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 SEPTEMBER 30, 2001
COMMISSION FILE NUMBER 1-8014
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 November 13, 2001, 88,456,940 shares of the registrant's common shares,
without par value were outstanding.
================================================================================
PART I. FINANCIAL INFORMATION
MOORE CORPORATION LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
September 30, December 31,
2001 2000
------------ ------------
(UNAUDITED)
ASSETS
Current Assets
Cash and short-term securities $ 96,394 $ 36,538
Accounts receivable, net 344,934 407,304
Inventories (Note 2) 154,348 154,484
Deferred income taxes 77,915 78,632
Prepaid expenses 17,757 22,683
---------- ----------
Total current assets 691,348 699,641
Property, plant and equipment, net 345,554 409,099
Prepaid pension costs 232,283 312,180
Goodwill, net 73,247 130,530
Deferred income taxes 125,084 125,035
Other assets 150,754 191,941
---------- ----------
TOTAL ASSETS $1,618,270 $1,868,426
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank indebtedness $ 12,983 $ 29,428
Accounts payable and accrued liabilities 487,818 400,057
Short-term debt 2,705 2,709
Deferred income taxes - 462
Other current liabilities 26,201 35,591
---------- ----------
Total current liabilities 529,707 468,247
Long-term debt 276,211 272,465
Postretirement benefits 243,220 243,374
Deferred income taxes 154,409 191,121
Other liabilities 64,044 57,289
Minority interest 11,397 11,245
---------- ----------
Total liabilities 1,278,988 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 152,837 431,821
Cumulative translation adjustments (132,779) (126,360)
---------- ----------
Total shareholders' equity 339,282 624,685
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,618,270 $1,868,426
========== ==========
(See notes to the consolidated financial statements)
MOORE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
-------------------- -----------------------
2001 2000 2001 2000
-------- -------- ---------- ----------
Net sales $510,603 $550,493 $1,617,325 $1,677,763
Cost of sales 349,864 384,817 1,179,553 1,187,697
Selling, general and
administrative expenses 122,785 126,860 444,533 417,492
Restructuring provision (Note 3) 6,540 1,170 109,914 4,995
Depreciation and amortization 33,187 29,256 165,933 83,696
-------- -------- ---------- ----------
Total operating expenses 512,376 542,103 1,899,933 1,693,880
-------- -------- ---------- ----------
Income (loss) from operations (1,773) 8,390 (282,608) (16,117)
Investment and other income(expense) (2,446) (8,446) (4,876) (7,290)
Interest expense 6,608 6,335 20,881 18,570
-------- -------- ---------- ----------
Loss before income taxes and
minority interest (10,827) (6,391) (308,365) (41,977)
Income tax (benefit) expense 884 1,158 (35,741) (12,162)
Minority interest 460 361 1,373 1,074
-------- -------- ---------- ----------
Net loss $(12,171) $ (7,910) $ (273,997) $ (30,889)
======== ======== ========== ==========
Loss per common share:
Basic $ (0.14) $ (0.09) $ (3.10) $ (0.35)
-------- -------- ---------- ----------
Diluted $ (0.14) $ (0.09) $ (3.10) $ (0.35)
-------- -------- ---------- ----------
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
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
Nine months ended
September 30,
-----------------------
2001 2000
--------- ---------
Balance, January 1 $ 431,821 $ 480,049
Change in accounting policy:
Income taxes - 2,443
Employee future benefits - 33,295
--------- ---------
Balance, January 1 restated 431,821 515,787
Net loss (273,997) (30,889)
Convertible subordinated debentures (564) -
Dividends (5(cent)per share in 2001 and 15(cent)in 2000) (4,423) (13,171)
--------- ---------
Balance, September 30 $ 152,837 $ 471,727
========= =========
(See notes to the consolidated financial statements)
MOORE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
Three months ended
September 30,
---------------------
2001 2000
-------- --------
OPERATING ACTIVITIES
Net loss $(12,171) $ (7,910)
