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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 29, 1996 Commission file number 1-11802
[Graphic Omitted]
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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
GREENWICH, CONNECTICUT 06831
(Address of principal executive offices) (Zip Code)
203-532-4200
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $.01 par value per share New York Stock Exchange, Inc.
9-1/8% Senior Subordinated Notes due 2003 New York Stock Exchange, Inc.
</TABLE>
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
The only class of voting securities of World Color Press, Inc. is its
Common Stock, par value $.01 per share (the "Common Stock"). On March 14, 1997,
the aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $322.8 million.
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The number of shares of the Common Stock outstanding as of March 14, 1997:
33,744,531
DOCUMENTS INCORPORATED BY REFERENCE
Certain exhibits as listed on the Exhibit Index and filed with registrant's
registration statement on Form S-1 (No. 33-99676) under the Securities Act of
1933, as amended, are incorporated by reference into Part IV of this Form 10-K.
Portions of the registrant's 1996 Annual Report to Stockholders are incorporated
by reference into Part II of this Form 10-K. Portions of the registrant's
definitive Proxy Statement dated March 27, 1997 are incorporated by reference
into Part III of this Form 10-K.
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INDEX
Page
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PART I
ITEM 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . 6
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 7
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . 7
ITEM 8. Financial Statements and Supplementary Data . . . . . . . . . . 8
ITEM 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . . . . . . . . . 8
PART III
ITEM 10. Directors and Executive Officers of the Registrant. . . . . . . 8
ITEM 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . 8
ITEM 12. Security Ownership of Certain Beneficial Owners and Management. 8
ITEM 13. Certain Relationships and Related Transactions. . . . . . . . . 8
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-13
SIGNATURES. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14-15
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PART I
ITEM 1. BUSINESS.
GENERAL
World Color Press, Inc. (together with its subsidiaries, "World Color" or the
"Company") is an industry leader in the management and distribution of print and
digital information. The Company is the third largest diversified commercial
printer in the United States, providing digital prepress, press, multi-media,
binding and distribution services to customers in the magazine, commercial,
catalog, direct mail, directory and book market sectors. Founded in 1903, the
Company currently operates a national network of 36 production and distribution
facilities and an extensive network of sales offices nationwide. Through
selective acquisitions and internal expansion, World Color has strategically
positioned itself as a full-service provider of multiple high technology
solutions for its customers' imaging, print and distribution needs.
The Company operates in one business segment -- printing services. The
following table presents the percentage of total revenue contributed by each
market sector during the past three fiscal years.
1996 1995 1994
Magazines 29% 31% 40%
Commercial 27 30 28
Catalogs 27 23 20
Direct Mail 9 9 4
Directories 6 7 8
Racksize Books 2 - -
--- --- ---
TOTAL: 100% 100% 100%
---- ---- ----
---- ---- ----
The Company completed five acquisitions in 1996 including: Viking Color
(February), a digital prepress provider; Shea Communications (April), a
commercial, catalog and direct mail printer; Ringier America (June), a
printer of magazines, catalogs, commercial materials and mass-market,
racksize books; ISA Direct (August), a provider of direct imaging,
personalization and other lettershop services to the direct mail industry;
and MT Orlando (October), a regional commercial printer. The above table
includes the revenues recognized by World Color from these operations from
their respective acquisition dates in 1996.
Substantially all sales are made to customers through employees of the Company
based upon customer specification. A significant amount of the Company's sales
are made pursuant to term contracts with its customers, with the remainder being
made on an order-by-order basis. As a result, the Company has a significant
backlog of orders. No customer accounted for more than 10% of the Company's net
sales in 1996. In the opinion of management, the loss, at substantially the
same time, of all of the business provided by any one of its largest customers
could have an adverse effect upon the Company.
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MARKET SECTORS
MAGAZINES. The Company believes that it ranks second in the U.S. consumer
magazine printing sector, based on internal analyses of historical industry
data. The Company believes that its principal competitors in this sector
consist of three diversified printing companies. World Color's publication
customer base includes some of the largest and most established consumer
magazines in a diverse range of market categories. Established publications are
the most likely to have a continuing and improving presence. Additionally, the
popularity of these magazines makes them less susceptible to cyclical downturns
in advertising spending, which the Company believes provides it with a
significant advantage over competitors whose customers may be more susceptible
to such downturns.
A majority of the Company's magazine printing is performed under contracts with
remaining terms of between one and nine years, the largest of which are with
customers whose relationships with the Company average more than 20 years. The
Company has extended a majority of such contracts beyond their initial
expiration dates and intends to continue this practice when economically
practicable.
COMMERCIAL. The Company targets the high-end of the commercial printing
sector and is a premier printer of high quality, specialty products such as
annual reports (including its own) and automobile and travel brochures.
World Color is also a leading printer of product brochures, bill stuffers,
informational marketing materials and other advertising supplements. The
Company has focused on building lasting customer relationships in the
commercial sector through investments in equipment, focused customer service
and the maintenance of the flexibility required to accommodate specific and
changing customer needs. The Company believes its reputation for and
dedication to innovation and leadership in specialized services will allow it
to enjoy continued loyalty from its customers.
The Company also prints free-standing inserts and retail inserts for established
national retailers. With a broad range of specialized equipment and focused
attention to customer service, the Company provides its commercial customers
with format flexibility, high speed production and the ability to print high
quality commercial products from start to finish at one full-service source.
CATALOGS. The Company believes that it is one of the leading U.S. printers of
consumer catalogs. In addition, the Company's business-to-business catalog
printing work spans a broad range of industries including the computer, home and
office furniture, office products and industrial safety products industries.
The Company's key competitors in the catalog market consist of four diversified
commercial printers whose facilities enable them to compete in the national
market and smaller local and regional printers who compete for regional
business.
DIRECT MAIL. The Company believes that it is a leading provider of production
and distribution services for direct mail marketers. Direct mail marketing
services are an important and rapidly growing component of many businesses'
marketing programs and overall U.S. advertising expenditures. The Company's
services in this sector include the production for specialty advertising clients
of direct mail brochures and magazine inserts tailored to the specifications of
each magazine on a customer's media list. In addition, the Company provides
direct marketers with direct imaging, personalization and other lettershop
services. The Company has devoted significant resources to this rapidly growing
sector, and has a division, World Color DirectTM, focused exclusively on
marketing and cross-selling its direct mail services.
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DIRECTORIES. Pacific Bell Directory accounts for substantially all of the
Company's net sales in the directory sector. The Company prints four-color
white-page and yellow-page directories for Pacific Bell pursuant to a
contract which extends through the year 2000 and which can be extended by
Pacific Bell for up to an additional five years.
BOOKS. Through its acquisition of Ringier America World Color is the largest
printer of mass-market, racksize books. In January 1997 the Company acquired
the Book Services Group of Rand McNally, which prints hardcover books for the
consumer, education and reference markets, and services 21 of the 25 largest
U.S. publishers.
CURRENT SERVICES
PREPRESS SERVICES. The Company provides a complete spectrum of film and
digital preparation services, from traditional paste-up and color separations
to state-of-the-art, all-digital prepress, as well as digital imaging and
digital archiving. All of the Company's plants, together with its nine
specialized prepress facilities strategically located close to the Company's
customers, provide high quality, 24-hour preparatory services linked directly
to the Company's printing facilities. In addition, the Company's computer
systems enable customers and World Color to exchange images and textual
material electronically directly between the Company's printing and prepress
facilities and the customers' business locations. The Company's integrated
prepress operations provide it with a comparative advantage over traditional
prepress shops which provide similar non-integrated services.
PRESS AND BINDING SERVICES. The Company believes that it provides its
customers with access to state-of-the-art technology in all phases of the
printing and binding process, including, among others, wide-web presses,
computerized quality information systems, computer-to-plate and digital
processing systems, high speed binding and personalization capabilities and
robotic material handling. Wide-web press technology, the large expenditure
for which only a small number of well-capitalized printers are able to
justify, generates significant cost savings on longer press runs. The
computerized quality information systems provide the Company and its
customers with instant analysis of the quality of the printing, thereby
enabling the Company to improve its performance and plan preventative
maintenance of its equipment more effectively. The computer-to-plate and
digital processing technologies eliminate the use of film which significantly
reduces costs and production time and enables World Color's customers to
extend their production deadlines. The Company's personalization
capabilities allow customers to include different content, whether
advertising or editorial or both, within different copies of their product
depending upon the geographic, demographic and subscriber specifications of
their readers.
The Company operates web and sheetfed offset, rotogravure, flexographic and
digital presses. The Company believes that the variety and capabilities of its
presses and other production equipment allow World Color to meet the broad range
of its customers' printing needs and be the full service provider demanded by
the market. This capacity provides the Company with a competitive advantage
over those smaller printers who are unable to meet this demand.
DISTRIBUTION AND LOGISTICS. The Company believes that its sophisticated mailing
and distribution capabilities are among the best in the industry. World Color
maintains a network of strategic regional locations from which it provides its
customers important local access to the Company's nationwide services. Fifteen
of the Company's printing plants are strategically located in the mid-region of
the country. Management believes that the size of the printing plants and their
central location and close proximity to each other provide the Company with a
significant advantage in distribution capabilities, enabling it to distribute a
greater volume of product than its competitors to a wider target market at
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a lower cost. The Company also operates regional facilities on the west and
east coasts which serve more regionalized needs. The Company uses
computerized cost studies to examine the benefits of pooled and palletized
mailings for each customer to develop an efficient and cost effective
distribution plan designed to ensure that the customer's product reaches
consumers at narrowly specified delivery times.
NEW MEDIA. Through its World Color Digital Media division the Company has
established itself as a multi-media provider. The Company is able to transform
customers' existing printed and digital material into interactive media such as
user-friendly information kiosk systems, Internet web sites, corporate
intranets, CD-ROM's and computer laptop sales presentations.
COMPETITION
Although the Company is one of the largest diversified commercial printers in
the United States, the industry is highly competitive in most product
categories and geographic regions. Competition is largely based on price,
quality, range of services offered, distribution capabilities, customer
service, availability of printing time on appropriate equipment and
state-of-the-art technology. The Company competes for commercial business
not only with large national printers, but also with smaller regional
printers. In certain circumstances, due primarily to factors such as freight
rates and customer preference for local services, printers with better access
to certain regions of the country may have a competitive advantage in such a
region. The Company believes that primarily due to the continued excess
capacity in the industry, there has been downward pricing pressure and
increased competition in the printing industry.
RAW MATERIALS
The primary raw materials required in a printing operation are ink and paper.
