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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001 COMMISSION FILE NUMBER 1-8014
[logo omitted]
MOORE CORPORATION LIMITED
(Exact name of registrant as specified in its charter)
ONTARIO, CANADA 98-0154502
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization
40 KING ST. W., SUITE 3501 M5H 3Y2
TORONTO, ONTARIO, CANADA (Zip code)
(Address of principal executive offices)
416-364-2600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
At May 11, 2001, 88,456,940 shares of the registrant's common shares, without
par value were outstanding.
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1
PART I. FINANCIAL INFORMATION
MOORE CORPORATION LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
MARCH 31, DECEMBER 31,
2001 2000
--------- ------------
(UNAUDITED)
ASSETS
Current Assets
Cash and short-term securities $ 87,069 $ 36,538
Accounts receivable, net 384,545 407,304
Inventories (Note 2) 157,424 154,484
Deferred income taxes 80,967 78,632
Prepaid expenses 26,057 22,683
---------- ----------
Total current assets 736,062 699,641
Property, plant and equipment, net 382,510 409,099
Prepaid pension costs 208,346 312,180
Goodwill, net 74,864 130,530
Deferred income taxes 122,956 125,035
Other assets 167,216 191,941
---------- ----------
TOTAL ASSETS $1,691,954 $1,868,426
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank indebtedness $ 38,644 $ 29,428
Accounts payable and accrued liabilities 436,025 400,057
Short-term debt 1,905 2,709
Deferred income taxes - 462
Other current liabilities 32,383 35,591
---------- ---------
Total current liabilities 508,957 468,247
Long-term debt 308,354 272,465
Postretirement benefits 238,186 243,374
Deferred income taxes 154,380 191,121
Other liabilities 54,760 57,289
Minority interest 11,338 11,245
---------- ----------
Total liabilities 1,275,975 1,243,741
---------- ----------
SHAREHOLDERS' EQUITY
Common shares without par value, 88,456,940
Shares issued and outstanding 310,881 310,881
Equity portion of subordinated convertible debentures 8,343 8,343
Retained earnings 225,757 431,821
Cumulative translation adjustments (129,002) (126,360)
---------- ----------
Total shareholder's equity 415,979 624,685
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $1,691,954 $1,868,426
========== ==========
(See notes to the consolidated financial statements)
MOORE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 31, 2000
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
2001 2000
---------- ---------
Net sales $ 574,196 $ 576,864
Cost of sales 460,932 409,518
Selling, general and administrative expenses 186,942 147,650
Restructuring provision (Note 3) 66,651 1,532
Depreciation and amortization 88,985 27,378
---------- ---------
Total operating expenses 803,510 586,078
---------- ---------
Loss from operations (229,314) (9,214)
Investment and other income (expense) (2,577) 8
Interest expense 7,239 5,775
---------- ---------
Loss before income taxes and minority interests (239,130) (14,981)
Income tax benefit (38,097) (6,445)
Minority interests 427 349
---------- ---------
Net loss $ (201,460) $ (8,885)
========== =========
Loss per common share:
Basic $ (2.28) $ (0.10)
---------- ---------
Diluted $ (2.28) $ (0.10)
---------- ---------
Average number of common shares
outstanding (in thousands):
Basic 88,457 88,457
---------- ---------
Diluted 88,457 88,457
---------- ---------
(See notes to the consolidated financial statements)
3
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
March 31,
2001 2000
--------- ---------
(UNAUDITED)
Balance, beginning of period $ 431,821 $ 480,049
Change in accounting policy:
Income taxes - 2,443
Employee future benefits - 33,295
--------- ---------
Balance, beginning restated 431,821 515,787
Net loss (201,460) (8,885)
Convertible subordinated debentures (181) -
Dividends (.05 per share in 2001 and 2000) (4,423) (4,423)
--------- ---------
Balance, end of period $ 225,757 $ 502,479
========= =========
(See notes to the consolidated financial statements)
4
MOORE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 31, 2000
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
2001 2000
--------- --------
OPERATING ACTIVITIES
Net loss $(201,460) $ (8,885)
Adjustments to reconcile net cash provided
by (used in) operating activities:
Depreciation and amortization 88,985 27,725
Loss on sale of property, plant and equipment 127 684
Net loss on sale of other assets 4,225 -
Restructuring provision, net of cash paid 55,540 -
Pension settlement 102,015 -
Deferred income taxes (38,841) 2,610
Other 1,086 3,352
Changes in operating assets and liabilities:
Accounts receivable, net 22,751 49,380
Inventories (2,941) (5,637)
Accounts payable and accrued liabilities (18,237) (95,689)
Income taxes (3,210) (17,383)
