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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 JUNE 30, 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 August 10, 2001, 88,456,940 shares of the registrant's common shares, without
par value were outstanding.
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PART I. FINANCIAL INFORMATION
MOORE CORPORATION LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
JUNE 30, DECEMBER 31,
2001 2000
---------- ------------
(UNAUDITED)
ASSETS
Current Assets
Cash and short-term securities $ 66,357 $ 36,538
Accounts receivable, net 352,002 407,304
Inventories (Note 2) 150,969 154,484
Deferred income taxes 77,657 78,632
Prepaid expenses 18,935 22,683
---------- ----------
Total current assets 665,920 699,641
Property, plant and equipment, net 371,400 409,099
Prepaid pension costs 208,703 312,180
Goodwill, net 73,745 130,530
Deferred income taxes 125,589 125,035
Other assets 155,986 191,941
---------- ----------
TOTAL ASSETS $1,601,343 $1,868,426
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank indebtedness $ 22,347 $ 29,428
Accounts payable and accrued liabilities 459,635 400,057
Short-term debt 2,841 2,709
Deferred income taxes 586 462
Other current liabilities 26,571 35,591
---------- ---------
Total current liabilities 511,980 468,247
Long-term debt 276,655 272,465
Postretirement benefits 240,374 243,374
Deferred income taxes 154,354 191,121
Other liabilities 53,201 57,289
Minority interest 11,292 11,245
---------- ----------
Total liabilities 1,247,856 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 165,168 431,821
Cumulative translation adjustments (130,905) (126,360)
---------- ----------
Total shareholder's equity 353,487 624,685
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $1,601,343 $1,868,426
========== ==========
(See notes to the consolidated financial statements)
MOORE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------------
2001 2000 2001 2000
--------- --------- ---------- ----------
Net sales $ 532,526 $ 550,406 $1,106,722 $1,127,270
Cost of sales 368,757 393,362 829,689 802,880
Selling, general and
administrative expenses 134,806 142,982 321,748 290,632
Restructuring provision (Note 3) 36,723 2,293 103,374 3,825
Depreciation and amortization 43,761 27,062 132,746 54,440
--------- --------- ---------- ----------
Total operating expenses 584,047 565,699 1,387,557 1,151,777
--------- --------- ---------- ----------
Loss from operations (51,521) (15,293) (280,835) (24,507)
Investment and other income (expense) 152 1,148 (2,430) 1,156
Interest expense 7,034 6,460 14,273 12,235
--------- --------- ---------- ----------
Loss before income taxes and
minority interests (58,403) (20,605) (297,538) (35,586)
Income tax (benefit) expense 1,472 (6,875) (36,625) (13,320)
Minority interests 491 364 913 713
--------- --------- ---------- ----------
Net loss $ (60,366) $ (14,094) $ (261,826) $ (22,979)
========= ========= ========== ==========
Loss per common share:
Basic $ (0.68) $ (0.16) $ (2.96) $ (0.26)
--------- --------- ---------- ----------
Diluted $ (0.68) $ (0.16) $ (2.96) $ (0.26)
--------- --------- ---------- ----------
Average number of common shares
outstanding (in thousands):
Basic 88,457 88,457 88,457 88,457
--------- --------- ---------- ----------
Diluted 88,457 88,457 88,457 88,457
--------- --------- ---------- ----------
(See notes to the consolidated financial statements)
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
Six months ended
June 30,
-----------------------
2001 2000
--------- ---------
Balance, at January 1 $ 431,821 $ 480,049
Change in accounting policy:
Income taxes - 2,443
Employee future benefits - 33,295
--------- ---------
Balance, at January 1 restated 431,821 515,787
Net loss (261,826) (22,979)
Convertible subordinated debentures (404) -
Dividends (5(cent)per share in 2001 and 10(cent) in 2000) (4,423) (8,846)
--------- ---------
