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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 September 29, 1996 Commission file number 1-11802
[GRAPHIC OMITTED]
World Color Press, Inc.
(Exact name of registrant as specified in its charter)
Delaware 37-1167902
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
The Mill, 340 Pemberwick Road 06831
Greenwich, Connecticut (Zip Code)
(Address of principal executive offices)
203-532-4200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 8, 1996, 33,744,531 shares of the registrant's common stock, $.01
par value, were outstanding.
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WORLD COLOR PRESS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 1996
INDEX
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Page
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Part I. Financial Information
Condensed Consolidated Balance Sheets as of September 29, 1996
and December 31, 1995.....................................................................3
Condensed Consolidated Statements of Operations for the Three and Nine Months
Ended September 29, 1996 and October 1, 1995..............................................4
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 29, 1996 and October 1, 1995..............................................5
Notes to Condensed Consolidated Financial Statements...........................................6 - 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................ 9 -11
Part II. Other Information................................................................................12
</TABLE>
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<PAGE>
WORLD COLOR PRESS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 29, 1996 AND DECEMBER 31, 1995
(Dollars in thousands)
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<CAPTION>
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SEPTEMBER 29, DECEMBER 31,
ASSETS 1996 1995
(Unaudited) (Note)
--------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16,140 $ 8,902
Accounts receivable - net 315,284 218,022
Inventories 183,298 130,369
Deferred income taxes 35,119 28,364
Other 22,721 11,060
--------------- -------------
Total current assets 572,562 396,717
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NONCURRENT ASSETS:
Property, plant and equipment, at cost 1,316,081 924,300
Accumulated depreciation and amortization (502,356) (443,879)
--------------- -------------
Property, plant and equipment - net 813,725 480,421
Goodwill - net 423,291 249,473
Other 40,006 24,117
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Total noncurrent assets 1,277,022 754,011
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TOTAL ASSETS $ 1,849,584 $ 1,150,728
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 306,155 $ 198,522
Current maturities of long-term debt 8,510 37,360
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Total current liabilities 314,665 235,882
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NONCURRENT LIABILITIES:
Long-term debt 921,527 449,746
Deferred income taxes 95,265 9,258
Other long-term liabilities 119,244 97,076
--------------- -------------
Total noncurrent liabilities 1,136,036 556,080
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value - shares authorized,
100,000,000 at September 29, 1996 and December 31, 1995;
shares outstanding, 33,743,531 at September 29, 1996 and
32,218,427 at December 31, 1995 337 322
Additional paid-in capital 583,721 574,831
Accumulated deficit (185,175) (216,387)
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Total stockholders' equity 398,883 358,766
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,849,584 $ 1,150,728
=============== =============
</TABLE>
Note: Derived from audited financial statements.
See notes to condensed consolidated financial statements.
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<PAGE>
WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 29, 1996 AND OCTOBER 1, 1995
(Dollars in thousands, except per share data)
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THREE MONTHS NINE MONTHS
------------------------------ ------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 487,804 $ 367,331 $ 1,159,181 $ 947,974
Cost of sales 391,398 300,440 952,547 786,109
----------- ----------- ----------- -----------
Gross profit 96,406 66,891 206,634 161,865
Selling, general and
administrative expenses 45,249 32,272 113,177 94,891
----------- ----------- ----------- -----------
Operating income 51,157 34,619 93,457 66,974
Interest expense 18,025 10,446 40,333 27,400
----------- ----------- ----------- -----------
Income before income taxes 33,132 24,173 53,124 39,574
Income tax provision 13,915 9,670 21,912 15,830
----------- ----------- ----------- -----------
Net income $ 19,217 $ 14,503 $ 31,212 $ 23,744
=========== =========== =========== ===========
Net income per common
and common equivalent share $ 0.55 $ 0.42 $ 0.89 $ 0.69
Weighted average common and
common equivalent shares outstanding 35,059,968 34,440,867 34,998,285 34,440,867
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 29, 1996 AND OCTOBER 1, 1995
(In thousands)
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NINE MONTHS
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1996 1995
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OPERATING ACTIVITIES:
Net income $ 31,212 $ 23,744
Adjustments to reconcile net income to net cash
flows provided by (used in) operating activities:
Depreciation and amortization 73,614 55,277
Deferred income tax provision 8,464 7,915
Amortization of debt issuance costs 1,589 1,414
Changes in operating assets and liabilities:
Accounts receivable - net (32,368) (52,124)
Inventories (11,472) (88,216)
Accounts payable and accrued expenses 33,712 26,592
Other assets and liabilities - net (39,434) (12,117)
----------- -----------
Net cash flows provided by (used in) operating activities 65,317 (37,515)
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INVESTING ACTIVITIES:
Additions to property, plant and equipment - net (41,375) (110,504)
Acquisitions of businesses, net of cash acquired (163,148) (108,275)
----------- -----------
Net cash used in investing activities (204,523) (218,779)
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FINANCING ACTIVITIES:
Net borrowings on debt 137,539 166,286
Proceeds from issuance of common stock 8,905 74,776
----------- -----------
Net cash provided by financing activities 146,444 241,062
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,238 (15,232)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,902 24,828
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 16,140 $ 9,596
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
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1. BASIS OF PRESENTATION
The accompanying condensed consolidated interim financial statements have
been prepared by World Color Press, Inc. (along with its subsidiaries, the
"Company") pursuant to the rules and regulations of the Securities and
Exchange Commission and reflect normal and recurring adjustments, which
are, in the opinion of the Company, considered necessary for a fair
presentation. As permitted by these regulations, these statements do not
include all information required by generally accepted accounting
principles to be included in an annual set of financial statements,
however, the Company believes that the disclosures made are adequate to
make the information presented not misleading. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's latest Annual Report on Form 10-K.