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 33,187 29,583
Restructuring provision, net of cash paid (14,360) -
Deferred income taxes (29) 265
Other 2,267 5,504
Changes in operating assets and liabilities:
Accounts receivable, net 7,079 (24,867)
Inventories (3,387) 6,509
Accounts payable and accrued liabilities 46,872 5,348
Income taxes (370) 29,531
Deferred income taxes (255) (29,181)
Other (11,826) (8,211)
-------- --------
Net cash provided by operating activities 47,007 6,571
INVESTING ACTIVITIES
Property, plant and equipment, net (2,679) (14,497)
Increase in long-term receivables 1,478 197
Proceeds from sale of other assets - (1,788)
Deferred charges (1,459) (120)
Other (4,446) (2,874)
-------- --------
Net cash used in investing activities (7,106) (19,082)
FINANCING ACTIVITIES
Dividends - (4,325)
Proceeds from issuance of long-term debt 796 48,924
Payments on long-term debt (1,902) (25,590)
Other 588 (2,161)
-------- --------
Net cash (used in) provided by financing activities (518) 16,848
Effect of exchange rate on cash 18 593
-------- --------
Net increase in cash 39,401 4,930
Cash at beginning of period (a) 44,010 (7,264)
-------- --------
Cash at end of period (a) $ 83,411 $ (2,334)
======== ========
Cash paid during the period for:
Interest $ 9,842 $ 10,322
Income Taxes $ 225 $ 841
(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
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
Nine months ended
September 30,
---------------------
2001 2000
--------- --------
OPERATING ACTIVITIES
Net loss $(273,997) $(30,889)
Adjustments to reconcile net cash provided
by (used in) operating activities:
Depreciation and amortization 165,933 84,716
Net loss on sale of other assets 4,225 -
Restructuring provision, net of cash paid 66,917 -
Pension settlement 102,015 -
Deferred income taxes (38,940) 5,033
Other 4,481 2,869
Changes in operating assets and liabilities:
Accounts receivable, net 62,370 64,501
Inventories 136 8,145
Accounts payable and accrued liabilities 21,500 (121,572)
Income taxes (4,969) (413)
Deferred income taxes 2,436 (24,658)
Other (16,951) (6,143)
--------- --------
Net cash provided by (used in) operating activities 95,156 (18,411)
INVESTING ACTIVITIES
Property, plant and equipment, net (14,581) (29,715)
Increase in long-term receivables (3,274) (104)
Proceeds from sale of other assets 12,526 4,361
Deferred charges (5,992) (2,445)
Other (2,787) (13,414)
--------- --------
Net cash used in investing activities (14,108) (41,317)
FINANCING ACTIVITIES
Dividends (8,846) (13,171)
Proceeds from issuance of long-term debt 50,207 135,671
Payments on long-term debt (46,310) (87,556)
Other (673) (4,026)
--------- --------
Net cash (used in) provided by financing activities (5,622) 30,918
Effect of exchange rate on cash 875 1,383
--------- --------
Net increase (decrease) in cash 76,301 (27,427)
Cash at beginning of period (a) 7,110 25,093
--------- --------
Cash at end of period (a) $ 83,411 $ (2,334)
========= ========
Cash paid during the period for:
Interest $ 21,547 $ 22,312
Income Taxes $ 3,149 $ 4,217
(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
Handbook Section 3461, Employee Future Benefits and CICA Handbook Section 3465,
Accounting for Income Taxes. The Consolidated Statements 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 Handbook 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 nine months ended September 30,
2001 excludes the impact of the subordinated convertible debentures, since it
would be antidilutive.
The consolidated financial statements have been prepared in conformity with
Canadian generally accepted accounting principles and include estimates and
assumptions of management that affect the amounts reported in the consolidated
financial statements. Actual results could differ from these estimates.
Additionally, the Corporation is reviewing its investment in non-core assets and
businesses. It is reasonably possible that carrying values of these investments
could be adjusted in the near-term based upon these reviews.
