<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 1998
REGISTRATION NO. 333-51311
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
WORLD COLOR PRESS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 37-1167902
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
--------------------------
<TABLE>
<S> <C>
THE MILL JENNIFER L. ADAMS, ESQ.
340 PEMBERWICK ROAD VICE CHAIRMAN, CHIEF LEGAL AND
GREENWICH, CONNECTICUT 06831 ADMINISTRATIVE OFFICER AND SECRETARY
(203) 532-4200 WORLD COLOR PRESS, INC.
(Address, Including Zip Code, and Telephone THE MILL
Number, Including Area Code, of Registrant's 340 PEMBERWICK ROAD
Principal Executive Offices) GREENWICH, CONNECTICUT 06831
(203) 532-4200
(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code,
of Agent for Service)
</TABLE>
--------------------------
COPIES TO:
<TABLE>
<S> <C>
STEVEN DELLA ROCCA, ESQ. MARK C. SMITH, ESQ.
Latham & Watkins Skadden, Arps, Slate, Meagher & Flom LLP
885 Third Avenue, Suite 1000 919 Third Avenue
New York, New York 10022 New York, New York 10022
(212) 906-1200 (212) 735-3000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- -------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- -------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of an
aggregate of 9,000,000 shares of Common Stock (the "U.S. Offering"). The second
prospectus relates to a concurrent offering outside the United States and Canada
of an aggregate of 1,000,000 shares of Common Stock (the "International
Offering," and together with the U.S. Offering, the "Offerings"). The
prospectuses for the U.S. Offering and the International Offering will be
identical with the exception of the front and back cover pages, the inside front
cover page and the "Underwriting" section of the prospectus. Such alternate
pages appear in the Registration Statement immediately following the complete
prospectus for the U.S. Offering and are each labeled "International Alternate
Page."
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 19, 1998
10,000,000 SHARES
[LOGO]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
Of the 10,000,000 shares of Common Stock offered, 9,000,000 shares are being
offered hereby in the United States and 1,000,000 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting."
All of the shares of Common Stock offered are being sold by Selling
Stockholders of the Company. The Selling Stockholders consist only of certain
KKR Partnerships that are limited partnerships affiliated with Kohlberg Kravis
Roberts & Co., L.P. See "The Company" and "Principal and Selling Stockholders."
The Company will not receive any of the proceeds from the sale of the shares
offered hereby.
The last reported sale price of the Common Stock, which is listed under the
symbol "WRC," on the New York Stock Exchange on May 18, 1998 was $31 1/4 per
share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDERS(2)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Share....................................... $ $ $
Total (3)....................................... $ $ $
</TABLE>
- ---------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the Selling
Stockholders.
(3) The Selling Stockholders have granted the U.S. Underwriters an option for
30 days to purchase up to an additional 1,350,000 shares of Common Stock at
the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, the Selling
Stockholders have granted the International Underwriters an option for 30
days to purchase up to an additional 150,000 shares of Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. If such options are exercised in full, the
total initial public offering price, underwriting discount and proceeds to
Selling Stockholders will be $ , $ and $ , respectively. See
"Underwriting."
-------------------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the shares
will be ready for delivery through the facilities of DTC in New York, New York,
on or about May , 1998 against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
<PAGE>
-------------------
The date of this Prospectus is May , 1998.
<PAGE>
ART FOR INSIDE FRONT
COVER TO PROSPECTUS
Fold out of the Company's logo
overlaid with examples of the Company's
magazine, catalog, commercial, book, direct mail and
directory customers
ART FOR INSIDE BACK
COVER TO PROSPECTUS
Map of United States indicating location of
48 Production and Distribution Facilities
----------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERINGS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
AVAILABLE INFORMATION
World Color Press, Inc. ("World Color" or the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission, at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains a World Wide Web site on the
Internet at http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
In addition, reports, proxy statements and other information concerning the
Company can be inspected at the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with amendments and exhibits thereto, the "Registration Statement")
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). The Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement for further information with respect to the Company and
the securities offered hereby. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission by the Company pursuant
to the Exchange Act, are incorporated herein by reference and made a part of
this Prospectus:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 1997 (the "1997 10-K");
(ii) the portions of the Company's 1997 Annual Report to Stockholders that
have been incorporated by reference into the 1997 10-K;
(iii) the portions of the Company's 1997 definitive Proxy Statement for its
Annual Meeting of Stockholders dated March 27, 1998 that have been incorporated
by reference into the 1997 10-K;
(iv) the Company's Quarterly Report on Form 10-Q for the quarter ended March
29, 1998; and
(v) the description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed on January 22, 1996 pursuant to Section
12 of the Exchange Act.
Each document filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
document. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the request of any such person, a copy of any
or all of the foregoing documents incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Written or telephone requests for such copies
should be directed to Dean Cherry, Office of Investor Relations, World Color
Press, Inc., The Mill, 340 Pemberwick Road, Greenwich, Connecticut 06831,
telephone: (203) 532-4200.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE STATED, THE INFORMATION IN THIS
PROSPECTUS ASSUMES THAT THE UNDERWRITERS' (AS DEFINED HEREIN) OVER-ALLOTMENT
OPTION IS NOT EXERCISED. ALL REFERENCES TO FISCAL YEARS ARE TO THE COMPANY'S
FISCAL YEAR WHICH IS THE 52 OR 53-WEEK PERIOD ENDING ON THE LAST SUNDAY IN
DECEMBER. AS USED HEREIN, THE "COMPANY" AND "WORLD COLOR" REFER TO WORLD COLOR
PRESS, INC. AND ITS SUBSIDIARIES.
THE COMPANY
World Color is an industry leader in the management and distribution of
print and digital information, with revenues of approximately $2.1 billion for
the twelve months ended March 29, 1998. 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
commercial, magazine, catalog, book, direct mail and directory market sectors.
Founded in 1903, the Company currently operates a national network of 48
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.
Since the appointment of a new management team in May 1991, World Color has
significantly expanded its national presence as a leading, innovative commercial
printer, and has achieved significant growth in sales, adjusted operating income
(as defined herein) and net income, while also improving its operating margins.
Management's commitment to this growth is evidenced by the management team's
long-term ownership interest in the Company. Over the past seven fiscal years,
net sales and adjusted operating income grew at compound annual rates of 21.0%
and 40.8%, respectively, and net income increased from a net loss of $58.7
million in 1991 to net income of $57.2 million in 1997. In addition, the Company
has recorded five consecutive years of improvement in its adjusted operating
income margins.
GROWTH STRATEGY
World Color has increased stockholder value through emphasizing quality,
diversification of its business mix, operational efficiencies and strategic
growth. Specifically, the Company's growth strategy is to (i) further establish
and strengthen its leadership positions in diverse and balanced businesses, (ii)
make strategic acquisitions and broaden the array of services provided to its
customers, (iii) provide high quality services within a low cost operating
structure and (iv) increase efficiency and productivity through investment in
technology. The key elements underlying this strategy are described below.
ESTABLISH AND STRENGTHEN LEADERSHIP POSITIONS IN DIVERSE, BALANCED
BUSINESSES. World Color continues to increase its services and expand its
geographic presence in order to provide for its customers' full range of digital
imaging, print and information management and delivery needs. The Company has
chosen to operate in areas of the industry in which it believes it can capture a
larger share of its customers' business by offering a broad array of high
quality products and services, cost-effective distribution, advanced
technological capabilities and competitive pricing. The Company's commitment to
quality, combined with its broad range of services offered, has formed the basis
for World Color's long-standing customer relationships. As a result of its
diverse business mix, geographic presence and reputation for quality, World
Color has been able to attract new customers as well as capture incremental
sales from existing customers.
STRATEGIC ACQUISITIONS. The fragmented printing industry continues to
undergo significant consolidation due primarily to changing customer demand for
a full range of sophisticated services and the high levels of capital investment
necessary to meet this demand. Since the beginning of 1993, World
4
<PAGE>
Color has capitalized on the industry's consolidation opportunities by
successfully integrating 20 acquisitions having an aggregate purchase price of
approximately $1.3 billion (including assumed indebtedness), including four
acquisitions that have been completed since the beginning of fiscal 1998 having
a combined purchase price of approximately $200 million (including assumed
indebtedness). The Company has targeted its acquisitions to expand its services
and geographic presence and to diversify its business mix by, among other
things, targeting customers operating in new markets such as the direct mail and
book markets. Additionally, the April 1998 acquisitions have been accretive to
World Color's earnings because of, among other things, significant cost savings
in the purchase of raw materials, the reduction of overhead costs and
productivity gains captured by the Company's ability to better absorb and manage
available capacity at newly acquired facilities. World Color believes that its
competitive and financial strengths and considerable experience in identifying,
acquiring and integrating complementary businesses will continue to provide
significant growth opportunities. While the Company continuously evaluates
opportunities to make strategic acquisitions, at present it has no commitments
or agreements with respect to any material acquisitions.
LOW COST OPERATING STRUCTURE. World Color makes a vigorous effort to
optimize the management of its financial resources and believes its ratio of
selling, general and administrative expenses to net sales is among the lowest in
the industry. A reengineering process begun in January 1996 has also contributed
to the Company's improved cost structure and productivity. This effort entailed
standardizing and streamlining the many processes of the Company's diverse
operations. Results have included more effective approaches to applying
technology and greater leverage from shared services. World Color's
"one-company" operating structure has also improved capacity utilization by
balancing production across plants and reduced costs by providing a central
support organization for administrative services. In addition, the Company's
purchasing power enables it to acquire raw materials and equipment on more
favorable terms than its smaller competitors, as well as to ensure the
availability of raw materials in tight markets.
TARGETED CAPITAL INVESTMENTS TO INCREASE EFFICIENCY AND PRODUCTIVITY. World
Color historically has been at the forefront of technological advances and is
committed to maintaining its position as an industry leader through strategic
capital spending. Since the beginning of 1993, the Company has invested
approximately $472.8 million in equipment and plant expansions (exclusive of
equipment obtained from acquisitions) to position the Company for continued
growth and productivity improvements. The Company believes that its significant
size and financial strength allow it to invest in technological capabilities
that are not commercially viable for smaller or less well-capitalized
competitors. The Company's ongoing capital investment program has enabled it to
increase its productivity and to serve its customers better by improving the
quality, flexibility, speed and cost of production.
5
<PAGE>
MARKETS AND CUSTOMERS
As illustrated in the charts below, since the appointment of World Color's
current management team in 1991, the Company has diversified its business mix
and expanded into serving customers in faster growth markets, thereby reducing
the Company's dependence on magazine printing.
WORLD COLOR BUSINESS MIX
PERCENTAGE OF NET SALES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1990 PRO FORMA 1997*
<S> <C> <C> <C> <C>
Magazines 72% Magazines 27%
Catalogs 4% Catalogs 23%
Commercial 10% Direct Mail 7%
Directories 14% Books 11%
Commercial 28%
Directories 4%
</TABLE>
- ------------------------
* As used herein, "Pro Forma 1997" gives effect to the acquisitions of Rand
McNally Book Services Group (January 1997), The Johnson & Hardin Co. (July
1997), Magna Graphic, Inc. (January 1998), Century Graphics Corporation
(February 1998), Dittler Brothers, Incorporated (March 1998) and Acme
Printing Company, Inc. (April 1998), as if each had occurred on the first
day of fiscal 1997. The Pro Forma 1997 amounts are not necessarily
indicative of the results that would have occurred had the acquisitions been
consummated on the first day of fiscal 1997, or of World Color's or the
acquired companies' individual or combined future results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMMERCIAL. The Company is a premier printer of high quality specialty
products such as annual reports and automobile and travel brochures, for
customers such as Adobe/Logistix, BMG, Columbia Pictures, Donna Karan/New York,
Ford Motor, Guess?, Halston, Mercedes Benz, Microsoft, Outback Steakhouse,
Pillsbury and Princess Cruises. World Color is also a leading printer of product
brochures, bill stuffers, informational marketing materials and other
advertising supplements. For instance, it prints freestanding inserts and retail
inserts for established national retailers such as J.C. Penney, News America,
Pier 1 Imports, True Value and Wal-Mart. The Company has focused on building
lasting customer relationships 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 has recently
expanded its commercial printing services. As a result of the February 1998
acquisition of Century Graphics Corporation ("Century Graphics"), World Color is
the third largest offset printer of retail advertising inserts in the U.S. In
March 1998, the Company acquired Dittler Brothers, Incorporated ("Dittler
Brothers") an industry leader in three highly specialized areas--complex
personalized direct response materials, unique and intricate
consumer-involvement promotional game pieces, and airline guides and hotel
directories. Dittler Brothers' long-standing customers include leading players
in the direct mail, fast food, soft drink and other consumer markets.
Additionally, the April 1998 acquisition of Acme Printing Company, Inc. has
enhanced the Company's position as a leading printer of annual reports.
MAGAZINES. The Company believes that it is the second largest printer of
consumer magazines in the United States, printing over 1.8 billion magazines
annually. The Company believes that its principal
6
<PAGE>
competitors in this category consist of three diversified printing companies.
Magazines printed by the Company are among the best-selling in their class and
include such titles as AMERICAN WAY, ARCHITECTURAL DIGEST, CIGAR AFICIONADO,
EBONY, ELLE, ENTERTAINMENT WEEKLY, ESPN MAGAZINE, FORBES, GOLF DIGEST, GOOD
HOUSEKEEPING, MEN'S HEALTH, NATIONAL GEOGRAPHIC, NEWSWEEK, ROAD AND TRACK, SOAP
OPERA WEEKLY, TEEN, TV GUIDE, VOGUE AND WOMAN'S DAY. These magazines are
published by leading publishers such as Conde Nast, ESPN, Forbes, Hachette
Filipacchi, Hearst, Johnson Publishing, National Geographic, The New York Times
Sports & Leisure Group, News America Publications, Newsweek, Petersen, Primedia
and Rodale. 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 ten 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 practical.
CATALOGS. The Company is a leading printer for the U.S. catalog market, and
prints approximately 3.0 billion catalogs annually. The Company's key
competitors in this category consist of four diversified commercial printers
whose facilities enable them to compete in the national market and smaller and
local regional printers who compete for regional business. The Company prints
over 2,000 catalog titles including Abercrombie & Fitch, Avon, Blair,
Chadwick's, Crate & Barrel, Hammacher Schlemmer, J. Peterman Co., Sara Lee,
Starbucks, Talbot's, Victoria's Secret and Williams-Sonoma. 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 business-to-business
customers include Global DirectMail, Paper Direct and Reliable.
BOOKS. Through its acquisition of Ringier America in June 1996, World Color
believes it has become the largest printer of mass-market, racksize books in the
world. The Company currently prints mass-market, racksize books for customers
including Avon Books, Bantam Doubleday Dell, Kensington Publishing, Penguin
Books USA, Random House and St. Martin's Press/TOR. 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 many of the
largest U.S. publishers. The Company prints hardcover books for customers
including Grolier, Rand McNally, Random House, Reader's Digest, Rodale, Thomas
Publishing, and Time Warner. The Company has recently purchased equipment to
supplement its offerings to book customers and purchased Magna Graphic, Inc.
