20 years to 40 years
3 years to 20 years
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net assets of acquired businesses. Management reviews periodically the value and
amortization period of goodwill. When circumstances or events indicate a possible decline in the net recoverable amount for goodwill, an evaluation, on a not-
discounted basis, of the future expected cash flows related to the plants or products which gave rise to the goodwill is undertaken. As the case may be, the carrying
amount of goodwill is then reduced.
Deferred income taxes
The Company follows the tax deferral method of accounting for income taxes, whereby earnings are charged with income taxes relating to reported earnings.
Differences between such taxes and taxes currently payable are accounted for and arise because certain items of revenue and expense are reported in the
accounts at different times than they are reported for income tax purposes.
Income taxes relating to retained earnings of foreign subsidiaries are not provided for by the Company, as such earnings are reinvested in foreign operations.
Stock option plan
Holders of options under the stock option plan (the “Plan”) of Quebecor Inc. have the following choices when they want to exercise their options:
a)
b)
acquire Treasury shares at the corresponding option exercise price;
or
receive a cash payment from Quebecor Inc. equivalent to the difference between the market value of the underlying shares and the exercise price
of the option.
The Company considers probable that, in most cases, choice b) will be privileged and, consequently, that the benefit attached to vested options under the Plan
should be accounted for as an expense, as for the other items of the compensation program. Thus, a liability is recorded. Subsequent adjustments to this
liability, originating from fluctuations in underlying share price and increases or decreases in the number of vested options, are recorded on a quarterly basis
and included in operating expenses.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Post-employment benefits other than pension
The Company provides life insurance and medical insurance coverage to some of its employees after their retirement. The costs of these benefits are recognized
as incurred by the retirees and paid by the Company.
1. FINANCIAL EXPENSES
Interest on long-term debt and convertible debentures
Interest on bank indebtedness
Investment income
Other
Interest capitalized to the cost of fixed assets
1999
343.2
22.8
(6.8)
3.0
362.2
(10.6)
351.6
$
$
1998
196.8
10.4
(5.5)
11.7
213.4
(16.9)
196.5
$
$
1997
$ 178.0
4.4
(3.5)
8.0
186.9
(8.9)
$ 178.0
2. RESERVE FOR RESTRUCTURING OF OPERATIONS AND OTHER NON-RECURRING ITEMS
This item includes the following :
a) Printing segment
The Printing segment recorded a US$180 million (CDN$267.6 million) charge in 1999 which encompasses the restructuring of its operations and certain
other non-recurring items. This charge is comprised of the following :
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Write-down of assets
Reserve for restructuring of operations
Other non-recurring charges
$ 148.3
94.1
25.2
$ 267.6
The reserve for restructuring of operations includes costs related to the closing of plants and severance, benefits and other personnel-related costs. It also
includes costs related to the streamlining of administrative management and the implementation of a sales force reduction program. These activities are
expected to be substantially completed by June 2001.
b) Books, Magazines and Music segment, New Media segment and Head Office
In 1999, the Books, Magazines and Music segment, the New Media segment and Head Office recorded write-offs and write-downs of assets, principally goodwill
and fixed assets which suffered a permanent decline in their net recoverable amount, which total $10.4 million.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
3. INCOME TAXES
The following table reconciles the statutory tax rate with the effective tax rate:
Statutory tax rate
Amortization of excess fixed asset cost on business acquisitions
Recovery of income taxes arising from the use of unrecorded tax benefits
Other
Effective tax rate before the following item
Effect of the non-taxable gains on dilution
Effective tax rate
4. BUSINESS ACQUISITIONS AND DISPOSITIONS
1999
1998
1997
31.9 %
2.2
(5.0)
(2.3)
26.8
(10.2)
16.6 %
33.0 %
1.9
—
(1.2)
33.7
—
33.7 %
32.9 %
2.9
—
(0.4)
35.4
—
35.4 %
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During the year ended December 31, 1999, the Company acquired the following businesses, which have been accounted for by the purchase method:
Geographic
segment
Acquired
interest
Date of
acquisition
Printing Segment
Cayfo, S.A.
Editorial Perfil
World Color Press, Inc. ("World Color")
Oberndorfer Druckerei
Forest Products Segment
Finlay Forest Industries Inc.(1)
Newspapers Segment
Sun Media Corporation ("Sun Media") (2)
Melfort Journal and Wynyard Advance
The Beacon Herald
The Lloydminster Daily Times
New Media Segment
Informission Group Inc.
Europe
South America
United States
Europe
Canada
Canada
Canada
Canada
Canada
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
March 1999
April 1999
August and October 1999
September 1999
August 1999
January 1999
June 1999
August 1999
September 1999
Canada, United
States and Europe
58.23 %
November 1999
(1) Previously a joint-venture held at 49.9%.
(2) A 30% interest was sold to non-controlling shareholders in June 1999.
In addition, during the year ended December 31, 1999, the Company increased its interest in several of its subsidiaries in the Printing, Books, Magazines
and Music, Broadcasting as well as New Media segments.
Goodwill related to these acquisitions is amortized over periods varying from 10 years to 40 years.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
4. BUSINESS ACQUISITIONS AND DISPOSITIONS (Continued)
Business acquisitions are summarized as follows:
World Color
Sun Media
Other
Total
1999
1998
1997
Assets acquired
Cash and cash equivalents
Non-cash operating working capital
Fixed assets
Goodwill
Deferred income taxes
Non-controlling interest
Other
Liabilities assumed
Bank indebtedness
Non-cash operating working capital
deficiency
Long-term debt
Deferred income taxes
Convertible debentures
Non-controlling interest
Other
Net assets acquired at fair value
Consideration
Cash
Notes payable
Increase in the interest of non-
controlling shareholders
B Shares
$
$
$
$
—
769.6
1,293.2
2,694.6
11.9
15.0
80.0
$
49.7
—
188.9
763.3
46.5
—
17.1
$
90.9
216.1
229.3
253.4
2.6
—
12.1
$
140.6
985.7
1,711.4
3,711.3
61,0
15.0
109.2
$
25.0
37.0
770.3
371.6
27.3
13.8
12.6
$
5.9
62.5
385.4
130.0
0.8
2.2
28.5
—
—
(13.1)
(13.1)
(2.6)
(17.5)
(707.8)
(1,660.6)
—
(202.5)
—
(123.0)
2,170.4
1,263.9
—
906.5
—
2,170.4
(18.3)
(429.6)
—
—
(0.7)
—
616.9
616.9
—
—
—
616.9
$
$
$
(206.1)
(85.4)
(16.5)
—
(66.8)
(0.3)
416.2
325.7
90.5
—
—
416.2
$
$
$
(932.2)
(2,175.6)
(16.5)
(202.5)
(67.5)
(123.3)
3,203.5
2,206.5
90.5
906.5
—
3,203.5
$
$
$
(7.7)
(117.3)
(6.0)
—
(11.3)
(3.9)
1,108.8
1,104.3
—
—
4.5
1,108.8
$
$
$
(46.3)
(61.8)
—
—
(18.1)
(7.2)
464.4
464.4
—
—
—
464.4
$
$
$
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In October 1999, Quebecor Printing Inc. sold the operating assets of its BA Banknote Division for a cash consideration of US$18 million (CDN$27 million).
