UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 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 in the past 90 days. Yes [X] No [ ]
At August 12, 1996, 33,745,315 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 JUNE 30, 1996
INDEX
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Page
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Part I. Financial Information
Condensed Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995.....................................................................3
Condensed Consolidated Statements of Operations for the Three and Six Months
ended June 30, 1996 and July 2, 1995......................................................4
Condensed Consolidated Statements of Cash Flows for the Six Months
ended June 30, 1996 and July 2, 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
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WORLD COLOR PRESS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(Dollars in thousands)
- ---------------------------------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
ASSETS 1996 1995
(Unaudited) (Note)
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CURRENT ASSETS:
Cash and cash equivalents $ 12,475 $ 8,902
Accounts receivable - net 263,450 218,022
Inventories 156,065 130,369
Deferred income taxes 38,418 28,364
Other 17,661 11,060
-------------- -------------
Total current assets 488,069 396,717
-------------- -------------
NONCURRENT ASSETS:
Property, plant and equipment, at cost 1,291,627 924,300
Accumulated depreciation and amortization (476,783) (443,879)
-------------- -------------
Property, plant and equipment - net 814,844 480,421
Goodwill - net 426,376 249,473
Other 39,458 24,117
-------------- -------------
Total noncurrent assets 1,280,678 754,011
-------------- -------------
TOTAL ASSETS $ 1,768,747 $ 1,150,728
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 254,375 $ 198,522
Current maturities of long-term debt 9,449 37,360
-------------- -------------
Total current liabilities 263,824 235,882
-------------- -------------
NONCURRENT LIABILITIES:
Long-term debt 909,225 449,746
Deferred income taxes 92,706 9,258
Other long-term liabilities 123,291 97,076
-------------- -------------
Total noncurrent liabilities 1,125,222 556,080
-------------- -------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value - shares authorized, 100,000,000 at June 30,
1996 and December 31, 1995; shares issued and outstanding,
33,749,717 at June 30, 1996 and 32,218,427 at December 31, 1995 337 322
Additional paid-in capital 583,756 574,831
Accumulated deficit (204,392) (216,387)
-------------- ------------
Total stockholders' equity 379,701 358,766
-------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,768,747 $ 1,150,728
============== ============
Note: Derived from audited financial statements.
See notes to condensed consolidated financial statements.
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WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JULY 2, 1995
(Dollars in thousands, except per share data)
- ---------------------------------------------------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
1996 1995 1996 1995
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NET SALES $ 342,266 $ 305,244 $ 671,377 $ 580,643
COST OF SALES 284,324 253,704 561,149 485,669
------------- ----------- ----------- -----------
GROSS PROFIT 57,942 51,540 110,228 94,974
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 35,624 33,919 67,928 62,619
------------- ----------- ----------- -----------
OPERATING INCOME 22,318 17,621 42,300 32,355
INTEREST EXPENSE 12,224 9,579 22,308 16,954
------------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 10,094 8,042 19,992 15,401
INCOME TAX PROVISION 4,038 3,216 7,997 6,160
------------- ----------- ----------- -----------
NET INCOME $ 6,056 $ 4,826 $ 11,995 $ 9,241
============== ============= ============ =============
Net income per common
and common equivalent share $ 0.17 $ 0.14 $ 0.34 $ 0.27
Weighted average common and
common equivalent shares outstanding 35,084,876 34,440,867 34,964,688 34,440,867
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See notes to condensed consolidated financial statements.
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WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996 AND JULY 2, 1995
(In thousands)
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SIX MONTHS
1996 1995
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OPERATING ACTIVITIES:
Net income $ 11,995 $ 9,241
Adjustments to reconcile net income to net cash
flows provided by (used in) operating activities:
Depreciation and amortization 42,994 35,985
Deferred income tax provision 3,494 3,051
Amortization of debt issuance costs 921 799
Changes in operating assets and liabilities:
Accounts receivable - net 19,466 9,729
Inventories 15,603 (61,691)
Accounts payable and accrued expenses (16,633) (16,252)
Other assets and liabilities, net (27,041) (10,375)
----------- -----------
Net cash flows provided by (used in) operating activities 50,799 (29,513)
----------- -----------
INVESTING ACTIVITIES:
Additions to property, plant and equipment - net (28,844) (90,817)
Acquisitions of businesses, net of cash acquired (153,498) (107,643)
----------- -----------
Net cash used in investing activities (182,342) (198,460)
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FINANCING ACTIVITIES:
Net borrowings on debt 126,176 136,572
Proceeds from issuance of common stock 8,940 74,776
----------- -----------
Net cash provided by financing activities 135,116 211,348
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 3,573 (16,625)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,902 24,828
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,475 $ 8,203
=========== ===========
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See notes to condensed consolidated financial statements.
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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, based in Chicago, Illinois, 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 World Color and the lenders and agents party thereto. The Credit
Agreement provides for an additional $566,000 of commitments, for aggregate
total 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 bank credit facility remain
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 will be 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. Upon completion
of this process, the Company will finalize the allocation of purchase
price. 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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WORLD COLOR PRESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
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 that will result 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 World Color and Ringier America, the pro forma
results for the six months ended June 30, 1996 and July 2, 1995 are not
necessarily indicative of full year results.
SIX MONTHS ENDED
JUNE 30, JULY 2,
1996 1995
Net sales $ 854,840 $ 797,868
Net income $ 4,294 $ 24,095
Net income per common
and common equivalent share $ 0.12 $ 0.70
Pro forma net income and net income per common and common equivalent share
for the six months ended July 2, 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 six months ended June 30, 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:
JUNE 30, DECEMBER 31,
1996 1995
Raw materials $ 91,126 $ 96,003
Work-in-process 64,939 34,366
----------- -----------
Total $ 156,065 $ 130,369
=========== ===========
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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.