The Company supplies all of the ink and a substantial amount of the paper
used in the printing process. The Company provides warehouse space for both
World Color and customer supplied paper. The Company's contracts with its
customers generally provide for price adjustments to reflect price changes
for materials, wages and outside services. World Color's materials
management program capitalizes on the Company's purchasing power in order to
minimize materials costs while optimizing inventory management. In addition,
the Company's strong commercial relationships with a relatively small number
of suppliers allow the Company to negotiate favorable price discounts and
achieve more assured sourcing of high quality paper that meets the Company's
specifications. The Company believes that it has adequate allocations with
its paper suppliers to meet its customers' needs. An adequate supply of ink
is available. The Company is not dependent upon any one source for its paper
or ink.
ENVIRONMENTAL COMPLIANCE
The Company is subject to regulation under various and changing federal, state
and local laws relating to the environment and to employee safety and health.
These environmental regulations relate to the generation, storage,
transportation, disposal and emission into the environment of various
substances. Permits are required for operation of the Company's business
(particularly air emission permits), and these permits are subject to renewal,
modification and, in certain circumstances, revocation. The Company believes
that it is in substantial compliance with such laws and permitting requirements.
The Company is also subject to regulation under various and changing federal,
state and local laws which allow regulatory authorities to compel (or to seek
reimbursement for) cleanup of environmental contamination at its own sites and
at facilities where its waste is or has been disposed.
The Company has internal controls and personnel dedicated to compliance with all
applicable environmental laws. The Company estimates that capital expenditures
in 1997 and 1998 required to
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comply with federal, state and local provisions for environmental controls,
as well as expenditures for the Company's share of costs for environmental
clean-up, if any, will not be material and will not have a material effect
upon its earnings or its competitive position.
RESEARCH AND DEVELOPMENT
Suppliers of equipment and materials used by companies such as World Color
perform most of the research and development related to the printing industry.
Accordingly, the Company has not spent a material amount of resources for such
purposes. World Color does, however, dedicate significant resources to
improving its operating efficiencies and the services it provides to its
customers. In an effort to realize increased efficiencies in its printing
processes, the Company has made significant investments in state-of-the-art
equipment, including new press and binding technology, digital photography and
computer-to-plate systems.
EMPLOYEES
As of March 1, 1997, the Company had approximately 12,500 employees, of which
approximately 2,300 or 18% were represented by unions. As of March 1, 1997,
approximately 66% of such union employees were covered under several
different labor contracts which expire in September and October 1998 and
another 26% of such union employees were covered under labor contracts which
expire in mid to late 1999. The Company believes it has satisfactory
employee and labor relations.
ITEM 2. PROPERTIES.
The Company's corporate office is currently located in leased facilities in
Greenwich, Connecticut. Production facilities are located throughout the United
States, as set forth below. The Company believes its facilities provide
adequate productive capacity for its needs. Summary information regarding the
Company's facilities is set forth below:
Location Use Owned/Leased Square Footage
-------- --- ------------ --------------
Jonesboro, AR Printing Plant Owned 425,000
Los Angeles, CA Printing Plant Leased 299,000
Prepress Leased 21,000
Merced, CA Printing Plant Owned 500,000
North Haven, CT Printing Plant Owned 440,000
Washington, D.C. Prepress Owned 65,000
Lake Mary, FL Prepress Leased 11,000
Orlando, FL Printing Plant Leased 167,000
Prepress Leased 27,000
Tampa, FL Multi-media Leased 14,300
Augusta, GA Printing Plant Owned 650,000
Gainesville, GA Printing Plant Leased 130,000
Altamont, IL Distribution Leased 27,000
Aurora, IL Printing Plant Owned 227,000
Bensenville, IL Distribution / Bindery Owned 307,000
Des Plaines, IL Prepress / Warehouse Owned 181,000
Effingham, IL Printing Plant Owned 640,000
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Elk Grove Village, IL Printing Plant Owned 175,000
Printing Plant Leased 99,000
Warehouse Leased 102,000
Flora, IL Distribution Owned 80,000
Salem, IL Printing Plant Owned 680,000
Lexington, KY Warehouse Leased 350,000
Versailles, KY Printing Plant Owned 1,090,000
Warehouse Leased 27,400
Taunton, MA Printing Plant Owned 352,000
Warren, MI Prepress Leased 11,000
St. Charles, MO Prepress Leased 20,000
Corinth, MS Printing Plant Owned 623,000
Warehouse Leased 25,600
Charlotte, NC Prepress Leased 28,115
New York, NY Prepress Leased 10,000
Oberlin, OH Printing Plant Owned 110,000
Oklahoma City, OK Printing Plant Owned 210,000
Stillwater, OK Printing Plant Owned 335,000
Covington, TN Printing Plant Owned 565,000
Dresden, TN Printing Plant Owned 618,300
Warehouse Leased 34,900
Dyersburg, TN Printing Plant Owned 865,000
Trenton, TN Distribution Owned 50,000
Brookfield, WI Printing Plant Owned 309,000
In addition, the Company maintains an extensive network of sales offices located
throughout the United States. The Company believes that none of its leases is
material to its operations and that such leases were entered into on market
terms.
ITEM 3. LEGAL PROCEEDINGS.
The Company does not believe that there are any pending legal proceedings which,
if adversely determined, could have a material adverse effect on the financial
condition or results of operations of the Company, taken as a whole.
There were no material pending legal proceedings that were terminated in the
fourth quarter of the fiscal year ended December 29, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET PRICE RANGE OF COMMON STOCK
World Color's Common Stock is listed on the New York Stock Exchange under
the symbol: "WRC". At March 14, 1997 there were 111 record holders of the Common
Stock. The following table sets forth the range of the high and low sales
prices of the Common Stock as quoted on the New York Stock Exchange for 1996.
The first quarter 1996 information reflects market prices from January 25, 1996
(the date of the Company's initial public offering) to March 31, 1996. Prior to
January 25, 1996, there was no established public trading market for the
Company's Common Stock. The Company paid no dividends during 1995 or 1996.
1996 High Low Close
First Quarter 21 1/2 18 1/4 19
Second Quarter 25 1/2 18 25 3/8
Third Quarter 25 1/8 20 1/2 22
Fourth Quarter 24 1/8 17 3/4 19 1/8
DIVIDEND POLICY
The Company does not anticipate declaring and paying cash dividends on the
Common Stock at any time in the foreseeable future. The decision whether to
apply legally available funds to the payment of dividends on the Common Stock
will be made by the Board of Directors of the Company from time to time in the
exercise of its prudent business judgment, taking into account, among other
things, the Company's results of operations and financial condition, any then
existing or proposed commitments for the use by the Company of available funds,
and the Company's obligations with respect to any then outstanding class or
series of its preferred stock. The Company is restricted by the terms of
certain of its outstanding debt and financing agreements from paying cash
dividends on its Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
See "Selected Financial Data" on page 23 of the Company's Annual Report to
Stockholders, which information is incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
See "Management's Discussion and Analysis" on page 24 - 26 of the Company's
Annual Report to Stockholders, which information is incorporated by reference
herein.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements described in Item 14(a) hereof are
incorporated herein. The supplementary quarterly data set forth in Note 14 on
page 45 of the Company's Annual Report to Stockholders is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See "Election of Directors" on pages 2 - 4; "Executive Officers" on pages 9-10
and "Other Matters" on page 17 of the Company's definitive Proxy Statement
dated March 27, 1997 which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
See "Board of Directors -- Director Compensation" on page 5; "Executive
Compensation -- Summary Compensation Table", "-- Option Grants in 1996", "--
Aggregate Option Exercises in Fiscal 1996 and Fiscal Year-End Option Values",
"-- Compensation Under Retirement Plans" and "-- Agreements With Named
Executive Officers" on pages 10 - 14 and "-- Compensation Committee
Interlocks and Insider Participation" on page 16 of the Company's definitive
Proxy Statement dated March 27, 1997 which information is incoporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See "Stock Ownership of Certain Beneficial Owners and Management" on pages
7-8 of the Company's definitive Proxy Statement dated March 27, 1997 which
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See "Certain Relationships and Related Transactions" on page 6 of the Company's
definitive Proxy Statement dated March 27, 1997 which information is
incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
(i) Financial Statements
The Company's Consolidated Financial Statements, as included in
Part II, Item 8, are as follows:
Page in 1996
Annual Report to
Stockholders
------------
Independent Auditors' Report 27
Consolidated Balance Sheets as of December 29, 1996 and
December 31, 1995 28
Consolidated Statements of Operations for the Years ended
December 29, 1996, December 31, 1995 and
December 25, 1994 29
Consolidated Statements of Stockholders' Equity for the
Years ended December 29, 1996, December 31, 1995 and
December 25, 1994 30
Consolidated Statements of Cash Flows for the Years ended
December 29, 1996, December 31, 1995 and
December 25, 1994 31
Notes to Consolidated Financial Statements 32 - 45
(ii) Financial Statement Schedule:
Independent Auditors' Report, as set forth on page 12 of this
report.
Schedule II, Valuation and Qualifying Accounts, as set forth
on page 13 of this report.
All other schedules have been omitted because they are
inapplicable or are not required or the information is
included elsewhere in the financial statements or notes
thereto.
(iii) Exhibits:
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EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Amended and Restated Certificate of Incorporation of World Color Press,
Inc. incorporated by reference to Exhibit 3.1 to World Color's
Registration Statement on Form S-1 (No. 33-99676) under the Securities
Act of 1933, as amended (the "World Color Equity S-1").
3.2 Amended and Restated By-Laws of World Color Press, Inc.
4.1 Indenture (the "Indenture") between World Color and First Trust National
Association, as trustee, relating to World Color's 9-1/8% Senior
Subordinated Notes due 2003 (the "Notes"), incorporated by reference
to Exhibit 4.1 to World Color's Annual report on Form 10-K for the
fiscal year ended December 26, 1993.
4.2 Specimen of 9-1/8% Senior Subordinated Notes due 2003 (included in the
Indenture incorporated by reference as Exhibit 4.1).
10.1 Second Amended and Restated Credit Agreement, dated as of June 6, 1996,
among World Color and the lenders and agents party thereto (the "Credit
Agreement"), incorporated by reference to Exhibit 10.2 to World Color's
Current Report on Form 8-K dated June 21, 1996.
10.2 First Amendment dated as of June 10, 1996 to the Credit Agreement,
incorporated by reference to Exhibit 10.3 to World Color's Current
Report on Form 8-K dated June 21, 1996.