Deferred income taxes 1,383 4,290
Other (7,733) 9,186
--------- --------
Net cash provided by (used in) operating activities 3,690 (30,367)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (7,735) (19,335)
Proceeds from sale of property, plant and equipment 508 24,377
Increase in long-term receivables (1,734) (79)
Proceeds from sale of other assets 12,526 -
Deferred charges (1,089) (13,832)
Other 1,090 (3,880)
--------- --------
Net cash provided by (used in) investing activities 3,566 (12,749)
FINANCING ACTIVITIES
Dividends (4,423) (4,423)
Proceeds from issuance of long-term debt 42,708 40,401
Payments on long-term debt (3,961) (16,333)
Other (502) (2,270)
--------- --------
Net cash provided by financing activities 33,822 17,375
Effect of exchange rate on cash 237 150
--------- --------
Net increase (decrease) in cash 41,315 (25,591)
Cash at beginning of period (a) 7,110 25,093
--------- --------
Cash at end of period (a) $ 48,425 $ (498)
========= ========
(a) Cash is defined as cash and short-term securities less short-term bank loans
(See notes to the consolidated financial statements)
5
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (TABULAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE
DATA)
1. BASIS OF PRESENTATION
The accompanying consolidated interim financial statements have been prepared by
Moore Corporation Limited in accordance with the recommendations of the Canadian
Institute of Chartered Accountants' (CICA) Handbook Section 1751 Interim
Financial Statements. As permitted by these standards, these interim financial
statements do not include all information required by Canadian generally
accepted accounting principles to be included in annual financial statements.
However, the Corporation considers that the disclosures made are adequate for a
fair presentation. Comparative figures have been reclassified where appropriate
to conform to the current presentation.
These consolidated interim financial statements are prepared in accordance with
the accounting policies described in the Corporation's latest Annual Report and
should be read in conjunction with the consolidated financial statements and the
notes thereto included in the Corporation's latest Annual Report.
Effective January 1, 2001 the Corporation adopted the new recommendations of
CICA Section 3500, Earnings Per Share. The adoption had no impact on prior
period reported earnings per share amounts. The calculation of earnings per
share on a diluted basis for the three months ended March 31, 2001 excludes the
impact of the subordinated convertible debentures, since it would result in an
antidilutive effect.
The consolidated financial statements have been prepared in conformity with
Canadian generally accepted accounting principles, and, as such include
estimates and assumptions of management that affect the amounts reported in the
consolidated financial statements. Actual results could differ from these
estimates.
2. INVENTORIES
March 31, December 31,
2001 2000
---------------------------------
Raw materials $ 44,894 $ 43,010
Work in process 13,871 14,612
Finished goods 94,905 93,441
Other 3,754 3,421
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Total $ 157,424 $ 154,484
=================================
3. RESTRUCTURING AND OTHER RELATED CHARGES
For the three month period ended March 31, 2001, the Corporation recorded a
pretax restructuring provision as follows:
Moore North America $ 18,497
Integrated Business Solutions 8,719
International and Other 6,530
Corporate Office 32,905
================
Total $ 66,651
================
The restructuring charge for the three months ended March 31, 2001 includes
provisions related to workforce reductions of $34.6 million (1,146 positions),
lease terminations of $28.5 million, facility closing and other cash costs of
$3.6 million.
The reconciliation of the restructuring liability as of March 31, 2001 is as
follows:
6
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (TABULAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE
DATA)
3. RESTRUCTURING AND OTHER RELATED CHARGES (continued)
December 31, 2001 Cash Non-cash March 31,
2000 Provision Expenditures Write-offs 2001
---------------------------------------------------------------------------------
Employee terminations (1) $ 6,626 $ 34,568 $ (6,498) $ - $ 34,696
Other 29,059 32,083 (3,088) - 58,054
Losses on disposals 10,276 - - - 10,276
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Total $ 45,961 $ 66,651 $ (9,586) $ - $ 103,026
=================================================================================
(1) Of the total positions planned for elimination, 5,265 have been eliminated
as of March 31, 2001
The Corporation expects that substantially all remaining severance payments will
occur within the next twelve months.