Quebecor Printing Inc. realized a loss amounting to US$1.9 million (CDN$2.8 million) on this disposal which is included in the reserve for restructuring
of operations.
In December 1999, Donohue Inc. sold all the shares it held in Donohue Matane Inc., a joint-venture. Proceeds from disposal as well as the carrying
amount were negligible.
Moreover, during 1999, Sun Media Corporation sold substantially all the assets of The Record, a daily newspaper in Sherbrooke, Quebec.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
5. ACCOUNTS RECEIVABLE
Trade
Other
1999
1998
$ 1,383.7
217.2
$ 1,600.9
$ 1,404.1
114.5
$ 1,518.6
During 1999, Quebecor Printing Inc. sold a portion of its trade receivables on a revolving basis under the terms of a Canadian securitization agreement dated
March 1998 (the "Canadian Program"). The Canadian Program limit is $125 million. As at December 31, 1999, the amount outstanding under the
Canadian Program was $100 million ($125 million as at December 31, 1998).
In September 1999, Quebecor Printing Inc. entered into an agreement to sell, on a revolving basis, a portion of its trade receivables in the United States
up to a maximum of US$206 million (CDN$297 million) (the "US Program"). In December 1999, the existing World Color securitization program of US$204
million (CDN$294 million) was combined with the US Program, resulting in a new US Program of US$410 million (CDN$591 million). As at December
31, 1999, the amount outstanding under the new US Program was US$400 million (CDN$577 million).
Securitization fees vary based on commercial paper rates in Canada and the United States and, generally, provide a lower effective funding cost than
available under Quebecor Printing Inc.'s bank facilities.
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6. INVENTORIES
Raw materials and supplies
Work in process
Finished goods
7. FIXED ASSETS
Land
Buildings and hydroelectric power plant
Machinery and equipment
Projects under development
Land
Buildings and hydroelectric power plant
Machinery and equipment
Projects under development
1999
$
620.7
349.5
204.3
$ 1,174.5
1998
446.2
141.3
207.9
795.4
$
$
1999
Accumulated
depreciation
$
—
230.0
2,780.2
—
$ 3,010.2
1998
Accumulated
depreciation
$
—
191.4
2,408.5
—
$ 2,599.9
Net
$
157.6
1,267.0
5,347.0
289.1
$ 7,060.7
Net
$
125.6
884.2
4,775.5
252.6
$ 6,037.9
Cost
157.6
1,497.0
8,127.2
289.1
10,070.9
Cost
125.6
1,075.6
7,184.0
252.6
8,637.8
$
$
$
$
As at December 31, 1999, the cost of fixed assets included an amount of $455.1 million ($674.0 million as at December 31, 1998) and the accumulated
depreciation balance included an amount of $199.7 million ($364.9 million as at December 31, 1998) for land, buildings and equipment leased under
capital leases.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
8. LONG-TERM DEBT
Effective interest
rates as at
December 31
1999
Quebecor Inc.
Revolving bank facility (i)
Other debt
Quebecor Printing Inc. and its subsidiaries (ii)
Revolving bank facility (iii)
Commercial paper (iv)
Acquisition bank facilities (v)
Senior Subordinated Notes (vi)
Senior Subordinated Notes (vi)
Senior Debentures (vii)
Senior Debentures (viii)
Obligations under capital leases and other (ix)
Donohue Inc. and its subsidiaries (ii)
Bank credit facility (x)
Senior Notes (xi a) and b))
Senior Notes (xi b))
Bonds, Investissement-Québec
Portion A
Portion B
Other (xii)
5.82 %
7.40 %
6.47 %
5.28 %
7.15 %
8.38 %
7.75 %
7.25 %
6.50 %
4.53 %
6.38 %
9.13 %
7.63 %
Years of
maturity
2001
2001
2003-2005
2003
2000-2002
2008
2009
2007
2027
2000-2009
2000-2005
2005
2007
8.74 %
2000-2005
Sun Media Corporation and its subsidiaries (ii)
Senior bank credit facility (xiii)
Senior Subordinated Notes (xiv)
7.40 %
9.50 %
2001-2006
2007
Other subsidiaries of Quebecor Inc. (ii)
Miscellaneous debts
0.91 %
2000-2004
Total long-term debt
Less current portion
Quebecor Printing Inc. and its subsidiaries
Donohue Inc. and its subsidiaries
Other subsidiaries of Quebecor Inc.
$
1999
164.0
8.7
172.7
516.7
331.0
1,335.1
435.3
417.6
216.5
216.5
370.7
3,839.4
750.4
206.6
274.2
—
—
106.7
1,337.9
481.8
228.4
710.2
4.8
$
1998
—
—
—
1,028.0
—
—
—
—
232.7
232.7
349.7
1,843.1
722.0
206.6
274.2
9.6
52.5
68.5
1,333.4
—
—
—
1.2
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6,065.0
3,177.7
111.5
90.1
3.0
204.6
5,860.4
$
79.2
94.6
0.4
174.2
3,003.5
$
(i) As at December 31, 1999, these borrowings were drawn on a bank facility of $225 million. The bank facility is a one-year revolving facility that can
be extended on a yearly basis. In the event it would not be extended, the outstanding borrowed amounts would convert into a one-year term loan. The
credit agreement governing this bank facility contains certain covenants, including the obligation to maintain investments in publicly-traded companies
having a market value of at least $1 billion. The borrowed amounts bear interest at floating rates based on Bankers’ Acceptances rates, bank prime rate
or LIBOR.
(ii) Debts of these subsidiaries are non-recourse to the parent company, Quebecor Inc.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
8. LONG-TERM DEBT (Continued)
(iii) In April 1999, Quebecor Printing Inc. refinanced its existing revolving bank facility of US$1.0 billion (CDN$1.4 billion) by a new revolving bank
facility composed of three tranches. The first tranche of US$250 million (CDN$360.8 million) matures in 2003 and provides liquidity back-up to the
commercial paper program of US$250 million (CDN$360.8 million) of Quebecor Printing Inc. The second tranche of US$250 million (CDN$360.8
million) matures in 2004, while the third tranche of US$500 million (CDN$721.6 million) matures in 2005. The credit agreement governing these
bank facilities contains certain covenants among which is the obligation to maintain certain financial ratios.
The revolving bank facility bears interest at floating rates based on LIBOR or Bankers' Acceptances rates.
As at December 31, 1999, the drawings under this facility were all denominated in US$.
(iv) In April 1999, Quebecor Printing Inc. initiated a Commercial paper program in Canada with an initial limit of CDN$250 million, which was subsequently
increased to US$250 million (CDN$360.8 million) in November 1999. As at December 31, 1999, $331 million of notes are outstanding under the
program and are classified as long-term since Quebecor Printing Inc. has the ability and the intent to maintain such debt on a long-term basis and has
a credit facility available (see above) to replace such debt, if necessary.
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(v) Quebecor Printing Inc. has negotiated and obtained two additional credit facilities totaling US$1.25 billion (CDN$1.8 billion) to finance the acquisition
of World Color. One of these is a revolving credit facility of US$450 million (CDN$650 million) maturing in August 2002. This facility can also be
used for general corporate purposes. The other facility is a term loan divided in two tranches. On the first tranche of US$650 million (CDN$938
million), a segment of US$350 million (CDN$505 million) matures in August 2000 and the remaining balance of US$300 million (CDN$433 million)
can be extended until August 2001. The second tranche of US$150 million (CDN$216 million) was cancelled in December 1999 at Quebecor
Printing Inc.’s request. The credit agreements governing these bank facilities contain certain restrictions, including the obligation to maintain certain
financial ratios.