Balance, at June 30 $ 165,168 $ 483,962
========= =========
(See notes to the consolidated financial statements)
MOORE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
Three months ended
June 30,
----------------------
2001 2000
--------- --------
OPERATING ACTIVITIES
Net loss $(60,366) $(14,094)
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 43,761 27,408
Restructuring provision, net of cash paid 25,737 -
Deferred income taxes (70) 2,158
Other 1,128 (5,987)
Changes in operating assets and liabilities:
Accounts receivable, net 32,540 39,988
Inventories 6,464 7,273
Accounts payable and accrued liabilities (7,135) (31,231)
Income taxes (1,389) (12,561)
Deferred income taxes 1,308 233
Other 2,608 (7,118)
--------- --------
Net cash provided by operating activities 44,586 6,069
INVESTING ACTIVITIES
Property, plant and equipment, net (4,802) (20,829)
Increase in long-term receivables (3,018) (222)
Proceeds from sale of other assets - 6,149
Deferred charges (3,444) (888)
Other 569 5,735
--------- --------
Net cash used in investing activities (10,695) (10,055)
FINANCING ACTIVITIES
Dividends (4,423) (4,423)
Proceeds from issuance of long-term debt 6,703 46,346
Payments on long-term debt (40,447) (45,633)
Other (759) 405
--------- --------
Net cash used in financing activities (38,926) (3,305)
Effect of exchange rate on cash 620 640
--------- --------
Net decrease in cash (4,415) (6,651)
Cash at beginning of period (a) 48,425 (613)
--------- --------
Cash at end of period (a) $ 44,010 $ (7,264)
========= ========
Cash paid during the period for:
Interest $ 1,081 $ 6,011
Income Taxes $ 1,472 $ 2,176
(a) Cash is defined as cash and short-term securities less short-term bank
loans.
(See notes to the consolidated financial statements)
MOORE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
Six months ended
June 30,
----------------------
2001 2000
--------- --------
OPERATING ACTIVITIES
Net loss $(261,826) $(22,979)
Adjustments to reconcile net cash provided
by (used in) operating activities:
Depreciation and amortization 132,746 55,133
Net loss on sale of other assets 4,225 -
Restructuring provision, net of cash paid 81,277 -
Pension settlement 102,015 -
Deferred income taxes (38,911) 4,768
Other 2,214 (2,635)
Changes in operating assets and liabilities:
Accounts receivable, net 55,291 89,368
Inventories 3,523 1,636
Accounts payable and accrued liabilities (25,372) (126,920)
Income taxes (4,599) (29,944)
Deferred income taxes 2,691 4,523
Other (5,125) 2,068
--------- --------
Net cash provided by (used in) operating activities 48,149 (24,982)
INVESTING ACTIVITIES
Property, plant and equipment, net (11,902) (15,218)
Increase in long-term receivables (4,752) (301)
Proceeds from sale of other assets 12,526 6,149
Deferred charges (4,533) (2,325)
Other 1,659 (10,540)
--------- --------
Net cash used in investing activities (7,002) (22,235)
FINANCING ACTIVITIES
Dividends (8,846) (8,846)
Proceeds from issuance of long-term debt 49,411 86,747
Payments on long-term debt (44,408) (61,966)
Other (1,261) (1,865)
--------- --------
Net cash (used in) provided by financing activities (5,104) 14,070
Effect of exchange rate on cash 857 790
--------- --------
Net increase (decrease) in cash 36,900 (32,357)
Cash at beginning of period (a) 7,110 25,093
--------- --------
Cash at end of period (a) $ 44,010 $ (7,264)
========= ========
Cash paid during the period for:
Interest $ 11,705 $ 11,990
Income Taxes $ 2,924 $ 3,376
(a) Cash is defined as cash and short-term securities less short-term bank
loans.
(See notes to the consolidated financial statements)
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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, 2000 the Corporation adopted the recommendations of CICA
3461, Employee Future Benefits and CICA 3465, Accounting for Income Taxes. The
Consolidated Statement of Retained Earnings have been restated to reflect the
cumulative effect of these new standards.