2. INVENTORIES
September 30, December 31,
2001 2000
------------ -----------
Raw materials $ 48,103 $ 43,010
Work-in-process 16,134 14,612
Finished goods 86,279 93,441
Other 3,832 3,421
------------ -----------
Total $ 154,348 $ 154,484
============ ===========
3. RESTRUCTURING AND OTHER RELATED CHARGES
For the three and nine month periods ended September 30, 2001, the Corporation
recorded a pretax restructuring provision as follows:
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
Forms and Labels $ 2,522 $ 24,854
Outsourcing 31 5,353
Commercial 3,667 23,014
Corporate Office 320 56,693
------------- -------------
Total $ 6,540 $ 109,914
============= =============
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 nine months ended September 30,
2001 includes provisions related to workforce reductions of $4.5 million and
$52.5 million, respectively (167 and 2,019 positions); and lease terminations,
facility closings and other cash costs of $2.0 million and $57.4 million,
respectively.
Over the same nine month period in 2000, the Corporation recorded a
restructuring provision of $4.9 million, related to employee terminations.
The reconciliation of the restructuring liability as of September 30, 2001 is as
follows:
December 31, 2001 Cash Noncash September 30,
2000 Provision Paid Write-offs 2001
----------- --------- -------- ---------- ------------
Employee terminations (1) $ 6,626 $ 52,473 $(31,252) $ - $ 27,847
Other 29,059 57,441 (11,745) - 74,755
Loss on disposals 10,276 - - - 10,276
----------- --------- -------- ---------- ------------
Total $ 45,961 $ 109,914 $(42,997) $ - $ 112,878
=========== ========= ======== ========== ============
(1) Of the total positions planned for elimination, 6,138 have been eliminated
as of September 30, 2001.
The Corporation expects that substantially all remaining severance payments will
occur within the next twelve months.
During the three and nine month periods ended September 30, 2001 the Corporation
recorded additional other related pretax charges as follows:
Three months ended
September 30,
------------------------------------------------------
Depreciation Selling, General
and Cost of & Administrative
Amortization Sales Expenses Total
------------ --------- -------------- -------
Forms and Labels $ 3,088 $ - $ - $ 3,088
Outsourcing - - - -
Commercial - - - -
Corporate Office 4,600 - - 4,600
------------ --------- -------------- -------
Total $ 7,688 $ - $ - $ 7,688
============ ========= ============== =======
Nine months ended
September 30,
-------------------------------------------------------
Depreciation Selling, General
and Cost of & Administrative
Amortization Sales Expenses Total
------------ --------- -------------- --------
Forms and Labels $ 8,405 $ - $ - $ 8,405
Outsourcing 342 - - 342
Commercial 4,312 - - 4,312
Corporate Office 21,500 61,209 45,622 128,331
------------ --------- -------------- --------
Total $ 34,559 $ 61,209 $ 45,622 $141,390
============ ========= ============== ========
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 nine months ended September 30, 2001 consist
of: a $102.0 million charge for the partial settlement of the U.S. pension plan
(curtailed as of December 31, 2000), non-cash charges of $34.6 million for asset
impairments and other nonrecurring charges of $4.8 million.
4. DISPOSITION AND ASSETS HELD FOR DISPOSITION
During the nine months ended September 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 nine months ended September 30,
2001 and 2000 are sales of $4.0 million and $52.6 million, respectively, and
loss from operations of $0.8 million and income from operations of $0.3 million
respectively, from divested assets.
During the nine months ended September 30, 2001, the Corporation formalized
plans to dispose of certain non-core assets within the Commercial 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), which is included in
depreciation and amortization. Net sales and operating results contributed by
these assets were $57.9 million and $(47.0) million, and $53.6 million and $2.2
million for the nine months ended September 30, 2001 and 2000, respectively. In
August 2001, the Corporation entered into a definitive agreement to sell these
non-core assets to Minacs Worldwide Inc., contingent upon financing and
regulatory approval. The transaction is expected to be completed during the
fourth quarter of 2001.