(vi) The Senior Subordinated Notes (the “Notes”) were issued by World Color in two series before it was acquired by Quebecor Printing Inc. The aggregate
principal amount of the first series is US$300 million (CDN$433 million) and the Notes are redeemable at the option of Quebecor Printing Inc. at a
decreasing premium between November 2003 and November 2006 and at par value thereafter. The aggregate principal amount of the second series
is US$300 million (CDN$433 million) and the Notes are redeemable at the option of Quebecor Printing Inc. at a decreasing premium between
February 2004 and February 2007 and at par value thereafter. The Notes were revalued in order to reflect their fair value at the time World Color was
acquired by Quebecor Printing Inc. The Notes contain certain restrictions on World Color, including limitations on its ability to incur additional indebtedness.
(vii) These debentures are repayable in US dollars.
(viii) These debentures are redeemable at the option of the holder at their par value on August 1, 2004, and are repayable in US dollars.
(ix) Obligations under capital leases and other debt are partially secured by assets. In addition, a portion of $266 million is repayable in Euro currencies,
a portion of $87 million is repayable in US dollars and a portion of $13 million is repayable in Swedish krona.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
8. LONG-TERM DEBT (Continued)
(x) The bank credit facility of US$855 million (CDN$1,234 million) consists of four tranches. The first tranche is a revolving credit of US$200 million
(CDN$289 million), or the equivalent in Canadian dollars, maturing in 2003. The second and third tranches are term credits of US$230 million
(CDN$332 million) and US$300 million (CDN$433 million) payable in quarterly installments maturing in 2003 and 2005, respectively. The fourth tranche
is a revolving credit of US$125 million (CDN$180 million) up to 2000 that will become thereafter a term credit payable in quarterly installments
maturing in 2005. During 1999, Donohue Inc. obtained a new revolving credit facility of $100 million, or the equivalent in US dollars, maturing in 2000.
These credits bear interest at floating rates based on Banker's Acceptances rates, bank prime rate or LIBOR. The credit agreement contains usual
covenants such as the obligation to maintain certain financial ratios.
(xi) a) The Senior Notes issued by a subsidiary of Donohue Inc. will be redeemable at the subsidiary’s option on or after May 15, 2000, in whole or in
part, at a premium until year 2003 and at par thereafter, plus accrued interest.
b) Repayable in US dollars.
(xii) Other debt include a portion of $103.5 million repayable in US dollars.
(xiii) The Senior bank credit facility is comprised of three tranches. The first and second tranches are term reducing loans maturing in 2006. The third
tranche is a revolving credit facility of $100 million maturing in 2006 which was unused at December 31, 1999. The credit agreement governing this
bank facility contains certain covenants, including the obligation to maintain certain financial ratios, and certain restrictions, including a restriction on
dividend payments by Sun Media Corporation.
The facility bears interest at floating rates based on Bankers’ Acceptances rates or bank prime rate and is collateralized by liens on all assets as well
as shares of Sun Media Corporation and its subsidiaries.
(xiv) The Senior Subordinated Notes were issued in two series by Sun Media Corporation in 1997. Their outstanding principal amount as of December 31,
1999 was US$97.5 million (CDN$140.7 million) and US$58.5 million (CDN$84.4 million), respectively, and their nominal interest rate is 9.5%.
The Notes were recorded at their fair market value of $230.6 million when Sun Media Corporation was acquired.
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Principal repayments on long-term debt in each of the next five years are as follows:
2000
2001
2002
2003
2004
$ 204.6
$ 358.7
$ 920.3
$ 637.3
$ 663.9
9. OTHER LIABILITIES
Pension accrual
Reserve for unfavorable leases acquired
Reserve for environmental matters
Workers’ compensation accrual
Other
1999
120.9
83.1
27.1
24.8
83.5
339.4
$
$
1998
108.9
12.0
33.7
18.0
54.7
227.3
$
$
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
10. CONVERTIBLE DEBENTURES
Convertible Senior Subordinated Notes 6.00% (a)
French Convertible Debentures (b)
Maturity
2007
2001
1999
185.9
73.5
259.4
$
$
1998
—
90.3
90.3
$
$
a) The Convertible Senior Subordinated Notes mature on October 1, 2007. The Notes were revalued in order to reflect their fair market value at the time
World Color was acquired by Quebecor Printing Inc. Since the acquisition of World Color by Quebecor Printing Inc., each US$1,000 tranche is convertible
into 30.5884 Subordinate Voting Shares of Quebecor Printing Inc. and US$197.25 (CDN$284.69) cash. The portion of the Notes related to the option
to convert into Subordinate Voting Shares of Quebecor Printing Inc. was valued at the date of acquisition and classified as non-controlling interest. The Notes
are convertible at the option of the holder at any time, and redeemable at the option of Quebecor Printing Inc. at a decreasing premium from
October 2000 to the final maturity. Certain conditions apply to any redemption between October 2000 and October 2002. During 1999, pursuant to the
terms of the Notes, Quebecor Printing Inc. made a par tender offer for 100% of the face value of US$151.8 million (CDN$219.1 million) and repurchased
US$7.6 million (CDN$11.0 million) thereof. As at December 31, 1999, the aggregate principal amount of outstanding Notes was US$144.2 million
(CDN$208.1 million). If all outstanding Notes were converted into Subordinate Voting Shares of Quebecor Printing Inc., Quebecor Inc.’s interest in
Quebecor Printing Inc. would decrease to 36.95% from 38.05%.
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b) A French subsidiary of Quebecor Printing Inc. issued debentures convertible into shares of its capital stock. The total amount of convertible debentures outstanding
as at December 31, 1999 was FF344 million ($76.0 million) (FF344.0 million ($94.8 million) as at December 31, 1998). Quebecor
Printing Inc. owns call options on all of the debentures. In addition, a portion of FF172.0 million ($38.0 million) cannot be converted without the prior consent
of Quebecor Printing Inc. The interest of Quebecor Printing Inc. in this subsidiary would decrease from 100% to 78.5% if all the debentures were converted
without Quebecor Printing Inc. exercising its call options. The convertible debentures bear interest at rates varying from 1.0% to 5.0%
and mature on December 31, 2001. A portion of these debentures has been discounted for accounting purposes at an imputed rate of 4.5% in order to
establish its fair value within the context of a business combination.
11. NON-CONTROLLING INTEREST
Non-controlling interest includes the interest of the non-controlling shareholders in the shares of subsidiaries of Quebecor Inc. As at December 31, 1999,
the most significant non-controlling interests in the participating shares of subsidiaries were as follows:
Subsidiary
Quebecor Printing Inc.
Donohue Inc.
Sun Media Corporation
Informission Group Inc.
Segment
Printing
Forest Products
Newspapers
New Media
Non-controlling
interest
61.95 %
80.46 %
30.00 %
41.77 %
12. CAPITAL STOCK
a) Authorized capital stock
An unlimited number of Class A Multiple Voting Shares with voting rights of ten votes per share (herein referred to as "A shares"), convertible at any time
into Class B Subordinate Voting Shares on a one-for-one share basis.