("Magna Graphic"), a digital prepress provider, in January 1998, to further
support the Company's expansion of services to the educational book market.
DIRECT MAIL. Direct mail marketing services are an important and growing
component of many businesses' marketing programs and overall U.S. advertising
expenditures. The Company prints direct mail materials such as booklets,
inserts, bill stuffers and other advertisements for customers including ADVO,
Blair, Cartier, Citicorp, DiscoverCard, The Franklin Mint, Frito-Lay, Goodyear
Tire & Rubber Company, National Geographic and Quaker Oats. Among the direct
mail services provided are direct imaging, personalization and other lettershop
services. The addition of Dittler, an industry leader in, among other things,
the production of highly specialized direct response materials, has
significantly increased the Company's direct mail personalization capabilities.
The Company believes the acquisition of Dittler has established World Color as
the only direct mail printer capable of providing complex personalization for
both short and long-run projects.
DIRECTORIES. The Company has printed directories since 1981 predominantly
through its relationship with Pacific Bell. 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. The Company prints over a total of 100
different regional directory titles for Pacific Bell and certain other
customers. The Company prints over 32 million directories annually.
------------------------
The Company is a Delaware corporation and has its principal offices at The
Mill, 340 Pemberwick Road, Greenwich, Connecticut 06831, and its telephone
number is (203) 532-4200.
7
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock Offered:
U.S. Offering.............................. 9,000,000 shares
International Offering..................... 1,000,000 shares
Total.................................. 10,000,000 shares
Common Stock to be outstanding after the
Offerings.................................. 38,402,123 shares (1)
Use of Proceeds.............................. The Company will not receive any proceeds
from the sale of Common Stock offered hereby.
NYSE Symbol.................................. WRC
</TABLE>
- ------------------------
(1) Does not, as of May 15, 1998, include 3,215,820 shares of Common Stock
issuable upon exercise of stock options outstanding after the Offerings,
1,836,736 of which will be exercisable immediately after the Offerings. Also
excludes 3,660,477 shares of Common Stock issuable upon conversion of the
Company's 6% Convertible Senior Subordinated Notes due 2007 (the "6%
Convertible Notes"). All of the shares issuable upon exercise of stock
options are subject to lock-up restrictions of either 120 or 180 days after
the date of this Prospectus.
RISK FACTORS
Prior to making an investment in the Common Stock offered hereby,
prospective purchasers of the Common Stock should take into account the specific
considerations set forth under "Risk Factors" as well as the other information
set forth in this Prospectus.
8
<PAGE>
SUMMARY FINANCIAL DATA
The following summary operating and financial data for the fiscal years
ended December 31, 1995 through December 28, 1997 have been derived from the
Company's consolidated financial statements, which have been audited by Deloitte
& Touche LLP, independent auditors, whose report thereon is included elsewhere
in this Prospectus. The following summary operating and financial data for the
three-month periods ended March 30, 1997 and March 29, 1998 have been derived
from the Company's unaudited condensed consolidated financial statements which,
in the opinion of management, contain all adjustments (consisting of only normal
and recurring adjustments) necessary to present fairly the Company's financial
position and results of operations at such dates and for such periods. The data
presented below should be read in conjunction with, and are qualified in their
entirety by reference to, the Company's consolidated financial statements and
the notes thereto appearing elsewhere in this Prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
FISCAL YEAR (1) THREE MONTHS (1)
------------------------------------------- ------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE DATA)
OPERATING DATA:
Net sales............................ $ 1,295,582 $ 1,641,412 $ 1,981,225 $ 458,351 $ 550,407
Cost of sales........................ 1,074,785 1,349,130 1,613,938 383,036 462,834
------------- ------------- ------------- ----------- -----------
Gross profit......................... 220,797 292,282 367,287 75,315 87,573
Selling, general and administrative
expenses........................... 125,539 153,071 188,688 43,592 51,427
Streamlining and other special
charges (2)........................ 40,900 -- -- -- --
------------- ------------- ------------- ----------- -----------
Operating income..................... 54,358 139,211 178,599 31,723 36,146
Interest expense and securitization
fees............................... 37,897 58,417 80,039 19,821 20,150
Income tax provision................. 6,584 33,533 41,341 4,999 6,638
------------- ------------- ------------- ----------- -----------
Net income........................... $ 9,877 $ 47,261 $ 57,219 $ 6,903 $ 9,358
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Net income per common share (3):
Basic.............................. $ 0.31 $ 1.40 $ 1.65 $ 0.20 $ 0.24
Diluted............................ 0.29 1.35 1.60 0.20 0.24
OTHER OPERATING DATA:
EBITDA (4)........................... $ 169,926 $ 243,704 $ 310,309 $ 65,537 $ 70,874
Adjusted operating income (5)........ 95,258 139,211 178,599 31,723 36,146
Capital expenditures................. 120,339 70,639 93,145 21,790 47,520
Gross profit margin.................. 17.0% 17.8% 18.5% 16.4% 15.9%
EBITDA margin........................ 13.1 14.8 15.7 14.3 12.9
Adjusted operating income margin..... 7.4 8.5 9.0 6.9 6.6
</TABLE>
<TABLE>
<CAPTION>
AT MARCH, 29,
BALANCE SHEET DATA: 1998
-------------
<S> <C>
Working capital............................................................ $ 240,885
Property, plant and equipment, net......................................... 931,380
Total assets............................................................... 2,163,018
Long-term debt (including current maturities).............................. 1,045,823
Stockholders' equity....................................................... 609,277
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
9
<PAGE>
- ------------------------
(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 1996 and 1997 each consisted of 52 weeks. The three-month periods
ended March 30, 1997 and March 29, 1998 each consisted of 13 weeks.
(2) In the fourth quarter of 1995, the Company recorded a streamlining charge
of $40,900 ($24,540 net of tax benefits). This charge, which was primarily
non-cash, was related to the realignment of certain business operations
which resulted in the writedown of certain assets and a provision for other
associated costs. See Note 15 to the Company's consolidated financial
statements.
(3) In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," the Company has calculated net income per common
share--basic and diluted based on the weighted average shares and dilutive
common equivalent shares outstanding, as applicable, during each period
after giving effect to the change in the Company's capital structure
pursuant to the Merger and Options Adjustments (as defined in the Notes to
the Company's consolidated financial statements).
(4) EBITDA represents earnings before interest expense and securitization fees,
income taxes, depreciation, amortization and non-recurring streamlining and
other special charges. EBITDA is not intended to represent cash flows for
the period, is not presented as an alternative to operating income as an
indicator of operating performance, may not be comparable to other similarly
titled measures of other companies and should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles. See the Company's consolidated
financial statements and the notes thereto appearing elsewhere in this
Prospectus.
(5) Adjusted operating income represents operating income before non-recurring
streamlining and other special charges. Adjusted operating income is not
intended to represent cash flows for the period, is not presented as an
alternative to operating income as an indicator of operating performance,
may not be comparable to other similarly titled measures of other companies
and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. See the Company's consolidated financial statements and the
notes thereto appearing elsewhere in this Prospectus.
10
<PAGE>
RISK FACTORS
A PROSPECTIVE INVESTOR SHOULD CONSIDER CAREFULLY ALL OF THE INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO PURCHASE THE COMMON
STOCK OFFERED HEREBY AND, IN PARTICULAR, THE FOLLOWING FACTORS.
FORWARD-LOOKING INFORMATION
This Prospectus contains various forward-looking statements and information
that are based on management's belief as well as assumptions made by and
information currently available to management. When used in this document, the
words "anticipate," "estimate," "project," "expect" and similar expressions are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected. Among the
key factors that may have a direct bearing on the Company's operating results
are changes in customer demands for the Company's products, changes in raw
material and equipment costs and availability, seasonal changes in customer
orders, pricing actions by the Company's competitors and general changes in
economic conditions.
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, and will continue to be, downward pricing pressure and increased
competition in the printing industry.
TECHNOLOGY
Production technology in the printing industry has evolved and continues to
evolve. Although the Company has invested approximately $472.8 million in
printing facilities and equipment (exclusive of equipment obtained in
acquisitions) since the beginning of fiscal 1993, it may be required to invest
significant capital in additional production technology in order to remain
competitive. The Company believes that its recent capital investments in
state-of-the-art technology, including new press and binding technology, digital
imaging technology, computer-to-plate and digital processing technologies and
real-time product quality monitoring systems have allowed it to realize
increased efficiencies in the services it offers its customers.
GROWTH THROUGH ACQUISITIONS
To expand its services and geographic presence, diversify its business mix
and lead the consolidation trend in the printing industry, the Company's
business strategy includes growth through acquisitions. There can be no
assurance that future acquisitions will be consummated on acceptable terms or
that any newly acquired companies will be successfully integrated into the
Company's operations. The Company may use Common Stock (which could result in
dilution to the purchasers of the Common Stock offered hereby) or may incur
additional long-term indebtedness or a combination thereof for all or
11
<PAGE>
a portion of the consideration to be paid in future acquisitions. While the
Company continuously evaluates opportunities to make strategic acquisitions, it
has no present commitments or agreements with respect to any material
acquisitions.
ENVIRONMENTAL COMPLIANCE
The Company is subject to regulation under various federal, state and local
laws relating to the environment and to employee health and safety. 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 it is in substantial compliance
with such laws and permitting requirements. The Company is also subject to
regulation under various federal, state and local laws which allow regulatory
authorities to compel (or 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 expects to incur
ongoing capital and operating costs to maintain compliance with applicable
environmental laws, which costs the Company does not expect to be, in the
aggregate, material. The Company cannot predict the environmental legislation or
regulations that may be enacted in the future or how existing or future laws or
regulations will be administered or interpreted. Compliance with more stringent
laws or regulations, as well as more vigorous enforcement policies of the
regulatory agencies or stricter interpretation of existing laws, may require
additional expenditures by the Company, some or all of which may be material.
See "Business--Environmental Compliance."
12
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
offered hereby.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock has been listed on the New York Stock Exchange under the
symbol "WRC" since January 26, 1996. The following table sets forth the low and
high sales prices of the Common Stock for the fiscal quarters indicated as
reported on the New York Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
LOW HIGH
----------- -----------
<S> <C> <C>
1996
First Quarter (beginning January 26, 1996).................................. 18 1/4 21 1/2
Second Quarter.............................................................. 18 25 1/2
Third Quarter............................................................... 20 1/2 25 1/8
Fourth Quarter.............................................................. 17 3/4 24 1/8
1997
First Quarter............................................................... 18 1/8 22 5/8
Second Quarter.............................................................. 19 5/8 26 1/4
Third Quarter............................................................... 23 1/4 32 7/16
Fourth Quarter.............................................................. 22 11/16 30 1/4
1998
First Quarter............................................................... 25 3/8 34 3/4
Second Quarter (through May 18, 1998)....................................... 30 11/16 35 11/16
</TABLE>
On May 18, 1998, the closing price of the Common Stock as reported on the
New York Stock Exchange was $31 1/4.
The Company has not declared or paid any dividends on its Common Stock and
does not anticipate doing so for 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, and the
Company may in the future enter into loan or other agreements or issue debt
securities or preferred stock that restrict the payment of cash dividends on
Common Stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
13
<PAGE>
CAPITALIZATION
The following table sets forth the actual cash and cash equivalents and the
consolidated capitalization of the Company as of March 29, 1998. The information
below should be read in conjunction with the Company's consolidated financial
statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 29, 1998
---------------------------
<S> <C>
(IN THOUSANDS, EXCEPT
SHARE DATA)
<CAPTION>
<S> <C>
Cash and cash equivalents............................................................ $ 32,791
-----------
-----------
Debt:
Borrowings under the Credit Agreement (1)(2)....................................... $ 677,200
9 1/8% Senior Subordinated Notes due 2003.......................................... 150,000
6% Convertible Senior Subordinated Notes due 2007.................................. 151,800
Other debt (3)..................................................................... 66,823
-----------
Total debt..................................................................... $ 1,045,823
-----------
Stockholders' equity:
Common Stock, $0.01 par value--authorized, 100,000,000 shares; issued and
outstanding, 38,363,353 at March 29, 1998 (4).................................... $ 384
Additional paid-in capital......................................................... 711,442
Accumulated deficit................................................................ (102,549)
-----------
Total stockholders' equity..................................................... 609,277
-----------
Total capitalization................................................................. $ 1,655,100
-----------
-----------
</TABLE>
- ------------------------
(1) At March 29, 1998, commitments under the Credit Agreement aggregated
$920,000, and the weighted average interest rate of the Company's
outstanding borrowings under the Credit Agreement was 6.20%.
(2) Includes current maturities of $0.
(3) Includes current maturities of $9,273.
(4) Does not include 3,255,690 shares of Common Stock issuable upon exercise of
outstanding stock options (of which 1,871,363 were then exercisable) and
3,660,477 shares of Common Stock issuable upon conversion of the 6%
Convertible Notes.