Certain reclassifications have been made to prior period amounts to conform
with the current presentation.
2. ACQUISITIONS
On June 6, 1996, the Company acquired from Ringier A.G. all of the issued
and outstanding capital stock of Krueger Acquisition Corporation, including
all of the issued and outstanding capital stock of Ringier Holdings, Inc.,
Ringier America, Inc., Krueger Ringier, Inc., Ringier Print U.S., Inc. and
W.A. Krueger Co. Olathe (collectively, "Ringier America"), for
approximately $128,000 (the "Acquisition"). In addition, the Company
assumed approximately $287,000 of Ringier America's indebtedness, of which
approximately $281,000 was liquidated upon consummation of the Acquisition.
Ringier America is a leading diversified commercial printer whose business
includes the printing of catalogs, magazines and soft-cover books.
The Acquisition and liquidation of indebtedness were funded using proceeds
from acquisition term loans under the Second Amended and Restated Credit
Agreement dated as of June 6, 1996, as amended (the "Credit Agreement"),
among the Company and the lenders and agents party thereto. The Credit
Agreement provides for an additional $566,000 of commitments, for aggregate
commitments of $975,000. The credit facility provides for varying
semi-annual reductions in commitments and matures on December 31, 2002. All
other significant financial provisions of the credit facility were
substantially unchanged.
The Acquisition is being accounted for as a purchase and the financial
statements include the results of Ringier America's operations from the
acquisition date. The excess of purchase cost over estimated fair value of
net assets acquired was approximately $158,000, and is being amortized
using the straight-line method over 35 years. The Company is in the process
of assessing the operations of Ringier America and finalizing the
assignment of fair value to assets acquired and liabilities assumed.
Accordingly, the final asset and liability fair values may differ from
those set forth in the accompanying condensed consolidated balance sheet;
however, the final fair values are not expected to be materially different
from those presented herein.
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<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
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The following unaudited pro forma financial information gives effect to the
Acquisition and liquidation of certain indebtedness of Ringier America as
if these transactions had occurred at the beginning of the periods
presented. These pro forma results reflect certain adjustments, including
the increase in amortization for the excess of purchase cost over estimated
fair value of net assets acquired and the net increase in indebtedness used
to fund the transactions, as well as the impact on depreciation and certain
other expenses, based on a preliminary allocation of purchase price to the
fair value of assets acquired and liabilities assumed. These pro forma
results do not reflect identified cost savings and other synergies that
will result or have resulted from the combination of the two businesses,
and are not necessarily indicative of the results that would have occurred
had the Acquisition been consummated at the beginning of the periods
presented, nor are they necessarily indicative of future results. Due to
the seasonal nature of the operations of both the Company and Ringier
America, the pro forma results for the nine months ended September 29, 1996
and October 1, 1995 are not necessarily indicative of full year results.
NINE MONTHS ENDED
-----------------------------------
SEPTEMBER 29, OCTOBER 1,
1996 1995
------------- ---------------
Net sales $ 1,342,644 $ 1,308,282
Net income $ 23,511 $ 40,183
Net income per common
and common equivalent share $ 0.67 $ 1.17
Pro forma net income and net income per common and common equivalent share
for the nine months ended October 1, 1995 presented above include $31,481
($19,373 net of tax, or $0.56 per share) of income recorded by Ringier
America in January, 1995 related to the final settlement of a customer's
future obligations under a printing services contract.
During the nine months ended September 29, 1996, the Company acquired
certain other businesses whose contributions were not significant to the
Company's results of operations for the periods presented, nor are they
expected to have a material effect on the Company's results on a continuing
basis.
3. INVENTORIES
Inventories are summarized as follows:
SEPTEMBER 29, DECEMBER 31,
1996 1995
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Raw materials $ 79,795 $ 96,003
Work-in-process 103,503 34,366
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Total $ 183,298 $ 130,369
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<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
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4. INITIAL PUBLIC OFFERING
On January 25, 1996, 15,861,568 shares of the Company's common stock were
sold at $19 per share in an initial public equity offering (the
"Offering"). All of the shares in the Offering were sold by existing
stockholders. The Company did not receive any of the proceeds from the sale
of the shares, except that certain members of former management elected to
participate in the Offering by exercising certain stock options granted to
them by the Company. An aggregate of 1,531,290 shares underlying such
options were sold in the Offering, generating proceeds to the Company of
$8,940. These proceeds were used to pay expenses of the Offering and for
general corporate purposes. Since the Offering, the Company has repurchased
shares held by certain members of former management totaling $35.
-8-
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WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
General
On June 6, 1996, the Company acquired the outstanding stock of Ringier America,
a leading diversified commercial printer whose business includes the printing of
catalogs, magazines and soft-cover books, for approximately $128,000. In
addition, the Company assumed approximately $287,000 of Ringier America's
indebtedness, of which approximately $281,000 was liquidated upon consummation
of the Acquisition. In addition, the Company acquired certain other businesses
in the first nine months of fiscal 1996 whose contributions were not significant
to the Company's results of operations for the periods presented, nor are they
expected to have a material effect on the Company's results on a continuing
basis. Collectively, Ringier America and these other acquired companies will
hereinafter be referred to as the "1996 Acquisitions."