An unlimited number of Class B Subordinate Voting Shares (herein referred to as "B shares"), convertible into A shares on a one-for-one share basis only
if a takeover bid regarding A shares is made to holders of A shares without being made concurrently and under the same terms to holders of B shares.
Holders of B shares are entitled to elect 25 % of the Board of Directors of Quebecor Inc. Holders of A shares may elect the other members of the Board
of Directors.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
12. CAPITAL STOCK (Continued)
b)
Issued capital stock
A shares
B shares
Number
Amount
Number
Amount
Balance as at December 31, 1998
25,837,127
$
11.5
38,912,295
$
337.1
Shares issued for cash upon the exercise of
stock options
Shares redeemed
A shares converted into B shares
—
(18,400)
(1,145,158)
—
—
(0.5)
75,000
(220,600)
1,145,158
0.9
(1.9)
0.5
Balance as at December 31, 1999
24,673,569
$
11.0
39,911,853
$
336.6
c) Stock option plan
Under a stock option plan established by Quebecor Inc., 2,000,000 B Shares have been set aside for officers, senior employees and other key employees
of the Company. The exercise price of each option is equal to the weighted average transaction price of B Shares on The Toronto Stock Exchange in the 5
days preceding the grant. Each option may be exercised during a period not exceeding ten years from the date it was granted. Options usually vest as
follows: 1/3 after one year, 2/3 after two years and 100% three years after the original grant. The Board of Directors may, at its discretion, affix different
vesting periods at the moment of each grant.
The following table provides details regarding changes to outstanding options for the years ended December 31, 1999 and 1998:
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1999
Weighted
average
exercise price
Options
1998
Weighted
average
exercise price
Options
222,834
Balance at beginning
1,002,817
Granted
(75,000)
Exercised
Cancelled against cash payment (35,334)
Balance at end
Vested options at end
1,115,317
144,849
$
$
$
18.22
359,834
34.58
40,000
12.31 (25,000)
22.33 (152,000)
33.20
23.94
222,834
182,834
$
$
$
16.87
29.02
18.83
17.77
18.22
15.86
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Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
12. CAPITAL STOCK (Continued)
c) Stock option plan (Continued)
The following table provides summary information regarding outstanding options as at December 31, 1999:
Outstanding options
Vested options
Range of
exercise
price
Number of
outstanding options as
at December 31, 1999
Weighted
average years
to maturity
$15 to $20
$20 to $25
$25 to $30
$30 to $35
$35 to $40
42,500
50,000
20,000
602,817
400,000
$15 to $40
1,115,317
4.6 years
3.6 years
8.3 years
9.3 years
9.7 years
9.2 years
Weighted
average
exercise
price
17.85
20.19
29.02
33.02
36.94
33.20
$
$
$
$
$
$
Number of
vested options as at
December 31, 1999
42,500
50,000
—
52,349
—
144,849
Weighted
average
exercise
price
17.85
20.19
—
32.47
—
23.94
$
$
$
$
$
$
For the year ended December 31, 1999, a charge reversal of $0.8 million (charges of $2.3 million and $0.6 million for the years ended December 31, 1998
and 1997, respectively) relative to the plan was included under “Selling and administrative expenses” in the Consolidated Statements of Income.
13. TRANSLATION ADJUSTMENT
Balance at beginning
Effect of exchange rate variation on translation of net assets of
self-sustaining foreign operations
Portion included in income as a result of reductions in net investments
in self-sustaining foreign operations
Balance at end
14. COMMITMENTS AND CONTINGENCIES
a) Leases
1999
1998
$ 131.5
$
42.3
(121.5)
91.2
(18.8)
(2.0)
$
(8.8)
$ 131.5
The Company rents premises and equipment under operating leases which expire at various dates up to 2010 and for which minimum lease payments total
$936.7 million. Minimum payments under these leases for each of the next five years are as follows:
2000
2001
2002
2003
2004
$ 171.7
$ 149.5
$ 122.6
87.8
$
71.9
$
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
14. COMMITMENTS AND CONTINGENCIES (Continued)
b) Fixed assets
As at December 31, 1999, Quebecor Printing Inc. had commitments to purchase fixed assets valued at approximately US$29 million
(CDN$42 million).
A wholly-owned subsidiary of Donohue Inc. has undertaken in 1998 a modernization program of its facilities in Texas. This program includes the
replacement of three paper machines by a more modern machine, the transformation of a kraft pulp mill to meet the new requirements of the U.S.
environmental regulations, the expansion of a de-inking facility, the improvement and the modification of other paper machines and also the broadening
of the collection, sorting and recycling of paper. The total cost of this program is estimated at US$332 million (CDN$479 million). At December 31, 1999,
the subsidiary had incurred costs of US$129 million and had firm commitments of US$70 million (CDN$101 million) in connection with this
modernization program.
c) Environment
The Company is subject to various laws, regulations and government policies principally in North America and Europe, relating to health and safety, to
the generation, storage, transportation, disposal and environment emissions of various substances, and to environment protection in general.
The Company believes it is in compliance with such laws, regulations and government policies, in all material respect. Furthermore, the Company
does not anticipate that the compliance with such environmental statutes will have a material adverse effect upon its competitive or consolidated
financial position.
15. FINANCIAL INSTRUMENTS
The Company has operations and exports its products in several countries and is therefore exposed to risks relating to foreign exchange fluctuations. It is
also subject to risks relating to interest rate fluctuations. In order to reduce these risks, Quebecor Inc. and its subsidiaries make a portion of their borrowings
in foreign currencies and use derivative financial instruments. None of these instruments is held or issued for speculative purposes.
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a) Description of derivative financial instruments
i) Management of foreign exchange risk
Reference amount in millions of CDN$ as at December 31 (1)
1999
1998
Maturity in
less than one
year
Maturity
between
1 and 3 years
Maturity in
less than one
year
Maturity
between
1 and 3 years
156.1
169.2
51.1
62.2
5.8
348.4
18.8
112.9
22.2
26.5
—
—
169.2
—
137.6
135.1
—
41.0
18.0
503.3
42.0
143.3
8.9
—
23.3
—
88.8
—
Currencies
bought/sold
CDN$ / US$
US$ / Euro
US$ / SEK
Other
CDN$ / US$
CDN$ / US$
CDN$ / £
Quebecor Printing Inc. and its subsidiaries
Forward foreign exchange contracts
Forward foreign exchange contracts
Forward foreign exchange contracts
Forward foreign exchange contracts
Donohue Inc. and its subsidiaries
Forward foreign exchange contracts
Foreign currency options
Foreign currency options
(1) Exchange rates as at December 31, 1999 were used to translate amounts in foreign currencies.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
15. FINANCIAL INSTRUMENTS (Continued)
a) Description of derivative financial instruments (Continued)
ii) Management of interest rate risk
Quebecor Printing Inc. has entered into interest rate swap agreements on an amount of US$45.9 million (CDN$66.3 million) in EURO currencies.
These contracts mature between December 2000 and March 2003. Quebecor Printing Inc. also entered into cross currency interest rate swap
agreements (US$/EURO) on an amount of US$26.1 million (CDN$37.6 million). These contracts mature between December 2000 and
November 2001.