During the three month period ended March 31, 2001 the Corporation recorded
additional other related pretax charges as follows:
Depreciation Selling General &
and Administrative
Amortization Cost of Sales Expenses Total
-------------------------------------------------------------------
Moore North America $ 1,881 $ - $ - $ 1,881
Integrated Business Solutions 2,774 - - 2,774
International and Other 980 - - 980
Corporate Office 6,441 61,209 41,749 109,399
===================================================================
Total $ 12,076 $ 61,209 $ 41,749 $ 115,034
===================================================================
Total other related charges for the three months ended March 31, 2001 consist
of: a $102 million charge for the partial settlement of the U.S. pension plan
(curtailed as of December 31, 2000), other executive severance of $0.9 million
and non-cash charges of $12.1 million for asset impairments.
4. DISPOSITION AND ASSETS HELD FOR DISPOSITION
During the first quarter of 2001, the Corporation divested certain non-core
assets including Colleagues, its European advertising agency, and an investment
in common shares and secured convertible notes receivable of Vista Information
Solutions, Inc. (Vista). As a result of these transactions, the Corporation
received total consideration of $12.5 million and recorded a loss on disposition
of $7.1 million net of tax. Included in the Corporation's results of operations
for the three months ended March 31, 2001 and 2000 are sales of $4.0 million and
$20.4 million, respectively, and losses from operations of $0.8 million and $0.2
million respectively, from divested assets.
During the first quarter of 2001, the Corporation formalized plans to dispose of
certain other non-core assets within the International and Other segment. The
Corporation recorded a non-cash charge of $45.7 million, (net of $2.6 million in
taxes), included in depreciation and amortization, based upon anticipated
proceeds from disposition. Net sales and operating results contributed by these
assets were $18.7 and $(49.5), and $17.6 and $0.7 for the three months ended
March 31, 2001 and 2000, respectively.
7
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (TABULAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE
DATA)
5. RECONCILIATION TO U.S. GAAP
Three months ended
March 31,
2001 2000
-----------------------------------
Net loss as reported $ (201,460) $ (8,885)
US GAAP Adjustments, net of taxes:
Pension expense 104,997 1,023
Postretirement benefits 2,652 2,248
Capitalized software 2,355 (484)
Interest expense (181) -
-----------------------------------
Net loss as determined under U.S. GAAP $ (91,637) $ (6,098)
-----------------------------------
Loss per share:
Basic loss per share $ (1.04) $ (.07)
Diluted loss per share $ (1.04) $ (.07)
Average shares outstanding - basic and diluted (in
thousands) 88,457 88,457
Comprehensive income:
Net loss U.S. GAAP $ (91,637) $ (6,098)
Other comprehensive income (loss):
Cumulative translation adjustments (2,642) (850)
Reclass adjustment for losses included in income (798) -
Unrealized gains on available-for-sale securities - 5,763
-----------------------------------
Total comprehensive loss $ (95,077) $ (1,185)
-----------------------------------
-----------------------------------
Balance Sheet Items: March 31, 2001 December 31, 2000
As reported U.S. GAAP As reported U.S. GAAP
-------------------------------------------------------
Net pension asset $(183,351) $(124,311) $(286,360) $ (56,891)
Other assets - computer software (120,664) (74,969) (127,999) (78,412)
Postretirement benefits 238,186 396,853 243,374 402,672
Long-term deferred tax asset (122,956) (184,836) (125,035) (287,156)
Long-term deferred tax liability 154,380 95,385 191,121 167,238
Accounts payable and accrued liabilities 436,025 430,025 400,057 394,057
Long-term debt 308,354 316,697 272,465 280,808
Equity portion of subordinated convertible
debentures 8,343 - 8,343 -
Cumulative translation adjustments (129,002) (93,818) (126,360) (91,176)
Retained earnings 225,757 54,046 431,821 150,287
On January 1, 2001 the Corporation adopted SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities" for US GAAP purposes. The adoption did not
have a material impact on the results of operations or financial condition of
the Corporation.