In March, 1995, the Company purchased The Lanman Companies, Inc. and its
subsidiaries, a group of graphic communications companies, Northeast Graphics
Inc., a national commercial printer, and The Wessel Company, Inc., a national
commercial printer of direct marketing materials. Collectively, these acquired
companies will hereinafter be referred to as the "1995 Acquisitions."
Results of operations for this interim period are not necessarily indicative of
results for the full year. The Company's operations are seasonal. Historically,
approximately two-thirds of its operating income has been generated in the
second half of the fiscal year.
Results of Operations
Three Months Ended September 29, 1996 versus Three Months Ended October 1, 1995
Net sales increased $120,473 or 33%, to $487,804 in 1996 from $367,331 in 1995.
The increase was due to the inclusion of the sales from the 1996 Acquisitions
and stronger base business performance, partially offset by the significant
decline in paper prices.
Gross profit increased $29,515 or 44% to $96,406 in 1996 from $66,891 in 1995.
The increase was attributable to the 1996 Acquisitions and improved operating
efficiencies. The 1996 gross profit margin of 19.8% increased from 18.2% in 1995
due to these factors and the effect of lower paper prices.
Selling, general and administrative expenses increased $12,977 or 40% to $45,249
in 1996 from $32,272 in 1995. The increase was attributable to the 1996
Acquisitions, including the related additional amortization expense for
goodwill.
Interest expense increased $7,579 or 73% to $18,025 in 1996 from $10,446 in
1995. The increase was attributable to an increase in average borrowings
primarily incurred to fund the 1996 Acquisitions, capital expenditures and
working capital requirements, partially offset by a slightly lower average cost
of funds.
-9-
<PAGE>
WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
Nine Months Ended September 29, 1996 versus Nine Months Ended October 1, 1995
Net sales increased $211,207 or 22%, to $1,159,181 in 1996 from $947,974 in
1995. The increase was attributable to the inclusion of the sales from both the
1996 and 1995 Acquisitions.
Gross profit increased $44,769 or 28% to $206,634 in 1996 from $161,865 in 1995.
The increase was attributable to both the 1996 and 1995 Acquisitions and
improved operating efficiencies. The gross profit margin increased to 17.8% in
1996 from 17.1% in 1995 because of these factors.
Selling, general and administrative expenses increased $18,286 or 19% to
$113,177 in 1996 from $94,891 in 1995. The increase was attributable to both the
1996 and 1995 Acquisitions, including the related additional amortization
expense for goodwill.
Interest expense increased $12,933 or 47% to $40,333 in 1996 from $27,400 in
1995. The increase was primarily attributable to an increase in average
borrowings primarily incurred to fund the 1996 and 1995 Acquisitions, working
capital requirements and capital expenditures, partially offset by a slightly
lower average cost of funds.
The effective tax rate, primarily composed of the combined federal and state
statutory rates, was 41.25% for the first nine months of 1996 compared to 40%
for the comparable period in 1995. The increase was due to the additional
amortization expense for goodwill resulting from the 1996 Acquisitions.
Liquidity and Capital Resources
On January 25, 1996, 15,861,568 shares of the Company's common stock were sold
at $19 per share in the Offering. All of the shares in the Offering were sold by
existing stockholders. The Company did not receive any of the proceeds from the
sale of the shares, except that certain members of former management elected to
participate in the Offering by exercising certain stock options granted to them
by the Company. An aggregate of 1,531,290 shares underlying such options were
sold in the Offering, generating proceeds to the Company of $8,940. These
proceeds were used to pay expenses of the Offering and for general corporate
purposes.
Net income from operations plus depreciation and amortization and deferred
income taxes was $114,879 and $88,350 for the nine months ended September 29,
1996 and October 1, 1995, respectively. The Company's outstanding indebtedness
less cash increased $435,693 from December 31, 1995 to September 29, 1996 due
primarily to the 1996 Acquisitions and the liquidation of certain of the 1996
Acquisitions' indebtedness. Exclusive of the 1996 Acquisitions, raw materials
inventory levels decreased approximately $38,000 or 40% in the first nine months
of 1996 as a result of the Company's successful efforts to utilize existing
inventory, combined with lower inventory requirements due to more normalized
availability and lower prices of paper. The Company anticipates that 1996
capital expenditures will be approximately $75,000 for the full year.
-10-
<PAGE>
WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
The acquisition of Ringier America and the liquidation of certain of its
indebtedness were funded using proceeds from acquisition term loans under the
Second Amended and Restated Credit Agreement dated as of June 6, 1996, as
amended, which provides for an additional $566,000 of commitments, for aggregate
commitments of $975,000. The credit facility provides for varying semi-annual
reductions in commitments and matures on December 31, 2002. All other
significant financial provisions of the credit facility remain substantially
unchanged. As of September 29, 1996, the Company had undrawn commitments under
the credit facility of $90,500 in acquisition term loan facilities and $159,900
in a revolving credit facility.
The Company believes that its liquidity, capital resources and cash flows are
sufficient to fund planned capital expenditures, working capital requirements
and interest and principal payments for the foreseeable future.