10.3 Participation Agreement, dated as of April 30, 1990, among World Color,
as lessee, General Electric Capital Corporation, as owner participant
and The Connecticut National Bank, as owner trustee, as amended,
incorporated by reference to Exhibit 10.18 to World Color's
Registration Statement on Form S-1 (No. 33-59490) under the Securities
Act of 1933, as amended (the "World Color Debt S-1").
10.4 Lease Agreement, dated as of April 30, 1990, between the Connecticut
National Bank, as Owner Trustee, as lessor and World Color, as lessee,
as amended, incorporated by reference to Exhibit 10.19 to the World
Color Debt S-1.
10.5 Form of Unitholders Agreement, incorporated by reference to Exhibit
10.21 to the World Color Debt S-1.
10.6 Form of Optionholders Agreement between World Color and the
Optionholders (as defined therein), incorporated by reference to
Exhibit 10.23 to the World Color Debt S-1.
10.7 Second Amended and Restated Stock Option Plan of World Color Press,
Inc., incorporated by reference to Exhibit 10.9 to World Color's
Annual Report on Form 10-K for the fiscal year ended December 25, 1994.
10.8 Form of World Color Stock Option Agreement, incorporated by reference to
Exhibit 10.25 to the World Color Debt S-1.
10.9 Letter Agreement, dated as of November 4, 1991, between World Color
and Marc L. Reisch regarding certain severance arrangements,
incorporated by reference to Exhibit 10.26 to the World Color Debt S-1.
10.10 Letter Agreement, dated as of October 9, 1995, between World Color
and Jennifer L. Adams regarding certain severance arrangements,
incorporated by reference to Exhibit 10.12 to the World Color Equity
S-1.
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EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.11 Third Amendment to the World Color Press, Inc. Supplemental Executive
Retirement Plan, incorporated by reference to Exhibit 10.18 to World
Color's Annual Report on Form 10-K for the fiscal year ended December
25, 1994.
10.12 The World Color Press, Inc. Supplemental Retirement Plan, adopted June
14, 1995 as amended July 17, 1996, incorporated by reference to Exhibit
10.1 to the World Color Form 10-Q for the quarterly period ended
September 29, 1996.
10.13 Trust under the World Color Press, Inc. Supplemental Retirement Plan,
dated as of October 12, 1995, by and between World Color and Harris
Trust and Savings Bank, incorporated by reference to Exhibit 10.2 to
the World Color Form 10-Q for the quarterly period ended October 1,
1995.
10.14 The 1995 Senior Management Stock Option Plan of World Color Press,
Inc., incorporated by reference to Exhibit 10.22 to the World Color
Equity S-1.
10.15 Form of 1995 Senior Management Stock Option Agreement, incorporated by
reference to Exhibit 10.26 to the World Color Equity S-1.
10.16 Amended and Restated Registration Rights Agreement, dated as of
November 20, 1995, among World Color Press, Inc., KKR Partners II,
L.P., Manufacturing Acquisition Associates, L.P., PACE Equity
Associates, L.P., KKR Associates, L.P., Merrill Lynch Capital
Appreciation PSHP, No. 1, L.P., Merrill Lynch Offshore LBO
Partnership No. 1, Merrill Lynch Employees LBO Partnership No. 1,
Merrill Lynch Kecalp L.P. 1984, Merrill Lynch Kecalp L.P. 1986 and
Merrill Lynch L.P. Holdings, Inc., incorporated by reference to
Exhibit 10.24 to the World Color Equity S-1.
10.17 Registration Rights Agreement, dated as of November 20, 1995, among
World Color Press, Inc., APC Associates, GR Associates and WCP
Associates, incorporated by reference to Exhibit 10.25 to the World
Color Equity S-1.
11.0 Statement regarding computation of per share earnings.
13.0 Pages 23 - 45 of the 1996 Annual Report to Stockholders (with the
exception of the pages incorporated by reference herein, the
Annual Report to Stockholders is not part of this filing).
21.0 Subsidiaries of World Color.
27.0 Financial Data Schedule.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the fourth quarter of
World Color's fiscal year ended December 29, 1996.
11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of World Color Press, Inc.:
We have audited the consolidated financial statements of World Color Press,
Inc. and subsidiaries as of December 29, 1996 and December 31, 1995, and for
each of the three years in the period ended December 29, 1996, and have issued
our report thereon dated February 5, 1997; such consolidated financial
statements and report are included in your 1996 Annual Report to Stockholders
and are incorporated herein by reference. Our audits also included the
financial statement schedule of World Color Press, Inc., listed in Item 14.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
February 5, 1997
12
<PAGE>
SCHEDULE II
WORLD COLOR PRESS, INC.
<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
- ----------------------------------------------------------------------------------------------------
ADDITIONS OTHER
BALANCE AT CHARGED TO CHARGES- BALANCE
BEGINNING COSTS AND DEDUCTIONS- ADD (DEDUCT) AT END
CLASSIFICATION OF YEAR EXPENSES DESCRIBE DESCRIBE OF YEAR
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 29, 1996
Allowance for uncollectible
accounts receivable $ 6,356 $ 1,454 $ 834 (2) $ 1,500 (3) $ 8,476
YEAR ENDED DECEMBER 31, 1995
Allowance for uncollectible
accounts receivable $ 4,718 $ 1,875 $ 976 (2) $ 739 (3) $ 6,356
YEAR ENDED DECEMBER 25, 1994
Allowance for plant closings $11,999 $ - $11,999 (1) $ - $ -
Allowance for uncollectible
accounts receivable $ 8,692 $ 1,198 $ 5,172 (2) $ - $ 4,718
</TABLE>
(1) Write-off of excess book value over proceeds from sale of assets, for which
allowance was established.
(2) Write-offs of receivables, net of recoveries.
(3) Balance of acquired companies at acquisition date.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
Date: March 27, 1997 By: /s/ Thomas M. Pierno
--------------------------------
Thomas M. Pierno
Executive Vice President, Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on March 27, 1997.
SIGNATURES TITLES
/s/ Robert G. Burton Chairman of the Board of Directors, President
- ------------------------- and Chief Executive Officer (Principal Executive
Robert G. Burton Officer)
/s/ Thomas M. Pierno Executive Vice President, Chief Financial Officer
- ------------------------- (Principal Financial Officer; Principal
Thomas M. Pierno Accounting Officer)
/s/ Gerald S. Armstrong Director
- -------------------------
Gerald S. Armstrong
Director
- -------------------------
Dr. Mark J. Griffin
/s/ Michael W. Harris Director and President, Manufacturing
- -------------------------
Michael W. Harris
Director
- -------------------------
Henry R. Kravis
14
<PAGE>
/s/ Alexander Navab, Jr. Director
- -------------------------
Alexander Navab, Jr.
/s/ Marc L. Reisch Director and Group President, Sales and Chief
- ------------------------- Operating Officer
Marc L. Reisch
Director
- -------------------------
George R. Roberts
/s/ Scott M. Stuart
- ------------------------- Director
Scott M. Stuart
15
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS OF
WORLD COLOR PRESS, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders shall be held at any
place within or outside the State of Delaware as shall be designated from time
to time by the board of directors. In the absence of any such designation,
stockholders meetings shall be held at the principal executive office of the
Corporation.
Section 2. An annual meeting of stockholders shall be held each year
on a date and a time designated by the board of directors. At each annual
meeting directors shall be elected and any other proper business may be
transacted.
Section 3. At an annual meeting of the stockholders, only such
business (including the nomination of persons for election as directors as
described below) shall be conducted as shall have been properly brought before
the meeting. To be properly brought before an annual meeting, business must be
<PAGE>
(a) specified in the notice of meeting (or any supplement thereto) given by
or at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered
to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting
at which directors are to be elected; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received no later than the close of business on the tenth
day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made.
A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. Notwithstanding anything in the By-Laws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 3.
In the case of nominations of persons for election as directors, only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting of stockholders
(i) by or at the direction of the Board of Directors, (ii) by any nominating
committee or person appointed to make such nominations by the Board of
Directors, or (iii) by any stockholder of the Corporation entitled to vote for
the election of directors at the meeting who complies with the notice procedures
set forth in this Section 3. Such nominations, if made by a stockholder of the
Corporation as such, shall be made pursuant to timely notice (as described in
the first paragraph of this Section 3) in writing addressed to the Secretary of
the Corporation. Such stockholder's notice shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election
<PAGE>
or re-election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of stock of the corporation which
are beneficially owned by the person and (iv) any other information relating to
the person that would be required to be disclosed in solicitations for proxies
for the election of directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, or any successor thereto, and (b) as to the
stockholder giving the notice (i) the name and record address of the stockholder
and (ii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as a
director of the Corporation. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein.
The presiding officer of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business or a nomination of a
director was not properly brought before the meeting in accordance with this
Section 3, and if the presiding officer should so determine, the presiding
officer shall so declare to the meeting and say such business not properly
brought before the meeting shall not be transacted or that the defective
nomination shall be disregarded.
Section 4. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, shall constitute a quorum for the
transaction of business except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave less than a quorum and the
votes present may continue to transact business until adjournment. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority of the voting stock represented in person or by proxy
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date
<PAGE>
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote thereat.
Section 5. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
Section 6. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the secretary of the Corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the Corporation on the record date set by the board of directors as
provided in Article V, Section 6 hereof. All elections shall be had and all
questions decided by a plurality vote.
Section 7. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the president and shall be called by the
president or the secretary at the request in writing of a majority of the board
of directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation issued and outstanding,
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. Whenever stockholders are required or permitted to take
any action at a meeting, a written notice of the meeting shall be given which
notice shall state the place, date and hour of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called. The
written notice of any meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than
<PAGE>
sixty days before the date of the meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Section 9. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 10. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The board of directors shall consist of a minimum of three
(3) and a maximum of fifteen (15) directors. The number of directors shall be
fixed or changed from time to time, within the minimum and maximum, by the then
appointed directors. The directors need not be stockholders. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and the director elected shall hold office until
his successor is elected and qualified; provided, however, that unless otherwise
<PAGE>
restricted by the Certificate of Incorporation or by law, any director or the
entire board of directors may be removed, either with or without cause, from the
board of directors at any meeting of stockholders by a majority of the stock
represented and entitled to vote thereat.
Section 2. Vacancies on the board of directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election of directors and until
their successors are duly elected and shall qualify, unless sooner displaced.