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 and six months ended June 30, 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
June 30, December 31,
2001 2000
------------- -----------
Raw materials $ 47,273 $ 43,010
Work in process 13,249 14,612
Finished goods 86,698 93,441
Other 3,749 3,421
------------- -----------
Total $ 150,969 $ 154,484
============= ===========
3. RESTRUCTURING AND OTHER RELATED CHARGES
For the three and six month periods ended June 30, 2001, the Corporation
recorded a pretax restructuring provision as follows:
Three months Six months
Ended Ended
June 30, June 30,
----------- -----------
Moore North America $ 9,571 $ 27,758
Integrated Business Solutions 622 9,341
International and Other 3,372 9,902
Corporate Office 23,158 56,373
----------- -----------
Total $ 36,723 $ 103,374
=========== ===========
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS OF U.S DOLLARS, EXCEPT PER SHARE DATA)
3. RESTRUCTURING AND OTHER RELATED CHARGES (continued)
The restructuring provision for the three and six months ended June 30, 2001
includes provisions related to workforce reductions of $13.4 million and $48.0
million, respectively (706 and 1,852 positions); lease terminations, facility
closings and other cash costs of $23.3 million and $55.4 million, respectively.
Over the same six month period in 2000, the Corporation recorded a restructuring
provision of $3.8 million, related to employee terminations, offset by the
reversal of provisions no longer needed of $4.3 million.
The reconciliation of the restructuring liability as of June 30, 2001 is as
follows:
December 31, 2001 Cash Non-cash June 30,
2000 Provision Paid Write-offs 2001
------------- ----------- --------- ---------- ---------
Employee terminations (1) $ 6,626 $ 47,985 $ (17,839) $ - $ 36,772
Other 29,059 55,389 (4,258) - 80,190
Loss on disposals 10,276 - - - 10,276
------------- ----------- --------- ---------- ---------
Total $ 45,961 $ 103,374 $ (22,097) $ - $ 127,238
============= =========== ========= ========== =========
(1) Of the total positions planned for elimination, 5,971 have been eliminated
as of June 30, 2001.
The Corporation expects that substantially all remaining severance payments will
occur within the next twelve months.
During the three and six month periods ended June 30, 2001 the Corporation
recorded additional other related pretax charges as follows:
Three months ended
June 30,
------------------------------------------------------
Depreciation Selling General &
and Cost of Administrative
Amortization Sales Expenses Total
------------- --------- -------------- --------
Moore North America $ 4,051 $ - $ - $ 4,051
Integrated Business Solutions - - - -
International and Other 285 - - 285
Corporate Office 10,459 - 3,873 14,332
------------ --------- -------------- --------
Total $ 14,795 $ - $ 3,873 $ 18,668
============ ========= ============== ========
Six months ended
June 30,
------------------------------------------------------
Depreciation Selling General &
and Cost of Administrative
Amortization Sales Expenses Total
------------ --------- -------------- --------
Moore North America $ 5,932 $ - $ - $ 5,932
Integrated Business Solutions 2,774 - - 2,774
International and Other 1,265 - - 1,265
Corporate Office 16,900 61,209 45,622 123,731
------------ --------- -------------- --------
Total $ 26,871 $ 61,209 $ 45,622 $133,702
============ ========= ============== ========
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS OF U.S DOLLARS, EXCEPT PER SHARE DATA)
3. RESTRUCTURING AND OTHER RELATED CHARGES (continued)
Total other related charges for the six months ended June 30, 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,
legal settlement of $3.9 million and non-cash charges of $26.9 million for asset
impairments.
4. DISPOSITION AND ASSETS HELD FOR DISPOSITION
During the six months ended June 30, 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 $3.9 million in taxes. Included in the
Corporation's results of operations for the six months ended June 30, 2001 and
2000 are sales of $4.0 million and $40.4 million, respectively, and loss from
operations of $0.8 million and income from operations of $0.7 million
respectively, from divested assets.