-11-
<PAGE>
WORLD COLOR PRESS, INC.
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits required in accordance with Item 601 of Regulation S-K are
incorporated by reference herein as filed with registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, dated March 30,
1996.
In addition, the Company has filed herewith the following exhibits:
10.1 The World Color Press, Inc. Supplemental Retirement Plan dated June
14, 1995, as amended July 17, 1996.
27 Financial Data Schedule for the period ended September 29, 1996 (filed
in electronic form only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarterly period ended
September 29, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLD COLOR PRESS, INC.
Date: November 12, 1996 By: /s/ MARC L. REISCH
-------------------
Marc L. Reisch
Chief Operating and Financial Officer
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THE WORLD COLOR PRESS, INC.
SUPPLEMENTAL RETIREMENT PLAN
<PAGE>
THE WORLD COLOR PRESS, INC.
SUPPLEMENTAL RETIREMENT PLAN
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................... 1
Section 1.1 - General....................................................... 1
Section 1.2 - Actuarial Equivalent.......................................... 1
Section 1.3 - Administrator................................................. 1
Section 1.4 - Beneficiary................................................... 1
Section 1.5 - Benefit....................................................... 2
Section 1.6 - Board......................................................... 2
Section 1.7 - Cause......................................................... 2
Section 1.8 - Change in Control............................................. 2
Section 1.9 - Code.......................................................... 2
Section 1.10 - Committee.................................................... 2
Section 1.11 - Company; Company Affiliate................................... 2
Section 1.12 - Disability................................................... 3
Section 1.13 - Employer-Derived Benefit..................................... 3
Section 1.14 - Enrolled Actuary............................................. 3
Section 1.15 - ERISA........................................................ 3
Section 1.16 - Good Reason.................................................. 3
Section 1.17 - KKR; KKR Affiliate........................................... 4
Section 1.18 - Participant.................................................. 4
Section 1.19 - Plan......................................................... 4
Section 1.20 - Plan Year.................................................... 4
Section 1.21 - Qualified Benefit............................................ 4
Section 1.22 - Qualified Plan............................................... 4
Section 1.23 - Separation from the Service.................................. 4
Section 1.24 - SERP......................................................... 5
Section 1.25 - SERP Benefit ................................................ 5
Section 1.26 - Trust........................................................ 5
Section 1.27 - Trust Agreement.............................................. 5
Section 1.28 - Trust Fund................................................... 5
Section 1.29 - Vested Benefit............................................... 5
ARTICLE II
FUNDING OF BENEFITS........................... 5
Section 2.1 - Source of Benefits............................................ 5
Section 2.2 - Timing of Contributions....................................... 6
Section 2.3 - Investment of Trust........................................... 6
i
<PAGE>
ARTICLE III
BENEFITS................................. 6
Section 3.1 - Determination of Benefit...................................... 6
Section 3.2 - Vesting....................................................... 6
Section 3.3 - Health Coverage............................................... 7
ARTICLE IV
PAYMENT OF BENEFITS........................... 8
Section 4.1 - Commencement of Benefit....................................... 8
Section 4.2 - Forfeitures................................................... 8
Section 4.3 - Form of Payment............................................... 8
ARTICLE V
ADMINISTRATIVE PROVISIONS........................ 8
Section 5.1 - Administrator's Duties and Powers............................. 8
Section 5.2 - Limitations Upon Powers....................................... 9
Section 5.3 - Final Effect of Administrator Action.......................... 9
Section 5.4 - Majority Rule................................................. 9
Section 5.5 - Indemnification by the Company; Liability Insurance........... 9
Section 5.6 - Recordkeeping................................................. 10
Section 5.7 - Inspection of Records......................................... 10
Section 5.8 - Claims Procedure.............................................. 10
Section 5.9 - Conflicting Claims............................................ 10
Section 5.10 - Service of Process........................................... 10
ARTICLE VI
MISCELLANEOUS PROVISIONS......................... 11
Section 6.1 - Termination of the Plan....................................... 11
Section 6.2 - Limitation on Rights of Participant........................... 11
Section 6.3 - Plan Binding in Event of Consolidation or Merger.............. 11
Section 6.4 - Assignments, etc. Prohibited.................................. 11
Section 6.5 - Errors and Misstatements...................................... 11
Section 6.6 - Governing Law................................................. 12
Section 6.7 - Pronouns and Plurality........................................ 12
Section 6.8 - Titles........................................................ 12
Section 6.9 - References.................................................... 12
ii
<PAGE>
THE WORLD COLOR PRESS, INC.
SUPPLEMENTAL RETIREMENT PLAN
World Color Press, Inc., a Delaware corporation, adopted The World Color
Press, Inc. Supplemental Retirement Plan (the "Plan"), on June 14, 1995,
effective April 1, 1995 (the "Effective Date"), for the benefit of Robert G.
Burton. In order to amend the Plan in certain respects, the Company hereby
adopts this World Color Press, Inc. Amended and Restated Supplemental Retirement
Plan, effective as of April 1, 1995.
The Plan is maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended.
ARTICLE I
DEFINITIONS
Section 1.1 - General
Whenever the following terms are used in the Plan with the first letter
capitalized, they shall have the meaning specified below unless the context
clearly indicates to the contrary.