Sun Media Corporation has entered into a number of interest rate swap and cap agreements maturing in May 2002 in order to reduce it's exposure
to changes in interest rates on its senior bank credit facility. The interest rate swap agreements have the effect of converting the interest on
$100 million of the senior bank credit facility from a floating rate plus the applicable margin (the "Margin") to a weighted average fixed interest rate
of 5.39% plus the Margin. The interest rate cap agreements have the effect of limiting the interest on $100 million of the senior bank credit facility
to a maximum of 5.31% plus the Margin.
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Sun Media Corporation has also entered into a number of foreign exchange, fixed and variable interest rate swap agreements for 100% of its Senior
Subordinated Notes in order to reduce it's exposure to changes in the exchange rate of the US dollar as compared to the Canadian dollar. The effect
of these agreements is to convert the obligation of Sun Media Corporation to service US dollar denominated debt of $156 million into Canadian dollar
denominated debt of $212.5 million at an average exchange rate of CDN$1.3625 to US$1.00.
In addition, these interest rate swap agreements have the effect of converting the interest rate on US$123.5 million of Senior Subordinated Notes
from a fixed rate of 9.5% to a weighted average fixed interest rate on CDN$168.3 million of 9.51%. These agreements also convert the interest rate
on US$19.5 million of Senior Subordinated Notes from a fixed rate of 9.5% per annum to a floating interest rate on CDN$26.5 million equal to the
Banker's Acceptance Rate plus 3.08% per annum. These agreements convert the interest rate on a further US$13 million of Senior Subordinated
Notes from a fixed rate of 9.5% per annum to a floating interest rate on CDN$17.8 million equal to the Banker's Acceptance Rate plus 2.74%.
b) Fair value of financial instruments
The carrying amount of cash and cash equivalents, accounts receivable, bank indebtedness, and accounts payable and accrued liabilities approximates
fair value as these items have a short-term maturity.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
15. FINANCIAL INSTRUMENTS (Continued)
b) Fair value of financial instruments (Continued)
Financial instruments having a fair value different from their carrying amount as at December 31, 1999 and 1998 are:
Quebecor Printing Inc. and its subsidiaries
Long-term debt (including current portion)
Convertible debentures (including current
portion)
Interest rate swap agreements
Forward foreign exchange contracts
Cross currency interest rate swap agreements
Donohue Inc. and its subsidiaries
Long-term debt (including current portion)
Determinable
Not determinable (i)
Interest rate swap agreements
Foreign exchange forward contracts and
options
Sun Media Corporation and its subsidiaries
Long-term debt (including current portion)
Interest rate swap agreements
Interest rate cap agreements
1999
1998
Carrying amount
Fair value
Carrying amount
Fair value
$
(3,839.4)
$ (3,800.0)
$ (1,843.1)
$ (1,844.1)
(259.4)
—
—
—
(257.7)
(1.1)
12.6
2.3
(1,337.9)
—
—
(1,366.3)
—
—
—
11.0
(710.2)
—
1.2
(696.9)
1.4
1.6
(90.3)
—
—
—
(1,280.9)
(52.5)
—
—
—
—
—
(104.5)
(4.6)
(2.3)
—
(1,414.9)
N/A
(2.6)
(37.5)
—
—
—
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(i) The capital repayment and interest charge related to this debt depended on future operating cash flows of a joint venture. Therefore, the fair value could
not be determined.
Fair value is based essentially on discounted cash flows. Market quotes and interest rates as at December 31, 1999 and 1998 of similar instruments
having the same maturity were used.
The Company does not foresee any failure by the counter-parties to these contracts as they are all Canadian and international banks having at least an
A-rating from Standard & Poor's or an A3 rating from Moody's.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
15. FINANCIAL INSTRUMENTS (Continued)
c) Credit risk management
The Company, in the normal course of business, monitors the financial condition of its customers and reviews the credit history of each new customer. The
Company does not have a significant exposure to any individual customer or counter-party. The Company establishes an allowance for doubtful accounts
that corresponds to the specific credit risk of its customers, historical trends and economic circumstances.
The Company believes that the product and geographical diversity of its customer base serves to reduce the impact of abrupt fluctuations in local market
or product-line demand and thus reduces its credit risk. The Company has long-term contracts with most of its major customers.
The Company does not believe that it is exposed to an unusual level of customer credit risk.
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16. RELATED PARTY TRANSACTIONS
During the year, the Company made sales to certain of its subsidiaries' non-controlling shareholders and to affiliated companies in the amount of $86.2 million
($97.6 million and $47.4 million, respectively, for the years ended December 31, 1998 and 1997). As at December 31, 1999 the balance receivable
on these sales amounted to $7.9 million ($14.5 million as at December 31, 1998). These transactions were concluded at prices and conditions similar
to those prevailing on the open market and were accounted for at the exchange value.
17. PENSION PLANS
The Company offers defined benefit pension plans to its employees. The Company respects its obligations in regard of its contributions, which must be maintained
at a level sufficient to cover benefits. The Company's various pension plans were subject to an actuarial valuation during the last three years.
The net pension expense is as follows:
1999
1998
1997
Net pension expense
$
44.9
$
36.9
$
27.8
The capitalization of the pension plans is as follows:
Market value of pension fund assets
$ 1,656.2
$ 1,299.3
$ 1,146.6
Actuarial present value of accrued pension benefits
1,573.3
1,188.3
1,074.6
Excess
$
82.9
$
111.0
$
72.0
1999
1998
1997
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
18. MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) IN CANADA AND THE UNITED STATES
The Company’s consolidated financial statements are prepared in accordance with GAAP in Canada which differ in some respects from those applicable
in the United States. The following tables set forth the impact of material differences between GAAP in Canada and GAAP in the United States on the
Company’s consolidated financial statements.
a)
Consolidated statements of income
Net income, as reported in the consolidated
statements of income per GAAP in Canada
Adjustments
Foreign currency translation (i)
Post-employment benefits other than pension (ii)
Business process reengineering (iii)
Income taxes (iv)
Reserve for restructuring of operations (v)
Derivative financial instruments (vi)
Net income as adjusted per GAAP in the United States
(in Canadian dollars)
Earnings per share, as reported in the consolidated statements
of income per GAAP in Canada
Effect of adjustments, net of applicable income taxes
Earnings per share as adjusted per GAAP in the United States
(in Canadian dollars)
b)
Consolidated balance sheets
1999
1998
1997
$
481.0
$
172.7
$
143.3
8.9
(3.6)
0.7
(1.4)
(1.0)
6.4
(9.0)
(0.7)
0.7
0.5
—
(1.2)
(3.6)
(0.7)
(1.4)
0.3
—
(4.0)
$
$
$
491.0
$
163.0
$
133.9
7.43
0.15
7.58
$
$
2.64
(0.14)
2.50
$
$
2.18
(0.15)
2.03
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Current assets
Fixed assets
Goodwill
Other assets
Current liabilities
Long-term debt
Other liabilities
Deferred income taxes
Convertible debentures
Non-controlling interest
Retained earnings
Translation adjustment
1999
1998
Canada
United States
Canada
United States
$
2,910.4
7,060.7
4,535.5
322.9
2,439.4
5,860.4
339.4
545.7
259.4
3,658.7
1,387.7
(8.8)
$
2,973.8
7,130.4
4,772.2
320.3
2,487.0
5,895.2
428.9
768.1
289.5
3,608.8
1,379.7
(8.1)
$
2,500.8
6,037.9
1,049.5
253.2
1,891.1
3,003.5
227.3
597.2
90.3
2,607.5
944.4
131.5
$
2,445.2
5,858.7
1,291.6
334.8
1,908.4
2,980.7
255.2
755.8
90.3
2,533.6
926.4
131.3
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
18. MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) IN CANADA AND THE UNITED STATES (Continued)
(i) Under GAAP in Canada, unrealized exchange losses arising from the translation of long-term debt denominated in foreign currencies are deferred
and amortized over the remaining life of the related debt. Under GAAP in the United States, these losses would have been included in income and,
consequently, no amount would have been deferred in the consolidated balance sheets under the item "Other assets".