14
<PAGE>
SELECTED FINANCIAL DATA
The following selected operating and financial data for the five fiscal
years ended December 28, 1997 have been derived from the Company's audited
consolidated financial statements. The following selected operating and
financial data for the three-month periods ended March 30, 1997 and March 29,
1998 have been derived from the Company's unaudited condensed consolidated
financial statements which, in the opinion of management, contain all
adjustments (consisting of only normal and recurring adjustments) necessary to
present fairly the Company's financial position and results of operations at
such dates and for such periods. 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 Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR (1) (1)
----------------------------------------------------------------- ------------
1993 1994 1995 1996 1997 1997
----------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE DATA)
OPERATING DATA:
Net sales................................ $ 825,569 $ 971,627 $ 1,295,582 $ 1,641,412 $ 1,981,225 $ 458,351
Cost of sales............................ 715,895 817,934 1,074,785 1,349,130 1,613,938 383,036
----------- ---------- ------------ ------------ ------------ ------------
Gross profit............................. 109,674 153,693 220,797 292,282 367,287 75,315
Selling, general and administrative
expenses............................... 69,688 90,312 125,539 153,071 188,688 43,592
Streamlining and other special
charges (2)............................ 98,000 -- 40,900 -- -- --
----------- ---------- ------------ ------------ ------------ ------------
Operating income (loss).................. (58,014) 63,381 54,358 139,211 178,599 31,723
Interest expense and securitization
fees................................... 25,080 23,825 37,897 58,417 80,039 19,821
Income tax provision (benefit)........... (24,700) 15,822 6,584 33,533 41,341 4,999
----------- ---------- ------------ ------------ ------------ ------------
Extraordinary charge (3)................. 7,007 -- -- -- -- --
Cumulative effect of changes in
accounting methods (4)................. 55,900 -- -- -- -- --
----------- ---------- ------------ ------------ ------------ ------------
Net income (loss)........................ $ (121,301) $ 23,734 $ 9,877 $ 47,261 $ 57,219 $ 6,903
----------- ---------- ------------ ------------ ------------ ------------
----------- ---------- ------------ ------------ ------------ ------------
Net income (loss) per common share (5):
Basic.................................. $ (4.26) $ 0.74 $ 0.31 $ 1.40 $ 1.65 $ 0.20
Diluted................................ (4.26) 0.69 0.29 1.35 1.60 0.20
OTHER OPERATING DATA:
EBITDA (6)............................... $ 103,651 $ 124,023 $ 169,926 $ 243,704 $ 310,309 $ 65,537
Adjusted operating income (7)............ 39,986 63,381 95,258 139,211 178,599 31,723
Capital expenditures..................... 57,234 83,875 120,339 70,639 93,145 21,790
Gross profit margin...................... 13.3% 15.8% 17.0% 17.8% 18.5% 16.4%
EBITDA margin............................ 12.6 12.8 13.1 14.8 15.7 14.3
Adjusted operating income margin......... 4.8 6.5 7.4 8.5 9.0 6.9
BALANCE SHEET DATA (AT PERIOD END):
Working capital.......................... $ 83,125 $ 113,144 $ 160,835 $ 227,068 $ 168,752 $ 271,004
Property, plant and equipment, net....... 356,060 363,929 480,421 818,157 857,195 867,608
Total assets............................. 818,130 837,417 1,150,728 1,822,432 1,933,571 1,987,022
Long-term debt (including current
maturities)............................ 323,118 293,515 487,106 897,867 819,113 1,076,828
Stockholders' equity..................... 247,570 274,113 358,766 414,932 599,769 421,835
<CAPTION>
1998
------------
<S> <C>
OPERATING DATA:
Net sales................................ $ 550,407
Cost of sales............................ 462,834
------------
Gross profit............................. 87,573
Selling, general and administrative
expenses............................... 51,427
Streamlining and other special
charges (2)............................ --
------------
Operating income (loss).................. 36,146
Interest expense and securitization
fees................................... 20,150
Income tax provision (benefit)........... 6,638
------------
Extraordinary charge (3)................. --
Cumulative effect of changes in
accounting methods (4)................. --
------------
Net income (loss)........................ $ 9,358
------------
------------
Net income (loss) per common share (5):
Basic.................................. $ 0.24
Diluted................................ 0.24
OTHER OPERATING DATA:
EBITDA (6)............................... $ 70,874
Adjusted operating income (7)............ 36,146
Capital expenditures..................... 47,520
Gross profit margin...................... 15.9%
EBITDA margin............................ 12.9
Adjusted operating income margin......... 6.6
BALANCE SHEET DATA (AT PERIOD END):
Working capital.......................... $ 240,885
Property, plant and equipment, net....... 931,380
Total assets............................. 2,163,018
Long-term debt (including current
maturities)............................ 1,045,823
Stockholders' equity..................... 609,277
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
15
<PAGE>
- ------------------------
(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 1993, 1994, 1996 and 1997 each consisted of 52 weeks. The three-month
periods ended March 30, 1997 and March 29, 1998 each consisted of 13 weeks.
(2) See Note 15 to the Company's consolidated financial statements regarding the
1995 amount. Operating income in 1993 was reduced by $98,000 of special
charges. These charges reflect the Company's strategy in 1993 to grant price
concessions to certain significant customers to renew and extend long-term
contracts in advance of their expiration dates and to streamline its
operations in response to the continuing competitive marketplace.
(3) The 1993 extraordinary charge of $7,007 represents a writeoff, net of an
income tax benefit of $4,670, of deferred financing costs related to early
repayments of indebtedness during 1993.
(4) Effective December 28, 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and SFAS No.
109, "Accounting For Income Taxes." Effective this same date, the Company
also elected early adoption of SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The cumulative effect of adopting these new
accounting standards was a non-cash charge to income of $55,900, net of an
income tax benefit of $22,100.
(5) In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," the Company has calculated net income (loss) per
common share--basic and diluted based on the weighted average shares and
dilutive common equivalent shares outstanding, as applicable, during each
period after giving effect to the change in the Company's capital structure
pursuant to the Merger and Options Adjustments (as defined in the Notes to
the Company's consolidated financial statements).
(6) EBITDA represents earnings before interest expense and securitization fees,
income taxes, depreciation, amortization and non-recurring streamlining and
other special charges. EBITDA is not intended to represent cash flows for
the period, is not presented as an alternative to operating income as an
indicator of operating performance, may not be comparable to other similarly
titled measures of other companies and should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles. See the Company's consolidated
financial statements and the notes thereto appearing elsewhere in this
Prospectus.
(7) Adjusted operating income represents operating income before non-recurring
streamlining and other special charges. Adjusted operating income is not
intended to represent cash flows for the period, is not presented as an
alternative to operating income as an indicator of operating performance,
may not be comparable to other similarly titled measures of other companies
and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. See the Company's consolidated financial statements and the
notes thereto appearing elsewhere in this Prospectus.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
GENERAL
The Company is a diversified commercial printer serving customers in the
magazine, catalog, commercial, book, direct mail and directory markets. The
Company's objective is to continue its growth in net sales, operating income,
operating income margin and net income. World Color has achieved compound annual
growth rates in net sales and adjusted operating income over the past seven
fiscal years of 21.0% and 40.8%, respectively, and has grown net income from a
net loss of $58.7 million in 1991 to net income of $57.2 million in 1997.
The Company's revenues are derived primarily from the sale of services and
materials to its customer base, including digital and prepress services, press
and binding services and distribution and logistics services. The Company has a
broad and diverse customer base, of which no one customer accounted for more
than 5.0% of 1997 net sales. There continues to be significant pricing pressure
on all printers, including the Company.
Operating expenses include primarily the cost of paper and ink, salaries and
employee benefits, occupancy, depreciation and amortization and other general
and administrative expenses. The Company is focused on providing high-quality
services within a low cost structure by, among other things, increasing
efficiency and productivity and matching costs to revenues.
The Company's 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. Since the beginning of 1997, the paper market has
firmed in pricing and availability for certain grades. During the first quarter
of 1998, the price for most grades of paper increased modestly. Although the
Company anticipates that the price of certain grades of paper may continue to
increase during the balance of 1998, the Company believes it has adequate
allocations with its paper suppliers to meet its customers' needs. The Company's
contracts with its customers generally provide for price adjustments to reflect
price changes for other materials, wages and outside services.
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.
ACQUISITION HISTORY
World Color has completed 20 strategic acquisitions since the beginning of
1993 having a combined purchase price of approximately $1.3 billion, including
four acquisitions that have been completed since the beginning of fiscal 1998
having a combined purchase price of approximately $200 million, including
assumed indebtedness. These acquisitions have enabled the Company to diversify
its business mix and to expand its services and geographic presence. The
following table summarizes these acquisitions.
17
<PAGE>
<TABLE>
<CAPTION>
DATE ACQUISITION LOCATION STRATEGIC BENEFITS
- ------------ -------------------- ------------------ ------------------------------------
<S> <C> <C> <C>
April 1998 ACME PRINTING Wilmington, MA EXPANDED EAST COAST PRESENCE IN THE
COMPANY, INC. PRINTING OF HIGH-END COMMERCIAL
PRODUCTS.
March 1998 DITTLER BROTHERS, Atlanta, EXPANDED AND ENHANCED DIRECT MAIL
INCORPORATED GA/Oakwood, GA CAPABILITIES. ESTABLISHED THE
COMPANY AS AN INDUSTRY LEADER IN THE
PRODUCTION OF UNIQUE AND INTRICATE
CONSUMER-INVOLVEMENT PROMOTIONAL
GAME PIECES.
February CENTURY GRAPHICS Metairie, ESTABLISHED THE COMPANY AS THE THIRD
1998 CORPORATION LA/Omaha, LARGEST OFFSET PRINTER OF RETAIL
NE/Winchester, VA/ ADVERTISING INSERTS.
South Windsor, CT
January 1998 MAGNA GRAPHIC, INC. Lexington, KY DIGITAL PREPRESS ACQUISITION FURTHER
EXPANDING THE COMPANY'S SERVICES TO
THE EDUCATIONAL BOOK MARKET.
July 1997 THE JOHNSON & HARDIN Lebanon, OH/ COMPLEMENTARY SHORT TO MEDIUM-RUN
CO. Red Bank, OH PRINTER SERVICING THE MAGAZINE AND
COMMERCIAL MARKET SECTORS, LOCATED
IN THE MID-REGION OF THE COUNTRY;
PROVIDED VALUABLE SHORT CUT-OFF
PRESS CAPACITY.
January 1997 RAND MCNALLY BOOK & Versailles, ESTABLISHED PRESENCE AS A PRINTER OF
MEDIA SERVICES KY/ Taunton, MA HARDCOVER BOOKS; COMPLEMENTARY TO
COMPANY ("RAND OPERATIONS SERVICING MASS-MARKET,
MCNALLY") RACKSIZE BOOK PUBLISHERS.
October 1996 MT/ORLANDO, INC. Orlando, FL COMPLEMENTARY EXPANSION OF
COMMERCIAL OPERATING PRESENCE IN
SOUTHEASTERN REGION.
August 1996 ISA DIRECT, INC. Aurora, IL INCREASED NATIONAL PRESENCE AS A
PRINTER OF DIRECT MAIL MATERIALS;
PROVIDED DIRECT IMAGING AND
PERSONALIZATION CAPABILITIES.
June 1996 KRUEGER ACQUISITION Itasca, IL SIGNIFICANT EXPANSION OF CATALOG AND
CORPORATION (RINGIER (headquarters) MAGAZINE PRINTING CAPABILITIES;
AMERICA) PROVIDED ENTRY INTO PRINTING FOR
MASS-MARKET, RACKSIZE BOOK
PUBLISHERS.
April 1996 SHEA COMMUNICATIONS Oklahoma City, OK COMPLEMENTARY EXPANSION OF
COMPANY COMMERCIAL, CATALOG AND DIRECT MAIL
PRINTING CAPABILITIES.
February VIKING COLOR Los Angeles, CA INCREASED NATIONAL DIGITAL PREPRESS
1996 CAPABILITIES.
November DIGITAL PRE-PRESS, New York, NY INCREASED NATIONAL DIGITAL PREPRESS
1995 INC. CAPABILITIES.
September IMAGE TECHNOLOGIES, St. Petersburg, FL ESTABLISHED PRESENCE AS AN
1995 INC. INTERACTIVE, MULTI-MEDIA SERVICE
PROVIDER.
March 1995 THE WESSEL COMPANY, Elk Grove Village, STRENGTHENED PRESENCE AS A PRINTER
INC. IL OF DIRECT MAIL MATERIALS.
March 1995 NORTHEAST GRAPHICS North Haven, CT COMPLEMENTARY EXPANSION OF
INC. COMMERCIAL OPERATING PRESENCE IN
NORTHEASTERN REGION.
March 1995 THE LANMAN
COMPANIES, INC.:
Lanman Progressive Washington, D.C. INCREASED NATIONAL DIGITAL PREPRESS
CAPABILITIES.
Lanman Lithotech, Orlando, FL INCREASED NATIONAL DIGITAL PREPRESS
Inc. CAPABILITIES.
Central Florida Orlando, FL EXPANDED COMMERCIAL CAPABILITIES AND
Press, L.L.C. OPERATING PRESENCE IN SOUTHEASTERN
REGION.
May 1994 UNIVERSAL GRAPHICS Warren, MI INCREASED NATIONAL DIGITAL PREPRESS
CORPORATION CAPABILITIES.
February WEB INSERTS/ Gainesville, GA INCREASED PRESENCE AS A PRINTER FOR
1994 ATLANTA, INC. CATALOG INSERT AND DIRECT MAIL
PUBLISHERS.
December GEORGE RICE & SONS Los Angeles, CA ESTABLISHED WEST COAST PRESENCE IN
1993 THE PRINTING OF HIGH-END COMMERCIAL
PRODUCTS.
February THE ALDEN PRESS Elk Grove Village, SIGNIFICANTLY INCREASED PRESENCE AS
1993 COMPANY IL A PRINTER FOR THE SPECIALTY CONSUMER
CATALOG AND DIRECT MAIL PUBLISHERS.
</TABLE>
18
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 29, 1998 COMPARED TO THREE MONTHS ENDED MARCH 30, 1997
Net sales increased $92.1 million or 20%, to $550.4 million in 1998 from
$458.4 million in 1997. The increase was due to the inclusion of the sales from
the acquisitions in 1997 and 1998, higher paper prices and stronger base
business performance.
Gross profit increased $12.3 million or 16% to $87.6 million in 1998 from
$75.3 million in 1997. The gross profit margin decreased to 15.9% from 16.4% in
1997 due to increased sales resulting from higher paper prices and increased
paper sales, slightly offset by the benefits of certain cost reduction
initiatives and other synergies resulting from the combination of acquisitions
and increased plant utilization.
Selling, general and administrative expenses increased $7.8 million or 18%
to $51.4 million in 1998 from $43.6 million in 1997. The increase was
attributable to the acquisitions in 1997 and 1998, including the related
additional amortization expense for goodwill.
Interest expense and securitization fees increased $0.3 million to $20.2
million in 1998 from $19.8 million in 1997. The 1998 amount includes $3.1
million of fees resulting from the securitization of accounts receivable entered
into in the second half of 1997. See "--Liquidity and Capital Resources."
The effective tax rate, primarily composed of the combined federal and state
statutory rates, was 41.5% for the first three months of 1998 compared to 42%
for the comparable period in 1997.
YEAR ENDED DECEMBER 28, 1997 COMPARED TO YEAR ENDED DECEMBER 29, 1996
Net sales increased $339.8 million or 20.7% to $1,981.2 million in 1997 from
$1,641.4 million in 1996. The increase was attributable to the inclusion of both
a full year of results from the acquisitions in 1996 and results from the
acquisitions in 1997, as well as improved sales in the Company's base business.
Gross profit increased $75.0 million or 25.7% to $367.3 million in 1997 from
$292.3 million in 1996, due primarily to the inclusion of the acquisitions in
1996 and 1997. Gross profit margin improved to 18.5% in 1997 from 17.8% in 1996.
This improvement is a result of the acquisitions in 1996 and 1997, including the
benefits of certain cost reduction initiatives and other synergies resulting
from the combination of the businesses.
Selling, general and administrative expenses increased $35.6 million or
23.3% to $188.7 million in 1997 from $153.1 million in 1996. The increase is
attributable to the acquisitions in 1996 and 1997, including the related
additional amortization expense for goodwill, offset by benefits derived from
cost saving initiatives. In addition, in 1997 the Company incurred a higher than
usual provision for bad debts related to a customer that entered into
bankruptcy.
Interest expense and securitization fees increased $21.6 million or 37.0% to
$80.0 million in 1997 from $58.4 million in 1996. The increase is attributable
to higher average borrowings incurred to fund acquisitions, capital expenditures
and working capital requirements. The 1997 amount includes $5.1 million of fees
resulting from the Company's asset securitization arrangement entered into on
June 30, 1997. See "--Liquidity and Capital Resources."
The effective tax rate, primarily composed of the combined federal and state
statutory rates, was approximately 42.0% for 1997 and 41.5% for 1996. This
slight increase was due to additional nondeductible amortization expense for
goodwill resulting from acquisitions.