Section 1.2 - Actuarial Equivalent
"Actuarial Equivalent" shall mean the equivalent of a given Benefit or a
given amount payable in another manner or by other means, determined by or under
the direction of the Administrator in accordance with actuarial principles,
methods and assumptions which are found to be appropriate by the Enrolled
Actuary, acting independently of the Administrator or the Company and in the
exercise of his or her sole professional judgment. Such principles, methods and
assumptions, however, shall be reasonable in the aggregate and shall constitute
the Enrolled Actuary's best estimate of anticipated experience under the Plan.
Such assumptions shall include at any time, those assumptions then in effect
under the Qualified Plan.
Section 1.3 - Administrator
"Administrator" shall mean the Company, acting through its Board or the
Committee. The Company shall have all duties and responsibilities imposed by
ERISA, except as specifically assigned to, delegated to or reserved to the Board
and the Committee under the Plan.
Section 1.4 - Beneficiary
"Beneficiary" shall mean the person or trust properly designated as the
Participant's primary beneficiary in the manner provided in the Qualified Plan;
provided that if no such primary beneficiary is designated under the Qualified
Plan, "Beneficiary" shall mean the person or trust so designated by the
Participant for purposes of this Plan.
<PAGE>
Section 1.5 - Benefit
"Benefit" of the Participant shall mean the benefit payable pursuant to
Section 3.1.
Section 1.6 - Board
"Board" shall mean the Board of Directors of the Company. The Board may
delegate any power or duty otherwise allocated to the Administrator to any other
person or persons, including the Committee.
Section 1.7 - Cause
"Cause" for termination of the Participant's employment with the Company
shall mean his
(a) conviction of a felony involving moral turpitude and the
exhaustion of all appeals therefrom, or
(b) gross dereliction of duties as determined by the Board and
confirmed in an opinion of outside counsel which dereliction is not cured
after specific written notice thereof and reasonable opportunity to cure.
Section 1.8 - Change in Control
"Change in Control" shall mean that Manufacturing Acquisition Associates,
L.P., KKR or KKR Affiliates or any other person or entity directly or indirectly
controlled by KKR or KKR Affiliates shall cease to be the beneficial owners of
at least ten percent (10%) of the equity interests of the Company having
ordinary voting power in the election of directors of the Company and shall not
have designated at least one-third of the then current directors of the Company.
For purposes of this definition, "control" shall have the meaning given such
term under Rule 405 of the Securities Act of 1933, as amended.
Section 1.9 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
Section 1.10 - Committee
"Committee" shall mean the Compensation Committee of the Board of Directors
of World Color Press, Inc.
Section 1.11 - Company; Company Affiliate
(a) "Company" shall mean World Color Press, Inc. and any successor
company which continues the Plan under Section 6.3.
2
<PAGE>
(b) "Company Affiliate" shall mean any employer which, at the time of
reference, was, with the Company, a member of a controlled group of
corporations or trades or businesses under common control, or a member of
an affiliated service group, as determined under regulations issued by the
Secretary under Code Sections 414(b), (c), (m) and 415(h) and any other
entity required to be aggregated with the Company pursuant to regulations
issued under Code Section 414(o).
Section 1.12 - Disability
"Disability" of the Participant shall mean his inability to discharge his
assigned duties on a substantially full-time basis for a continuous period of
not less than 180 days as a result of mental or physical disease, as determined
by the Administrator.
Section 1.13 - Employer-Derived Benefit
"Employer-Derived Benefit" of the Participant for a period of time shall
mean the sum of his "Matching Contributions" and "Nonelective Contributions"
(including "Qualified Matching Contributions" and "Qualified Nonelective
Contributions"), as such terms are defined in the World Color Press 401(k)
Savings and Investment Plan, for such period, plus any earnings thereon for all
periods.
Section 1.14 - Enrolled Actuary
"Enrolled Actuary" shall mean the person enrolled by the Joint Board for
the Enrollment of Actuaries established under subtitle C of title III of ERISA
who has been engaged by the Administrator on behalf of the Participant to make
and render all necessary actuarial determinations, statements, opinions,
assumptions, reports and valuations under the Plan as required by law or
requested by the Administrator.
Section 1.15 - ERISA
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
Section 1.16 - Good Reason
"Good Reason" for termination of the Participant's employment with the
Company shall mean
(a) his voluntary termination of his employment with the Company
within 90 days following a Change in Control of the Company; or
(b) his voluntary termination of his employment with the Company
following (i) the Company's diminishment of his duties or assignment to him
of duties inconsistent with his position, (ii) a material and adverse
change in his conditions of employment, or (iii) a reduction in his
compensation disproportionate to that of Company's senior executives
generally.
3
<PAGE>
Section 1.17 - KKR; KKR Affiliate
(a) "KKR" shall mean Kohlberg Kravis Roberts & Co., L.P., a New York
limited partnership.
(b) "KKR Affiliate" shall mean any other person or entity directly or
indirectly controlling, controlled by or under common control with KKR. For
purposes of this definition "control" shall have the meaning given such
term under Rule 405 of the Securities Act of 1933, as amended.
Section 1.18 - Participant
"Participant" shall mean Robert G. Burton
Section 1.19 - Plan
"Plan" shall mean The World Color Press, Inc. Supplemental Retirement Plan.
Section 1.20 - Plan Year
"Plan Year" shall be the taxable year of the Company (presently ending on
the last Sunday in December); provided however, that the first Plan Year shall
be the period from the Effective Date through December 31, 1995.