8
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (TABULAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE
DATA)
6. SEGMENT INFORMATION
During the first quarter of 2001, management of the Corporation realigned its
business segments to conform with management's process for making decisions with
regard to resource allocation and performance evaluation.
Three months ended Integrated International
March 31, 2001 Moore North Business And
America Solutions Other Consolidated
- - --------------------------------------------------------------------------------------------------
Total revenue $ 291,105 $ 158,284 $ 131,728 $ 581,117
Intersegment revenue (6,224) (365) (332) (6,921)
Sales to customers outside the
enterprise $ 284,881 $ 157,919 $ 131,396 $ 574,196
Segment operating profit (loss) (7,213) 12,775 (54,384) (48,822)
Non-operating expenses - - - (180,492)
Loss from operations (229,314)
Segment assets $ 863,367 $ 221,689 $ 335,286 $ 1,420,342
Corporate assets including
investments - - - 271,612
Total assets - - - $ 1,691,954
Depreciation and amortization $ 12,714 $ 9,440 $ 66,831 $ 88,985
Capital expenditures $ 1,242 $ 5,412 $ 1,081 $ 7,735
Three months ended Integrated International
March 31, 2000 Moore North Business And
(Restated) America Solutions Other Consolidated
- - ----------------------------------------------------------------------------------------------------
Total revenue $ 285,735 $ 137,599 $ 157,632 $ 580,966
Intersegment revenue (3,415) (298) (389) (4,102)
Sales to customers outside the
enterprise $ 282,320 $ 137,301 $ 157,234 $ 576,864
Segment operating profit 1,157 19,316 4,290 24,763
Non-operating expenses - - - (33,977)
Loss from operations (9,214)
Segment assets $ 1,027,347 $ 183,007 $ 439,661 $ 1,650,015
Corporate assets including
investments - - - 241,895
Total assets - - - $ 1,891,910
Depreciation and amortization $ 15,596 $ 7,041 $ 4,741 $ 27,378
Capital expenditures $ 9,717 $ 4,126 $ 5,492 $ 19,335
7. PENDING LITIGATION
The Corporation and its subsidiaries are defendants in lawsuits associated with
their business and operations. These actions are being vigorously contested. It
is not possible to predict the outcome of the pending actions, but management
believes, based on advice of counsel, that these actions will not have a
material adverse effect upon the results of operations, cash flows or financial
condition of the Corporation.
8. ENVIRONMENTAL
The Corporation is subject to laws and regulations relating to the protection of
the environment. The Corporation provides for expenses associated with
environmental remediation obligations when such amounts are probable and can be
reasonably estimated. Such accruals are adjusted as new information develops or
circumstances change and are not discounted. While it is not possible to
quantify with certainty the potential impact of actions regarding environmental
matters, particularly remediation and other compliance efforts that the
Corporation's subsidiaries may undertake in the future, in the opinion of
management, compliance with the present environmental protection laws, before
taking into account estimated recoveries from third parties, will not have a
material adverse effect upon the results of operations, cash flows or financial
condition of the Corporation.
9
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (TABULAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE
DATA)
9. SUBSEQUENT EVENT
On April 12, 2001 the Board of Directors unanimously approved the suspension of
future dividends on all outstanding equity securities.
10
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AS
COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2000
The Corporation operates in one industry - the printing industry, and has three
distinct operating segments in which management assesses information on a
regular basis for decision-making purposes. The three segments are Moore North
America, Integrated Business Solutions and International and Other. These
segments market print and print related products and services to a
geographically diverse customer base.
The following discussion includes information on a corporate wide basis and on
an operating segment basis. Operating income for our three business segments,
which are presented in accordance with accounting standards generally accepted
in Canada in the following discussion, are supplemented by a discussion of
operating income before deductions for restructuring and other related charges
including the impairment of long-lived assets and pension settlement. This
supplemental discussion of operating results before certain charges should be
read in conjunction with the Corporation's reported financials.
Consolidated results of operations for the three month period ended March 31,
2001 and 2000 are shown in the accompanying condensed consolidated statement of
earnings on pages 2 through 5 - of this interim report.
Net sales decreased $2.7 million or 0.5%. Net sales for our core businesses,
Moore North America and Integrated Business Solutions Group rose $23.2 million,
or 5.5% due to increased focus on customers and recent cross-selling
initiatives. These increases were offset by a $25.9 million decrease in our
non-core businesses principally as a result of lower volumes and a significant
deterioration in European sales.