19
<PAGE>
YEAR ENDED DECEMBER 29, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales increased $345.8 million or 26.7% to $1,641.4 million in 1996 from
$1,295.6 million in 1995. The increase was due to acquisitions in 1996,
partially offset by lower paper prices. 1996 net sales also benefited slightly
by continued business growth from new and existing customers.
Gross profit increased $71.5 million or 32.4% to $292.3 million in 1996 from
$220.8 million in 1995. The increase is attributable to the inclusion of
acquisitions in 1996, as well as increased volume and improved operating
efficiencies. Gross profit margin improved to 17.8% in 1996 from 17.0% in 1995
as a result of acquisitions in 1996, 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 $27.5 million or
21.9% to $153.1 million in 1996 from $125.5 million in 1995. The increase is
partially attributable to acquisitions in 1996, including the related additional
amortization expense for goodwill, as well as increased selling expenses related
to higher volume.
Operating income increased $84.9 million or 156.1% to $139.2 million in 1996
from $54.4 million in 1995. The increase is attributable to the factors
discussed in the preceding paragraphs, and the absence in 1996 of a streamlining
charge of $40.9 million 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
$44.0 million or 46.1%.
Interest expense increased $20.5 million or 54.1% to $58.4 million in 1996
from $37.9 million in 1995. The increase is attributable to higher average
borrowings incurred to fund acquisitions in 1996 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.
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
$124.7 million, $165.3 million and $203.2 million for the fiscal years 1995,
1996 and 1997, respectively, and was $42.5 million and $46.4 million for the
first three months of 1997 and 1998, respectively. Cash flow from operations was
primarily used to fund working capital requirements, capital expenditures and
acquisitions.
Working capital was $160.8 million, $227.1 million and $168.8 million at
December 31, 1995, December 29, 1996 and December 28, 1997, respectively, and
was $271.0 million and $240.9 million at March 30, 1997 and March 29, 1998,
respectively.
Capital expenditures totaled $120.3 million, $70.6 million and $93.1 million
in 1995, 1996 and 1997, respectively, and $47.5 million for the first three
months of 1998. These capital expenditures reflect the purchase of additional
press and bindery equipment and other capital items. These capital expenditures
have 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 1998 to approximate 4%
to 5% of net sales. Additional expenditures in 1998 are possible in line with
growth in earnings and cash flows, or expansion opportunities in certain
markets.
The Company's capital expenditures and acquisitions have been funded through
operations and borrowings under the Company's Second Amended and Restated Credit
Agreement dated as of June 6, 1996, (as amended, the "Credit Agreement"). In
June 1997, the Credit Agreement was amended in
20
<PAGE>
conjunction with the sale of accounts receivable described below. After giving
effect to this amendment, certain pay-downs and concurrent commitment
reductions, the Credit Agreement provides for aggregate total commitments of
$920.0 million, comprised of $95.0 million in term loan commitments, $250.0
million of revolving loan commitments and $575.0 million in acquisition term
loan commitments. The Credit Agreement provides for varying semi-annual
reductions in commitments through maturity on December 31, 2002. Borrowings bear
interest at rates that fluctuate with the prime rate and Eurodollar rate. As of
March 29, 1998, the weighted average borrowing rate under the Credit Agreement
was 6.2%, and $111.2 million of acquisition term loan commitments and $115.9
million of revolving loan commitments were, in each case, unutilized.
Concurrently with the amendment to the Credit Agreement, on June 30, 1997,
the Company entered into an agreement to sell, on a revolving basis for a period
of up to five years, certain of its accounts receivable to a wholly-owned
subsidiary, which entered into an agreement to transfer, on a revolving basis,
an undivided percentage ownership interest in a designated pool of accounts
receivable to a maximum of $204.0 million. At March 29, 1998, $200.0 million of
accounts receivable had been sold and reflected as a reduction of accounts
receivable. The net proceeds were primarily used to repay certain indebtedness
incurred under the Credit Agreement. Fees associated with the securitization
vary based on commercial paper rates plus a margin, providing a lower effective
rate than that available from the Company's traditional funding sources.
On October 8, 1997, the Company issued 4,600,000 shares of its common stock,
receiving net proceeds of approximately $127.6 million (the "1997 Stock
Offering"). Concurrent with the 1997 Stock Offering, the Company issued $151.8
million aggregate principal amount of its 6% Convertible Notes, receiving net
proceeds of approximately $147.9 million. Interest on the 6% Convertible Notes
is payable semi-annually at the annual rate of 6.0%. The 6% Convertible Notes
have no required principal payments prior to maturity on October 1, 2007. The 6%
Convertible Notes in the aggregate are convertible into 3,660,477 shares of the
Company's common stock at $41.47 per share subject to adjustment upon the
occurrence of certain events. The net proceeds from the 1997 Stock Offering and
6% Convertible Notes offering were used to repay certain indebtedness incurred
under the Credit Agreement.
At December 28, 1997, the Company has net operating loss carryforwards for
federal income tax purposes of $14.9 million available to reduce future taxable
income, which net operating loss carryforwards expire primarily in 2000, and has
federal tax credits of $2.5 million expiring primarily from 1999 to 2002 and
state tax credits of approximately $2.6 million expiring from 2001 to 2012.
Also, the Company has alternative minimum tax carryover credits of $34.5 million
which do not expire and may be applied against regular tax in the future, in the
event regular tax expense exceeds alternative minimum tax.
Concentrations of credit risk with respect to accounts receivable are
limited due to the Company's diverse operations and large customer base. As of
March 29, 1998, the Company had no significant concentrations of credit risk.
In order to reduce the exposure on its variable rate indebtedness, the
Company has entered into interest rate cap agreements with a notional value of
$500.0 million, expiring in the third quarter of 1998. The impact of these
agreements on the consolidated financial statements was not material for the
periods presented. While the Company is exposed to credit loss in the event of
nonperformance by the counterparties of these agreements, management believes
that the possibility of incurring such a loss is remote due to the
creditworthiness of the counterparties. The Company does not hold or issue any
derivative financial instruments for trading purposes.
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.
The Company has evaluated the potential impact of the situation commonly
referred to as the "Year 2000 Issue." The Year 2000 Issue, which affects most
corporations, concerns the inability of information systems, primarily computer
software programs, to properly recognize and process date sensitive
21
<PAGE>
information relating to the year 2000 and beyond. During the past several years,
the Company has taken actions to prepare its systems for the year 2000. As a
result, the majority of the Company's financial systems as well as certain other
significant information systems are currently year 2000 compliant. While the
Company will continue to evaluate its systems, it has determined, based upon the
available information, that additional costs associated with the Year 2000 Issue
will not have a material adverse effect upon its operating results or financial
condition.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components in the financial statements. The Company adopted this
statement in the first quarter of 1998. The adoption of SFAS No. 130 did not
have a material effect on the Company's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board also issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 establishes standards for reporting information on operating segments in
the financial statements. The Company will adopt this statement for the fiscal
year ended 1998. The Company is currently evaluating the impact SFAS No. 131 may
have on additional disclosure, if any, to its consolidated financial statements.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,"
which standardizes the disclosure for pensions and other postretirement
benefits. The Company will adopt this statement for the fiscal year ended 1998.
The Company is currently evaluating the impact SFAS No. 132 may have on
additional disclosure, if any, to its consolidated financial statements.
22
<PAGE>
BUSINESS
GENERAL
World Color is an industry leader in the management and distribution of
print and digital information, with revenues of approximately $2.1 billion for
the twelve months ended March 29, 1998. 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
commercial, magazine, catalog, book, direct mail and directory market sectors.
Founded in 1903, the Company currently operates a national network of 48
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.
Since the appointment of a new management team in May 1991, World Color has
significantly expanded its national presence as a leading, innovative commercial
printer, and has achieved significant growth in sales, adjusted operating income
and net income, while also improving its operating margins. Management's
commitment to this growth is evidenced by the management team's long-term
ownership interest in the Company. Over the past seven fiscal years, net sales
and adjusted operating income grew at compound annual rates of 21.0% and 40.8%,
respectively, and net income increased from a net loss of $58.7 million in 1991
to net income of $57.2 million in 1997. In addition, the Company has recorded
five consecutive years of improvement in its adjusted operating income margins.
GROWTH STRATEGY
World Color has increased stockholder value through emphasizing quality,
diversification of its business mix, operational efficiencies and strategic
growth. Specifically, the Company's growth strategy is to (i) further establish
and strengthen its leadership positions in diverse and balanced businesses, (ii)
make strategic acquisitions and broaden the array of services provided to its
customers, (iii) provide high quality services within a low cost operating
structure and (iv) increase efficiency and productivity through investment in
technology. The key elements underlying this strategy are described below.
ESTABLISH AND STRENGTHEN LEADERSHIP POSITIONS IN DIVERSE, BALANCED
BUSINESSES. World Color continues to increase its services and expand its
geographic presence in order to provide for its customers' full range of digital
imaging, print and information management and delivery needs. The Company has
chosen to operate in areas of the industry in which it believes it can capture a
larger share of its customers' business by offering a broad array of high
quality products and services, cost-effective distribution, advanced
technological capabilities and competitive pricing. The Company's commitment to
quality, combined with its broad range of services offered, has formed the basis
for World Color's long-standing customer relationships. As a result of its
diverse business mix, geographic presence and reputation for quality, World
Color has been able to attract new customers as well as capture incremental
sales from existing customers.
STRATEGIC ACQUISITIONS. The fragmented printing industry continues to
undergo significant consolidation due primarily to changing customer demand for
a full range of sophisticated services and the high levels of capital investment
necessary to meet this demand. Over the past five years, World Color has
capitalized on the industry's consolidation opportunities by successfully
integrating 20 acquisitions having an aggregate purchase price of approximately
$1.3 billion, including four acquisitions that have been completed since the
beginning of fiscal 1998 having a combined purchase price of approximately $200
million, including assumed indebtedness. The Company has targeted its
acquisitions to expand its services and geographic presence and to diversify its
business mix by, among other things, targeting customers operating in new
markets such as the direct mail and book markets. Additionally, the acquisitions
have been accretive to World Color's earnings because of, among other things,
significant cost savings in the purchase of raw materials, the reduction of
overhead costs and productivity gains
23
<PAGE>
captured by the Company's ability to better absorb and manage available capacity
at newly acquired facilities. World Color believes that its competitive and
financial strengths and considerable experience in identifying, acquiring and
integrating complementary businesses will continue to provide significant growth
opportunities. While the Company continuously evaluates opportunities to make
strategic acquisitions, at present it has no commitments or agreements with
respect to any material acquisitions.
LOW COST OPERATING STRUCTURE. World Color makes a vigorous effort to
optimize the management of its financial resources and believes World Color's
ratio of selling, general and administrative expenses to net sales is among the
lowest in the industry. A reengineering process begun in January 1996 has also
contributed to the Company's improved cost structure and productivity. This
effort entailed standardizing and streamlining the many processes of the
Company's diverse operations. Results have included more effective approaches to
applying technology and greater leverage from shared services. World Color's
"one-company" operating structure has also improved capacity utilization by
balancing production across plants and reduced costs by providing a central
support organization for administrative services. In addition, the Company's
purchasing power enables it to acquire raw materials and equipment on more
favorable terms than its smaller competitors, as well as to ensure the
availability of raw materials in tight markets.
TARGETED CAPITAL INVESTMENTS TO INCREASE EFFICIENCY AND PRODUCTIVITY. World
Color historically has been at the forefront of technological advances and is
committed to maintaining its position as an industry leader through strategic
capital spending. Since the beginning of 1993, the Company has invested
approximately $472.8 million in equipment and plant expansions (exclusive of
equipment obtained from acquisitions) to position the Company for continued
growth and productivity improvements. The Company believes that its significant
size and financial strength allow it to invest in technological capabilities
that are not commercially viable for smaller or less well-capitalized
competitors. The Company's ongoing capital investment program has enabled it to
increase its productivity and to serve its customers better by improving the
quality, flexibility, speed and cost of production.
THE PRINTING INDUSTRY
The $64 billion commercial printing industry in the United States is highly
fragmented and capital-intensive, and includes the printing and distribution of
magazines, advertising inserts, catalogs, direct mail, free-standing inserts,
directories and other printed material. There are approximately 35,000
commercial printers in the United States today, approximately 500 of which have
revenues in excess of $10 million. Technological trends in the industry,
together with increasing demands by customers for specialized capabilities and a
full range of services have increased the competitive advantages available to
the Company and other large printers. The Company believes that only large,
well-capitalized printers, such as itself, will be capable of making the capital
expenditures necessary to invest in state-of-the-art technology and provide
customers a full range of services and as a result, the Company believes that
consolidation in the printing industry will continue.
WORLD COLOR SERVICES
As a result of significant capital expenditures and strategic acquisitions
which have allowed the Company to diversify its services, expand its geographic
presence and enhance its use of new technologies, World Color is an industry
leader in the management and distribution of print and digital information. The
Company's services include:
DIGITAL AND PREPRESS SERVICES. The Company is a leader in the transition
from conventional prepress to an all-digital workflow, providing 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. The Company's 11 specialized digital and prepress
facilities, which are strategically located close to the Company's customers,
provide high quality, 24-hour preparatory
24
<PAGE>
services linked directly to the Company's various 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
comparative advantages over traditional prepress shops that are not able to
provide the same level of integrated services. The Company's digital group also
provides multi-media services such as the transformation of customers' existing
printed and digital material into interactive media such as user-friendly
information kiosk systems, Internet web sites, corporate intranets, CD-ROMs and
computer laptop sales presentations. The Company's digital services group has
provided a natural opportunity for the Company's cross-selling efforts by
offering its integrated prepress and multi-media services to the Company's print
customers who may have historically used third-party suppliers for their
prepress and multi-media needs.
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, a large expenditure which
only a small number of well-capitalized printers are able to justify, generates
a 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 and flexographic
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 the 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.
Nearly all of the Company's printing facilities dedicated to servicing its
magazine, catalog and direct mail customers are strategically located in the
mid-region of the country. The Company believes that the size of these 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 a lower cost. The Company also operates 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 mailing 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.
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<PAGE>
MARKETS AND CUSTOMERS
As illustrated in the charts below, since the appointment of World Color's
current management team in 1991, the Company has diversified its business mix
and expanded into serving customers in faster growth markets, thereby reducing
the Company's dependence on magazine printing.
WORLD COLOR BUSINESS MIX
PERCENTAGE OF NET SALES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1990 PRO FORMA 1997*
<S> <C> <C> <C> <C>
Magazines 72% Magazines 27%
Catalogs 4% Catalogs 23%
Commercial 10% Direct Mail 7%
Directories 14% Books 11%
Commercial 28%
Directories 4%
</TABLE>
- ------------------------
* As used herein, "Pro Forma 1997" gives effect to the acquisitions of Rand
McNally Book Services Group (January 1997), The Johnson & Hardin Co. (July
1997), Magna Graphic, Inc. (January 1998), Century Graphics Corporation
(February 1998), Dittler Brothers, Incorporated (March 1998) and Acme
Printing Company, Inc. (April 1998), as if each had occurred on the first
day of fiscal 1997. The Pro Forma 1997 amounts are not necessarily
indicative of the results that would have occurred had the acquisitions been
consummated on the first day of fiscal 1997, or of World Color's or the
acquired companies' individual or combined future results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMMERCIAL
The Company had Pro Forma 1997 consolidated net sales for the commercial
market of approximately $678.0 million.