Section 1.21 - Qualified Benefit
"Qualified Benefit" of a Participant shall mean the payment payable under
the Qualified Plan at the times and over the applicable periods specified in
Article IV thereof.
Section 1.22 - Qualified Plan
"Qualified Plan" shall mean the World Color Press, Inc. Employee Retirement
Plan, as in effect on the date hereof and as may be amended form time to time.
Section 1.23 - Separation from the Service
(a) "Separation from the Service" of the Participant shall mean his
Disability, retirement, or resignation from or discharge by the Company or
a Company Affiliate or his death, but not his transfer among the Company
and Company Affiliates.
(b) A leave of absence or sick leave authorized by the Company or a
Company Affiliate in accordance with established policies or a vacation
period shall not constitute a Separation from the Service; provided,
however, that failure to return to work upon expiration of any leave of
absence, sick leave or vacation shall be considered a resignation effective
as of the commencement of any such leave of absence, sick leave or
vacation.
4
<PAGE>
Section 1.24 - SERP
"SERP" shall mean the World Color Press, Inc. Supplemental Executive
Retirement Plan.
Section 1.25 - SERP Benefit
"SERP Benefit" shall mean the payment payable under the SERP at the times
and over the applicable periods specified in Article IV thereof.
Section 1.26 - Trust
"Trust" shall mean the trust maintained under the Trust Agreement.
Section 1.27 - Trust Agreement
"Trust Agreement" shall mean that certain Trust under the World Color
Press, Inc. Supplemental Retirement Plan as it may be amended from time to time,
providing for the investment and administration of the Trust Fund. By this
reference, the Trust Agreement is incorporated herein.
Section 1.28 - Trust Fund
"Trust Fund" shall mean the fund established under the Trust Agreement from
which any amounts payable under the Plan are to be paid.
Section 1.29 - Vested Benefit
"Vested Benefit" of the Participant on a given date shall mean the product
of the Actuarial Equivalent of the Benefit provided hereunder if the Participant
were to have a Separation from the Service on such date and the percentage of
the Participant's Benefit that is Vested on such date.
ARTICLE II
FUNDING OF BENEFITS
Section 2.1 - Source of Benefits
(a) The Plan shall be unfunded for purposes of ERISA and the Code;
however the Company shall contribute to the Trust for each Plan Year
beginning with the Plan Year ending December 31, 1995 such amount as the
Enrolled Actuary determines to be necessary to contribute for such Plan
Year to fund fully the Participant's entire Benefit under the Plan by the
fifth anniversary of the Effective Date on a straight line basis.
(b) Upon a Change in Control, the Company shall contribute to the
Trust such amount, if any, as the Enrolled Actuary determines to be
necessary to fund fully the Participant's Benefit.
5
<PAGE>
Section 2.2 - Timing of Contributions
The Company shall make the contributions described in Section 2.1(a) for a
Plan Year no later than 10 days after the end of the Plan Year for which such
contribution relates, and shall make the contributions described in Section
2.1(b) no later than 10 days after the effective date of a Change in Control.
Section 2.3 - Investment of Trust
The Company may direct the investment of assets in the Trust Fund, but
shall do so prudently in accordance with the objectives of the Plan.
ARTICLE III
BENEFITS
Section 3.1 - Determination of Benefit
The Participant's Benefit hereunder shall be the Actuarial Equivalent of an
annuity for the life of the Participant beginning on April 1, 2000 with annual
payments equal to the excess of
(a) $750,000 per year, over
(b) the sum of
(i) the Actuarial Equivalent of any Qualified Benefit to which
the Participant is entitled under the Qualified Plan,
(ii) the Actuarial Equivalent of any SERP Benefit to which the
Participant is entitled under the SERP, and
(iii) the Actuarial Equivalent of any Employer-Derived Benefit
for his period of participation in the Plan.
Section 3.2 - Vesting
(a) The Participant's Benefit shall be 100% Vested on the earliest to
occur of
(i) his involuntary termination without Cause,
(ii) his termination for Good Reason, or
(iii) if he is then an employee of the Company,
(A) the fifth anniversary of the Effective Date or
(B) a Change in Control of the Company,
6
<PAGE>
and, except as otherwise provided in this subsection (a) or Section 3.2(b),
the Participant's Benefit shall not be Vested at all.
(b) Except as the Participant's Benefit may have become Vested
previously pursuant to subsection (a), if the Participant's Separation from
the Service is the result of the Participant's death or Disability, the
Vested portion if his Benefit shall be the percentage of such Benefit shown
in the following table:
If his Separation
occurs on or after and before Vested Percentage
- ------------------ ---------- -----------------
April 1, 1995 April 1, 1996 20%
April 1, 1996 April 1, 1997 40%
April 1, 1997 April 1, 1998 60%
April 1, 1998 April 1, 1999 80%
April 1, 1999 100%
Section 3.3 - Health Coverage
(a) Upon the Participant's Separation from the Service and until the
earlier of the Participant's death or his or his spouse's eligibility for
Medicare coverage, the Company shall provide to the Participant and his spouse,
in any manner selected by the Company in its discretion, health insurance
coverage and benefits substantially equivalent to the coverage and benefits
provided under the Company's non-union retiree health benefit plan (the "Retiree
Plan") and the Supplemental Executive Health Plan (the "SEHP"), each as in
effect on the Effective Date, with the result that the net after-tax effect to
the Participant and his spouse is no less favorable than the net after-tax
effect to the Participant and his spouse of participating in the Retiree Plan
and the SEHP.