5. RECONCILIATION TO U.S. GAAP
Three months ended Nine months ended
September 30, September 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Net loss as reported $ (12,171) $ (7,910) $(273,997) $ (30,889)
U.S. GAAP Adjustments, net of taxes:
Pension expense (955) 2,388 102,207 7,168
Postretirement benefits 3,660 3,417 8,983 8,820
Capitalized software 1,068 424 9,435 (484)
Interest expense 63 - 189 -
--------- --------- --------- ---------
Net loss as determined under U.S. GAAP $ (8,335) $ (1,681) $(153,183) $ (15,385)
--------- --------- --------- ---------
Loss per share:
Basic loss per share $ (0.09) $ (0.02) $ (1.73) $ (0.17)
Diluted loss per share $ (0.09) $ (0.02) $ (1.73) $ (0.17)
Average shares outstanding -
basic and diluted (in thousands) 88,457 88,457 88,457 88,457
Comprehensive income (loss):
Net loss U.S. GAAP $ (8,335) $ (1,681) $(153,183) $ (15,385)
Other comprehensive income (loss):
Cumulative translation adjustments (1,874) (3,713) (6,419) (9,496)
Reclass adjustment for losses
included in income - - (798) -
Unrealized losses on
available-for-sale securities - 6,372 - 4,642
--------- --------- --------- ---------
Total comprehensive income (loss) $ (10,209) $ 978 $(160,400) $ (20,239)
========= ========= ========= =========
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: September 30, 2001 December 31, 2000
As reported U.S. GAAP As reported U.S. GAAP
----------- --------- ----------- ---------
Net pension asset $ (217,283) $(153,634) $ (286,360) $ (56,891)
Other assets - computer software (97,458) (63,468) (127,999) (78,412)
Postretirement benefits 243,220 387,672 243,374 402,672
Long-term deferred tax asset (125,084) (181,420) (125,035) (287,156)
Long-term deferred tax liability 154,409 100,387 191,121 167,238
Accounts payable and accrued liabilities 487,818 481,818 400,057 394,057
Long-term debt 276,211 283,793 272,465 280,808
Equity portion of subordinated
convertible debentures 8,343 - 8,343 -
Cumulative translation adjustments (132,779) (97,595) (126,360) (91,176)
Retained earnings (deficit) 152,837 (7,319) 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 third 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
September 30, 2001 Forms
and Labels Outsourcing Commercial Consolidated
---------- ----------- ---------- ------------
Total revenue $ 279,133 $ 71,801 $ 163,327 $ 514,261
Intersegment revenue (651) (60) (2,947) (3,658)
Sales to customers outside the
enterprise 278,482 71,741 160,380 510,603
Segment operating profit 27,411 9,587 8,472 45,470
Nonoperating expenses - - - (47,243)
Loss from operations (1,773)
Depreciation and amortization 24,499 4,198 4,490 33,187
Capital expenditures-net 2,191 1,122 - 3,313
Nine months ended
September 30, 2001 Forms
and Labels Outsourcing Commercial Consolidated
---------- ----------- ---------- ------------
Total revenue $ 876,027 $ 250,716 $ 505,804 $ 1,632,547
Intersegment revenue (1,427) (937) (12,858) (15,222)
Sales to customers outside the
enterprise 874,600 249,779 492,946 1,617,325
Segment operating profit (loss) 39,149 31,312 (48,080) 22,381
Nonoperating expenses - - - (304,989)
Loss from operations (282,608)
Segment assets 636,788 130,395 346,795 1,113,978
Corporate assets including
investments 504,292
Total assets 1,618,270
Depreciation and amortization 83,334 13,254 69,345 165,933
Capital expenditures-net 7,759 12,872 2,263 22,894
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS OF U.S DOLLARS, EXCEPT PER SHARE DATA)
6. SEGMENT INFORMATION (continued)
Three months ended
September 30, 2000 Forms
(Restated) and Labels Outsourcing Commercial Consolidated
---------- ----------- ---------- ------------
Total revenue $ 303,618 $ 65,341 $ 186,168 $ 555,127
Intersegment revenue - (454) (4,180) (4,634)
Sales to customers outside the
enterprise 303,618 64,887 181,988 550,493
Segment operating profit 28,437 9,651 5,342 43,430
Nonoperating expenses - - - (35,040)
Income from operations 8,390
Depreciation and amortization 18,400 4,204 6,652 29,256
Capital expenditures 9,271 1,529 4,649 15,449
Nine months ended
September 30, 2000 Forms
(Restated) and Labels Outsourcing Commercial Consolidated
---------- ----------- ---------- ------------
Total revenue $ 916,753 $ 212,002 $ 564,188 $ 1,692,943
Intersegment revenue - (689) (14,491) (15,180)
Sales to customers outside the
enterprise 916,753 211,313 549,697 1,677,763
Segment operating profit 43,433 30,598 10,658 84,689
Nonoperating expenses - - - (100,806)
Loss from operations (16,117)
Segment assets 878,395 63,916 501,146 1,443,457
Corporate assets including
Investments 388,501
Total assets 1,831,958
Depreciation and amortization 51,734 12,626 19,336 83,696
Capital expenditures 32,253 6,038 22,433 60,724
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.