Income from operations decreased $220.1 million to a loss of $229.3 million as a
result of the restructuring and other charges as well as the loss resulting from
the settlement of the U.S. pension plan included in the first quarter 2001.
These charges were partially offset by improved operating results in the core
businesses.
In order to provide a better understanding of the financial results for the
first quarter ended March 31, 2001 and 2000 we have identified transactions that
affect comparability between periods. These items have been removed from the
operating results of the affected quarters as follows:
During the first quarter of 2001, the Corporation recorded restructuring and
other related charges totaling $132.5 million, net of taxes, or $1.50 per
diluted share. These charges can be categorized as follows:
o Restructuring provisions of $66.7 million, primarily related to workforce
reductions, lease terminations and other asset write-offs.
o Non-cash charges related to asset impairment of $12.1 million, included in
depreciation and amortization expense.
o Executive severance of $0.9 million relating to the replacement of senior
executive officers.
o Loss on disposal of non-core assets of $7.1 million (net of $3.9 million
in taxes), included in investment and other income, related to the
Colleagues business unit in Europe and an investment in Vista Information
Solutions, Inc.
o Write-down on non-core businesses held for sale of $45.7 (net of $2.6
million in taxes).
The Corporation also recorded an after-tax loss of $61.7 million (net of $40.3
million in taxes), or .70 per diluted share, associated with the partial
settlement of the US pension plan, which was curtailed as of December 31, 2000.
In March 2001, the Corporation purchased approximately $600 million of annuity
contracts settling approximately 70% of the outstanding obligation. The balance
of the annuity contracts is expected to be purchased during the fourth quarter
of 2001,resulting in an anticipated pretax loss of approximately $15.0 million.
11
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
During the first quarter of 2000, the Corporation recorded after-tax
restructuring costs of $1.0 million (net of $0.6 million in taxes), related to
employee terminations; offset by the reversal of provisions no longer needed of
$2.6 million, (net of $1.7 million in taxes).
All further discussions regarding the results of operations will be based on the
Corporation's operating results net of the above mentioned items.
(IN MILLIONS)
------------------
Net Sales:
Moore North America $ 284.9 $ 282.3
Integrated Business Solutions 157.9 137.3
International and Other 131.4 157.3
------------------
$574.2 $576.9
------------------
Income (loss) from operations:(1)
Moore North America $ 13.2 $ 1.9
Integrated Business Solutions 24.3 19.7
International and Other 1.4 4.4
General Corporate (38.2) (37.9)
------------------
$ 0.7 $ (11.9)
------------------
Net loss $ (7.3) $ (10.5)
Net loss per share $(0.08) $ (0.12)
(1) Presented net of above noted items
CONSOLIDATED
Net sales decreased $2.7 million or 0.5%. Net sales for our core businesses,
Moore North America and Integrated Business Solutions Group rose $23.2 million,
or 5.5% due to increased focus on customers and recent cross-selling
initiatives. These increases were offset by a $25.9 million decline in our
non-core businesses principally as a result of lower volumes and a significant
deterioration in European sales.
Income from operations increased by $12.6 million to $0.7 million as compared to
a loss of $11.9 million, reflecting the benefit of our cost cutting initiatives
including the reduction of information technology spending, the disposition of
nonessential assets and the reduction of our worldwide workforce by
approximately 10%. As a result of these restructuring actions, the Corporation
estimates that total projected pretax savings from these actions to be
approximately $100 million annually beginning in April 2001. The savings from
these actions will be used to reduce debt levels, to fund future acquisitions
and for other general corporate purposes. The Corporation has announced that it
anticipates additional restructuring actions as it continuously evaluates
product lines and the existing asset base and actively seeks opportunities to
improve its cost structure. The Corporation has not yet estimated the savings
from these activities.
Interest expense increased $1.5 million or 25% as a result of the increase in
total debt as a result of the issuance of $70.5 million subordinated convertible
debentures in December 2000 and the higher average cost of borrowing on our
revolving credit facility offset slightly by lower average borrowings under the
facility.
The effective income tax recovery rate was distorted by the inability to
recognize future income tax benefits on current operating losses due to
accumulated tax loss carryforwards.