(b) During such period of time as the Participant or his spouse shall be
eligible for Medicare coverage, the Company shall provide to the Participant or
his spouse, or both of them, as the case may be, insured Medicare supplementary
coverage with the extent of such coverage to be as provided in Standard Plan J
of the National Association of Insurance Commissioners ("NAIC") or in the NAIC
Standard Plan hereinafter adopted which provides for the most extensive benefit
coverage at any such time. If, with the full cooperation of the Participant and
his spouse, the Company is unable to secure such Medicare supplementary
coverage, this subsection (b) shall not apply and the Participant and/or his
spouse shall remain subject to subsection (a).
(c) Upon the death of the Participant, the Company shall provide to the
Participant's surviving spouse, for a period of 90 days, the coverage and
benefits specified in subsections (a) and/or (b), as applicable. Upon the
expiration of such 90-day period, the Company shall permit such spouse to elect
to continue such coverage and benefits for a period of three years, provided
that such spouse shall pay or reimburse the Company for the costs of such
coverage at the rates that would be applicable to such spouse for "continuation
coverage" as set forth at Code Section 4980B and the regulations thereunder.
7
<PAGE>
ARTICLE IV
PAYMENT OF BENEFITS
Section 4.1 - Commencement of Benefit
Payment of the Participant's Vested Benefit shall commence within 60 days
following the later of his Separation from the Service or the fifth Anniversary
of the Effective Date; provided however, that distribution to a Beneficiary
pursuant to Section 4.3(b) shall commence within 60 days following the date of
the Participant's death.
Section 4.2 - Forfeitures
The Participant's Benefit shall be forfeited upon his Separation from the
Service to the extent it has not become Vested, either previously or by reason
of such Separation.
Section 4.3 - Form of Payment
(a) If the Participant is living when payment of his Vested Benefit is
to commence, the Actuarial Equivalent of his Vested Benefit shall be paid
as a joint and survivor annuity consisting of annuity payments to the
Participant until his death, with the provision that if his Beneficiary
survives him, the Beneficiary shall receive annuity payments in the same
amount until the Beneficiary's death.
(b) If the Participant is deceased when payment of his Vested Benefit
is to commence, the Participant's Beneficiary shall receive a life annuity
until his or her death, such annuity computed as the excess of the
Actuarial Equivalent of the Participant's Vested Benefit on the day prior
to the date of the Participant's death over the Actuarial Equivalent of the
amount of any Company-provided life insurance benefits payable by reason of
the Participant's death.
ARTICLE V
ADMINISTRATIVE PROVISIONS
Section 5.1 - Administrator's Duties and Powers
(a) The Administrator shall conduct the general administration of the
Plan in accordance with the Plan and shall have all the necessary power and
authority to carry out that function. Among its necessary powers and duties
are the following:
(i) To delegate all or part of its function as Administrator to
others and to revoke any such delegation.
(ii) To determine questions of vesting of the Participant and his
entitlement to benefits, subject to the provisions of Section 5.8.
8
<PAGE>
(iii) To select and engage attorneys, accountants, actuaries,
appraisers, brokers, consultants, administrators, physicians or other
persons to render service or advice with regard to any responsibility
the Administrator or the Board has under the Plan, or otherwise, to
designate such persons to carry out fiduciary responsibilities under
the Plan, and (with the Committee, the Company, the Board and the
Company's officers and employees) to rely upon the advice, opinions or
valuations of any such persons, to the extent permitted by law, being
fully protected in acting or relying thereon in good faith.
(iv) To interpret the Plan for purpose of the administration and
application of the Plan in a manner not inconsistent with the Plan or
applicable law and to amend or revoke any such interpretation.
(v) To conduct claims procedures as provided in Section 5.8.
(b) Every finding, decision, and determination made by the
Administrator shall, to the full extent permitted by law, be final and
binding upon all parties, except to the extent found by a court of
competent jurisdiction to constitute an abuse of discretion.
Section 5.2 - Limitations Upon Powers
The Plan shall be uniformly and consistently administered, interpreted and
applied. The Plan shall be administered, interpreted and applied fairly and
equitably and in accordance with the specified purposes of the Plan.
Section 5.3 - Final Effect of Administrator Action
Except as provided in Section 5.8, all actions taken and all determinations
made by the Administrator in good faith shall be final and binding upon the
Participant and each other person interested in the Plan.
Section 5.4 - Majority Rule
The Committee shall act, with respect to the Plan, by a majority of its
members in office; provided, however, that the Committee may appoint one of its
members or a delegate to act on behalf of the Committee on matters arising in
the daily administration of the Plan or on specific matters.
Section 5.5 - Indemnification by the Company; Liability Insurance
(a) The Company shall pay or reimburse each of the Company's officers,
directors, Committee members or employees who are fiduciaries with respect
to the Plan for all expenses incurred by such persons in, and shall
indemnify and hold them harmless from, all claims, liability and costs
(including reasonable attorneys' fees) arising out of, resulting from or
relating to, the good faith performance of their fiduciary duties and
functions.
9
<PAGE>
(b) The Company may obtain and provide for any such person, or all of
them, at the Company's expense, liability insurance against liabilities
imposed on him by law.