Under GAAP in Canada, as of the moment they are identified as a hedge for long-term monetary liabilities, exchange gains or losses on a foreign
currency future revenue stream are offset against the corresponding losses or gains on the hedged items. Under GAAP in the United States, a
foreign currency future revenue stream cannot constitute a hedge of long-term monetary liabilities.
(ii) Post-employment benefits other than pension have been recognized as incurred by the retirees and paid by the Company, in conformity with GAAP
in Canada. Under GAAP in the United States, the cost of these benefits would have been recognized as the services were rendered and, consequently,
would have been allocated throughout the years during which these services were rendered by the employees concerned.
(iii) Under GAAP in Canada, certain costs incurred in connection with consulting contracts or internal projects that combine business process reengineering
and information technology transformation were recorded in the balance sheets under the items “Other assets” or “Fixed assets”, and are amortized
over periods varying between three to five years. Under GAAP in the United States, since 1997, these costs must be included in income as incurred.
Under GAAP in the United States, the expense for 1997 includes the unamortized balance of prior years’ deferred expenses.
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(iv) Under GAAP in Canada, deferred income taxes in the consolidated balance sheets are not adjusted to reflect subsequent changes in tax rates. In
addition, tax benefits arising from losses carried forward of acquired businesses not recognized as of the date of a business acquisition are accounted
for as income in the year the benefit is realized. Under GAAP in the United States, deferred income taxes in the consolidated balance sheets must
be adjusted to reflect subsequent changes in tax rates and tax benefits related to losses carried forward of acquired businesses are recorded as a
reduction of goodwill when they are realized. Moreover, some differences that are considered of a permanent nature under GAAP in Canada are rather
considered as temporary differences under GAAP in the United States.
(v) Under GAAP in the United States, a portion of the reserve for restructuring of operations included in “Accounts payable and accrued liabilities”
would not meet the criteria for recognition of a liability. In addition, a portion of the reserve for restructuring of operations related to the acquisition
of Sun Media Corporation in 1999, which was added to goodwill as allowed under GAAP in Canada, would have been expensed in the year under
GAAP in the United States.
(vi) Under GAAP in Canada, outstanding foreign currency forward and option contracts at year-end are off-balance sheet items. Under GAAP in the United
States, unrealized exchange gains or losses on foreign currency forward and option contracts must be accounted for in the income statement when
they do not constitute a hedge for a firm commitment.
Notes to consolidated financial statements (Continued)
(Tabular amounts are expressed in millions of Canadian dollars, unless stated otherwise)
18. MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) IN CANADA AND THE UNITED STATES (Continued)
c) Comprehensive income
The application of GAAP in the United Sates requires the disclosure of comprehensive income in a separate financial statement, which includes the
net income as well as revenues, charges, gains and losses recorded directly to equity.
Net income as adjusted per GAAP in the United States
Translation adjustment (1)
Comprehensive income per GAAP in the United States
(1) Change for the year.
19. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
1999
$
491.0
(139.4)
$
351.6
1998
163.0
88.8
251.8
$
$
1997
133.9
15.3
149.2
$
$
Although the Year 2000 change has occurred, it is not possible to conclude that all aspects of the Year 2000 Issue that may affect the entity, including
those related to customers, suppliers, or other third-parties, have been fully resolved.
20. COMPARATIVE FIGURES
Certain 1998 and 1997 figures have been reclassified to conform with the presentation adopted for the year ended December 31, 1999.
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Dividends and stock market price
The Company declares and pays dividends quarterly. Each Class A Multiple Voting Share (the "Class A Share") and each Class B Subordinate Voting Share
(the "Class B Share") are entitled to receive the dividends as determined by the Board of Directors, in an identical amount, at the same date and in the same
form, as if such shares constituted shares of a single class.
For the fiscal year ended December 31, 1999, the dividend declared and paid by the Company on Class A Shares and Class B Shares totalled $0.48 per share
while for the fiscal year ended December 31, 1998, it had totalled $0.44 per share.
The Class A Shares and the Class B Shares are listed on The Toronto Stock Exchange. These shares were, up to December 6, 1999, also listed on the Montreal
Exchange.
The following table sets forth the price range for the Class A Shares and Class B Shares on the Montreal Exchange (up to December 6, 1999) and on The Toronto
Stock Exchange for the periods indicated:
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CLASS A SHARES
CLASS B SHARES
Montreal and Toronto stock exchanges (CDN$)
Montreal and Toronto stock exchanges (CDN$)
Quarter ended
1999
December 31
September 30
June 30
March 31
1998
December 31
September 30
June 30
March 31
$
High
39.50
39.50
36.00
34.55
33.00
32.50
30.20
30.25
$
Low
34.25
35.00
31.25
31.25
26.75
27.90
28.50
23.60
$
High
39.00
39.25
36.50
34.25
33.00
33.25
29.95
30.25
$
Low
34.00
34.85
31.00
31.00
26.50
27.25
28.30
23.50
L i s t o f d i r e c t o r s a n d o f f i c e r s
QUEBECOR INC.
Board of Directors
Alain Bouchard
Chairman,
President and Chief Executive Officer,
Alimentation Couche-Tard Inc.
Charles G. Cavell (1)
President and Chief Executive Officer,
Quebecor Printing Inc.
Micheline Charest
Corporate Director
Michel Desbiens
President and Chief Executive Officer,
Donohue Inc.
Pierre Laurin (2)
Executive in Residence,
École des hautes études commerciales
Claire Léger (2)
Chairman and Secretary,
St-Hubert Food Group Inc.
Pierre Legrand, Q.C. (2) (3)
Senior Partner,
Ogilvy Renault
Raymond Lemay (1)
Corporate Director
The Right Honourable
Brian Mulroney, P.C., C.C., LL. D.
Senior Partner,
Ogilvy Renault and
Chairman of the Board,
Sun Media Corporation
Jean Neveu (1) (3)
Chairman of the Board,
Quebecor Inc. and
Quebecor Printing Inc.
Érik Péladeau (1) (3)
Chairman of the Board,
Quebecor Communications Inc. and
Vice Chairman of the Board,
Quebecor Inc. and Sun Media Corporation
Pierre Karl Péladeau (1) (3)
President and Chief Executive Officer,
Quebecor Inc.,
Chairman of the Board,
Informission Group Inc. and
Vice Chairman of the Board,
Quebecor Printing Inc.,
Donohue Inc. and Sun Media Corporation
(1) (3)
Charles-Albert Poissant, C.M., FCA
Chairman of the Board,
Donohue Inc.