If there are no directors in office, then an election of directors may be held
in the manner provided by statute. If, at the time of filling any vacancy or
any newly created directorship, the directors then in office shall constitute
less than a majority of the whole board (as constituted immediately prior to any
such increase), the Court of Chancery may, upon application of any stockholder
or stockholders holding at least ten percent of the total number of the shares
at the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The property and business of the Corporation shall be
managed by or under the direction of its board of directors. In addition to the
powers and authorities by these By-Laws expressly conferred upon them, the board
may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The directors may hold their meetings and have one or more
offices, and keep the books of the Corporation outside of the State of Delaware.
Section 5. Regular meetings of the board of directors may be held
without notice at such time and place as shall from time to time be determined
by the board.
<PAGE>
Section 6. Special meetings of the board of directors may be called
by the president on forty-eight hours' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
president or the secretary in like manner and on like notice on the written
request of two directors unless the board consists of only one director; in
which case special meetings shall be called by the president or secretary in
like manner or on like notice on the written request of the sole director.
Section 7. At all meetings of the board of directors a majority of
the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the board of directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these By-Laws. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
If only one director is authorized, such sole director shall constitute a
quorum.
Section 8. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
Section 10. The board of directors may designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or
<PAGE>
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in a resolution of the board of directors or in these By-Laws (as they
may be amended from time to time), shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to the following matters: (i) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by the General Corporation Law of the State of Delaware to be submitted
to stockholders for approval or (ii) adopting, amending or repealing any by-law
of the Corporation.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
OFFICERS
Section 1. The officers of this corporation shall be chosen by the
board of directors and shall include a president, a vice president, a secretary,
and a treasurer. The Corporation may also have at the discretion of the board
of directors such other officers as are desired, including a chairman of the
board, additional vice presidents, one or more assistant secretaries and
assistant treasurers, and such other officers as
<PAGE>
may be appointed in accordance with the provisions of Section 3 hereof. In the
event there are two or more vice presidents, then one or more may be designated
as executive vice president, senior vice president, vice president-marketing, or
other similar or dissimilar title. At the time of the election of officers, the
directors may by resolution determine the order of their rank. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 2. The board of directors, at its first meeting after each
annual meeting of stockholders, shall choose the officers of the Corporation.
Section 3. The board of directors may appoint such other officers and
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the board of directors.
Section 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer elected
or appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors. If the office of
any officer or officers becomes vacant for any reason, the vacancy shall be
filled by the board of directors.
CHAIRMAN OF THE BOARD
Section 6. The chairman of the board, if such an officer be elected,
shall, if present, preside at all meetings of the board of directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the board of directors or prescribed by the By-laws. If
there is no president, the chairman of the board shall in addition be the chief
executive officer of the Corporation and shall have the powers and duties
prescribed in Section 7 of this Article IV.
PRESIDENT
Section 7. Subject to such supervisory powers, if any, as may be
given by the board of directors to the chairman of the board, if there be such
an officer, the president shall be the chief executive officer of the
Corporation and shall, subject to the control of the board of directors, have
general supervision,
<PAGE>
direction and control of the business and officers of the Corporation. He shall
preside at all meetings of the stockholders and, in the absence of the chairman
of the board, or if there be none, at all meetings of the board of directors.
He shall be an ex-officio member of all committees and shall have the general
powers and duties of management usually vested in the office of president and
chief executive office of corporations, and shall have such other powers and
duties as may be prescribed by the board of directors or the By-Laws.
VICE PRESIDENTS
Section 8. In the absence or disability of the president, the vice
presidents in order of their rank as fixed by the board of directors, of if not
ranked, the vice president designated by the board of directors, shall perform
all the duties of the president, and when so acting shall have all the powers of
and be subject to all the restrictions upon the president. The vice presidents
shall have such other duties as from time to time may be prescribed for them,
respectively, by the board of directors.
SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all sessions of the board of
directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the board of
directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the board of directors, and shall perform such other duties
as may be prescribed by the board of directors or the By-Laws. He shall keep in
safe custody the seal of the Corporation, and when authorized by the board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an assistant secretary. The
board of directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors,
or if there be no such determination, the assistant secretary designated by
the board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may
from time to time prescribe.
<PAGE>
TREASURER AND ASSISTANT TREASURER
Section 11. The treasurer shall have the custody of the corporation
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys, and other valuable effects in the name and to the credit of the
Corporation, in such depositories as may be designated by the board of
directors. He shall disburse the funds of the Corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the board of directors, at its regular meetings, or when the board of
directors so requires, an account of all his transactions as treasurer and of
the financial condition of the Corporation. If required by the board of
directors, he shall give the corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the board of directors, for the
faithful performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 12. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors,
or if there be no such determination, the assistant treasurer designated by the
board of directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Every holder of stock of the Corporation shall be entitled
to have a certificate signed by, or in the name of the Corporation by, the
chairman or vice chairman of the board of directors, or the president or a vice
president, and by the secretary or an assistant secretary, or the treasurer or
an assistant treasurer of the Corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a
<PAGE>
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 3. If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of the State of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
LOST, STOLEN OR DESTROYED CERTIFICATES
Section 4. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 5. Upon surrender to the Corporation, or the transfer agent
of the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to
<PAGE>
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 6. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDER
Section 7. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
ARTICLE VI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute
<PAGE>
discretion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
CHECKS
Section 3. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers as the board of
directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the Corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name
of the corporation and the words "Corporate Seal, Delaware." Said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
NOTICES
Section 6. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 7. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
<PAGE>
ARTICLE VII
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal By-Laws is conferred upon the board of directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
ARTICLE VIII
INDEMNIFICATION
Section 1(a). The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to
<PAGE>
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no such
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation shall be successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the board of directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding as authorized by the board of directors in
the manner provided in paragraph (d) upon receipt of an undertaking by or on
behalf of the
<PAGE>
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Section 1.
(f) The indemnification provided by this Section 1 shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(g) The board of directors may authorize, by a vote of a majority of
a quorum of the board of directors, the Corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Section 1.
(h) For the purposes of this Section 1, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include service
as a director,
<PAGE>
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this section.
<PAGE>
EXHIBIT 11.0
WORLD COLOR PRESS, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Years Ended December 29, 1996, December 31, 1995, and December 25, 1994
(Dollars in thousands, except per share data)
FISCAL YEAR
-------------------------------------------------
1996 1995 1994
---- ---- ----
Net income $ 47,261 $ 9,877 $ 23,734
----------- ------------ -----------
----------- ------------ -----------
Weighted average
common shares 33,642,668 25,658,190 25,625,993
Incremental shares for
stock options(2) 1,360,255 2,222,440 (1) 2,222,440 (1)
Common Stock
issued (1) - 6,560,237 6,560,237
----------- ------------ -----------
Weighted average
common and common
equivalent shares
outstanding 35,002,923 34,440,867 34,408,670
----------- ------------ -----------
----------- ------------ -----------
Net income per
common and common
equivalent share $ 1.35 $ 0.29 $ 0.69
----------- ------------ -----------
----------- ------------ -----------
- -----------------
(1) Includes shares related to Common Stock issued and incremental shares
related to stock options granted within one year prior to the initial
filing of the registration statement for the initial public offering at an
exercise price or purchase price below $19.00 per share, the initial public
offering price, using the treasury stock method for the stock options, as
if they were outstanding for all periods presented.
(2) Includes incremental shares for dilutive common equivalent shares related
to the assumed exercise of stock options, using the treasury stock method.
<PAGE>
EXHIBIT 13.0
PORTIONS OF THE ANNUAL REPORT
[Page 23 of the Annual Report]
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data for the five fiscal years ended December
29, 1996 have been derived from the Company's audited consolidated financial
statements. The data presented below should be read in conjunction with, and is
qualified in its entirety by reference to, the Company's consolidated financial
statements and the notes thereto appearing elsewhere in this report.
<TABLE>
<CAPTION>
FISCAL YEAR (1)
- -------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales $1,641,412 $1,295,582 $971,627 $825,569 $660,847
Cost of sales 1,349,130 1,074,785 817,934 715,895 582,855
---------- ---------- -------- --------- --------
Gross profit 292,282 220,797 153,693 109,674 77,992
Selling, general and
administrative
expenses 153,071 125,539 90,312 69,688 57,423
Streamlining and other
special charges (2) - 40,900 - 98,000 6,140
---------- ---------- -------- --------- --------
Operating income (loss) 139,211 54,358 63,381 (58,014) 14,429
Interest expense 58,417 37,897 23,825 25,080 19,820
Income tax provision
(benefit) 33,533 6,584 15,822 (24,700) 775
Extraordinary charge - - - 7,007 -
Cumulative effect of changes in
accounting methods - - - 55,900 -
---------- ---------- -------- --------- --------
Net income (loss) $ 47,261 $ 9,877 $ 23,734 $(121,301) $ (6,166)
---------- ---------- -------- --------- --------
---------- ---------- -------- --------- --------
Net income (loss) per common
and common equivalent
share(3) $ 1.35 $ 0.29 $ 0.69 $ (4.26) $ (0.25)
Weighted average common and
common equivalent shares
outstanding (3) 35,003 34,441 34,409 28,468 24,712
OTHER OPERATING DATA:
Depreciation and
amortization $ 104,493 $ 74,668 $ 62,898 $ 66,533 $ 53,967
Capital expenditures 70,639 120,339 83,875 57,234 25,214
Gross profit margin 17.8% 17.0% 15.8% 13.3% 11.8%
BALANCE SHEET DATA (AT PERIOD END):
Working capital $ 227,068 $ 160,835 $113,144 $ 83,125 $ 40,540
Property, plant and
equipment, net 818,157 480,421 363,929 356,060 327,783
Total assets 1,822,432 1,150,728 837,417 818,130 573,907
Long-term debt (including
current maturities) 897,867 487,106 293,515 323,118 163,122
Stockholders' equity 414,932 358,766 274,113 247,570 296,847
</TABLE>
(1) The fiscal years shown each represent the 52 or 53-week period ending on
the last Sunday in December. Fiscal year 1995 consisted of 53 weeks. Fiscal
years 1992 to 1994 and 1996 each consisted of 52 weeks.
(2) See Note 13 to the Company's consolidated financial statements regarding
the 1995 amount. The 1993 charge reflects the Company's strategy in 1993
to grant price concessions to certain significant customers and renew and
extend long-term contracts in advance of their expiration dates, as well as
to streamline operations by downsizing certain facilities and consolidating
certain other operations. Also reflected are nonrecurring settlement costs
of $6,140 for 1992.
(3) Net income (loss) per common and common equivalent share is based on the
weighted average common and dilutive common equivalent shares outstanding
during each period after giving effect to the change in the Company's
capital structure pursuant to the Merger and the Options Adjustments (as
defined in the notes to the Company's consolidated financial statements).