The Company is a premier printer of high quality, specialty products such as
annual reports and automobile and travel brochures. World Color is also a
leading printer of product brochures, bill stuffers, informational marketing
materials and other advertising supplements. In addition, the Company prints
free standing inserts and retail inserts for established national retailers such
as J.C. Penney, News America, Pier 1 Imports, True Value and Wal-Mart. The
Company has focused on building lasting customer relationships 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's significant customers in this sector include:
<TABLE>
<S> <C>
- ADOBE/LOGISTIX - HALSTON
- BMG - MERCEDES BENZ
- COLUMBIA PICTURES - MICROSOFT
- DONNA KARAN/NEW YORK - OUTBACK STEAKHOUSE
- FORD MOTOR - PILLSBURY
- GUESS? - PRINCESS CRUISES
</TABLE>
26
<PAGE>
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. The Company
has recently expanded its commercial printing services. As a result of the
February 1998 acquisition of Century Graphics, World Color is the third largest
offset printer of retail advertising inserts in the U.S. In March 1998, the
Company acquired Dittler Brothers, an industry leader in three highly
specialized areas--complex personalized direct response materials, unique and
intricate consumer-involvement promotional game pieces, and airline guides and
hotel directories. Dittler Brothers' long-standing customers include leading
players in the direct mail, fast food, soft drink and other consumer markets.
Additionally, the April 1998 acquisition of Acme Printing Company, Inc. has
enhanced the Company's position as a leading printer of annual reports.
MAGAZINES
The Company believes that it is the second largest U.S. consumer magazine
printer, printing over 1.8 billion magazines annually with approximately 600
titles. The Company had approximately $649.0 million in Pro Forma 1997
consolidated net sales in this category and believes that its principal
competitors in this category consist of three diversified printing companies.
The Company's customers in this sector include publishers such as The Conde
Nast Publications Inc., ESPN, Forbes, Inc., Hachette Filipacchi Magazines, Inc.,
Hearst Corporation, Johnson Publishing, National Geographic, The New York Times
Company Sports & Leisure Group, News America Publications, Inc., Newsweek, Inc.,
Petersen Publishing Company, Primedia, Rodale Press, Inc., and certain of their
respective affiliates, whose titles include:
<TABLE>
<S> <C>
- AMERICAN WAY - MEN'S HEALTH
- ARCHITECTURAL DIGEST - NATIONAL GEOGRAPHIC
- CIGAR AFICIONADO - NEWSWEEK
- EBONY - ROAD AND TRACK
- ELLE - SOAP OPERA WEEKLY
- ENTERTAINMENT WEEKLY - TEEN
- ESPN MAGAZINE - TV GUIDE
- FORBES - VOGUE
- GOLF DIGEST - WOMAN'S DAY
- GOOD HOUSEKEEPING
</TABLE>
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.
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<PAGE>
A majority of the Company's magazine printing is performed under contracts
with remaining terms of between one and ten 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
practical. The Company is currently the largest printer for Conde Nast and
Hachette Filipacchi.
CATALOGS
The Company is a leading printer for the U.S. catalog market, with Pro Forma
1997 consolidated net sales of approximately $562.4 million in this market. The
Company prints approximately 3.0 billion catalogs annually.
The Company believes that the consumer catalogs market is one of the fastest
growing markets of the retail industry. 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 currently prints over 2,000
catalog titles including:
<TABLE>
<S> <C>
- ABERCROMBIE & FITCH - J. PETERMAN CO.
- AVON - PAPER DIRECT
- BLAIR - RELIABLE
- CHADWICK'S - SARA LEE
- CRATE & BARREL - STARBUCKS
- GLOBAL DIRECTMAIL - TALBOT'S
- HAMMACHER SCHLEMMER - VICTORIA'S SECRET
- WILLIAMS-SONOMA
</TABLE>
The Company's key competitors in this category 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.
BOOKS
The Company had Pro Forma 1997 consolidated net sales for the book sector of
approximately $254.5 million. Through its acquisition of Ringier America in June
1996, World Color believes it has become the largest printer of mass-market,
racksize books in the world. The Company currently prints mass-market, racksize
books for customers including:
<TABLE>
<S> <C>
- AVON BOOKS - PENGUIN BOOKS USA
- BANTAM DOUBLEDAY DELL - RANDOM HOUSE
- KENSINGTON PUBLISHING - ST. MARTINS PRESS/TOR
</TABLE>
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 many of the largest U.S. publishers. The Company prints
hardcover books for customers including:
<TABLE>
<S> <C>
- GROLIER - RODALE
- RAND MCNALLY - THOMAS PUBLISHING
- RANDOM HOUSE - TIME WARNER
- READER'S DIGEST
</TABLE>
The Company believes that its principal competitors in the mass-market,
racksize book and the hardcover book categories consist of two diversified
printing companies. The Company has recently purchased equipment to supplement
its offerings to book customers and purchased Magna Graphic, a digital prepress
provider, in January 1998, to further support the Company's expansion of
services to the educational book market.
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<PAGE>
DIRECT MAIL
The Company had Pro Forma 1997 consolidated net sales for the direct mail
printing market of approximately $172.4 million. 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 growing component
of many businesses' marketing programs and overall U.S. advertising
expenditures. Among the direct mail services provided are direct imaging,
personalization and other lettershop services. The Company's traditional
strengths in efficient, high quality production, printing and mailing and
distribution services are the foundation of the Company's direct mail services
and allow the Company to provide a broad range of direct mail services. The
Company focuses on marketing and cross-selling its direct mail services.
World Color's customers in this sector include:
<TABLE>
<S> <C>
- ADVO - THE FRANKLIN MINT
- BLAIR - FRITO-LAY
- CARTIER - GOODYEAR TIRE & RUBBER COMPANY
- CITICORP - NATIONAL GEOGRAPHIC
- DISCOVERCARD - QUAKER OATS
</TABLE>
The addition of Dittler Brothers, an industry leader in, among other things,
the production of highly specialized direct response materials, has
significantly increased the Company's direct mail personalization capabilities.
The Company believes the acquisition of Dittler Brothers established World Color
as the only direct mail printer capable of providing complex personalization for
both short and long-run projects.
DIRECTORIES
The Company had Pro Forma 1997 consolidated net sales from directory
printing of approximately $95.8 million. The Company has printed directories
since 1981 predominantly through its relationship with Pacific Bell. 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. The Company prints
over a total of 100 different regional directory titles for Pacific Bell and
certain other customers. The Company prints over 32 million directories
annually.
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 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. Since the beginning of 1997, the paper
market has firmed in pricing and availability for certain grades. During the
first quarter of 1998, the price for most grades of paper increased modestly.
Although the Company anticipates that the price of certain grades of paper may
continue to increase during the balance of 1998, the Company believes it has
adequate allocations with its paper suppliers to meet its customers' needs. The
Company's contracts with its customers generally provide for price adjustments
to reflect price changes for other 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 is not dependent
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<PAGE>
upon any one source for its paper or ink. Given the volume of the Company's
purchases, the Company is generally able to obtain quality paper, ink and other
materials at competitive prices. The Company believes that an adequate supply of
ink is available.
EMPLOYEES
As of May 15, 1998, the Company had approximately 15,600 employees, of which
approximately 2,779, or 17.8%, were represented by unions. As of May 15, 1998,
approximately 1,573 of such union employees were covered under several different
labor contracts which expire in September and October 1998, with the balance
covered by labor contracts that expire during 1999, 2000 and 2002. The Company
believes it has satisfactory employee and labor relations.
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) clean-up 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 1998 and 1999 required to 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 adverse effect on the Company. The Company expects to incur
ongoing capital and operating costs to maintain compliance with applicable
environmental laws, which costs the Company does not expect to be, in the
aggregate, material.
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.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth the names, ages as of the date of this Prospectus
and titles of the executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- --------------------------------------------------------
<S> <C> <C>
Robert G. Burton............ 60 Chairman of the Board of Directors, President and Chief
Executive Officer
Jennifer L. Adams........... 39 Vice Chairman, Chief Legal and Administrative Officer
and Secretary
Jerome V. Brofft............ 53 Senior Vice President, Purchasing and Logistics
Dean E. Cherry.............. 37 Executive Vice President, Investor Relations and
Corporate Communications
Michael W. Harris........... 43 President, Manufacturing
Michael D. Helfand.......... 38 Executive Vice President, Chief Financial Officer
Richard T. Lane............. 41 Executive Vice President, Strategic Development
Robert B. Lewis............. 34 Senior Vice President, Controller
James E. Lillie............. 36 Executive Vice President, Operations
Heidi J. Nolte.............. 40 Senior Vice President, Chief Information Officer
Thomas J. Quinlan III....... 35 Vice President, Treasurer
Marc L. Reisch.............. 42 Vice Chairman, Group President
Brian W. Sullivan........... 40 President, Commercial Division
</TABLE>
ROBERT G. BURTON has been Chairman of the Board, President and Chief
Executive Officer since May 1991.
JENNIFER L. ADAMS was appointed Vice Chairman, Chief Legal and
Administrative Officer and Secretary in January 1998. Prior thereto, Ms. Adams
was Executive Vice President, Chief Legal and Administrative Officer and
Secretary since July 1995 and Executive Vice President, General Counsel and
Secretary of the Company since October 1993. Prior thereto, Ms. Adams was Vice
President, General Counsel and Secretary of the Company from December 1991 until
October 1993.
JEROME V. BROFFT has been Senior Vice President, Purchasing and Logistics
since October 1995 and prior thereto was Vice President, Purchasing and
Logistics since February 1995. Prior thereto, Mr. Brofft was Vice President,
Purchasing since May 1992. Prior to joining World Color in May 1992, Mr. Brofft
was Director of Purchasing at Western Publishing Company.
DEAN E. CHERRY has been Executive Vice President, Investor Relations and
Corporate Communications since February 1997. Prior thereto, Mr. Cherry was
Executive Vice President, Operations since September 1996 and Senior Vice
President, Operations from January 1994 to September 1996. Mr. Cherry was Vice
President, Regional Manager of World Color's Stillwater, Oklahoma plant from
January 1993 to January 1994 and was Vice President, Operations from June 1991
until January 1993.
MICHAEL W. HARRIS has been President, Manufacturing since December 1995 and
prior thereto was Executive Vice President--Manufacturing since July 1995. Prior
thereto, Mr. Harris was Senior Vice President, Manufacturing since October 1993
and was Vice President, Manufacturing since 1992.
MICHAEL D. HELFAND has been Executive Vice President, Chief Financial
Officer since March 1998. Prior thereto, Mr. Helfand was employed at ABC, Inc.,
a division of the Walt Disney Company, for 12 years, most recently as a Vice
President in the Finance Group.
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<PAGE>
RICHARD T. LANE has been Executive Vice President, Strategic Development
since November 1997. Prior thereto, Mr. Lane was Senior Vice President,
Corporate Sales since joining the Company in June 1997. Prior to joining the
Company, Mr. Lane was Vice President, Major Account Division of the Magazine
Publishing Services business unit at R.R. Donnelley & Sons since 1993.
ROBERT B. LEWIS has held the position of Senior Vice President, Controller
since December 1997. Prior thereto, Mr. Lewis was Vice President, Corporate
Controller since August 1997. Prior thereto, Mr. Lewis was Vice President,
Corporate Accounting since November 1996 and until then had been Vice President,
Strategic Planning since joining the Company in August 1996. Prior thereto, Mr.
Lewis was with L.P. Thebault (a commercial printer) since 1989, most recently as
Vice President, Budgetary Operations.
JAMES E. LILLIE has been Executive Vice President, Operations since January
1998. Prior thereto, Mr. Lillie held the position of Corporate Vice President,
Human Resources since May 1996 and prior thereto was Regional Vice President,
Human Resources from January through April 1996. Mr. Lillie held the position of
Vice President, General Manufacturing Manager of World Color's Bradley Printing
facility from January 1995 to January 1996 and, prior thereto, held the position
of Vice President and Senior Human Resources and Administration Executive at
Alden Press, since Alden was acquired by the Company in February 1993.
HEIDI J. NOLTE has been Senior Vice President, Chief Information Officer of
the Company since July 1997. Prior thereto, Ms. Nolte was Vice President, Chief
Information Officer since joining World Color in September 1994. Prior to
joining World Color, Ms. Nolte was Senior Director, MIS at U.S. Surgical where
she had been employed since 1979.
THOMAS J. QUINLAN III has been Vice President, Treasurer since July 1997.
Prior thereto, Mr. Quinlan was Assistant Treasurer of the Company since February
1994 and prior thereto, was Manager of Treasury Administration at Marsh &
McLennan Companies Inc.
MARC L. REISCH was appointed Vice Chairman, Group President in January
1998. Prior thereto, Mr. Reisch was Group President, Sales and Chief Operating
Officer since August 1996. Prior thereto, Mr. Reisch was Executive Vice
President, Chief Operating and Financial Officer since June 1996 and Executive
Vice President, Chief Operating and Financial Officer and Treasurer since July
1995. Prior thereto he was Executive Vice President, Chief Financial Officer and
Treasurer since October 1993. From October 1991 until October 1993, Mr. Reisch
was Vice President, Chief Financial Officer and Treasurer of the Company.
BRIAN W. SULLIVAN has been President, Commercial Division since September
1996. Prior thereto, Mr. Sullivan was President, Northeast Graphics Inc.
("Northeast Graphics") since December 1995 and prior thereto, was Vice
President, Sales & Marketing, Northeast Graphics since April 1989.
The Company's Board of Directors consists of Gerald S. Armstrong, Mr.
Burton, Patrice M. Daniels, Dr. Mark J. Griffin, Henry R. Kravis, Alexander
Navab, Jr., Mr. Reisch, George R. Roberts and Scott M. Stuart. Messrs. Kravis
and Roberts are managing members of the limited liability company ("KKR LLC"),
which is the general partner of Kohlberg Kravis Roberts & Co., L.P. ("KKR"). Mr.
Stuart is a member of KKR LLC. Messrs. Kravis, Roberts and Stuart are General
Partners of KKR Associates L.P. ("KKR Associates"), a New York limited
partnership and an affiliate of KKR. Mr. Navab is an Executive of KKR and a
limited partner of KKR Associates. Upon completion of the Offerings, Messrs.