MOORE CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS OF U.S DOLLARS, EXCEPT PER SHARE DATA)
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 No. 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".
In August 2001, the CICA issued Handbook Section 3061, Goodwill and Other
Intangible Assets. The guidance of this new Section is consistent with SFAS No.
142. The Corporation is evaluating the impact of SFAS No. 142 and CICA Section
3061, but does not believe that either of these accounting standards will have a
material impact upon its financial condition or results of operations.
MOORE CORPORATION LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.
MANAGEMENT'S 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 Forms and Labels, Outsourcing
and Commercial. 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 these charges should be read in conjunction with the Corporation's
reported financial statements.
Consolidated results of operations for the three and nine months ended September
30, 2001 and 2000 are shown in the accompanying consolidated statements of
operations.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AS
COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2000
Net sales for the three months ended September 30, 2001, decreased $39.9 million
or 7.2%, from the same prior year period. This decline resulted from the first
quarter divestiture of the Colleagues business unit, the decision to exit
certain unprofitable accounts and the devaluation of certain foreign currencies.
Income from operations decreased $10.2 million to a loss of $1.8 million, as a
result of a restructuring provision for workforce reductions and lease
terminations and the write-off of certain impaired assets. 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 by $4.1
million, or 3.2%.
Net loss for the three months ended September 30, 2001, increased by $4.3
million to $12.2 million, or $(0.14) per share, primarily due to the
Corporation's ongoing restructuring activities.
In order to provide a better understanding of the financial results for the
three months ended September 30, 2001 and 2000, the Corporation has identified
transactions that affect comparability between periods. The following items have
been removed from the operating results of the affected quarters.
During the three months ended September 30, 2001, the Corporation recorded
restructuring and other charges totaling $14.2 million (net of taxes), or $0.16
per diluted share. These charges include a restructuring provision of $6.5
million related to workforce reductions and lease terminations and non-cash
charges related to asset impairments of $7.7 million, which are included in
depreciation and amortization expense.
For the same period in 2000, the Corporation recorded restructuring and other
charges of $4.3 million (net of taxes), or $.05 per diluted share. These charges
include a restructuring charge of $0.4 million, related to employee terminations
and the write-down of the investment in JetForm Corporation of $8.6 million,
partially offset by the reversal of provisions no longer needed of $4.7 million.
All further discussions regarding the results of operations for the three months
ended September 30, 2001 and 2000 will be based on the Corporation's operating
results net of the above mentioned items.
MOORE CORPORATION LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended
September 30,
--------------------
2001 2000
------- -------
(IN MILLIONS)
Net Sales:
Forms and Labels $ 278.5 $ 303.6
Outsourcing 71.7 64.9
Commercial 160.4 182.0
------- -------
$ 510.6 $ 550.5
------- -------
Income (loss) from operations:(1)
Forms and Labels $ 33.6 $ 30.2
Outsourcing 9.6 6.7
Commercial 11.7 4.8
Corporate Office (42.4) (36.9)
------- -------
$ 12.5 $ 4.8
------- -------
Net income/(loss) $ 2.0 $ (3.6)
Net income/(loss) per share $ 0.02 $ (0.04)
(1) Presented net of above noted items
Consolidated
Income from operations, net of the aforementioned items, increased by $7.7
million to $12.5 million from the prior year quarter, reflecting the
Corporation's financial discipline and ability to aggressively control costs.
Net income for the three month period ended September 30, 2001 increased $5.6
million to $2.0 million, or $0.02 per share as compared to a net loss of $ 3.6
million or $(0.04) per share for the three month period ended September 30,
2000. Improved results reflect the continued beneficial impact of the
Corporation's cost containment initiatives.