During the six months ended June 30, 2001, the Corporation formalized plans to
dispose of certain other non-core assets within the International and Other
segment. Based upon anticipated proceeds from disposition, the Corporation
recorded a non-cash charge of $45.7 million, (net of $2.6 million in taxes),
included in depreciation and amortization. Net sales and operating results
contributed by these assets were $38.9 million and $(48.5) million, and $35.0
million and $1.7 million for the six months ended June 30, 2001 and 2000,
respectively.
5. RECONCILIATION TO U.S. GAAP
Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net loss as reported $ (60,366) $ (14,094) $(261,826) $ (22,979)
U.S. GAAP Adjustments, net of taxes:
Pension expense (1,835) 3,757 103,162 4,780
Postretirement benefits 2,671 3,155 5,323 5,403
Capitalized software 6,012 (424) 8,367 (908)
Interest expense 307 - 126 -
--------- --------- --------- ---------
Net loss as determined under
U.S. GAAP $ (53,211) $ (7,606) $(144,848) $ (13,704)
--------- --------- --------- ---------
Loss per share:
Basic loss per share $ (0.60) $ (0.08) $ (1.64) $ (0.15)
Diluted loss per share $ (0.60) $ (0.08) $ (1.64) $ (0.15)
Average shares outstanding -
basic and diluted (in thousands) 88,457 88,457 88,457 88,457
Comprehensive income:
Net loss U.S. GAAP $ (53,211) $ (7,606) $(144,848) $ (13,704)
Other comprehensive loss:
Cumulative translation adjustments (1,903) (4,933) (4,545) (5,783)
Reclass adjustment for losses
included in income - - (798) -
Unrealized losses on
available-for-sale securities - (7,493) - (1,730)
--------- --------- --------- ---------
Total comprehensive loss $ (55,114) $ (20,032) $(150,191) $ (21,217)
========= ========= ========= =========
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS OF U.S DOLLARS, EXCEPT PER SHARE DATA)
5. RECONCILIATION TO U.S. GAAP (continued)
Balance Sheet Items: June 30, 2001 December 31, 2000
As reported U.S. GAAP As reported U.S. GAAP
----------- ---------- ------------ ---------
Net pension asset $(193,703) $(131,632) $(286,360) $ (56,891)
Other assets - computer software ( 98,748) (62,988) (127,999) (78,412)
Post-retirement benefits 240,374 390,874 243,374 402,672
Long-term deferred tax asset (125,589) (184,284) (125,035) (287,156)
Long-term deferred tax liability 154,354 100,202 191,121 167,238
Accounts payable and
accrued liabilities 459,635 453,635 400,057 394,057
Long-term debt 276,655 284,482 272,465 280,808
Equity portion of subordinated
convertible debentures 8,343 - 8,343 -
Cumulative translation adjustments (130,905) (95,721) (126,360) (91,176)
Retained earnings 165,168 1,016 431,821 150,287
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.