Kravis and Roberts intend to resign from the Board of Directors and KKR intends
to relinquish two of their four seats on the Company's Board of Directors.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of April 15,1998 and is adjusted to reflect the
sale of 11,500,000 shares in the Stock Offerings (assuming exercise of the
Underwriters' over-allotment option in full) including beneficial ownership by
(i) each stockholder of World Color who owns more than 5% of the outstanding
shares of the Common Stock, (ii) each director of World Color, (iii) the Chief
Executive Officer of World Color, (iv) World Color's four highest paid executive
officers (exclusive of the Chief Executive Officer) and (v) all directors and
executive officers of World Color as a group. Except as otherwise noted, the
persons named in the table below have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them. The
address for the listed beneficial owners, unless stated otherwise, is c/o World
Color Press, Inc., The Mill, 340 Pemberwick Road, Greenwich, Connecticut 06831.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
AS OF APRIL 15, 1998 AFTER OFFERINGS (1)
----------------------- -----------------------
<S> <C> <C> <C> <C>
NAME SHARES PERCENT SHARES PERCENT
- -------------------------------------------------------------- ---------- ----------- ---------- -----------
KKR Associates (2)............................................ 17,546,289 45.7% 6,046,289 15.7%
Janus Capital Corporation..................................... 2,097,585(3) 5.5 2,097,585(3) 5.5
Henry R. Kravis (2)........................................... -- -- -- --
George R. Roberts (2)......................................... -- -- -- --
Scott M. Stuart (2)........................................... -- -- -- --
Alexander Navab, Jr........................................... -- -- -- --
Gerald S. Armstrong........................................... 109,661(4) * 109,661(4) *
Patrice M. Daniels............................................ 183 * 183 *
Mark J. Griffin............................................... 1,895 * 1,895 *
Robert G. Burton.............................................. 802,722(5) 2.1 802,722(5) 2.1
Marc L. Reisch................................................ 169,636(6) * 169,636(6) *
Jennifer L. Adams............................................. 125,200(7) * 125,200(7) *
Dean E. Cherry................................................ 141,847(8) * 141,847(8) *
Brian W. Sullivan............................................. 13,582(9) * 13,582(9) *
All directors and executive officers as a group............... 1,521,696 10) 3.8 1,521,696 10) 3.8
</TABLE>
- ------------------------
* Signifies less than 1%
(1) For purposes of this table "beneficial ownership" includes any shares which
such person has the right to acquire within 60 days of April 15, 1998. For
purposes of computing the percentage of outstanding shares held by each
person or group of persons named above on a given date, any security which
such person or persons has the right to acquire within 60 days after such
date is deemed to be outstanding for purposes of computing the percentage
ownership of such person, but is not deemed to be outstanding in computing
the percentage ownership of any other person.
(2) Shares of the Common Stock shown as owned by KKR Associates are owned of
record by KKR Associates, APC Associates, L.P. ("APC Associates"), GR
Associates, L.P. ("GR Associates"), WCP Associates, L.P. ("WCP Associates")
and KKR Partners II, L.P. ("KKR Partners II" and, collectively, the "KKR
Partnerships"). The sole general partner of each of APC Associates, GR
Associates, WCP Associates and KKR Partners II is KKR Associates which
possesses sole voting and investment power with respect to the shares of the
Common Stock shown as owned by KKR Associates. Messrs. Kravis, Roberts and
Stuart (directors of World Color) and Robert I. MacDonnell, Paul E. Raether,
Michael W. Michelson, Michael T. Tokarz, James H. Greene, Jr., Edward A.
Gilhuly, Perry Golkin and Clifton S. Robbins, as the general partners of KKR
Associates, may be deemed to share beneficial ownership of the shares of
Common Stock shown as beneficially owned by KKR Associates. Each of such
persons disclaim beneficial ownership of such shares, other than to the
extent of his economic interest in such shares. The address of KKR
Associates is 9 West 57th Street, New York, New York 10019.
(3) Reflects shares of which Janus Capital Corporation ("Janus Capital"), in its
role as a registered investment advisor, may be deemed to be the beneficial
owner, as reported in a Schedule 13G filed with the Securities and Exchange
Commission, dated February 13, 1998 (the "Janus 13G"). Mr. Thomas H. Bailey,
also as reported in the Janus 13G, due to his 12.2% ownership of Janus
Capital and his positions as President and Chairman of the Board thereof,
may be deemed to exercise control over Janus Capital and therefore, may be
deemed to have the power to exercise or direct such voting and/or
dispositive power that Janus Capital may have with respect to the Common
Stock. In the Janus 13G, Mr. Bailey specifically disclaims beneficial
ownership over any of the Common Stock.
(4) Includes an aggregate of 90,595 options that are exercisable within 60 days
of the date hereof as well as an aggregate of 1,500 shares owned of record
by children of Mr. Armstrong, of which shares Mr. Armstrong may be deemed to
have indirect ownership.
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<PAGE>
(5) Includes an aggregate of 684,240 options that are exercisable within 60 days
of the date hereof as well as 1,000 shares owned of record as joint tenants
by Mr. Burton's wife and son, and 154 shares owned of record by children of
Mr. Burton, all of which shares Mr. Burton may be deemed to have indirect
ownership. Mr. Burton disclaims beneficial ownership of such shares.
(6) Includes an aggregate of 146,250 options that are exercisable within 60 days
of the date hereof.
(7) Includes an aggregate of 106,341 options that are exercisable within 60 days
of the date hereof as well as an aggregate of 1,380 shares owned of record
by children of Ms. Adams, of which shares Ms. Adams may be deemed to have
indirect ownership. Ms. Adams serves as the custodian for such shares.
(8) Includes an aggregate of 118,250 options that are exercisable within 60 days
of the date hereof.
(9) Includes an aggregate of 9,000 options that are exercisable within 60 days
of the date hereof.
(10) Includes an aggregate of 1,284,345 options that are exercisable within 60
days of the date hereof as well as the shares that may be deemed to be owned
indirectly by each of Mr. Armstrong, Mr. Burton and Ms. Adams as set forth
in notes (4), (5) and (7).
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") of the Company authorizes 100,000,000 shares of Common Stock,
par value $0.01 per share, and 50,000,000 shares of preferred stock, par value
$0.01 per share. The Board of Directors of the Company, in its sole discretion,
may issue Common Stock from the authorized and unissued shares of Common Stock.
Subject to limitations imposed by law or the Certificate of Incorporation, the
Board of Directors is empowered to determine the designation of and the number
of shares constituting a series of preferred stock; the dividend rate for the
series; the terms and conditions of any voting, conversion and exchange rights
for the series; the amounts payable on the series upon redemption or the
Company's liquidation, dissolution or winding-up; the provisions of any sinking
fund for the redemption or purchase of shares of any series; and the preferences
and relative rights among the series of preferred stock.
As of May 15, 1998, no shares of preferred stock and 38,402,123 shares of
Common Stock were issued and outstanding, 3,215,820 shares of Common Stock were
issuable upon exercise of outstanding options, 1,836,736 of which are
immediately exercisable and 3,660,477 shares of Common Stock were issuable upon
conversion of the Company's 6% Convertible Notes.
THE COMMON STOCK
Each share of Common Stock is entitled to one vote at all meetings of
stockholders of the Company for the election of directors and all other matters
submitted to stockholder vote. The Common Stock does not have cumulative voting
rights. Accordingly, the holders of a majority of the outstanding shares of
Common Stock can elect all the directors if they choose to do so. Dividends may
be paid to the holders of Common Stock when, as and if declared by the Board of
Directors of the Company out of funds legally available therefor. The Common
Stock has no preemptive or similar rights. Holders of Common Stock are not
liable to further call or assessment. Upon the liquidation, dissolution or
winding up of the affairs of the Company, any assets remaining after provision
for payment of creditors and holders of preferred stock would be distributed pro
rata among holders of Common Stock.
The Company has not declared or paid any dividends on its Common Stock and
does not anticipate doing so for 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. In addition, the Company is prohibited by the
terms of certain of its outstanding debt and financing agreements from paying
cash dividends on its capital stock, and may in the future enter into loan or
other agreements or issue debt securities or preferred stock that restrict the
payment of cash dividends on the Company's capital stock. See "Price Range of
Common Stock and Dividend Policy," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
The Certificate of Incorporation of the Company provides that except for
liability (i) for any breach of a director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit, directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duties
as a director. Such provision does not exonerate the directors from liability
under federal securities laws and has no effect on any non-monetary remedies
that may be available to the Company or its stockholders. The By-Laws of the
Company provide for indemnification of the officers and directors of the Company
to the full extent permitted by applicable law.
35
<PAGE>
The Company's By-Laws provide for additional notice requirements for
stockholder nominations and proposals at annual or special meetings of the
Company. At annual meetings, stockholders will be entitled to submit nominations
for directors or other proposals only upon written notice to the Company not
less than 60 days, nor more than 90 days, prior to the annual meeting.
Harris Trust Company of New York is the Registrar and the Transfer Agent for
the Common Stock.
SECTION 203 OF THE DELAWARE LAW
Generally, Section 203 of the DGCL prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to the date
of the business combination, the transaction is approved by the board of
directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock, or (iii) on or
after such date the business combination is approved by the board and by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder. A "business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
the stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock.
36
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general summary of certain United States federal income
and estate tax consequences expected to result under current law from the
purchase, ownership, sale or other taxable disposition of the Common Stock by a
"Non-United States Holder." For the purpose of this summary, a "Non-United
States Holder" is any person or entity that is, as to the United States, a
foreign corporation, a non-resident alien individual, a foreign partnership, a
foreign estate or a foreign trust as such terms are defined in the Internal
Revenue Code of 1986, as amended and in effect (the "Code"). This summary does
not deal with all aspects of United States federal income and estate taxation
that may be relevant to Non-United States Holders in light of their personal
circumstances or to certain Non-United States Holders that may be subject to
special treatment under United States federal income tax laws. Furthermore, this
summary does not address foreign, state or local tax consequences. This summary
is based on current provisions of the Code and administrative and judicial
interpretations as of the date hereof, all of which are subject to change,
possibly with retroactive effect. Prospective foreign investors are urged to
consult their tax advisors regarding the United States federal, state, local and
non-United States income and other tax consequences of purchasing, owning and
disposing of Common Stock.
DIVIDENDS
The Company does not expect to pay dividends on its Common Stock in the
foreseeable future. See "Price Range of Common Stock and Dividend Policy."
Generally, any dividend paid to a Non-United States Holder of Common Stock that
is not effectively connected with the conduct of the Non-United States Holder of
a trade or business within the United States will be subject to withholding of
United States federal income tax at a rate of 30% of the gross amount of the
dividend (or such lower tax rate as may be specified by an applicable income tax
treaty). Under current United States Treasury regulations, dividends paid to an
address in a country other than the United States are presumed to be paid to a
resident of such country for purposes of the withholding discussed above (unless
the payor has knowledge to the contrary) and, under the current interpretation
of United States Treasury regulations, for purposes of determining the
applicability of a tax treaty rate. However, under the New Withholding
Regulations (defined below), a Non-United States Holder of Common Stock who
wishes to claim the benefit of an applicable treaty rate would be required to
satisfy certain certification and other requirements.
Dividends received by a Non-United States Holder that are effectively
connected with a United States trade or business conducted by such Non-United
States Holder are exempt from the 30% withholding tax discussed above. However,
such effectively connected dividends, net of certain deductions and credits, are
taxed at the same graduated rates applicable to United States persons. A Non-
United States Holder may claim exemption from withholding under the effectively
connected income exception by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of Business in the United
States) or a successor form with the Company or its paying agent. In addition to
being subject to the graduated tax described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a United
States trade or business of such corporate Non-United States Holder may also be
subject to a branch profits tax at a rate of 30% (or such lower rate as may be
specified by an applicable income tax treaty).
SALE OR DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax on any gain recognized upon the sale or other disposition of
Common Stock unless (i) such gain is effectively connected with a United States
trade or business of the Non-United States Holder or, if a tax treaty applies,
the gain is attributable to the holder's United States permanent establishment
(in either case, the branch profits tax also may apply if the Non-United States
Holder is a corporation), (ii) in the case of
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<PAGE>
certain Non-United States Holders who are non-resident alien individuals and
hold the Common Stock as a capital asset, such individuals are present in the
United States for 183 or more days in the taxable year of disposition and
certain other conditions are met, (iii) the Common Stock constitutes a United
States real property interest by reason of the Company's status as a "United
States real property holding corporation" ("USRPHC") for United States federal
income tax purposes at any time within the shorter of the five-year period
preceding such disposition or such Non-United States Holder's holding period for
such Common Stock or (iv) the Non-United States Holder is subject to tax
pursuant to the provisions of United States federal income tax law applicable to
certain United States expatriates. If a Non-United States Holder falls under
clause (i) or (iii) above, the holder will be taxed on the net gain derived from
the sale at regular graduated United States federal income tax rates (and, with
respect to corporate Non-United States Holders, may also be subject to the
branch profits tax described above). If an individual Non-United States Holder
falls under clause (ii) above, the holder generally will be subject to a 30% tax
on the gain derived from the sale, which gain may be offset by U.S. capital
losses recognized within the same taxable year of such sale.
The Company currently is not and does not expect to become a USRPHC for
United States federal income tax purposes. The Company will qualify as a USRPHC
if the fair market value of its United States real property interests equals 50%
or more of the aggregate fair market value of the Company's worldwide real
property interests and any other assets of the Company used or held for use in a
trade or business. If the Common Stock is regularly traded on an established
securities market, however, it will be treated as a United States real property
interest only in the case of a Non-United States Holder who owns more than 5% of
the value of the outstanding Common Stock during the five-year period preceding
the holder's disposition of any shares of Common Stock or, if shorter, the
Non-United States Holder's holding period for such Common Stock. Generally, if
the sale or disposition of Common Stock constitutes a sale or disposition of a
United States real property interest, the amount realized from such sale or
disposition by a Non-United States Holder will be subject to United States
withholding tax equal to 10% of such amount. However, the amount realized by a
Non-United States Holder will not be subject to such withholding if, during the
calendar year in which the disposition occurs, the Common Stock is regularly
traded on an established securities market, or the holder otherwise establishes
an exemption.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In the event the Company decides, contrary to its present intent, to pay
dividends with respect to its Common Stock, then, generally, the Company must
report annually to the United States Internal Revenue Service (the "IRS") the
amount of dividends paid, the name and address of the recipient, and the amount,
if any, of tax withheld. See "Dividend Policy." A similar report will be sent
annually to the each Non-United States Holder as to the dividends paid to such
holder. Pursuant to tax treaties or other agreements, the IRS may make this
information available to tax authorities in the recipient's country of
residence. These information reporting requirements apply regardless of whether
withholding was reduced or eliminated by an applicable tax treaty or because the
dividends were effectively connected with a United States trade or business.
Dividends paid to a Non-United States Holder that are subject to the 30% or
reduced treaty rate of United States withholding tax previously discussed will
be exempt from United States backup withholding tax. Otherwise, a backup
withholding tax at a rate of 31% may apply to dividends paid to Non-United
States Holders that are not "exempt recipients" and that fail to provide certain
information regarding their foreign status in the manner required by the Code
and applicable United States Treasury Department regulations.