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation
Committee
QUEBECOR INC.
Officers
Jean Neveu
Chairman of the Board
Érik Péladeau
Vice Chairman of the Board
Pierre Karl Péladeau
President and Chief Executive Officer
SUN MEDIA CORPORATION
Board of Directors
François R. Roy
Executive Vice President and
Chief Financial Officer
Jacques Malo
Executive Vice President and
Chief Information Officer
Louis Saint-Arnaud
Vice President,
Legal Affairs and Secretary
Benoît Huard
Controller and Treasurer
Claudine Tremblay
Assistant Secretary
QUEBECOR COMMUNICATIONS INC.
Officers
Érik Péladeau
Chairman of the Board
Jean-François Douville
President and Chief Executive Officer
Benoît Huard
Vice President,
Finance and Administration
Natalie Larivière
Vice President,
Distribution and Electronic Commerce
Bertrand Leduc
Vice President,
Corporate Promotion
André Rousseau
Vice President,
Book Sector
Louis Saint-Arnaud
Vice President,
Legal Affairs and Secretary
Claire Syril
Vice President,
Magazine Sector
Julie Tremblay
Vice President,
Human Resources
Claudine Tremblay
Assistant Secretary
QUEBECOR NEW MEDIA INC.
Officers
Érik Péladeau
Chairman of the Board
Pierre Karl Péladeau
President
Hugues Simard
Vice President,
Corporate Development
Louis Saint-Arnaud
Vice President,
Legal Affairs and Secretary
Charles G. Cavell
President and Chief Executive Officer,
Quebecor Printing Inc.
Paul V. Godfrey
President and Chief Executive Officer,
Sun Media Corporation
Dale H. Lastman
Co-Chairman,
Goodman Phillips & Vineberg
The Honourable Barbara J. McDougall
President and Chief Executive Officer,
The Canadian Institute of
International Affairs
The Right Honourable
Brian Mulroney, P.C., C.C., LL. D.
Senior Partner,
Ogilvy Renault and
Chairman of the Board,
Sun Media Corporation
Jean Neveu
Chairman of the Board,
Quebecor Inc. and
Quebecor Printing Inc.
Robert Normand
Corporate Director
Philip J. Olsson
Managing Director,
Royal Bank Equity
Partners Limited
Jim Pattison
President and Chief Executive Officer,
The Jim Pattison Group
Érik Péladeau
Chairman of the Board,
Quebecor Communications Inc. and
Vice Chairman of the Board,
Quebecor Inc. and Sun Media Corporation
Pierre Karl Péladeau
President and Chief Executive Officer,
Quebecor Inc.,
Chairman of the Board,
Informission Group Inc. and
Vice Chairman of the Board,
Quebecor Printing Inc.,
Donohue Inc. and Sun Media Corporation
Dale E. Richmond
President and Chief Executive Officer,
Ontario Municipal Employees
Retirement System
SUN MEDIA CORPORATION
Officers
The Right Honourable
Brian Mulroney, P.C., C.C., LL. D.
Chairman of the Board
Érik Péladeau
Vice Chairman of the Board
Pierre Karl Péladeau
Vice Chairman of the Board
Paul V. Godfrey
President and Chief Executive Officer
K. John Boots
Vice President,
Finance and Chief Financial Officer
Trudy A. Eagan
Vice President and
Chief Administrative Officer
William R. Dempsey
Vice President,
Community Newspaper Division
Pierre Francoeur
Vice President,
Eastern Group and Publisher and
Chief Executive Officer,
Le Journal de Montréal
J. Craig Martin
Vice President,
Western Group and Publisher and
Chief Executive Officer,
The Edmonton Sun
Bill Neil
Vice President,
National Sales and Marketing
Louis Saint-Arnaud
Vice President,
Legal Affairs and Secretary
Julie Tremblay
Vice President,
Human Resources
Guy Huntingford
Publisher and Chief Executive Officer,
The Calgary Sun
Lester Pyette
Publisher and Chief Executive Officer,
The London Free Press
Mark Stevens
Publisher and Chief Executive Officer,
The Toronto Sun
Daniel Poulin
Special Assistant to the Chairman
Claudine Tremblay
Assistant Secretary
Alan Shanoff
Assistant Secretary
TQS INC.
Board of Directors
Louis V. Audet
President and Chief Executive Officer,
Cogeco Inc.
Jean-Marc Brunet
Chairman of the Board and
Chief Executive Officer,
Le Naturiste J.M.B. Inc.
Michel J. Carter
Vice President, General Manager,
Cogeco Radio Television Inc.
P. Wilbrod Gauthier
Chairman of the Board,
TQS Inc.
Michel Gervais
General Manager,
Centre hospitalier Robert-Giffard
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Roger Quesnel
Vice President,
Sales and Marketing, Market Pulp
Paul Buron
Treasurer
Jocelyn Pépin
Corporate Controller
Denys Lamarre
Director,
Legal Department
and Assistant Secretary
René Guimond
President and Chief Executive Officer,
TQS Inc.
Diane Labelle
Vice President,
Communications
Pierre Hébert
Vice President, General Manager,
La Fondation Les Ailes de la Mode
Luc Bois
Vice President,
Technology – e/outsourcing
Monic Houde
Corporate Director
Érik Péladeau
Chairman of the Board,
Quebecor Communications Inc. and
Vice Chairman of the Board,
Quebecor Inc. and Sun Media Corporation
TQS INC.
Officers
P. Wilbrod Gauthier
Chairman of the Board
René Guimond
President and Chief Executive Officer
Normand Comeau
Vice President,
Finance and Administration
Richard Gauthier
Vice President,
Human Resources
Thérèse David
Vice President,
Communications
Luc Doyon
Vice President,
Programs and Operations
Jean Durocher
Vice President,
Sales and Marketing
Renaud Francoeur
General Manager,
CFAP Television
Bernard Guérin
Director,
Legal Affairs
Claudine Tremblay
Secretary
.
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INFORMISSION GROUP INC.
Officers
Pierre Karl Péladeau
Chairman of the Board
Jacques Topping
President and Chief Executive Officer
Alexandre Taillefer
Executive Vice President and
Chief Strategy Officer
Réal Perron
Executive Vice President and
Chief Operating Officer
Claude Doré
Vice President and
Chief Financial Officer
Martin Le Sauteur
Executive Vice President,
America
Michel Lamontagne
Vice President,
Strategic Business Development
Luc Filiatreault
Vice President, Sales
Mark Jodoin
Vice President, Marketing
Jean Énault
Vice President, Finance,
America
Daniel Dussault
Vice President,
Telecommunications
Jacques-Hervé Roubert
President, Europe
Christophe Tricaud
General Manager, Europe
Pierre Deschênes
General Manager,
Infosphère, Paris
Ron Cheung
Vice President, Toronto
Michael Moran
Vice President, Montreal
Jean-Yves St-Arnaud
Vice President, Quebec City
Andrew Milne
Vice President, Ottawa
Robert Schneider
Vice President, Seattle
Paul English
General Manager, New York
QUEBECOR PRINTING INC.*
Officers
Jean Neveu
Chairman of the Board
Pierre Karl Péladeau
Vice Chairman of the Board
Charles G. Cavell
President and Chief Executive Officer
Marc L. Reisch
President and Chief Executive Officer,
Quebecor World North America
Christopher H. Rudge
President,
Quebecor World Canada and
President,
Quebecor World International
Guy Trahan
President,
Quebecor World Latin America
Christian M. Paupe
Executive Vice President,
Chief Financial Officer and
Chief Administrative Officer
Gilbert Martinet
Vice President,
Manufacturing, Technology and
Environment
Sean M. Twomey
Vice President,
Business Development
Louis Saint-Arnaud
Vice President,
Legal Affairs and Secretary
Serge Reynaud
Vice President,
Human Resources
Carl Gauvreau
Vice President and Corporate Controller
* New corporate name as of April 25, 2000: Quebecor World Inc.