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
June 30, 2001 Moore North Business And
America Solutions Other Consolidated
----------- ---------- ------------ ------------
Total revenue $ 274,531 $ 141,190 $ 122,381 $ 538,102
Intersegment revenue (4,578) (657) (341) (5,576)
Sales to customers outside the
enterprise 269,953 140,533 122,040 532,526
Segment operating profit 10,822 13,947 906 25,675
Non-operating expenses - - - (77,196)
Loss from operations (51,521)
Depreciation and amortization 14,775 7,332 21,654 43,761
Capital expenditures - 6,265 5,581 11,846
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS OF U.S DOLLARS, EXCEPT PER SHARE DATA)
6. SEGMENT INFORMATION (continued)
Six months ended Integrated International
June 30, 2001 Moore North Business And
America Solutions Other Consolidated
---------- ---------- ----------- ------------
Total revenue $ 565,636 $ 299,474 $ 254,109 $ 1,119,219
Intersegment revenue (10,802) (1,022) (673) (12,497)
Sales to customers outside the
enterprise 554,834 298,452 253,436 1,106,722
Segment operating profit (loss) 3,609 26,722 (53,478) (23,147)
Non-operating expenses - - - (257,688)
Loss from operations (280,835)
Segment assets 628,023 200,461 322,641 1,151,125
Corporate assets including
investments 450,218
Total assets 1,601,343
Depreciation and amortization 27,489 16,772 88,485 132,746
Capital expenditures 811 12,108 6,662 19,581
Three months ended Integrated International
June 30, 2000 Moore North Business And
(Restated) America Solutions Other Consolidated
----------- ---------- ------------- ------------
Total revenue $ 278,601 $ 123,049 $ 153,340 $ 554,990
Intersegment revenue (3,915) (166) (503) (4,584)
Sales to customers outside the
enterprise 274,686 122,883 152,837 550,406
Segment operating profit 2,533 10,794 3,169 16,496
Non-operating expenses - - - (31,789)
Loss from operations (15,293)
Depreciation and amortization 8,403 6,247 12,412 27,062
Capital expenditures 12,231 4,863 8,846 25,940
Six months ended Integrated International
June 30, 2000 Moore North Business And
(Restated) America Solutions Other Consolidated
----------- ---------- ----------- ------------
Total revenue $ 564,336 $ 260,648 $ 310,972 $ 1,135,956
Intersegment revenue (7,330) (464) (892) (8,686)
Sales to customers outside the
enterprise 557,006 260,184 310,080 1,127,270
Segment operating profit 3,690 30,110 7,459 41,259
Non-operating expenses - - - (65,766)
Loss from operations (24,507)
Segment assets 814,883 172,118 429,195 1,416,196
Corporate assets including
investments 402,413
Total assets 1,818,609
Depreciation and amortization 23,999 13,288 17,153 54,440
Capital expenditures 21,948 8,989 14,338 45,275
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS OF U.S DOLLARS, EXCEPT PER SHARE DATA)
7. PENDING LITIGATION
There are various lawsuits pending against or affecting the Corporation and its
subsidiaries. None of these claims are expected to have a material adverse
effect upon the Corporation's consolidated financial condition or results of
operations.
8. ENVIRONMENTAL MATTERS
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, or consolidated
financial condition of the Corporation.
9. DIVIDEND
On April 12, 2001 the Board of Directors unanimously approved the suspension of
future dividends on all outstanding equity securities.
10. RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the United States Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 142 "Goodwill and Other
Intangible Assets" (SFAS 142), which is effective for fiscal years beginning
after December 15, 2001. SFAS 142 requires that the carrying value of goodwill
be evaluated annually for impairment and disallows the amortization of goodwill.
The standard also requires reclassification of identifiable intangibles out of
previously reported goodwill. Identifiable intangibles are amortized over their
estimated useful lives and will be reviewed annually for impairment in
accordance with the Statement of Financial Accounting Standards No. 121
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". The Company is evaluating, but has not yet determined the impact
of the adoption of SFAS 142.
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Corporation operates in the printing industry with 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 is presented in accordance with
accounting standards generally accepted in Canada. The following discussion is
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 financial statements.
Consolidated results of operations for the three and six months ended June 30,
2001 and 2000 are shown in the accompanying consolidated statements of
operations.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2001 AS
COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2000
Reported net sales, for the three months ended June 30, 2001, decreased $17.9
million or 3.3%, from the same prior year period. The Corporation's revenues
were adversely impacted by the first quarter divestiture of the Colleagues
business unit, the decision to exit certain unprofitable accounts and the
devaluation of certain foreign currencies. The decline was partially offset by
organic growth of 4% in the Corporation's core business, Forms and Labels and
Integrated Business Solutions Group, due to the continued focus on significant
customers and cross-selling opportunities.
Income from operations decreased $36.2 million to a loss of $51.5 million,
versus the same prior year period, as a result of the restructuring and other
related charges. These charges were partially offset by improved operating
results in the core businesses as the rationalization of operations and
continued focus on cost containment significantly reduced Selling, General and
Administrative expenses.