Generally, United States information reporting and backup withholding will
not apply to a payment of disposition proceeds if the payment is made outside
the United States through a non-U.S. office of a non-U.S. broker. However,
information reporting requirements (but not backup withholding) will apply to a
payment of disposition proceeds outside the United States through an office
outside the United States
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<PAGE>
of a broker that is (a) a United States person, (b) a controlled foreign
corporation for United States federal income tax purposes or (c) a foreign
person 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment (or for
such part of the period during which the foreign broker had been in existence)
was effectively connected with the conduct of a United States trade or business,
unless such broker has documentary evidence in its files of the owner's foreign
status and has no actual knowledge to the contrary, or the holder otherwise
establishes an exemption. The payment of the proceeds of the disposition of
Common Stock to or through the United States office of a broker is subject to
information reporting and backup withholding at a rate of 31% unless the holder
certifies its non-United States status under penalties of perjury or otherwise
establishes an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund may
be obtained, provided that the required information is furnished to the IRS.
NEW WITHHOLDING REGULATIONS
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules applicable to Non-United States
Holders (the "New Withholding Regulations"). In general, the New Withholding
Regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. The New Withholding
Regulations also clarify the duties of the United States payors making payments
to foreign persons and modify the rules concerning withholding on payments made
to Non-United States holders through foreign intermediaries. The New Withholding
Regulations are generally effective for payments made after December 31, 1999,
subject to certain transition rules. NON-UNITED STATES HOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE IMPACT, IF ANY, OF THE NEW
WITHHOLDING REGULATIONS ON THEIR INVESTMENT IN COMMON STOCK.
FEDERAL ESTATE TAXES
An individual Non-United States Holder who (i) is not a citizen or resident
of the United States (as specially defined for United States federal estate tax
purposes) at the time of death and (ii) owns, or is treated as owning, Common
Stock at the time of his or her death or has made certain lifetime transfers of
an interest in Common Stock will be required to include the value of such Common
Stock in his or her gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
39
<PAGE>
LEGAL MATTERS
The legality of the Common Stock will be passed upon for the Company by
Latham & Watkins, New York, New York. Certain legal matters relating to the
Offerings will be passed upon for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York. Certain partners of Latham & Watkins,
members of their families, related persons and others have an indirect interest,
through limited partnerships, in less than 1% of the Common Stock of the
Company. Such persons do not have the power to vote or dispose of such shares of
Common Stock. In addition, Latham & Watkins has in the past provided, and may
continue to provide, legal services to KKR and its affiliates.
EXPERTS
The consolidated financial statements as of December 29, 1996 and December
28, 1997 and for each of the three years in the period ended December 28, 1997
included in this Prospectus and the related financial statement schedule
incorporated by reference from the Company's Annual Report on Form 10-K for the
year ended December 28, 1997 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and
incorporated herein by reference and have been so included and incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
40
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PAGE
---
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 29, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 30, 1997 AND MARCH 29, 1998 (UNAUDITED)
Condensed Consolidated Balance Sheet (Unaudited) as of March 29, 1998.............. F-2
Condensed Consolidated Statements of Operations (Unaudited ) for the Three Months
Ended March 30, 1997 and March 29, 1998.......................................... F-3
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months
Ended March 30, 1997 and March 29, 1998.......................................... F-4
Notes to Consolidated Financial Statements (Unaudited)............................. F-5
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995, DECEMBER 29,
1996 AND DECEMBER 28, 1997
Independent Auditors' Report....................................................... F-7
Consolidated Balance Sheets as of December 29, 1996 and December 28, 1997.......... F-8
Consolidated Statements of Operations for the Years Ended December 31, 1995,
December 29, 1996 and December 28, 1997.......................................... F-9
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1995, December 29, 1996 and December 28, 1997.................................... F-10
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995,
December 29, 1996 and December 28, 1997.......................................... F-11
Notes to Consolidated Financial Statements......................................... F-12
</TABLE>
F-1
<PAGE>
WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 29,
1998
------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 32,791
Accounts receivable--net........................ 182,987
Inventories..................................... 251,162
Deferred income taxes........................... 28,345
Other........................................... 39,797
------------
Total current assets........................ 535,082
Property, plant and equipment, at cost.......... 1,598,844
Accumulated depreciation and amortization....... (667,464)
------------
Property, plant and equipment--net............ 931,380
Goodwill--net................................... 628,434
Other........................................... 68,122
------------
TOTAL ASSETS...................................... $ 2,163,018
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses........... $ 284,924
Current maturities of long-term debt............ 9,273
------------
Total current liabilities................... 294,197
Long-term debt.................................. 1,036,550
Deferred income taxes........................... 103,557
Other long-term liabilities..................... 119,437
------------
Total liabilities........................... 1,553,741
------------
Stockholders' Equity:
Common stock, $.01 par value--shares authorized,
100,000,000 at March 29, 1998; shares
outstanding, 38,363,353 at March 29, 1998..... 384
Additional paid-in capital...................... 711,442
Accumulated deficit............................. (102,549)
------------
Total stockholders' equity.................. 609,277
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $ 2,163,018
------------
------------
</TABLE>
See notes to condensed consolidated financial statements.
F-2
<PAGE>
WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTH PERIODS
ENDED
------------------------
MARCH 30, MARCH 29,
1997 1998
----------- -----------
<S> <C> <C>
NET SALES.......................................................................... $ 458,351 $ 550,407
COST OF SALES...................................................................... 383,036 462,834
----------- -----------
Gross profit................................................................... 75,315 87,573
Selling, general and administrative expenses....................................... 43,592 51,427
----------- -----------
OPERATING INCOME................................................................... 31,723 36,146
INTEREST EXPENSE AND SECURITIZATION FEES........................................... 19,821 20,150
----------- -----------
INCOME BEFORE INCOME TAXES......................................................... 11,902 15,996
INCOME TAX PROVISION............................................................... 4,999 6,638
----------- -----------
NET INCOME......................................................................... $ 6,903 $ 9,358
----------- -----------
----------- -----------
Net income per common share--basic................................................. $ 0.20 $ 0.24
Net income per common share--diluted............................................... $ 0.20 $ 0.24
</TABLE>
See notes to condensed consolidated financial statements.
F-3
<PAGE>
WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTH PERIODS ENDED
--------------------------
MARCH 30, MARCH 29,
1997 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income...................................................................... $ 6,903 $ 9,358
Adjustments to reconcile net income to net cash flows used in operating
activities:
Depreciation and amortization................................................. 33,814 34,728
Deferred income tax provision................................................. 1,785 2,291
Changes in operating assets and liabilities:
Accounts receivable--net.................................................... 25,511 18,804
Inventories................................................................. (1,984) (36,410)
Accounts payable and accrued expenses....................................... (59,718) (38,224)
Other assets and liabilities--net........................................... (15,171) (13,919)
------------ ------------
Net cash used in operating activities..................................... (8,860) (23,372)
------------ ------------
INVESTING ACTIVITIES:
Additions to property, plant and equipment--net................................. (21,790) (47,520)
Acquisitions of businesses, net of cash acquired................................ (154,975) (160,703)
------------ ------------
Net cash used in investing activities..................................... (176,765) (208,223)
------------ ------------
FINANCING ACTIVITIES:
Net borrowings on debt.......................................................... 178,961 226,710
------------ ------------
Net cash provided by financing activities................................. 178,961 226,710
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS............................................. (6,664) (4,885)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................................... 33,182 37,676
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.......................................... $ 26,518 $ 32,791
------------ ------------
------------ ------------
</TABLE>
See notes to condensed consolidated financial statements.
F-4
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated interim financial statements have
been prepared by World Color Press, Inc. (along with its subsidiaries, the
"Company") pursuant to the rules and regulations of the Securities and Exchange
Commission and reflect normal and recurring adjustments, which are, in the
opinion of the Company, considered necessary for a fair presentation. As
permitted by these regulations, these statements do not include all information
required by generally accepted accounting principles to be included in an annual
set of financial statements, however, the Company believes that the disclosures
made are adequate to make the information presented not misleading. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's latest Annual Report on Form 10-K.
During the period ended March 29, 1998, the Company acquired certain
businesses whose contributions were not significant to the Company's results of
operations for the period presented, nor are they expected to have a material
effect on the Company's results on a continuing basis.
2. NET INCOME PER COMMON SHARE
Common shares of 33,744,531 and 38,354,853 were utilized to calculate net
income per common share--basic for the first quarter ended 1997 and 1998,
respectively. Net income per common share-- diluted was computed utilizing the
basic shares noted above as well as common stock equivalents of 741,571 and
1,044,124 for the first quarter ended 1997 and 1998, respectively. Options to
purchase 354,000 and 25,000 shares of common stock were not included in the
computations of net income per common share--diluted for the first quarter of
1997 and 1998, respectively, because the exercise price of the options was
greater than the average market price of the common shares. Common shares and
interest incurred from convertible debt securities were also omitted from the
1998 diluted calculation since the effect was antidilutive.
3. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
MARCH 29,
1998
------------
<S> <C>
Work-in-process..................................................... $ 120,616
Raw materials....................................................... 130,546
------------
Total............................................................. $ 251,162
------------
------------
</TABLE>
4. IMPLEMENTATION OF NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components in the financial statements. The Company adopted this
statement in the first quarter of 1998. The adoption of SFAS No. 130 did not
have a material effect on the Company's consolidated financial statements.
F-5
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. IMPLEMENTATION OF NEW ACCOUNTING STANDARDS (CONTINUED)
In June 1997, the Financial Accounting Standards Board also issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 establishes standards for reporting information on operating segments in
the financial statements. The Company will adopt this statement for the fiscal
year ended 1998. The Company is currently evaluating the impact SFAS No. 131 may
have on additional disclosure, if any, to its consolidated financial statements.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,"
which standardizes the disclosure for pensions and other postretirement
benefits. The Company will adopt this statement for the fiscal year ended 1998.
The Company is currently evaluating the impact SFAS No. 132 may have on
additional disclosure, if any, to its consolidated financial statements.
F-6
<PAGE>
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 28, 1997 and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 28, 1997. 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 28, 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 28, 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
February 4, 1998
F-7
<PAGE>
WORLD COLOR PRESS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 33,182 $ 37,676
Accounts receivable--net of allowances for doubtful accounts of $8,476 and $9,287,
respectively.................................................................... 311,478 166,747
Inventories....................................................................... 140,160 204,889
Deferred income taxes............................................................. 32,944 31,297
Other............................................................................. 24,843 33,625
------------- -------------
Total current assets............................................................ 542,607 474,234
Property, plant and equipment--net................................................ 818,157 857,195
Goodwill--net..................................................................... 423,880 535,416
Other............................................................................. 37,788 66,726
------------- -------------
TOTAL ASSETS........................................................................ $ 1,822,432 $ 1,933,571
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................. $ 172,013 $ 163,710
Accrued expenses.................................................................. 134,854 132,802
Current maturities of long-term debt.............................................. 8,672 8,970
------------- -------------
Total current liabilities....................................................... 315,539 305,482
Long-term debt.................................................................... 889,195 810,143
Deferred income taxes............................................................. 91,555 100,045
Other long-term liabilities....................................................... 111,211 118,132
------------- -------------
Total liabilities............................................................... 1,407,500 1,333,802
------------- -------------
Stockholders' equity:
Common stock, $.01 par value -authorized, 100,000,000 shares in 1996 and 1997;
shares outstanding, 33,744,531 in 1996 and 38,353,853 in 1997................... 337 384
Additional paid-in capital........................................................ 583,721 711,292
Accumulated deficit............................................................... (169,126) (111,907)
------------- -------------
Total stockholders' equity...................................................... 414,932 599,769
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................................... $ 1,822,432 $ 1,933,571
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
WORLD COLOR PRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
NET SALES........................................................... $ 1,295,582 $ 1,641,412 $ 1,981,225
COST OF SALES....................................................... 1,074,785 1,349,130 1,613,938
------------- ------------- -------------
Gross profit.................................................... 220,797 292,282 367,287
------------- ------------- -------------
OTHER OPERATING EXPENSES:
Selling, general and administrative............................... 125,539 153,071 188,688
Streamlining charge............................................... 40,900 -- --
------------- ------------- -------------
Total other operating expenses.................................. 166,439 153,071 188,688
------------- ------------- -------------
OPERATING INCOME.................................................... 54,358 139,211 178,599
INTEREST EXPENSE AND SECURITIZATION FEES............................ 37,897 58,417 80,039
------------- ------------- -------------
INCOME BEFORE INCOME TAXES.......................................... 16,461 80,794 98,560
INCOME TAX PROVISION................................................ 6,584 33,533 41,341
------------- ------------- -------------
NET INCOME.......................................................... $ 9,877 $ 47,261 $ 57,219
------------- ------------- -------------
------------- ------------- -------------
Net income per common share--basic.................................. $ 0.31 $ 1.40 $ 1.65
Net income per common share--diluted................................ $ 0.29 $ 1.35 $ 1.60
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
WORLD COLOR PRESS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT
----------- ----------- -------------
<S> <C> <C> <C>
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)
Net income.............................................................. -- -- 57,219
Common stock issued..................................................... 47 127,571 --
----- ----------- -------------
BALANCE, DECEMBER 28, 1997................................................ $ 384 $ 711,292 $ (111,907)
----- ----------- -------------
----- ----------- -------------
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
WORLD COLOR PRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................ $ 9,877 $ 47,261 $ 57,219
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 74,668 104,493 131,710
Streamlining charge................................................. 40,900 -- --
Deferred income tax provision (benefit)............................. (766) 13,573 14,272
Changes in operating assets and liabilities:
Proceeds from sale of accounts receivable......................... -- -- 200,000
Other changes in accounts receivable--net......................... (31,097) (30,062) (13,812)
Inventories....................................................... (51,083) 29,495 (53,936)
Accounts payable and accrued expenses............................. (7,650) 35,178 (43,577)
Other assets and liabilities--net................................. (28,105) (53,355) (52,571)
------------ ------------ ------------
Net cash provided by operating activities....................... 6,744 146,583 239,305
------------ ------------ ------------
INVESTING ACTIVITIES:
Additions to property, plant and equipment............................ (120,339) (70,639) (93,145)
Proceeds from sale of property, plant and equipment................... 7,959 1,345 2,006
Acquisitions of businesses, net of cash acquired...................... (108,738) (167,283) (172,539)
------------ ------------ ------------
Net cash used in investing activities........................... (221,118) (236,577) (263,678)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from borrowings.............................................. 214,037 562,120 285,775
Payments on long-term debt............................................ (90,365) (456,751) (384,526)
Proceeds from issuance of common stock................................ 74,776 8,905 127,618
------------ ------------ ------------
Net cash provided by financing activities....................... 198,448 114,274 28,867
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ (15,926) 24,280 4,494
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............................ 24,828 8,902 33,182
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR.................................. $ 8,902 $ 33,182 $ 37,676
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION
World Color Press, Inc. and subsidiaries (the "Company") specializes in the
production and distribution of data for customers in the magazine, catalog,
commercial, book, direct mail and directory 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 common
stock and additional paid-in capital amounts presented 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 28, 1997, 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.
On October 8, 1997, the Company issued 4,600,000 common shares through a
public offering, resulting in net proceeds of approximately $127,600. These
proceeds were utilized to repay certain indebtedness under the Credit Agreement
(as defined in Note 2).
