EXCLUSIVE

Montreal-based printing giant Quebecor World yesterday announced its filing for bankruptcy protection [0], and is entering into a $1 billion financing deal. In the nine-month period ending September 30, 2007, the company pulled in $4.2 billion in revenue, but posted a net loss of $374 million ($315 million net loss in the third quarter). Of the company’s individual segments, North America made $3.2 billion in revenue, Europe $745 million and Latin America $202 million.

FOLIO: spoke with magazine division president Doron Grosman to find out what’s next for the ailing company, and what the filing for bankruptcy protection means for its magazine business.

FOLIO:: What immediate effect will this bankruptcy filing have on your magazine business?

Grosman: From a customer standpoint the restructuring process should be transparent. Each stage will be publicly communicated as it happens. Our level of customer service, production quality and on-time delivery commitments remain unchanged. If anything, the restructuring will help us focus on further refinements and improvements as a world-class industry leader. I am delighted to report that the publishing community has been very encouraging of this action, recognizing that it will make the company stronger and better able to serve.

FOLIO:: How much magazine work accounts for your business? Do you see that changing in the future?

Grosman: In 2006 [the last period for which full-year statistics are available] the magazine business represented 26 percent of our operation, with $1.6 billion in sales. This puts it a close second to our retail inserts division. We don't foresee any substantial changes in that mix. What's important to note is that Quebecor World is unique in that it is one of the world's largest printers, and yet its products are all directed to consumers and similar affinity groups. Our publishers' readers are our readers; we are therefore engaged in the future of the magazine industry at the highest level.

FOLIO:: Quebecor World reported a net loss of $315 million in the third quarter of 2007. What do you attribute the company’s financial situation to?

Grosman: Quebecor World has been engaged in an ongoing five-point transformation plan for the past two years. As part of our process, we have invested very significant capital in our business and infrastructure, attracted many new, talented employees and managers to the company and have become more attuned to our customers’ needs.

Concurrently, however, the printing market, the supply chain and the credit markets have changed dramatically. Many companies along the magazine continuum—from paper companies, to printers and publishers—have had their operations deeply affected by these marketplace forces. These factors, combined with the unsuccessful sale of our European assets, have generated the current circumstances. One of the key transformational goals of our five-point plan was improving our balance sheet. This restructuring action allows us to take the necessary steps to do that.

FOLIO:: Some printers are starting to become new media vendors and circulation vendors. Do you anticipate new services forthcoming for Quebecor World’s magazine business? What is the company doing in these areas, and how will it expand?

Grosman: Quebecor World was the first printer to introduce digital technologies into the printing industry. In addition, we have developed a suite of e-publishing solutions that allow us to offer revenue-building solutions to publishers.

FOLIO:: What is Quebecor World doing in terms of “green” publishing and sustainability?

Grosman: Quebecor World also leads on the environmental front, and set a milestone in achieving Chain of Custody Certification for the world’s three leading forest management programs. These are the Forest Stewardship Council (FSC), Sustainable Forestry Initiative (SFI) and the Program for the Endorsement of Forest Certification (PEFC). Quebecor World is the first among the top North American printers to offer these three progressive chain of custody certification programs.

FOLIO:: What’s next for Quebecor World?

Grosman: The fact is that the restructuring and new financing allow the company to continue its normal operations. Quebecor World has positive cash flow with valuable, productive assets. Quebecor World is a proven performer in terms of productivity, efficiency and quality. None of that changes. The restructuring will strengthen our ability to ensure the company’s long-term viability. We are confident that we will emerge from restructuring a stronger organization and the printer of choice.