Interest expense increased $0.6 million or 8.9%, due to 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.
In order to provide a better understanding of the financial results for the
three months ended June 30, 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 three months ended June 30, 2001, the Corporation recorded
restructuring and other related charges totaling $55.4 million, net of taxes, or
$0.62 per diluted share. These charges include a restructuring provision of
$36.7 million is related to workforce reductions and lease terminations;
non-cash charges related to asset impairments of $14.8 million included in
depreciation and amortization expense; and other non-recurring one time charges
of $3.9 million.
For the same three month period in 2000, the Corporation recorded an after-tax
restructuring provision of $2.3 million (net of $0.7 million in taxes), related
to employee terminations.
Net loss, for the three months ended June 30, 2001, increased by $46.3 million
to $60.4 million, or $(0.68) per share, from the same prior year period, due to
the Corporation's ongoing restructuring related activities.
All further discussions regarding the results of operations, for the three
months ended June 30, 2001 and 2000 will be based on the Corporation's operating
results net of the above mentioned items.
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended
June 30,
-------------------
2001 2000
------- -------
(IN MILLIONS)
Net Sales:
Moore North America $ 270.0 $ 274.7
Integrated Business Solutions 140.5 122.9
International and Other 122.0 152.8
------- -------
$ 532.5 $ 550.4
------- -------
Income (loss) from operations:(1)
Moore North America $ 24.1 $ 3.0
Integrated Business Solutions 14.6 10.9
International and Other 4.6 3.6
General Corporate (39.4) (30.5)
------- -------
$ 3.9 $ (13.0)
------- -------
Net loss $ ( 5.0) $ (12.5)
Net loss per share $ (0.06) $ (0.14)
(1) Presented net of above noted items
Consolidated
Income from operations, net of the above items, increased by $16.9 million to
$3.9 million as compared to a loss of $13.0 million, for the comparable prior
year quarter, reflecting the Corporation's financial discipline and ability to
aggressively control costs.
Net loss for the three month period ended June 30, 2001 declined $7.6 million to
$5.0 million, or $0.06 per share as compared to a net loss of $ 12.5 million or
$0.14 per share for the three-month period ended June 30, 2000. Improved results
reflect the impact of the Corporation's cost containment initiatives.
Moore North America
Net sales for the three month period ended June 30, 2001 decreased $4.7 million,
or 1.7%, primarily due to lower volumes as a result of the decision to exit
certain unprofitable accounts.
Operating income increased by $21.0 million to $24.1 million. The favorable
variance versus the same period last year was primarily due to the continued
focus on indirect overhead reduction and the elimination of investments in
digital and internet strategies for the Forms business.
Integrated Business Solutions(IBS)
Net sales for the three month period ended June 30, 2001 increased $17.6 million
to $140.5 million, or 14.4%, primarily due to increased demand for our
outsourcing business resulting in significant new business at the Business
Communications Group (BCS).
Operating income increased $3.7 million, or 34.0% due to the increase in net
sales, favorable product mix and benefits resulting from restructuring and
reorganization programs.
International and Other
Net sales declined by $30.8 million or 20.2% due to the disposition of
Colleagues, certain unfavorable foreign currencies and weak demand in non-core
businesses due to a challenging economic environment.
International and Other contributed $4.6 million to consolidated operating
income, a 28.5% increase due to aggressive cost containment, as selling, general
and administrative expense declined $8.1 million, or 20.5%.
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AS
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2000
Reported net sales for the six months ended June 30, 2001, decreased $20.6
million or 1.8%. Net sales for the six months ended June 30, 2001, for our core
businesses, Moore North America and Integrated Business Solutions rose $36.1
million, or 4.4% due to increased focus on customers and recent cross-selling
initiatives. These increases were offset by a $56.7 million decrease during the
same period in our International and Other businesses principally as a result
the divestiture of Colleagues, the devaluation of certain foreign currencies and
a significant deterioration in European sales.