Forms and Labels
Net sales for the three month period ended September 30, 2001 decreased $25.1
million, or 8.3%, primarily due to lower volumes as a result of exiting certain
unprofitable accounts and unfavorable foreign currency translations.
Operating income increased by $3.4 million to $33.6 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.
Outsourcing
Net sales for the three month period ended September 30, 2001 increased $6.8
million to $71.7 million, or 10.5%, primarily due to increased demand for our
services resulting in significant new business in the Outsourcing Group.
Operating income increased by $2.9 million, or 43.3%, due to increased revenues,
improved product mix and cost savings achieved through workforce reductions.
MOORE CORPORATION LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Commercial
Net sales declined by $21.6 million or 11.9% due to the disposition of
Colleagues and weak demand in non-core businesses due to the challenging
economic environment.
Commercial contributed $11.7 million to consolidated operating income, a 143.7%
increase due to aggressive cost containment, resulting in an $8.9 million, or
23.4% decrease in selling, general and administrative expenses.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AS
COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000
Net sales for the nine months ended September 30, 2001, decreased $60.5 million
or 3.6%, primarily resulting from the divestiture of Colleagues, unfavorable
foreign currency translation, exiting certain unprofitable accounts and weak
demand in non-core businesses due to the challenging economic environment.
Loss from operations increased $266.5 million to a loss of $282.6 million as a
result of the restructuring and other charges. These charges were partially
offset by improved operating results in the core businesses.
Net loss for the nine months ended September 30, 2001, increased by $243.1
million to $274.0 million or $(3.10) per diluted share, primarily due to the
Corporation's restructuring actions.
In order to provide a better understanding of the financial results for the nine
months ended September 30, 2001 and 2000, the Corporation has identified
transactions that affect comparability between periods. The following items have
been removed from the operating results of the affected periods.
During the nine months ended September 30, 2001, the Corporation recorded
restructuring and other related charges of $263.8 million (net of taxes), or
$2.98 per diluted share. These charges include a restructuring provision of
$109.9 million primarily related to workforce reductions and lease terminations;
non-cash charges of $34.6 million that are included in depreciation and
amortization related to asset impairments; executive severance of $0.9 million
related to the replacement of senior executive officers; loss on disposal of
non-core assets that is 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 of
non-core assets held for sale is $45.7 million (net of $2.6 million in taxes);
and other nonrecurring charges of $3.9 million.
The Corporation also recorded a 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 U.S. 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 first six months of
2002, resulting in an anticipated pretax loss of approximately $15.0 million.
For the same nine month period in 2000, the Corporation recorded a restructuring
provision of $2.9 million (net of $2.0 million in taxes), related to employee
terminations and the writedown of the investment in JetForm Corporation of $8.6
million, which is included in investment and other income, partially offset by
the reversal of provisions no longer needed of $7.3 million (net of $1.7 million
in taxes).
All further discussions regarding the results of operations for the nine months
ended September 30, 2001 and 2000 will be based on the Corporation's operating
results net of the above mentioned items.
MOORE CORPORATION LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine months ended
September 30,
---------------------
2001 2000
-------- --------
(IN MILLIONS)
Net Sales:
Forms and Labels $ 874.6 $ 916.8
Outsourcing 249.8 211.3
Commercial 492.9 549.7
-------- --------
$1,617.3 $1,677.8
-------- --------
Income (loss) from operations:(1)
Forms and Labels $ 72.4 $ 46.5
Outsourcing 37.0 28.1
Commercial 27.6 10.6
Corporate Office (120.0) (105.3)
-------- --------
$ 17.0 $ (20.1)
-------- --------
Net loss $ (10.2) $ (26.6)
Net loss per share $ (0.12) $ (0.30)
(1) Presented net of above noted items
Consolidated
Income from operations for the nine months ended September 30, 2001, increased
by $37.1 million to $17.0 million as compared to a loss of $20.1 million,
reflecting the benefit of our cost cutting initiatives including the reduction
of information technology spending, the disposition of non-performing assets and
the reduction of our worldwide workforce by approximately 17%. 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 anticipates that this
will substantially complete the restructuring activity in the fourth quarter of
2001. The Corporation will continue to evaluate product lines, employee base and
the existing asset base as it actively seeks opportunities to improve its cost
structure. As part of this ongoing evaluation the Corporation is continuing its
review of its investment in non-core assets and businesses. It is reasonably
possible that carrying values of these investments could be adjusted in the
near-term based upon these reviews.