<PAGE>
[Page 24 - 26 of the Annual Report]
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLARS IN THOUSANDS)
GENERAL
In June 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. 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 mass-market,
racksize books. In addition, the Company acquired certain other businesses in
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 "Acquisitions."
In March 1995, the Company acquired three companies that operate in the
commercial, digital and direct response market sectors (the "1995 Acquisitions")
for an aggregate purchase price of approximately $108,000. In addition, the
Company liquidated approximately $44,500 of the acquired companies'
indebtedness.
The Company operates in the magazine, catalog, commercial, direct mail,
directory and book market sectors of the printing industry. As in recent years,
there continues to be significant pricing pressure on all printers, including
the Company. Net sales include sales to certain customers of paper purchased by
the Company. The price of paper, the primary raw material used by the Company,
is volatile over time and may cause significant swings in net sales and cost of
sales. The Company generally is able to pass on increases in the cost of paper
to its customers, while declines in paper costs result in lower prices to its
customers. In 1995, the availability of most grades of paper tightened and
paper prices increased significantly. Throughout 1996, paper prices decreased
significantly and availability returned to more normalized levels. During the
first quarter of 1997, the paper market has shown signs of firmness in pricing
and availability for certain grades. The Company expects these trends may
continue for the next several months. In addition, the Company's contracts with
its customers generally provide for price adjustments to reflect price changes
for other materials, wages and outside services.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 29, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales increased $345,830 or 26.7% to $1,641,412 in 1996 from $1,295,582 in
1995. The increase was due to the Acquisitions, partially offset by lower paper
prices. 1996 net sales also benefited slightly by continued business growth
from new and existing customers.
Gross profit increased $71,485 or 32.4% to $292,282 in 1996 from $220,797 in
1995. The increase is attributable to the inclusion of the Acquisitions, as
well as increased volume and improved operating efficiencies. Gross profit
margins improved to 17.8% in 1996 from 17.0% in 1995 as a result of the
Acquisitions, including certain cost savings and other operating synergies that
have resulted from the combination of the businesses, along with the effect of
lower paper prices.
Selling, general and administrative expenses increased $27,532 or 21.9% to
$153,071 in 1996 from $125,539 in 1995. The increase is partially attributable
to the Acquisitions, including the related additional amortization expense for
goodwill, as well as increased selling expenses related to higher volume.
<PAGE>
Operating income increased $84,853 or 156.1% to $139,211 in 1996 from $54,358 in
1995. The increase is attributable to the factors discussed in the preceding
paragraphs, and the absence in 1996 of a streamlining charge of $40,900 recorded
in the fourth quarter of 1995, when the Company finalized and committed to a
plan to realign certain business operations. The major components of this
realignment plan were to close a facility and to consolidate certain digital
prepress operations and functions. Before the reduction for the 1995
streamlining charge, 1996 operating income increased $43,953 or 46.1%.
Interest expense increased $20,520 or 54.1% to $58,417 in 1996 from $37,897 in
1995. The increase is attributable to higher average borrowings incurred to
fund the Acquisitions and capital expenditures, partially offset by a slight
benefit from a lower average cost of funds.
The effective income tax rate was approximately 41.5% for 1996 and 40.0% for
1995, and was primarily composed of the combined federal and state statutory
rates.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 25, 1994
Net sales increased $323,955 or 33.3% to $1,295,582 in 1995 from $971,627 in
1994. The 1995 Acquisitions accounted for approximately one half of the sales
increase. In addition, approximately one third of the sales increase resulted
from higher paper prices. Continued business growth from new and existing
customers also benefited 1995 sales.
Gross profit increased $67,104 or 43.7% to $220,797 in 1995 from $153,693 in
1994. The increase is attributable to the inclusion of the 1995 Acquisitions,
increased volume and improved operating efficiencies. Gross profit margins
improved to 17.0% in 1995 from 15.8% in 1994 primarily as a result of the 1995
Acquisitions.
Selling, general and administrative expenses increased $35,227 or 39.0% to
$125,539 in 1995 from $90,312 in 1994. The increase is partially attributable
to the 1995 Acquisitions, including the related additional amortization expense
for goodwill, as well as increased selling expenses related to higher volume.
Operating income decreased $9,023 or 14.2% to $54,358 in 1995 from $63,381 in
1994. The decrease is attributable to the inclusion in 1995 of the streamlining
charge of $40,900 described above, as well as the factors discussed in the
preceding paragraphs. Before the reduction for the streamlining charge,
operating income increased $31,877 or 50.3% to $95,258 in 1995 from $63,381 in
1994.
Interest expense increased $14,072 or 59.1% to $37,897 in 1995 from $23,825 in
1994. The increase is attributable to higher average borrowings primarily
incurred to fund the 1995 Acquisitions, capital expenditures and working capital
requirements associated with significant increases in price and inventory levels
of paper combined with an increased average cost of funds.
The effective income tax rate was 40.0% for both 1995 and 1994, and was
primarily composed of the combined federal and state statutory rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its liquidity and capital investment needs with
internally generated funds and external borrowings. Net income plus
depreciation and amortization, deferred taxes, and streamlining charge was
$165,327 in 1996 compared to $124,679 in 1995, an increase of $40,648 or 32.6%.
Cash flow from operations was primarily used to fund capital expenditures and
acquisitions.
<PAGE>
Working capital was $227,068 at December 29, 1996 and $160,835 at December 31,
1995. The increase of $66,233 or 41.2% was primarily due to the Acquisitions.
Exclusive of the Acquisitions, raw materials inventory levels decreased
approximately $42,000 or 44% in 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.
Capital expenditures totaled $70,639 and $120,339 in 1996 and 1995,
respectively. These capital expenditures reflect the purchase of additional
press and bindery equipment and the expansion of four of the Company's
facilities, which increased the Company's capacity and are part of the Company's
ongoing program to maintain modern, efficient plants and continually increase
productivity. The Company expects capital expenditures in 1997 to total
approximately $95,000. Additional expenditures in 1997 are possible in line
with growth in sales, earnings and cash flows or expansion opportunities in
certain markets.
The Company's capital expenditures and acquisitions have been funded in part by
borrowings under the Company's 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, which provides for aggregate total
commitments of $975,000, comprised of $125,000 in term loan commitments,
$250,000 of revolving loan commitments and $600,000 in acquisition term loan
commitments. The Credit Agreement provides for varying semi-annual reductions
in commitments and matures on December 31, 2002. Borrowings bear interest at
rates that fluctuate with the prime rate and Eurodollar rate. As of December
29, 1996, the weighted average borrowing rate was 6.7%, and $86,500 of
acquisition term loan commitments and $192,929 of revolving loan commitments
were unutilized.
The Company has operating lease arrangements for certain press and bindery
equipment. Lease expense related to such leases was approximately $24,500 in
1996 and $23,600 in 1995.
At December 29, 1996, the Company has net operating loss carryforwards for
federal income tax purposes of $37,107 available to reduce future taxable
income, expiring primarily between 2004 and 2008, and has tax credits of $2,291
expiring primarily from 1999 to 2002. Also, the Company has alternative minimum
tax carryover credits of $18,950 which do not expire and may be applied against
regular tax in the future, in the event regular tax expense exceeds alternative
minimum tax.
The Company believes that its liquidity, capital resources and cash flows from
operations are sufficient to fund planned capital expenditures, working capital
requirements and interest and principal payments for the foreseeable future.
SEASONALITY
The operations of the business are seasonal with approximately two-thirds of
historical operating profits recognized in the second half of the fiscal year,
primarily due to the higher number of magazine pages, new product launches and
back-to-school and holiday catalog promotions.