Income from operations decreased $256.3 million to a loss of $280.8 million as a
result of the restructuring and other charges. 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 six
months ended June 30, 2001 and 2000, we have identified transactions that affect
comparability between periods. These items have been removed from the operating
results of the affected periods as follows:
During the six months ended June 30, 2001, the Corporation recorded
restructuring and other related charges totaling $249.6 million, net of taxes,
or $2.82 per diluted share. These charges include a restructuring provision of
$103.4 million primarily related to workforce reductions and lease terminations;
non-cash charges included in depreciation and amortization related to asset
impairments of $26.9 million; executive severance of $0.9 million related to the
replacement of senior executive officers; loss on disposal of non-core assets
included in investment and other income of $7.1 million (net of $3.9 million in
taxes), related to the Colleagues business unit in Europe and an investment in
Vista Information Solutions, Inc.; the write-down on non-core assets held for
sale is $45.7 million (net of $2.6 million in taxes); and other non-recurring
one-time charges of $3.9 million.
The Corporation also recorded an after-tax loss of $61.7 million (net of $40.3
million in taxes), or $0.70 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 are expected to be purchased during the fourth quarter
of 2001,resulting in an anticipated pretax loss of approximately $15.0 million.
For the same six month period in 2000, the Corporation recorded an after-tax
restructuring provision of $2.5 million (net of $1.3 million in taxes), related
to employee terminations, partially 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, for the six months
ended June 30, 2001 and 2000 will be based on the Corporation's operating
results net of the above mentioned items.
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six months ended
June 30,
--------------------
2001 2000
-------- --------
(IN MILLIONS)
Net Sales:
Moore North America $ 554.8 $ 557.0
Integrated Business Solutions 298.5 260.2
International and Other 253.4 310.1
-------- --------
$1,106.7 $1,127.3
-------- --------
Income (loss) from operations:(1)
Moore North America $ 37.3 $ 4.9
Integrated Business Solutions 38.9 30.6
International and Other 6.0 8.0
General Corporate (77.7) (68.4)
-------- --------
$ 4.5 $ (24.9)
-------- --------
Net loss $ (12.2) $ (23.0)
Net loss per share $ (0.14) $ (0.26)
(1) Presented net of above noted items
Consolidated
Income from operations for the six months ended June 30, 2001, increased by
$29.4 million to $4.5 million as compared to a loss of $24.9 million, reflecting
the benefit of our cost cutting initiatives including the reduction of
information technology spending, the disposition of non-essential assets and the
reduction of our worldwide workforce by approximately 11%. The Corporation
estimates the total projected pretax savings from these restructuring 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 intends to complete these restructuring related charges by the
fourth quarter of 2001. However, the Corporation will continue to evaluate
product lines and the existing asset base as it actively seeks opportunities to
improve its cost structure.
Interest expense for the six months ended June 30, 2001, increased $2.0 million
or 16.7% over the same prior year period as a result of the higher average cost
of borrowing due to the issuance of $70.5 million subordinated convertible
debentures in December 2000.
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 carry-forwards.
Net loss for the six month period ended June 30, 2001, declined $10.8 million to
$12.2 million, or $0.14 per share as compared to a net loss of $23.0 million, or
$0.26 per share for the six month period ended June 30, 2000. Improved results
reflect the immediate impact of the Corporation's strategic initiative to align
its costs with its revenues and to eliminate non-essential activities.
Moore North America
Net sales, for the six month period ended June 30, 2001, decreased $2.2 million
or 0.4%, due to lower volumes in the Canadian Forms and Labels business. This
decrease in the Canadian Forms and Labels business was primarily due to the
Corporation's decision to exit certain unprofitable customer accounts.
Operating income increased by $32.4 million to $37.3 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.
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Integrated Business Solutions (IBS)
Net sales, for the six months ended June 30, 2001, increased $38.3 million or
14.7%, 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 increased by $8.3 million, or 27.1%, 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, for the six months ended June 30, 2001, declined by $56.7 million or
18.3% due primarily to lower than anticipated volumes in Europe, the devaluation
of certain foreign currencies and the disposition of Colleagues on March 30,
2001.