Interest expense for the nine months ended September 30, 2001, increased $2.3
million or 12.4% over the same prior year period due to an increase in debt
resulting from the issuance of $70.5 million subordinated convertible debentures
in December 2000 and higher average cost of borrowings offset by lower
borrowings under bank credit 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 nine month period ended September 30, 2001, declined $16.4
million to $10.2 million, or $(0.12) per share as compared to a net loss of
$26.6 million, or $(0.30) per share for the nine month period ended September
30, 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.
Forms and Labels
Net sales for the nine month period ended September 30, 2001, decreased $42.2
million or 4.6%, due to the unfavorable foreign currency translation and lower
volumes at the Canadian Forms and Labels business as a result of the
Corporation's decision to exit certain unprofitable customer accounts.
MOORE CORPORATION LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating income increased $25.9 million or 55.7% 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 the goal to
significantly reduce costs. For the nine month period ended September 30, 2001,
the cost containment initiative yielded $18.5 million or 9.6% in savings of
selling, general and administrative expenses, versus the same prior year period.
Outsourcing
Net sales for the nine months ended September 30, 2001, increased $38.5 million
or 18.2%, due to strong volume growth resulting from increased service offerings
and the benefits achieved from a sharper focus on leveraging core capabilities
with existing customers.
Operating income increased by $8.9 million, or 31.7%, due to increased revenues,
improved product mix and cost savings achieved through workforce reductions.
Commercial
Net sales for the nine months ended September 30, 2001, declined by $56.8
million or 10.3% due primarily to weakness in non-core businesses and the
disposition of Colleagues, the European advertising business, on March 30, 2001.
Commercial contributed $27.6 million to consolidated operating income, an
increase of $17.0 million from the same prior year period. This increase is
primarily due to cost containment initiatives at the Corporation's research
facility.
Corporate
The increase in corporate expense is primarily due to the elimination of pension
income resulting from the pension settlement and additional retirement savings
plan contributions, 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. However, the Corporation's operating revenues have
historically not been seasonal.
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 $43.2 million at September
30, 2001. Total availability as of September 30, 2001 was approximately $209.2
million.
As of September 30, 2001 the Corporation met all of its financial covenants and
the Corporation 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 expects to
receive approximately $150 million (before taxes, fees and transfers to other
employee benefit plans resulting from the termination of the U.S. pension plan)
within the next six to twelve months.
Net cash provided from operating activities was $95.2 million for the nine
months ended September 30, 2001 compared to a net cash usage of $18.4 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 usage by investing activities for the nine months ended September 30,
2001 was $14.1 million, a decline of $27.2 million versus the nine month period
ended September 30, 2000, primarily due to a substantial reduction of
expenditures for information technology and property, plant and equipment.
MOORE CORPORATION LIMITED
MANAGEMENT'S 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 anticipated use of savings
from cost reductions and anticipated amount and timing of the receipt of
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 cross-selling,
cost containment and other key strategies, the successful negotiation, execution
and integration of acquisitions, the ability to renegotiate or terminate
unprofitable contacts, the ability to divest non-core businesses, 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 periodic 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 September 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 September
30, 2001 the aggregate amount of outstanding forward contracts was $18.6
million. Notional gains and losses from these foreign currency contracts were
not significant at September 30, 2001. The Corporation does not use derivative
financial instruments for trading purposes.
MOORE CORPORATION LIMITED
PART II - OTHER INFORMATION
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(a) Articles of Amalgamation Previously filed
3.1(b) Amendment of Articles of Amalgamation Filed herein
3.2 By-Laws Previously filed
4.1 Note Purchase Agreement, dated as of March 25, 1999, Filed herein
among Moore Corporation Limited, Moore North
America Finance, Inc. and the Purchasers named therein
related to U.S. $85,500,000 principal amount of 7.84%
Senior Guaranteed Notes, Series A Due March 25, 2006
and U.S. $114,500,000 principal amount of 8.05% Senior
Guaranteed Notes, Series B Due March 25,2009
4.2 Debenture Purchase Agreement, dated as of Filed herein
December 12, 2000 between Moore Corporation Limited
and Chancery Lane/GSC Investors L.P.