<PAGE>
[Page 27 of the Annual Report]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of World Color Press, Inc.:
We have audited the accompanying consolidated balance sheets of World Color
Press, Inc. and subsidiaries as of December 29, 1996 and December 31, 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 29, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of World Color Press, Inc. and
subsidiaries at December 29, 1996 and December 31, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 29, 1996 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
February 5, 1997
<PAGE>
[Page 28 of the Annual Report]
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 29, 1996 AND DECEMBER 31, 1995
- -------------------------------------------------------------------------------
1996 1995
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 33,182 $ 8,902
Accounts receivable - net of allowances
for doubtful accounts
of $8,476 and $6,356, respectively 311,478 218,022
Inventories 140,160 130,369
Deferred income taxes 32,944 28,364
Other 24,843 11,060
----------- -----------
Total current assets 542,607 396,717
Property, plant and equipment - net 818,157 480,421
Goodwill - net 423,880 249,473
Other 37,788 24,117
----------- -----------
TOTAL ASSETS $ 1,822,432 $ 1,150,728
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 172,013 $ 108,894
Accrued expenses 134,854 89,628
Current maturities of long-term debt 8,672 37,360
----------- -----------
Total current liabilities 315,539 235,882
Long-term debt 889,195 449,746
Deferred income taxes 91,555 9,258
Other long-term liabilities 111,211 97,076
----------- -----------
Total liabilities 1,407,500 791,962
----------- -----------
Stockholders' equity:
Common stock, $.01 par value -
authorized, 100,000,000 shares
in 1996 and 1995; shares outstanding,
33,744,531 shares in 1996 and
32,218,427 in 1995 337 322
Additional paid-in capital 583,721 574,831
Accumulated deficit (169,126) (216,387)
----------- -----------
Total stockholders' equity 414,932 358,766
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,822,432 $ 1,150,728
----------- -----------
----------- -----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
[Page 29 of the Annual Report]
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 31, 1995 AND DECEMBER 25, 1994
- ---------------------------------------------------------------------------
1996 1995 1994
NET SALES $ 1,641,412 $ 1,295,582 $ 971,627
COST OF SALES 1,349,130 1,074,785 817,934
----------- ----------- -----------
Gross profit 292,282 220,797 153,693
----------- ----------- -----------
OTHER OPERATING EXPENSES:
Selling, general and
administrative 153,071 125,539 90,312
Streamlining charge - 40,900 -
----------- ----------- -----------
Total other operating
expenses 153,071 166,439 90,312
----------- ----------- -----------
OPERATING INCOME 139,211 54,358 63,381
INTEREST EXPENSE 58,417 37,897 23,825
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 80,794 16,461 39,556
INCOME TAX PROVISION 33,533 6,584 15,822
----------- ----------- -----------
NET INCOME $ 47,261 $ 9,877 $ 23,734
----------- ----------- -----------
----------- ----------- -----------
Net income per common and
common equivalent share $ 1.35 $ 0.29 $ 0.69
Weighted average common and
common equivalent
shares outstanding 35,002,923 34,440,867 34,408,670
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
[Page 30 of the Annual Report]
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 31, 1995 AND DECEMBER 25, 1994
- --------------------------------------------------------------------------------
Additional
Common Paid-in Accumulated
Stock Capital Deficit
BALANCE, DECEMBER 26, 1993 $ 257 $ 497,311 $ (249,998)
Net income - - 23,734
Capital contribution from PHLP - 2,809 -
------- --------- ----------
BALANCE, DECEMBER 25, 1994 257 500,120 (226,264)
Net income - - 9,877
Common stock issued 65 74,711 -
------- --------- ----------
BALANCE, DECEMBER 31, 1995 322 574,831 (216,387)
Net income - - 47,261
Common stock issued 15 8,890 -
------- --------- ----------
BALANCE, DECEMBER 29, 1996 $ 337 $ 583,721 $ (169,126)
------- --------- ----------
------- --------- ----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
[Page 31 of the Annual Report]
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 31, 1995 AND DECEMBER 25, 1994
- -------------------------------------------------------------------------------
1996 1995 1994
OPERATING ACTIVITIES:
Net income $ 47,261 $ 9,877 $ 23,734
Adjustments to reconcile net
income to net cash
provided by operating activities:
Depreciation and amortization 104,493 74,668 62,898
Streamlining charge - 40,900 -
Deferred income tax
provision (benefit) 13,573 (766) 12,271
Changes in operating assets
and liabilities:
Accounts receivable - net (30,062) (31,097) 6,001
Inventories 29,495 (51,083) (6,004)
Accounts payable and
accrued expenses 35,178 (7,650) 10,396
Other assets and
liabilities - net (53,355) (28,105) (9,172)
-------- --------- ---------
Net cash provided by
operating activities 146,583 6,744 100,124
-------- --------- ---------
INVESTING ACTIVITIES:
Additions to property,
plant and equipment (70,639) (120,339) (83,875)
Proceeds from sale of property,
plant and equipment 1,345 7,959 7,763
Acquisitions of businesses,
net of cash acquired (167,283) (108,738) (10,283)
-------- --------- ---------
Net cash used in
investing activities (236,577) (221,118) (86,395)
-------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from borrowings 562,120 214,037 18,750
Payments on long-term debt (456,751) (90,365) (48,353)
Decrease in note payable to PHLP - - (2,159)
Proceeds from capital contribution - - 2,809
Proceeds from issuance of common
stock 8,905 74,776 -
Proceeds from sale and leaseback
transaction - - 27,988
-------- --------- ---------
Net cash provided by (used in)
financing activities 114,274 198,448 (965)
-------- --------- ---------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 24,280 (15,926) 12,764
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 8,902 24,828 12,064
-------- --------- ---------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 33,182 $ 8,902 $ 24,828
-------- --------- ---------
-------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
[Pages 32 - 45 of the Annual Report]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 29, 1996, DECEMBER 31, 1995 AND DECEMBER 25, 1994
- --------------------------------------------------------------------------------
1. ORGANIZATION
World Color Press, Inc. and subsidiaries (the "Company") specializes in the
production and distribution of data for the magazine, catalog, commercial,
direct mail, directory, and book markets.
Prior to November 20, 1995, the Company was wholly-owned by Printing
Holdings, L.P. ("PHLP"), a nonoperating affiliate of Kohlberg Kravis
Roberts & Co. L.P. ("KKR"), whose holdings consisted solely of the
Company. On November 20, 1995, PHLP was merged with and into the Company,
with the Company as the survivor (the "Merger"). In connection with the
Merger, PHLP partnership units (aggregating approximately 65,500,000
units) were converted into approximately 32,200,000 shares of the
Company's common stock, principally at a ratio of one PHLP partnership
unit to 0.50 shares of common stock. Accordingly, the share information
and the related common stock and additional paid-in capital amounts
presented on the face of the consolidated balance sheets and on the
consolidated statements of stockholders' equity have been restated to
reflect the change in the Company's capital structure pursuant to the
Merger. Also pursuant to the Merger, the shares of the Company's common
stock owned by PHLP immediately prior to the Merger were canceled. On
November 20, 1995, the Company also amended and restated its Certificate
of Incorporation increasing the authorized number of shares of common
stock to 100,000,000 shares and newly authorizing 50,000,000 shares of
preferred stock, par value $0.01 per share. At December 29, 1996 and
December 31, 1995, there were no shares of preferred stock issued or
outstanding.
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 approximately $8,900. These proceeds were used to pay
expenses of the Offering and for general corporate purposes.
<PAGE>
2. BUSINESS ACQUISITIONS
In June 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
mass-market, racksize books. The Acquisition and liquidation of certain
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 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 $160,000, and is being amortized
using the straight-line method over 35 years. The Company is in the
process of finalizing the assignment of fair value to assets acquired and
liabilities assumed. Accordingly, the final asset and liability fair
values may differ from those included in the accompanying consolidated
balance sheet; however, the final fair values are not expected to be
materially different from those presented herein.
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 interest on
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.
UNAUDITED 1996 1995
Net sales $1,824,875 $ 1,810,391
Net income $ 39,560 $ 30,807
Net income per common and common
equivalent share $ 1.13 $ 0.89
Pro forma net income and net income per common and common equivalent share
for the year ended December 31, 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.
<PAGE>
In March 1995, the Company acquired three companies that operate in the
commercial, digital and direct mail market sectors (the "1995
Acquisitions") for an aggregate purchase price of approximately $108,000.
In addition, the Company liquidated approximately $44,500 of the acquired
companies' indebtedness. The 1995 Acquisitions and liquidation of
indebtedness were funded using proceeds from the Company's credit
facility. The 1995 Acquisitions were accounted for as purchases and the
financial statements include the results of their operations from the
respective acquisition dates. The excess of purchase cost over estimated
fair value of net assets acquired was approximately $81,700, which is
being amortized over 35 years.
During the years ended December 29, 1996 and December 31, 1995, 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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of World Color Press, Inc. and its subsidiaries. Intercompany
transactions have been eliminated.
CASH AND CASH EQUIVALENTS - Cash equivalents consist of highly liquid
instruments with original maturities of three months or less.
ACCOUNTING PERIOD - The Company's fiscal year is the 52 or 53-week period
ending on the last Sunday in December. Fiscal years 1996 and 1994 each
included 52 weeks. Fiscal year 1995 included 53 weeks.
CONSOLIDATED STATEMENTS OF CASH FLOWS - During 1996, 1995 and 1994, the
Company borrowed and repaid $407,200, $318,700 and $103,225, respectively,
pursuant to the terms of credit agreements. See also Note 7. Such amounts
have not been reflected in the consolidated statements of cash flows
because of the short-term nature of the borrowings.
Cash paid for interest by the Company during the years 1996, 1995 and 1994
was $54,037, $37,193 and $21,928, respectively, net of capitalized interest
of $252, $1,810 and $1,276. Cash paid for taxes during the years 1996,
1995 and 1994 was $18,068, $8,305 and $3,319, respectively.
REVENUE RECOGNITION - In accordance with trade practice, sales are
recognized by the Company on the basis of production and service activity
at the pro rata billing value of work completed.
INVENTORIES - The Company's raw materials of paper and ink and the related
raw material component of work-in-process are valued at the lower of cost,
as determined using the first-in, first-out ("FIFO") method, or market.
The remainder of the work-in-process is valued at the pro rata billing
value of work completed.
DEPRECIATION AND AMORTIZATION - Property, plant and equipment is stated at
cost. Depreciation is recorded principally on the straight-line method
over the estimated useful lives of the assets. Leasehold improvements are
amortized on the straight-line method over the lesser of the useful life of
the improvement or the lease term. Estimated useful lives used in
computing depreciation and amortization expense are 3 to 15 years for
machinery and equipment and 15 to 40 years for buildings and leasehold
improvements.
<PAGE>
GOODWILL - Goodwill is amortized using the straight-line method primarily
over 35 years. Amortization of goodwill for the years 1996, 1995 and 1994
was $10,757, $7,275 and $5,402, respectively, and is included in selling,
general and administrative expenses. Accumulated amortization of goodwill
was $34,804 and $24,047 as of year-end 1996 and 1995, respectively.
INCOME TAXES - The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", which requires
companies to apply current statutory income tax rates to deferred assets
and liabilities arising from differences in financial reporting and tax
reporting bases. Income tax information is disclosed in Note 9.
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE - Net income
(loss) per common and common equivalent share is based on the weighted
average common and dilutive common equivalent shares outstanding during
each period after giving effect to the change in the Company's capital
structure pursuant to the Merger and the Options Adjustments, as described
in Notes 1 and 10. This weighted average includes incremental shares for
dilutive common equivalent shares related to the assumed exercise of stock
options, using the treasury stock method. In addition, shares related to
common stock issued and incremental shares related to stock options granted
within one year prior to the Offering at a purchase or exercise price below
$19.00 per share were included in the weighted average, using the treasury
stock method for the stock options as if they were outstanding for all
periods presented. For all loss periods, the effect of the assumed exercise
of stock options which were issued in periods prior to the one-year period
previously mentioned is not included because the effect is antidilutive.
RECLASSIFICATIONS - Certain reclassifications have been made to prior
years' amounts to conform with the current presentation.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS - In March 1995, the
Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No.
121 establishes the accounting for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable
intangibles to be disposed. The Company adopted SFAS No. 121 for the year
ended December 29, 1996. Accordingly, the Company evaluates long-lived
assets, including goodwill, periodically to determine if there has been an
impairment of value by reviewing current and estimated undiscounted cash
flows. The carrying amounts of such long-lived assets will be adjusted if
and when it has been determined that a permanent impairment has occurred.
ACCOUNTING FOR STOCK-BASED COMPENSATION - In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 encourages companies to account
for stock compensation awards based on their fair value at the date they
are granted. The resulting compensation cost would be shown as an expense
on the income statement. Companies choosing not to apply the new
accounting method are permitted to continue following current accounting
requirements, however, they are required to disclose in the notes to the
financial statements the effect on net income and earnings per share had
the new accounting method been applied. The Company adopted SFAS No. 123
for 1996, but chose to follow the current accounting requirements.
Accordingly, the Company has disclosed in Note 10 the pro forma effect on
net income and net income per common and common equivalent share.