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WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars in thousands)
- --------------------------------------------------------------------------------
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 half 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 June 30, 1996 versus Three Months Ended July 2, 1995
Net sales increased $37,022 or 12.1%, to $342,266 in 1996 from $305,244 in 1995.
The increase was due to the 1996 Acquisitions.
Gross profit increased $6,402 or 12.4% to $57,942 in 1996 from $51,540 in 1995.
The increase was attributable to the 1996 Acquisitions and improved operating
efficiencies. The second quarter 1996 gross profit margin of 16.9% approximated
the margin from the same period in 1995.
Selling, general and administrative expenses increased $1,705 or 5.0% to $35,624
in 1996 from $33,919 in 1995. The increase was attributable to the 1996
Acquisitions, including the related additional amortization expense for
goodwill.
Interest expense increased $2,645 or 27.6% to $12,224 in 1996 from $9,579 in
1995. The increase was attributable to an increase in average borrowings
primarily incurred to fund the 1996 Acquisitions and capital expenditures,
partially offset by a slightly lower average cost of funds.
The effective tax rates for the second quarter of 1996 and 1995 were 40%, and
were primarily composed of the combined federal and state statutory rates.
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WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars in thousands)
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1996 versus Six Months Ended July 2, 1995
Net sales increased $90,734 or 15.6%, to $671,377 in 1996 from $580,643 in 1995.
The increase was primarily attributable to both the 1996 and 1995 Acquisitions;
higher paper prices in the first quarter of 1996 also contributed to the
increase.
Gross profit increased $15,254 or 16.1% to $110,228 in 1996 from $94,974 in
1995. The increase was attributable to both the 1996 and 1995 Acquisitions and
improved operating efficiencies. The first half 1996 gross profit margin of
16.4% was comparable to that of the same period in 1995.
Selling, general and administrative expenses increased $5,309 or 8.5% to $67,928
in 1996 from $62,619 in 1995. The increase was attributable to both the 1996 and
1995 Acquisitions, including the related additional amortization expense for
goodwill.
Interest expense increased $5,354 or 31.6% to $22,308 in 1996 from $16,954 in
1995. The increase was primarily attributable to an increase in average
borrowings primarily incurred to fund the 1996 and 1995 Acquisitions and capital
expenditures, partially offset by a slightly lower average cost of funds.
The effective tax rates for the first six months of 1996 and 1995 were 40%, and
were primarily composed of the combined federal and state statutory rates.
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 $59,404 and $49,076 for the six months ended June 30, 1996 and
July 2, 1995, respectively. The Company's outstanding indebtedness less cash
increased $427,995 from December 31, 1995 to June 30, 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 $30,000 or 31.9% in the first half of 1996 as a result
of the Company's successful efforts to utilize existing inventory, combined with
lower inventory requirements due to a more normalized availability and
lower prices of paper. The Company expects that paper prices will remain soft
during the last half of 1996. The Company anticipates that 1996 capital
expenditures will be approximately $75,000 for the full year. As of June 30,
1996, the Company had undrawn commitments of $100,000 under its acquisition term
loan facility and $163,600 under its revolving bank credit facility.
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WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars in thousands)
- --------------------------------------------------------------------------------
The acquisition of Ringier America and the liquidation of certain of its
indebtedness were funded using proceeds from acquisition term loans under the
Credit Agreement, which provides for an additional $566,000 of commitments,
for aggregate total 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 bank
credit facility remain substantially unchanged.
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.
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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.
(b) Reports on Form 8-K
The following report on Form 8-K was filed during the quarterly period
ended June 30, 1996:
(i) The registrant filed a Current Report on Form 8-K dated June 21,
1996, in respect of the purchase of Ringier America. The items
reported in such Current Report were Item 2 (Acquisition or
Disposition of Assets) and Item 7 (Financial Statements,
Pro Forma Financial Information and Exhibits). The following
financial statements were included therewith:
(a) Audited financial statements of Krueger Acquisition
Corporation (Ringier America's consolidated reporting entity)
for the Years Ended December 31, 1995, 1994 and 1993.
(b) Unaudited Pro Forma Combined Condensed Balance Sheet as of
March 31, 1996.
(c) Unaudited Pro Forma Combined Condensed Statements of
Operations for the three months ended March 31, 1996
and the fiscal year ended December 31, 1995.
(d) Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
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: August 14, 1996 By: /s/ MARC L. REISCH
-------------------
Marc L. Reisch
Executive Vice President, Chief Operating and
Financial Officer
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<LEGEND>
WORLD COLOR PRESS, INC.
FINANCIAL DATA SCHEDULE
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND
THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,475
<SECURITIES> 0
<RECEIVABLES> 263,450
<ALLOWANCES> 0
<INVENTORY> 156,065
<CURRENT-ASSETS> 488,069
<PP&E> 1,291,627
<DEPRECIATION> 476,783
<TOTAL-ASSETS> 1,768,747
<CURRENT-LIABILITIES> 263,824
<BONDS> 909,225
0
0
<COMMON> 337
<OTHER-SE> 379,364
<TOTAL-LIABILITY-AND-EQUITY> 1,768,747
<SALES> 671,377
<TOTAL-REVENUES> 671,377
<CGS> 561,149
<TOTAL-COSTS> 561,149
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,308
<INCOME-PRETAX> 19,992
<INCOME-TAX> 7,997
<INCOME-CONTINUING> 11,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,995
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