4.3 8.70% Subordinated Convertible Debenture due Filed herein
June 30, 2009 issued to Chancery Lane/GSC Investors
L.P.
4.4 Standstill Agreement, dated December 21, 2000 among Filed herein
Moore Corporation Limited, Chancery Lane/GSC
Investors L.P. and CLGI, Inc.
4.5 Registration Rights Agreement, dated as of Filed herein
December 21, 2000 between Moore Corporation
Limited and Chancery Lane/GSC Investors L.P.
10.1 Supplemental Executive Retirement Plan for Filed herein
Designated Executives - B
10.2 Employment Agreement, dated December 11, 2000, Filed herein
between Moore Corporation Limited and Robert
G. Burton
10.3 Employment Agreement, dated as of December 11, 2000, Filed herein
between Moore Corporation Limited and Robert Lewis
10.4 Employment Agreement, dated as of December 11, 2000, Filed herein
between Moore Corporation Limited and James Lillie
10.5 Amended Restated Credit Agreement, dated as of Filed herein
August 15, 1999, among FRDK, Inc., as the Borrower,
Moore Corporation Limited, as Parent and a Guarantor,
Certain Subsidiaries of the Parent, named therein,
as Subsidiary Guarantors, Certain Financial
Institutions named therein, as the Lenders and the
Bank of Nova Scotia, as Agent for the Lenders.
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 Not applicable
99 Additional exhibits Not applicable
(b) Reports on Form 8-K
On July 25, 2001 the Corporation filed a Current Report on Form 8-K, dated July
25, 2001, announcing its financial results for the second quarter 2001.
MOORE CORPORATION LIMITED
PART II - OTHER INFORMATION
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: November 14, 2001 By: Robert B. Lewis
Executive Vice President, Chief Financial Officer
By: Mark S. Hiltwein
Senior Vice President, Controller
(Chief Accounting Officer)
- --------------------------------------------------------------------------------
MOORE CORPORATION LIMITED
PART II - OTHER INFORMATION
EXHIBIT INDEX
EXHIBIT # DESCRIPTION LOCATION
- --------- ----------- --------
3.1(b) Amendment to Articles of Amalgamation 22
4.1 Note Purchase Agreement, dated as of March 25, 1999, 29
among Moore Corporation Limited, Moore North
America Finance, Inc. and the Purchasers named therein
related to U.S. $85,500,000 principal amount of 7.84%
Senior Guaranteed Notes, Series A Due March 25, 2006
and U.S. $114,500,000 principal amount of 8.05% Senior
Guaranteed Notes, Series B Due March 25,2009
4.2 Debenture Purchase Agreement, dated as of 130
December 12, 2000 between Moore Corporation Limited and
Chancery Lane/GSC Investors L.P.
4.3 8.70% Subordinated Convertible Debenture due 178
June 30, 2009 issued to Chancery Lane/GSC Investors L.P.
4.4 Standstill Agreement, dated December 21, 2000 among 206
Moore Corporation Limited, Chancery Lane/GSC
Investors L.P. and CLGI, Inc.
4.5 Registration Rights Agreement, dated as of 217
December 21, 2000 between Moore Corporation Limited and
Chancery Lane/GSC Investors L.P.
10.1 Supplemental Executive Retirement Plan for 251
Designated Executives - B
10.2 Employment Agreement, dated December 11, 2000 264
between Moore Corporation Limited and Robert G. Burton
10.3 Employment Agreement, dated as of December 11, 2000, 278
between Moore Corporation Limited and Robert Lewis
10.4 Employment Agreement, dated as of December 11, 2000, 291
between Moore Corporation Limited and James Lillie
10.5 Amended Restated Credit Agreement, dated as of 306
August 15, 1999, among FRDK, Inc., as the Borrower,
Moore Corporation Limited, as Parent and a Guarantor,
Certain Subsidiaries of the Parent, named therein,
as Subsidiary Guarantors, Certain Financial
Institutions named therein, as the Lenders and the
Bank of Nova Scotia, as Agent for the Lenders.