<PAGE>
4. INVENTORIES
Inventories are summarized as follows:
1996 1995
Work-in-process $ 73,747 $ 34,366
Raw materials 66,413 96,003
--------- ---------
Total $ 140,160 $ 130,369
--------- ---------
--------- ---------
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is as follows:
1996 1995
Land $ 14,822 $ 7,310
Buildings and leasehold improvements 247,806 163,414
Machinery and equipment 1,075,349 743,739
Leased property under capitalized leases 8,519 9,837
---------- ---------
1,346,496 924,300
Accumulated depreciation and amortization 528,339 443,879
---------- ---------
Total $ 818,157 $ 480,421
---------- ---------
---------- ---------
Depreciation expense related to property, plant and equipment was $91,186,
$65,526 and $54,862 for the years 1996, 1995 and 1994, respectively.
6. ACCRUED EXPENSES
Accrued expenses are as follows:
1996 1995
Compensation $ 48,447 $ 22,622
Employee health and welfare benefits 16,593 11,739
Streamlining charge 4,054 9,052
Deferred revenue 16,105 10,618
Interest 8,493 6,099
Other 41,162 29,498
--------- --------
Total $ 134,854 $ 89,628
--------- --------
--------- --------
<PAGE>
7. LONG-TERM DEBT
Long-term debt is summarized as follows:
1996 1995
Senior Subordinated Notes $150,000 $150,000
Borrowings under credit agreements 672,000 254,200
Notes payable, average of 9.17%
due 2004 - 2005 40,129 43,234
Capitalized lease obligations,
weighted average imputed interest rate of
9.25% due through 2007 5,067 3,676
Other debt, average of 8.45%
due 1997-2004 30,671 35,996
--------- --------
Total 897,867 487,106
Less current maturities 8,672 37,360
--------- --------
Noncurrent portion $889,195 $449,746
--------- --------
--------- --------
At December 29, 1996, the fair value of the Senior Subordinated Notes was
approximately $150,750 based on quoted market price. The fair value of the
Company's remaining debt approximated its carrying value, based upon the
Company's current incremental borrowing rates for similar types of
borrowing arrangements.
SENIOR SUBORDINATED NOTES - On May 10, 1993, Senior Subordinated Notes were
issued in the aggregate principal amount of $150,000. Interest on the
Notes is payable semi-annually at the annual rate of 9.125%. The Notes
have no required principal payments prior to maturity on March 15, 2003.
BORROWINGS UNDER CREDIT AGREEMENTS - On June 6, 1996, an amendment was
made to the Company's credit facility to provide for an additional $566,000
of commitments and to extend the maturity date two years to December 31,
2002. All other significant financial provisions of the credit agreement
remained substantially unchanged. As of December 29, 1996, the Company's
Credit Agreement provides for aggregate total commitments of $975,000,
comprised of $125,000 in term loan commitments, $250,000 of revolving loan
commitments and $600,000 in acquisition term loan commitments. The Credit
Agreement provides for varying semi-annual reductions in commitments, and
the borrowings bear interest at rates that fluctuate with the prime rate
and the Eurodollar rate which ranged from 6.25% to 8.50% in 1996 and 6.06%
to 9.00% in 1995. The Credit Agreement includes a commitment fee of .25%
per annum based on the daily average unutilized revolving credit
commitment. At December 29, 1996, $86,500 of acquisition term loan
commitments and $192,929 of the revolving loan commitments were unutilized.
The amount unutilized under the revolving credit commitments has been
reduced by outstanding letters of credit of $23,571, not reflected in the
accompanying consolidated financial statements, for which the Company was
contingently liable under the Credit Agreement. Such letters of credit
primarily guarantee various insurance reserves.
Borrowings under the terms of the Credit Agreement are secured by pledges
of various assets of the Company. The Credit Agreement has covenants
which, among other things, restrict the incurrence of additional
indebtedness by the Company and limit its ability to make payments to
affiliated parties. The Credit Agreement also restricts the payment of
dividends or other distributions of capital. The Company was in compliance
with these covenants as of December 29, 1996.
<PAGE>
Aggregate annual maturities of long-term debt subsequent to December 29,
1996 are as follows:
Year Amount
1997 $ 8,672
1998 85,485
1999 95,122
2000 108,733
2001 124,428
2002 and thereafter 471,305
----------
893,745
Noncurrent portion of capitalized lease obligations 4,122
----------
Total $ 897,867
----------
----------
8. LEASES
CAPITAL LEASES - The Company is a lessee under several noncancellable
capital lease agreements for certain fixed assets. The leases extend for
periods up to 11 years and contain purchase provisions.
OPERATING LEASES - The Company leases certain equipment, warehouse
facilities and office space under noncancellable operating leases which
expire over the next 12 years. Most of these operating leases provide the
Company with the option, after the initial lease term, either to purchase
the equipment or renew its lease based upon the fair value of the property
at the option date.
Future minimum rental payments required under noncancellable leases at
December 29, 1996 were as follows:
Year Capital Operating
1997 $ 1,379 $ 39,832
1998 1,376 39,680
1999 1,164 38,518
2000 642 37,346
2001 639 35,516
2002 and thereafter 1,485 71,835
------- --------
Total minimum lease payments 6,685 $262,727
Less imputed interest 1,618 --------
------- --------
Capitalized lease obligations 5,067
Less current maturities 945
-------
Noncurrent portion $ 4,122
-------
-------
Rental expense for operating leases was $36,299, $31,948 and $34,995 for
the years 1996, 1995 and 1994, respectively. Assets recorded under capital
leases amounted to $5,342 and $4,423, net of accumulated amortization of
$3,177 and $5,414, at the end of 1996 and 1995, respectively.
<PAGE>
9. INCOME TAXES
The provision (benefit) for income taxes is summarized as follows:
1996 1995 1994
Current:
Federal $ 16,542 $ 6,540 $ 2,669
State 3,418 810 882
-------- ------- --------
19,960 7,350 3,551
-------- ------- --------
Deferred:
Federal 12,491 (944) 11,176
State 1,082 178 1,095
-------- ------- --------
13,573 (766) 12,271
-------- ------- --------
Total $ 33,533 $ 6,584 $ 15,822
-------- ------- --------
-------- ------- --------
The tax effects of significant items comprising the Company's net deferred
tax asset (liability) as of December 29, 1996 and December 31, 1995 are as
follows:
1996 1995
Deferred tax assets:
Operating loss carryforwards $ 15,161 $ 27,903
Tax credit carryforwards 21,241 19,363
Postemployment benefits 22,106 15,577
Postretirement benefits other
than pensions 11,450 8,883
Pension accrual 7,668 2,000
Vacation accrual 5,390 2,785
Other differences 21,585 7,318
---------- --------
Gross deferred tax assets 104,601 83,829
---------- --------
Deferred tax liabilities:
Differences between book and
tax bases of property 138,116 41,732
Other differences 18,256 16,151
---------- --------
Gross deferred tax liabilities 156,372 57,883
---------- --------
Deferred tax asset valuation allowance 6,840 6,840
---------- --------
Net deferred tax asset (liability) (58,611) 19,106
Less current deferred tax asset 32,944 28,364
---------- --------
Noncurrent deferred tax liability $ (91,555) $ (9,258)
---------- --------
---------- --------
The 1996 and 1995 amounts above include a valuation allowance of $6,840
relating to a capital loss carryforward that is not expected to be realized
for tax purposes and for the timing limitations of certain state net
operating loss carryforwards.
<PAGE>
The following table reconciles the difference between the U.S. federal
statutory tax rates and the rates used by the Company in the determination
of net income:
1996 1995 1994
Income tax provision, at 35% $ 28,278 $ 5,761 $ 13,845
State and local income taxes, net of
federal income tax benefit 2,941 642 1,285
Deferred tax asset valuation allowance - (1,160) -
Other, primarily goodwill amortization 2,314 1,341 692
-------- ------- --------
Total $ 33,533 $ 6,584 $ 15,822
-------- ------- --------
-------- ------- --------
At December 29, 1996, the Company has net operating loss carryforwards for
federal income tax purposes of $37,107 available to reduce future taxable
income, expiring primarily between 2004 and 2008. The Company also has tax
credits of $2,291 expiring primarily from 1999 to 2002 and alternative
minimum tax carryover credits of $18,950 which do not expire and may be
applied against regular tax in the future, in the event that the regular tax
expense exceeds the alternative minimum tax.
10. EMPLOYEE BENEFIT PLANS
PENSION PLANS - The Company has defined benefit pension plans in effect
which cover certain employees who meet minimum eligibility requirements and
who are not covered by multiemployer plans. The Company contributes
annually amounts sufficient to satisfy the government's minimum standards.
Net periodic pension cost is determined based upon years of service and
compensation levels, using the projected unit credit method. Prior year
service costs and unrecognized gains and losses are amortized over the
estimated future service periods of active employees in the respective
plan.
The components of net periodic pension cost are as follows:
1996 1995 1994
Service cost (for benefits earned
during the year) $ 4,927 $ 2,270 $ 2,548
Interest cost on projected
benefit obligation 9,218 5,010 4,517
Actual return on plan assets (12,467) (7,751) 1,346
Net amortization and deferral 2,295 1,800 (7,046)
-------- -------- --------
Net periodic pension cost $ 3,973 $ 1,329 $ 1,365
-------- -------- --------
-------- -------- --------
<PAGE>
Effective January 1, 1997, several of the Company's defined benefit plans
were merged into the World Color Press, Inc. Retirement Plan, which was
then amended to form the World Color Press Cash Balance Plan (the "Cash
Balance Plan"), which provides for a new benefit formula applicable to all
participants. Annually, under the Cash Balance Plan, the Company will
credit each participant's account with a fixed percentage of the
participant's annual compensation.
The funded status of the Company's pension plans at year-end, which
reflects the aforementioned mergers and amendment, is presented below.