Net loss for the three month period ended March 31, 2001, declined $3.2 million
to $7.3 million, or .08 per share as compared to a net loss of $10.5 million, or
.12 per share for the three month period ended March 31, 2000. Improved results
reflect the immediate impact of the Corporation's strategic initiative to align
its costs with its revenues and to eliminate nonessential activities.
12
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MOORE NORTH AMERICA
Net sales for the three month period ended March 31, 2001 increased $2.6 million
or 0.9%, primarily due to increased volumes in the core US Forms and Labels
business. The increase was partially offset by declines in the Canadian Forms
and Labels business due to the Corporation's decision to exit certain
unprofitable customer accounts. Net sales for the three month period ended March
31, 2000 were adversely impacted by customer inventory build programs in
December 1999 related to anticipation of year 2000 problems.
Operating income for the three month period ended March 31, 2001 increased by
$11.3 million to $13.2 million, primarily due to the Corporation's decision to
streamline its Forms and Labels operations including the elimination of
non-customer critical positions in support of its goal to significantly reduce
costs.
INTEGRATED BUSINESS SOLUTIONS (IBS)
Net sales increased $20.6 million or 15.0% due to strong volume growth in both
Business Communications Services (BCS) and Response Marketing Services (RMS)
resulting from increased service offerings and the benefits achieved from a
sharper focus on leveraging core capabilities with existing customers.
Operating income for the three month period ended March 31, 2001 increased by
$4.6 million, or 23.3%, due to increased revenues, improved product mix and cost
savings achieved through reductions in workforce resulting from the combination
of the RMS and BCS divisions.
INTERNATIONAL AND OTHER
Net sales declined by $25.9 million or 16.5% due to lower than anticipated
volumes in Europe and an unfavorable foreign currency impact. European net sales
declined $17.0 million primarily due to weakness at the Colleagues business
unit, which was disposed of on March 30, 2001 (see note 4, included in the notes
to the consolidated financial statement).
International and Other contributed $1.4 million to consolidated operating
income, a decrease of $3.0 million. The Latin America operations contributed
$1.8 million on flat revenues, offset by weakness in both Europe and other
non-core businesses.
CORPORATE
The increase in corporate expense is due to the elimination of pension income as
a result of the pension settlement as well as additional retirement savings plan
contribution expense offset by a reduction in corporate overhead.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's primary source of liquidity is its $168 million committed
credit facility. This facility matures on August 5, 2002 and is subject to a
number of financial covenants. Uncommitted bank operating lines are also
maintained in a majority of the domestic markets in which the Corporation
operates. These facilities amount to approximately $49 million at March 31,
2001. Total availability as of March 31, 2001 was approximately $164 million.
As of March 31, 2001 the Corporation met its financial covenants and believes it
has sufficient liquidity to complete the planned restructuring activities and
effectively manage the financial needs of the businesses. On April 25, 2001, the
Corporation announced its decision to suspend future dividends to shareholders.
In addition, the Corporation anticipates proceeds of approximately $150 million
before taxes and fees resulting from the termination of the U.S. pension plan
within the next twelve months.
Net cash provided from operating activities was $3.7 million for the three
months ended March 31, 2001 compared to a net cash usage of $30.4 million for
the same period last year. The change was primarily due to significant
improvements in working capital including a reduction in days sales outstanding
and better operating results in the Corporation's core businesses.
Net cash provided by investing activities for the three months ended March 31,
2001 was $3.6 million versus net cash used of $12.7 million in the same period
of 2000. A substantial reduction of expenditures for software and property,
plant and equipment was the principal reason for the improvement.
13
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net cash provided from financing activities for the three months ended March 31,
2001 and 2000 was $33.8 million and $17.4 million, respectively.
At March 31, 2001 total debt less cash and short-term securities was $261.8
million, a decrease of $6.2 million from December 31, 2000.
In the normal course of business, the Corporation is exposed to interest rate
risk arising from fluctuations in interest rates on its borrowings under the
credit facility and other bank lines. The Chief Financial Officer is authorized
to enter into interest rate conversion agreements in order to manage the
interest rate risk associated with its debt. At March 31, 2001 no interest rate
conversion agreements existed.