Section 5.6 - Recordkeeping
(a) The Administrator shall maintain suitable records (in reasonable
detail) as follows:
(i) Records of the Participant's individual Benefit.
(ii) Records which show the operations of the Plan during each
Plan Year.
(iii) Records of the Administrator's deliberations and decisions.
(b) The Administrator shall appoint a secretary, and, at its
discretion, an assistant secretary, to keep the record of proceedings, to
transmit its decisions, instructions, consents or directions to any
interested party, to execute and file, on behalf of the Committee, such
documents, reports or other matters as may be necessary or appropriate to
perform ministerial acts.
(c) The Administrator shall not be required to maintain any records or
accounts which duplicate any records or accounts maintained by the Company.
Section 5.7 - Inspection of Records
Copies of the Plan and records of the Participant's Benefit shall be open
to inspection by the Participant or his duly authorized representatives at the
office of the Administrator upon reasonable notice and at any reasonable
business hour.
Section 5.8 - Claims Procedure
The claims procedures hereunder shall be in accordance with the claims
procedures set forth in the Qualified Plan; provided that for purposes of the
claims procedure under this Plan, the review official described in the Qualified
Plan shall be the Chief Financial Officer of the Company.
Section 5.9 - Conflicting Claims
The procedures for the resolution of conflicting claims by the Committee
shall be in accordance with the procedures set forth in the applicable section
of the Qualified Plan.
Section 5.10 - Service of Process
The Secretary of the Company is hereby designated as agent of the Plan for
the service of legal process.
10
<PAGE>
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 - Termination of the Plan
The Plan may be amended or terminated by the Board at any time, provided
that no such amendment may be made to Articles II, III or this Section 6.1
without the consent of the Participant, and provided further that if the Plan is
terminated before the Participant has received full payment of his Benefit,
whether before or after the effective date of such termination, the Company
shall contribute to the Trust all amounts, if any, as the Enrolled Actuary
determines to be necessary to fund fully the Participant's Benefit calculated as
if the Participant's Separation from the Service occurs on the fifth anniversary
of the Effective Date.
Section 6.2 - Limitation on Rights of Participant
Nothing contained in the Plan shall give the Participant the right to be
retained in the service of a Company or to interfere with or restrict the right
of the Company, which is hereby expressly reserved, to discharge or retire the
Participant, except as provided by law, at any time without notice and with or
without Cause.
Section 6.3 - Plan Binding in Event of Consolidation or Merger
In the event of the consolidation or merger of the Company with or into any
other corporation, this Plan shall be binding on such survivor corporation.
Section 6.4 - Assignments, etc. Prohibited
Except for the withholding of any tax under the laws of the United States
or any state or locality, no part of the Participant's Benefit hereunder shall
be liable for the debts, contracts or engagements of the Participant, his
beneficiaries or successors in interest, or be taken in execution by levy,
attachment or garnishment or by any other legal or equitable proceeding prior to
distribution, nor shall any such person have any rights to alienate, anticipate,
commute, pledge, incumber or assign any Benefits or payments hereunder in any
manner whatsoever.
Section 6.5 - Errors and Misstatements
In the event of any misstatement or omission of fact by the Participant to
the Administrator or any clerical error resulting in payment of benefits in an
incorrect amount, the Administrator shall promptly cause the amount of future
payments to be corrected upon discovery of the facts and shall cause the Company
to pay the Participant any underpayment in cash in a lump sum or to recoup any
overpayment from future payments to the Participant in such amounts as the
Administrator shall direct or to proceed against the Participant for recovery of
any such overpayment.
11
<PAGE>
Section 6.6 - Governing Law
This Plan shall be construed, administered and governed in all respects
under and by applicable federal laws and, where state law is applicable, the
laws of the State of New York.
Section 6.7 - Pronouns and Plurality
The masculine pronoun shall include the feminine pronoun, and the singular
the plural where the context so indicates.
Section 6.8 - Titles
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.
Section 6.9 - References
Unless the context clearly indicates to the contrary, a reference to a
statute, regulation or document shall be construed as referring to any
subsequently enacted, adopted or executed statute, regulation or document.
[signature page follows]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers duly authorized on this 17th day of July, 1996.
WORLD COLOR PRESS, INC.
By /s/ Marc L. Reisch
----------------------------------
By /s/ Jennifer L. Adams
----------------------------------
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 29, 1996 AND
THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 29, 1996 OF WORLD COLOR PRESS, INC. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> SEP-29-1996
<CASH> 16,140
<SECURITIES> 0
<RECEIVABLES> 315,284
<ALLOWANCES> 0
<INVENTORY> 183,298
<CURRENT-ASSETS> 572,562
<PP&E> 1,316,081
<DEPRECIATION> 502,356
<TOTAL-ASSETS> 1,849,584
<CURRENT-LIABILITIES> 314,665
<BONDS> 921,527
0
0
<COMMON> 337
<OTHER-SE> 398,546
<TOTAL-LIABILITY-AND-EQUITY> 1,849,584
<SALES> 1,159,181
<TOTAL-REVENUES> 1,159,181
<CGS> 952,547
<TOTAL-COSTS> 952,547
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,333
<INCOME-PRETAX> 53,124
<INCOME-TAX> 21,912
<INCOME-CONTINUING> 31,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,212
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
</TABLE>