<TABLE>
<CAPTION>
1996 1995
---------------------------- ---------------------------
(PLANS IN WHICH)
---------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
<S> <C> <C> <C> <C>
Actuarial present value of plan benefits:
Vested $ 83,262 $ 27,774 $ 44,564 $ 16,878
Nonvested 5,723 1,273 2,905 1,086
---------- -------- --------- --------
Accumulated benefit obligation 88,985 29,047 47,469 17,964
Effect of projected future salary increases 12,201 2,822 5,920 167
---------- -------- --------- --------
Projected benefit obligation 101,186 31,869 53,389 18,131
Plan assets at fair value 109,669 26,260 59,016 14,439
---------- -------- --------- --------
Plan assets greater than (less than) the
projected benefit obligation 8,483 (5,609) 5,627 (3,692)
Unrecognized net loss (gain) (18,520) (245) (7,949) 2,591
Unrecognized net transition
obligation (asset) (982) 347 (1,266) 405
Unrecognized prior service cost (credit) (6,508) 694 (116) 288
Adjustment required to recognize
minimum liability - (1,477) - (3,116)
---------- -------- --------- --------
Accrued pension liability $ (17,527) $ (6,290) $ (3,704) $ (3,524)
---------- -------- --------- --------
---------- -------- --------- --------
</TABLE>
The unrecognized net transition asset or obligation is being amortized over
the average expected future service periods of employees. The market value
of plan assets was used to calculate the assumed return on plan assets. At
the end of 1996 and 1995, an additional minimum pension liability for
unfunded accumulated benefit obligations of $1,477, and $3,116,
respectively, was recognized. The weighted average discount rate and rate
of increase in future compensation levels used in determining actuarial
present value of the projected benefit obligation for the Company's plans
were 8.0% and 3.5% in 1996 and 7.5% and 3.5% in 1995, respectively. The
expected long-term rate of return on plan assets used was 10.0%, 9.0% and
9.0% for 1996, 1995 and 1994, respectively. Plan assets consist
principally of common stocks and U.S. government and corporate obligations.
Certain union employees of the Company participate in multiemployer plans.
Amounts charged to benefit expense relating to the multiemployer plans for
1996, 1995 and 1994 totaled $3,185, $3,049 and $2,588, respectively. In
addition, the Company has various deferred savings and profit sharing plans
for certain employees who meet eligibility requirements. Amounts charged
to benefit expense related to these plans for 1996, 1995 and 1994 totaled
$1,044, $1,186 and $754, respectively.
<PAGE>
POSTRETIREMENT BENEFIT PLANS - The Company provides postretirement medical
benefits to eligible employees. The Company's postretirement health
care plans are unfunded. The status of the plans is as follows:
1996 1995
Actuarial present value of plan benefits:
Retirees $ 15,349 $ 11,519
Fully eligible active plan participants 2,274 875
Other active plan participants 8,503 3,807
-------- ---------
Total accumulated benefit obligation 26,126 16,201
Unrecognized net deferrals 5,172 6,186
-------- ---------
Accrued postretirement benefits $ 31,298 $ 22,387
-------- ---------
-------- ---------
The components of net periodic postretirement benefit cost are as follows:
1996 1995 1994
Service Cost $ 839 $ 511 $ 1,114
Interest Cost 1,596 1,192 1,649
Amortization of unrecognized
prior service cost (1,289) (1,289) -
Amortization of unrecognized net gain - (194) -
-------- -------- -------
Net periodic postretirement
benefit cost $ 1,146 $ 220 $ 2,763
-------- -------- -------
-------- -------- -------
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 9% and 7% at the end of 1995 and
1996, respectively, decreasing each successive year to 5% by 1997, after
which it remains constant. A one percentage point increase in the assumed
health care cost trend rate would increase the accumulated postretirement
benefit obligation as of December 29, 1996 by $1,791 and the annual
postretirement benefit expense by approximately $217. The assumed discount
rate used in determining the accumulated postretirement benefit obligation
was 8.0% and 7.5% in 1996 and 1995, respectively.
In the fourth quarter of 1994, the plan was amended to generally provide
lower benefits and greater cost-sharing from covered retirees. The plan
amendments became effective January 1, 1995.
STOCK OPTION PLANS - Upon consummation of the Merger described in Note 1,
the Stock Option Committee of the Board of Directors (the "Stock Option
Committee") adjusted all of the outstanding options so that each option
became exercisable for five times the number of shares of common stock for
which it had been exercisable immediately prior to the Merger at an
exercise price per share equal to one-fifth of the exercise price per
share immediately prior to the Merger (the "Options Adjustments").
Accordingly, the following stock option data has been presented on a
post-Merger basis.
<PAGE>
The Company has stock option plans that permit the Stock Option Committee
to grant up to an aggregate of 5,250,000 options to purchase shares of the
Company's common stock to certain key employees of the Company. Options
granted under the plans generally vest ratably over a five-year period.
Vested options may generally be exercised up to ten years from the date of
grant. Information related to the Company's stock option plans is
presented below.
Number of Option
Options Price
Outstanding at December 26, 1993 3,417,410 $5.49 to $10.30
Granted 31,065 $10.30
Exercised -
Rescinded/Canceled (42,475) $8.97 to $10.30
---------
Outstanding at December 25, 1994 3,406,000 $5.49 to $10.30
Granted 640,555 $11.20 to $15.00
Exercised (26,575) $5.49
Rescinded/Canceled (204,660) $6.89 to $10.30
---------
Outstanding at December 31, 1995 3,815,320 $5.49 to $15.00
Granted 354,000 $22.00
Exercised (1,532,290) $5.49 to $6.95
Rescinded/Canceled (74,725) $8.97 to $15.00
---------
Outstanding at December 29, 1996 2,562,305 $5.49 to $22.00
---------
---------
RESERVED FOR
EXERCISABLE FUTURE GRANTS
December 29, 1996 1,655,640 1,155,405
December 31, 1995 2,810,910 1,434,680
December 25, 1994 2,613,556 594,000
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which became effective for
the Company's current year financial statements. As allowable by SFAS No.
123, the Company has not recorded compensation expense for stock options
granted to employees, but rather, has determined the pro forma net income
and net income per common and common equivalent share amounts for fiscal
years 1996 and 1995, had compensation expense been recorded for options
granted during those years under the applicable fair value method described
in the statement.
For options granted during 1996, the fair value at the date of grant was
estimated using the Black-Scholes option pricing model. Under the
Black-Scholes model, a volatility factor of .312 was used. For options
granted during 1995, the fair value was estimated using the minimum value
method. Under this method, the expected volatility of the Company's common
stock is not estimated, as prior to the Offering there was no market for
the Company's common stock in which to monitor stock price volatility.
The following weighted average assumptions were used in calculating the
fair value of the options granted in 1996 and 1995, respectively: risk-free
interest rates of 6.80% and 6.41%; an assumed dividend yield of zero; and
an expected life of the options of ten years.
<PAGE>
For purposes of the pro forma disclosures, the estimated fair value of the
options granted is amortized to compensation expense over the options'
vesting period. The Company's pro forma information is as follows:
1996 1995
Net income:
As reported $ 47,261 $ 9,877
Pro forma $ 46,688 $ 9,746
Net income per common and common equivalent share:
As reported $ 1.35 $ 0.29
Pro forma $ 1.34 $ 0.28
Weighted average fair value of options
granted during the year $ 12.81 $ 7.01
11. TRANSACTIONS WITH AFFILIATES
The Company has incurred expenses of $750, $850 and $850 in 1996, 1995 and
1994, respectively, for management services provided by affiliated
companies. In addition, the Company paid $3,735 in advisory fees in 1995
associated with the acquisitions described in Note 2, to affiliated
companies.
At December 26, 1993, the Company had borrowings of $2,159 from PHLP, which
was evidenced by a promissory note. The promissory note bore interest at
the prime rate with such interest recorded as an addition to the note.
Interest expense for 1994 was $125. In the fourth quarter of 1994, the
balance owed of $2,809 was repaid and PHLP subsequently contributed this
amount to the Company as capital. In the fourth quarter of 1995, PHLP was
merged into the Company as described in Note 1.
12. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is subject to legal proceedings and other claims arising in the
ordinary course of operations. In the opinion of management, ultimate
resolution of proceedings currently pending will not have a material effect
on the results of operations or financial position of the Company.
<PAGE>
13. STREAMLINING CHARGE
In the fourth quarter of 1995, the Company finalized and committed to a
plan to realign certain business operations, resulting in a charge of
$40,900. The major components of this realignment plan were to close a
facility and to consolidate certain digital prepress operations and
functions. The financial statement effects of this decision were a
writedown of assets to net realizable value of $30,700, a provision for
severance costs of $8,000 and a provision for certain other related costs
of $2,200. The facility referred to above was exited and the consolidation
of the operations and functions were substantially complete at the end of
1996. At December 29, 1996, of the amounts provided for as severance and
other related costs, approximately $6,100 had been paid in cash and the
substantial balance of these liabilities will be paid by the end of 1997.
14. UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Net income Weighted average
(loss) per common and
common common
and common equivalent
Net income equivalent shares
Quarter ended Net sales Gross profit (loss) share outstanding
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 31, 1996 $ 329,111 $ 52,286 $ 5,939 $ 0.17 34,827,689
June 30, 1996 342,266 57,942 6,056 0.17 35,084,876
September 29, 1996 487,804 96,406 19,217 0.55 35,059,968
December 29, 1996 482,231 85,648 16,049 0.46 35,015,986
---------- --------- --------
$1,641,412 $ 292,282 $ 47,261 1.35 35,002,923
---------- --------- --------
---------- --------- --------
April 2, 1995 $ 275,399 $ 43,434 $ 4,415 $ 0.13 34,440,867
July 2, 1995 305,244 51,540 4,826 0.14 34,440,867
October 1, 1995 367,331 66,891 14,503 0.42 34,440,867
December 31, 1995 347,608 58,932 (13,867) (0.43) 32,346,096
---------- --------- --------
$1,295,582 $ 220,797 $ 9,877 0.29 34,440,867
---------- --------- --------
---------- --------- --------
</TABLE>
As described in Note 13, the results of the fourth quarter of 1995 include
a streamlining charge of $40,900 ($24,540 net of tax).
<PAGE>
Exhibit 21.0
SUBSIDIARIES
Northeast Graphics Inc.
The Wessel Company, Inc.
The Lanman Companies, Inc.
Lanman Lithotech, Inc.
Central Florida Press, L.L.C.
Image Technologies, Inc.
RAI, Inc.
KRI, Inc.
World Color Book Services, Inc.
Shea Communications Company
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 29, 1996 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 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> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> DEC-29-1996
<CASH> 33,182
<SECURITIES> 0
<RECEIVABLES> 319,954
<ALLOWANCES> 8,476
<INVENTORY> 140,160
<CURRENT-ASSETS> 542,607
<PP&E> 1,346,496
<DEPRECIATION> 528,339
<TOTAL-ASSETS> 1,822,432
<CURRENT-LIABILITIES> 315,539
<BONDS> 889,195
0
0
<COMMON> 337
<OTHER-SE> 414,595
<TOTAL-LIABILITY-AND-EQUITY> 1,822,432
<SALES> 1,641,412
<TOTAL-REVENUES> 1,641,412
<CGS> 1,349,130
<TOTAL-COSTS> 1,349,130
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,417
<INCOME-PRETAX> 80,794
<INCOME-TAX> 33,533
<INCOME-CONTINUING> 47,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,261
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.35
</TABLE>