The Corporation is exposed to credit risk with respect to short-term deposits
and bond portfolio. The credit risk is minimized substantially by ensuring that
these financial assets are placed with highly rated government and financial
institutions.
The Corporation is also exposed to credit risk on accounts receivable balances.
This risk is limited due to the Corporation's large, diverse customer base,
dispersed over various geographic regions and industrial sectors.
The Corporation is exposed to the impact of foreign currency fluctuations in
certain countries in which it operates. The exposure to foreign currency
movements is limited because the operational revenues and expenses of its
various subsidiaries and business units are substantially in the local currency
of the country in which they operate. To the extent revenues and expenses are
not in the local currency of the operating unit, the Corporation enters into
foreign currency forward contracts to hedge the currency risk. As of March 31,
2001 the aggregate amount of outstanding forward contracts was $18.4 million.
Notional gains and losses from these foreign currency contracts were not
significant at March 31, 2001. The Corporation does not use derivative financial
instruments for trading purposes.
SEASONALITY
Results of operations for this interim period are not necessarily indicative of
results for the full year. The Corporation's operations are seasonal and
historically a larger part of sales has been generated in the second half of the
fiscal year.
FORWARD LOOKING STATEMENT
Comments about market trends, dividends, anticipated earnings, projected cost
savings and future activities in 2001 and beyond, are forward-looking and are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are qualified in their entirety by reference to the
following cautionary statements. All forward looking statements speak only as of
the date hereof and are based on current expectations and involve a number of
assumptions, risks and uncertainties. Changes in the following important
factors, among others could cause actual results to differ materially from those
expressed in the forward-looking statements: The effects of paper price
fluctuations on the Corporation's forms operations, successful execution of key
strategies, the rate of migration from paper-based forms to digital formats,
future growth rates in the Corporation's Integrated Business Solutions
operations, the impact of currency fluctuations in the countries in which the
Corporation operates, general economic and other factors beyond the
Corporation's control, and other assumptions, risks and uncertainties described
from time to time in the Corporation's period filings with securities
regulators.
/s/ Robert B. Lewis /s/ Mark S. Hiltwein
Executive Vice President Senior Vice President Controller,
Chief Financial Officer Chief Accounting Officer
May 11, 2001
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MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CORPORATE INFORMATION
Shareholder Account Inquiries
The transfer agent and registrar for the common shares of the Corporation is
Computershare Trust Company of Canada at its offices in Montreal, Toronto,
Winnipeg, Calgary and Vancouver. The co-transfer agent and registrar is
Computershare Trust Company, Inc. of Colorado. Computershare Trust Company of
Canada operates a telephone enquiry line that can be reached by dialing
toll-free 1-800-663-9097 or (416) 981-9633. Correspondence should be addressed
to Moore Corporation Limited c/o Computershare Trust Company of Canada, 100
University Avenue, 11th Floor, Toronto, Ontario M5J 2Y1. Shareholders can also
email at caregistryinfo@computershare.com. Their internet address is
www.computershare.com.
Investor Relations
Institutional and individual investors seeking financial information about the
Corporation are invited to contact James E. Lillie, Executive Vice President,
Operations at 847-406-3711.
Management's Statement
The interim financial information included in this report is unaudited, but in
the opinion of management it reflects all adjustments that are necessary for a
fair presentation of the financial position, results of operations and changes
in cash flows for the interim periods.
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MOORE CORPORATION LIMITED
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
See note 9 to the consolidated financial statements on page 10 of this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT # DESCRIPTION LOCATION
--------- ----------- --------
2 Plan of acquisition, reorganization, arrangement, None
liquidation and succession
3.1 Articles of Amalgamation No amendments
3.2 By-Laws No amendments
4 Instruments defining the rights of security Not required. The registrant hereby agrees
holders, including indentures to file with the Commission a copy of any instrument
defining the rights of holders of the Registrant's
long-term debt upon request of the Commission
10 Material contracts Not applicable
11 Statement re: computation of per share earnings Filed herewith
15 Letter re: unaudited interim financial information Not applicable
18 Letter re: change in accounting principles Not applicable
19 Report furnished to shareholders Filed herewith
24 Power of attorney None
27 Financial data schedule Not required
99 Additional exhibits None
(b) Reports on Form 8-K: none
MOORE CORPORATION LIMITED
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