International and Other contributed $6.0 million to consolidated operating
income a decrease of $2.0 million from the same prior year period. This decrease
is primarily due to 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.
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.
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. The Corporation has the intent and believes it
has the ability to refinance its credit facility to the extent necessary to
finance its future operations. Uncommitted bank operating lines are also
maintained in a majority of the domestic markets in which the Corporation
operates. These facilities amount to approximately $33.0 million at June 30,
2001. Total availability as of June 30, 2001 was approximately $198.0 million.
As of June 30, 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. In April 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 six to twelve months.
Net cash provided from operating activities was $48.1 million for the six months
ended June 30, 2001 compared to a net cash usage of $25.0 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 usage by investing activities for the six months ended June 30, 2001
was $7.0 million, a decline of $15.2 million versus the six month period ended
June 30, 2000, primarily due to a substantial reduction of expenditures for
information technology and property, plant and equipment.
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statement
Statements about market trends, anticipated earnings, projected cost savings and
future activities in 2001 and beyond, including the anticipated completion of
restructuring charges by the end of the year, the timing of the release of
annuity contracts, the anticipated use of savings from cost reductions and
anticipated proceeds from the termination of the U.S. Pension Plan 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 and other raw material price fluctuations,
successful execution of cost containment and other key strategies, the rate of
migration from paper-based forms to digital formats, future growth rates in the
Corporation's core businesses, 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 June 30, 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 June 30,
2001 the aggregate amount of outstanding forward contracts was $18.9 million.
Notional gains and losses from these foreign currency contracts were not
significant at June 30, 2001. The Corporation does not use derivative financial
instruments for trading purposes.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were voted on at the Corporation's Annual Meeting of
Shareholders held on April 12, 2001:
1. The election of directors of the Corporation:
Shares For Shares Withheld
---------- ---------------
R.T. Ammon 62,944,414 284,159
R.G. Burton 62,931,425 297,148
S.A. Dawe 62,912,962 315,611
A.C. Eckert, III 62,943,481 285,092
D.R. McCamus 62,907,147 321,426
N.N. Minow 62,919,449 309,124
J.R.S. Prichard 62,881,763 346,810
L.H. Schipper 62,926,978 301,595
J.W. Stevens 62,945,612 232,961
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. The appointment of Pricewaterhouse Coopers LLP as auditors of the
Corporation and the authorization for the directors to fix the
remuneration to be paid to the auditors.
Shares For Shares Withheld
---------- ---------------
63,048,277 70,503
3. A special resolution approving the amendment of the Corporation's Articles
of Amalgamation to remove objects for which the Corporation is
incorporated set forth in clause 10 thereof.
Shares For Shares Withheld
---------- ---------------
54,823,581 384,244
4. Approval of the 2001 Long Term Incentive Plan
Shares For Shares Withheld
---------- ---------------
39,746,969 23,126,298
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 Item 4
3.2 By-Laws No amendments
4 Instruments defining the rights of security Not required.
10 Material contracts Not applicable
11 Statement re: computation of per share earnings Not applicable
15 Letter re: unaudited interim financial information Not applicable
18 Letter re: change in accounting principles Not applicable
19 Report furnished to shareholders Not applicable
24 Power of attorney None
99 Additional exhibits None
(b) Reports on Form 8-K
Current Report on Form 8-K filed with the Commission on April 25, 2001. On April
23, 2001 the Board of Directors asked for the resignation of the independent
accountants of the Registrant, and accordingly, Pricewaterhouse Coopers, LLP
resigned on April 23, 2001. The Registrant engaged Deloitte & Touche, LLP as its
new independent accountants as of April 23, 2001.
MOORE CORPORATION LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOORE CORPORATION LIMITED
Date: August 10, 2001 By: Robert B. Lewis
Executive Vice President, Chief Financial Officer
By: Mark S. Hiltwein
Senior Vice President, Controller
(Chief Accounting Officer)