Sylvain Levert
Vice President,
Corporate Services and Logistics
(Fribourg, Switzerland)
Mark D’Souza
Vice President and Treasurer
(Fribourg, Switzerland)
Gerald Brofft
Vice President,
Global Purchasing
(Fribourg, Switzerland)
Jeremy Roberts
Assistant Treasurer
(Fribourg, Switzerland)
Gaétan Lussier
Director, Internal Audit
Pierre Martel
Director, Taxation and Real Estate
Raynald Lecavalier
Director of Legal Affairs
and Assistant Secretary
Claudine Tremblay
Assistant Secretary
DONOHUE INC.
Officers
Charles-Albert Poissant, C.M., FCA
Chairman of the Board
Pierre Karl Péladeau
Vice Chairman of the Board
Michel Desbiens
President and Chief Executive Officer
Denis Jean.
Executive Vice President,
Pulp and Paper
Pierre G. Côté
Senior Vice President,
United States and British Columbia
operations and
Executive Vice President,
Donohue Industries Inc.
Louis-Marie Bouchard
Senior Vice President,
Woodlands and Sawmills
Gaston Bouffard
Senior Vice President
Sales and Marketing, Paper
Claude Hélie
Vice President and Chief Financial Officer
Louis-Gilles Gagnon
Vice President,
General Counsel and Corporate Secretary
Jacques Angers
Vice President,
Environment and Energy
Viateur Camiré
Vice President,
Human Resources
André Dupras
Vice President,
Corporate Communications and
Public Affairs
Yvan Gingras
Vice President, Administration and
Business Development
Yves Laflamme
Vice President,
Sales and Marketing, Lumber
Lucien N. Parent
Vice President,
Engineering, Research and Development
Ta b l e o f C o n t e n t s
G e n e r a l I n f o r m a t i o n
Highlights
Message to Shareholders
New Media
Newspapers
Television Broadcasting
Books, Magazines and Music
Printing
Forest Products
Management’s Discussion and Analysis
Financial Section
List of Directors and Officers
1
2
6
12
18
20
26
32
34
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Annual Meeting
Shareholders are invited to attend the Annual Meeting of Shareholders to be
held at 10:00 a.m. on Thursday, April 27, 2000 in the "Ovale" Room of the
Ritz-Carlton Montreal Hotel, 1228 Sherbrooke Street West, Montreal,
Quebec.
Stock Exchange Listings
The Class A Multiple Voting Shares and the Class B Subordinate Voting Shares
are listed on The Toronto Stock Exchange, under the ticker symbols QBR.A
and QBR.B, respectively.
Registrar and Transfer Agent
Desjardins Trust Inc. – Montreal
Co-transfer Agents
Montreal Trust Company
– Toronto
– Winnipeg
– Regina
– Calgary
– Vancouver
Harris Trust Company – New York
Auditors
KPMG LLP
Information
For further information or to obtain copies of the Annual Report and the Annual
Information Form, please contact the Department of Investor Relations and
Corporate Communications of the Company at (514) 877-5130, or address
correspondence to:
612 St. Jacques Street
Montreal, Quebec
H3C 4M8
Web Site: http://www.quebecor.com
Vous pouvez vous procurer une copie française de ce rapport annuel à l’adresse
indiquée ci-dessus.
Duplicate communications
Shareholders who receive more than one copy of a document, particularly of
the Annual Report or the quarterly reports, are requested to notify Desjardins
Trust Inc. at (514) 286-3102.
Currency
All dollar amounts appearing in this Annual Report are in Canadian dollars, except
if another currency is specifically mentioned.
Credits
Graphic Design: St. Remy Media Inc.
Printing: Imprimerie Quebecor Graphique-Couleur
Photography: Daniel Wiener, Chantal Lamarre and Laurent Gladu
ISBN : 2-922430-05-7
Legal Deposit – National Library of Quebec, 2000
Legal Deposit – National Library of Canada, 2000
Printed in Canada
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New Media
Canada
Ontario
Quebec
United States
Massachusetts
New York
Washington
France
Paris
Newspapers
Canada
Alberta
British Columbia
Manitoba
New Brunswick
Ontario
Quebec
Saskatchewan
United States
Florida
Television
Broadcasting
Canada
Quebec
Ontario
Books, Magazines
Music
Canada
Quebec
Printing
Canada
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Nova Scotia
Ontario
Quebec
United States
Arizona
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Colorado
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Washington, DC
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Queretaro
Perú
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Mikkeli
France
Aubervilliers
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Blois
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Claye Souilly
Hellemmes
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Marne la Vallée
Mary-sur-Marne
Neuilly-sur-Seine
Pont Saint-Martin
Roissy
Strasbourg
Germany
Dortmund
Spain
Seseña
Barcelona
Sweden
Skärholmen
Jönköping
Katrineholm
Switzerland
Fribourg
United Kingdom
Corby
India
New Delhi
Forest Products
Canada
British Columbia
Ontario
Quebec
United States
California
Georgia
Illinois
Kansas
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Ohio
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Business Offices
Quebecor Inc.
Head Office
612 St. Jacques Street
Montreal, Quebec
Canada H3C 4M8
Telephone: (514) 877-9777
Fax: (514) 877-9757
Groupe Informission Inc.
711 De La Commune West
Montreal, Quebec
Canada H3C 1X6
Telephone: (514) 392-1292
Fax: (514) 392-0911
Sun Media Corporation
Head Office
612 St. Jacques Street
Montreal, Quebec
Canada H3C 4M8
Telephone: (514) 877-9777
Fax: (514) 877-9790
Main business location
333 King Street East
Toronto, Ontario
Canada M5A 3X5
Telephone: (416) 947-3232
Fax: (416) 947-3119
TQS Inc.
Head Office
614 St. Jacques Street
Montreal, Quebec
Canada H3C 5R1
Telephone: (514) 390-6035
Fax: (514) 390-0773
Quebecor Communications Inc.
Head Office
612 St. Jacques Street
Montreal, Quebec
Canada H3C 4M8
Telephone: (514) 877-9777
Fax: (514) 878-3524
Quebecor Printing Inc.
Head Office
612 St. Jacques Street
Montreal, Quebec
Canada H3C 4M8
Telephone: (514) 954-0101
Fax: (514) 954-1426
Donohue Inc.
Head Office
500 Sherbrooke Street West
Suite 800
Montreal, Quebec
Canada H3A 3C6
Telephone: (514) 847-7700
Fax: (514) 847-7707
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