2. BUSINESS ACQUISITIONS
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 consolidated 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 using the straight-line method over 35 years.
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
F-12
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. BUSINESS ACQUISITIONS (CONTINUED)
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
was a leading diversified commercial printer whose business included 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 was accounted for as a
purchase and the consolidated 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.
During 1995 and 1996, the Company acquired certain other businesses whose
contributions were not significant to the Company's results of operations for
the periods presented, nor are they expected to have a material effect on the
Company's results on a continuing basis.
In 1997, the Company acquired two businesses operating in the book, magazine
and catalog markets. These companies were acquired for the aggregate purchase
price of approximately $173,000, primarily funded using proceeds from the
Company's credit facility. The Company liquidated approximately $20,000 of the
acquired companies' indebtedness. These acquisitions were accounted for as
purchases and the consolidated 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 $126,000 and
is being amortized using the straight-line method over 35 years.
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 year 1995 included 53 weeks.
Fiscal years 1996 and 1997 each included 52 weeks.
CONSOLIDATED STATEMENTS OF CASH FLOWS--During 1995, 1996 and 1997, the
Company borrowed and repaid $318,700, $407,200 and $563,200, 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.
F-13
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash paid for interest by the Company during the years 1995, 1996 and 1997
was $37,193, $54,037 and $75,738, respectively, net of capitalized interest of
$1,810, $252 and $941, respectively. Cash paid for taxes during the years 1995,
1996 and 1997 was $8,305, $18,068 and $28,266, 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.
GOODWILL--Goodwill is amortized using the straight-line method primarily
over 35 years. Amortization of goodwill for the years 1995, 1996 and 1997 was
$7,275, $10,757 and $16,424, respectively, and is included in selling, general
and administrative expenses. Accumulated amortization of goodwill was $34,804
and $51,228 as of year-end 1996 and 1997, respectively.
NET INCOME PER COMMON SHARE--In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," which establishes new standards for computing and
presenting net income per common share. The Company adopted SFAS No. 128 in the
fourth quarter 1997, and has calculated "net income per common share - basic"
based on the weighted average common shares outstanding during each period and
"net income per common share--diluted" based on the weighted average common and
dilutive common equivalent shares outstanding during each period. Weighted
average shares were adjusted to give effect to the change in the Company's
capital structure pursuant to the Merger and the Options Adjustments, as
described in Notes 1 and 11.
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 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
F-14
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. There were no
adjustments to the carrying value of these assets for 1996 or 1997.
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 has adopted only the disclosure provisions of SFAS No. 123.
Accordingly, the Company has disclosed in Note 11 the pro forma effect on net
income and net income per common share--basic and diluted.
RECENT ACCOUNTING PRONOUNCEMENTS--In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for the fiscal year ended 1998. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. The Company does not expect the adoption of SFAS No. 130
to have a material effect on its consolidated financial statements. SFAS No. 131
establishes standards for reporting information on operating segments in the
financial statements. The Company is currently evaluating the impact SFAS No.
131 may have on additional disclosure, if any, to its consolidated financial
statements.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,"
which standardizes the disclosure for pensions and other postretirement
benefits. The Company will adopt this statement for the fiscal year ended 1998.
The Company is currently evaluating the impact SFAS No. 132 may have on
additional disclosure, if any, to its consolidated financial statements.
4. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Work-in-process..................................................... $ 73,747 $ 111,326
Raw materials....................................................... 66,413 93,563
----------- -----------
Total............................................................. $ 140,160 $ 204,889
----------- -----------
----------- -----------
</TABLE>
F-15
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is as follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Land...................................................................... $ 14,822 $ 16,252
Buildings and leasehold improvements...................................... 247,806 292,092
Machinery and equipment................................................... 1,075,349 1,180,297
Leased property under capitalized leases.................................. 8,519 6,692
------------- -------------
1,346,496 1,495,333
Accumulated depreciation and amortization................................. 528,339 638,138
------------- -------------
Total................................................................... $ 818,157 $ 857,195
------------- -------------
------------- -------------
</TABLE>
Depreciation expense related to property, plant and equipment was $65,526,
$91,186 and $114,819 for the years 1995, 1996 and 1997, respectively.
6. ACCRUED EXPENSES
Accrued expenses are as follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Compensation.............................................................. $ 48,447 $ 50,239
Employee health and welfare benefits...................................... 16,593 9,696
Deferred revenue.......................................................... 16,105 10,956
Interest.................................................................. 8,493 10,368
Other..................................................................... 45,216 51,543
------------- -------------
Total................................................................... $ 134,854 $ 132,802
------------- -------------
------------- -------------
</TABLE>
7. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Senior Subordinated Notes................................................. $ 150,000 $ 150,000
Convertible Senior Subordinated Notes..................................... -- 151,800
Borrowings under credit agreements........................................ 672,000 450,500
Notes payable, average of 9.17% due 2004--2005............................ 40,129 36,729
Capitalized lease obligations, weighted average imputed interest rate of
9.27% due through 2003.................................................. 5,067 3,540
Other debt, average of 8.46% due 1998--2004............................... 30,671 26,544
------------- -------------
Total................................................................... 897,867 819,113
Less current maturities................................................... 8,672 8,970
------------- -------------
Noncurrent portion........................................................ $ 889,195 $ 810,143
------------- -------------
------------- -------------
</TABLE>
F-16
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. LONG-TERM DEBT (CONTINUED)
At December 28, 1997, the fair value of the Senior Subordinated Notes and
Convertible Senior Subordinated Notes was approximately $156,188 and $146,108,
respectively, based on quoted market prices. 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 (the
"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.
CONVERTIBLE SENIOR SUBORDINATED NOTES--On October 8, 1997, the Company
issued $151,800 aggregate principal amount of Convertible Senior Subordinated
Notes (the "Convertible Notes"), receiving net proceeds of approximately
$147,900. Interest on the Convertible Notes is payable semi- annually at the
annual rate of 6.00%. The Convertible Notes have no required principal payments
prior to maturity on October 1, 2007. The Convertible Notes in the aggregate are
convertible into 3,660,477 shares of the Company's common stock at $41.47 per
share, subject to adjustment upon the occurrence of certain events. The
Convertible Notes are redeemable at the option of the holder at any time and at
the option of the Company, at specified prices, subsequent to October 4, 2000.
The net proceeds from the Convertible Notes offering were utilized to repay
certain indebtedness incurred under the Credit Agreement.
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. In
June and October 1997, concurrent with the liquidation of indebtedness utilizing
proceeds from the Asset Securitization (as defined in Note 8), equity offering
and Convertible Notes offering, the Credit Agreement was amended to provide and
subsequently maintain the aggregate total commitments of $920,000, comprised of
$95,000 in term loan commitments, $250,000 of revolving loan commitments and
$575,000 in acquisition term loan commitments. All other significant financial
provisions of the Credit Agreement remained substantially unchanged. The Credit
Agreement requires 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 6.25% to 8.63% in
1997. The Credit Agreement includes a commitment fee of .25% per annum based on
the daily average unutilized revolving credit commitment. At December 28, 1997,
$272,000 of acquisition term loan commitments and $181,929 of the revolving loan
commitments were unutilized. The amount unutilized under the revolving loan
commitments has been reduced by outstanding letters of credit of $15,571, 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 28,
1997.
F-17
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. LONG-TERM DEBT (CONTINUED)
Aggregate annual maturities of long-term debt subsequent to December 28,
1997 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- --------------------------------------------------------------------------------- -----------
<S> <C>
1998............................................................................. $ 8,970
1999............................................................................. 25,209
2000............................................................................. 75,733
2001............................................................................. 96,427
2002............................................................................. 289,718
2003 and thereafter.............................................................. 320,512
-----------
816,569
Noncurrent portion of capitalized lease obligations.............................. 2,544
-----------
Total............................................................................ $ 819,113
-----------
-----------
</TABLE>
8. ASSET SECURITIZATION
In conjunction with the amended Credit Agreement described in Note 7, on
June 30, 1997, the Company entered into an agreement to sell, on a revolving
basis for a period of up to five years, certain of its accounts receivable to a
wholly-owned subsidiary, which entered into an agreement to transfer, on a
revolving basis, an undivided percentage ownership interest in a designated pool
of accounts receivable to a maximum of $204,000 (the "Asset Securitization"). At
December 28, 1997, $200,000 of accounts receivable had been sold and reflected
as a reduction of accounts receivable. Fees arising from the securitization
transaction of $5,133 are included in interest expense and securitization fees
in the consolidated statement of operations for the year ended December 28,
1997. These fees vary based on commercial paper rates plus a margin, providing a
lower effective rate than that available under the Company's Credit Agreement.
The Company maintains an allowance for doubtful accounts based on the expected
collectibility of all accounts receivable, including receivables sold.
9. 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 6
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 11 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.
F-18
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. LEASES (CONTINUED)
Future minimum rental payments required under noncancellable leases at
December 28, 1997 were as follows:
<TABLE>
<CAPTION>
YEAR CAPITAL OPERATING
- ----------------------------------------------------------------------- --------- -----------
<S> <C> <C>
1998................................................................... $ 1,465 $ 47,795
1999................................................................... 1,181 45,808
2000................................................................... 556 42,076
2001................................................................... 556 38,212
2002................................................................... 556 22,153
2003 and thereafter.................................................... 231 52,585
--------- -----------
Total minimum lease payments........................................... 4,545 $ 248,629
-----------
-----------
Less imputed interest.................................................. 1,005
---------
Capitalized lease obligations.......................................... 3,540
Less current maturities................................................ 996
---------
Noncurrent portion..................................................... $ 2,544
---------
---------
</TABLE>
Rental expense for operating leases was $31,948, $36,299 and $44,703 for the
years 1995, 1996 and 1997, respectively. Assets recorded under capital leases
amounted to $5,342 and $4,828, net of accumulated amortization of $3,177 and
$1,864 at the end of 1996 and 1997, respectively.
F-19
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
10. INCOME TAXES
The provision (benefit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal................................................... $ 6,540 $ 16,542 $ 21,178
State..................................................... 810 3,418 5,891
--------- --------- ---------
7,350 19,960 27,069
--------- --------- ---------
Deferred:
Federal................................................... (944) 12,491 14,525
State..................................................... 178 1,082 (253)
--------- --------- ---------
(766) 13,573 14,272
--------- --------- ---------
Total................................................. $ 6,584 $ 33,533 $ 41,341
--------- --------- ---------
--------- --------- ---------
</TABLE>
The tax effects of significant items comprising the Company's net deferred
tax liability as of December 29, 1996 and December 28, 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ------------
<S> <C> <C>
Deferred tax assets:
Operating loss carryforwards...................................... $ 15,161 $ 8,219
Tax credit carryforwards.......................................... 21,241 39,602
Postemployment benefits........................................... 22,106 20,906
Postretirement benefits other than pensions....................... 11,450 10,867
Pension accrual................................................... 7,668 7,232
Vacation accrual.................................................. 5,390 7,172
Other differences................................................. 21,585 10,119
---------- ------------
Gross deferred tax assets....................................... 104,601 104,117
---------- ------------
Deferred tax liabilities:
Differences between book and tax bases of property................ (138,116) (138,066)
Other differences................................................. (18,256) (27,959)
---------- ------------
Gross deferred tax liabilities.................................. (156,372) (166,025)
---------- ------------
Deferred tax asset valuation allowance.............................. (6,840) (6,840)
---------- ------------
Net deferred tax liability.......................................... (58,611) (68,748)
Less current deferred tax asset..................................... 32,944 31,297
---------- ------------
Noncurrent deferred tax liability................................... $ (91,555) $ (100,045)
---------- ------------
---------- ------------
</TABLE>
The 1996 and 1997 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 limitations of certain state net operating loss
carryforwards.
F-20
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
10. INCOME TAXES (CONTINUED)
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:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Income tax provision, at 35%................................ $ 5,761 $ 28,278 $ 34,496
State and local income taxes, net of federal income tax
benefit................................................... 642 2,941 3,665
Deferred tax asset valuation allowance...................... (1,160) -- --
Other, primarily goodwill amortization...................... 1,341 2,314 3,180
--------- --------- ---------
Total................................................... $ 6,584 $ 33,533 $ 41,341
--------- --------- ---------
--------- --------- ---------
</TABLE>
At December 28, 1997, the Company has net operating loss carryforwards for
federal income tax purposes of $14,875 available to reduce future taxable
income, expiring primarily in 2000. The Company also has federal tax credits of
$2,495 expiring primarily from 1999 to 2002 and state tax credits of $2,575
expiring from 2001 to 2012. In addition, the Company has alternative minimum tax
carryover credits of $34,532 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.
11. 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.
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.
Under the Cash Balance Plan, each participant's account is credited with both
interest and a fixed percentage of the participant's annual compensation.
The components of net periodic pension cost are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service cost (for benefits earned during the year)........... $ 2,270 $ 4,927 $ 5,201
Interest cost on projected benefit obligation................ 5,010 9,218 14,066
Actual return on plan assets................................. (7,751) (12,467) (14,947)
Net amortization and deferral................................ 1,800 2,295 (1,712)
--------- --------- ---------
Net periodic pension cost.................................... $ 1,329 $ 3,973 $ 2,608
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-21
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
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 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
(PLANS IN WHICH)
<CAPTION>
ACCUMULATED ASSETS ACCUMULATED
BENEFITS EXCEED BENEFITS
EXCEED ACCUMULATED EXCEED
ASSETS BENEFITS ASSETS
------------- ------------- -------------
<S> <C> <C> <C>
Actuarial present value of plan benefits:
Vested.............................................................. $ 27,774 $ 83,262 $ 170,732
Nonvested........................................................... 1,273 5,723 8,026
------------- ------------- -------------
Accumulated benefit obligation...................................... 29,047 88,985 178,758
Effect of projected future salary increases......................... 2,822 12,201 13,091
------------- ------------- -------------
Projected benefit obligation........................................ 31,869 101,186 191,849
Plan assets at fair value........................................... 26,260 109,669 168,625
------------- ------------- -------------
Plan assets greater than (less than) the projected benefit
obligation........................................................ (5,609) 8,483 (23,224)
Unrecognized net loss (gain)........................................ (245) (18,520) 15,474
Unrecognized net transition obligation (asset)...................... 347 (982) (408)
Unrecognized prior service cost (credit)............................ 694 (6,508) (11,125)
Adjustment required to recognize minimum liability.................. (1,477) -- (3,484)
------------- ------------- -------------
Accrued pension liability........................................... $ (6,290) $ (17,527) $ (22,767)
------------- ------------- -------------
------------- ------------- -------------
</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 1997, an additional minimum pension liability for unfunded
accumulated benefit obligations of $1,477 and $3,484, 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 1997, respectively. The expected long-term rate of return on plan
assets used was 9.0%, 10.0% and 10.0% for 1995, 1996 and 1997, respectively.
Plan assets consist principally of common stocks and U.S. government and
corporate obligations. At December 28, 1997, the plans' assets included an
aggregate of $4,614 of the Company's common stock.
Certain union employees of the Company participate in multiemployer plans.
Amounts charged to benefit expense relating to the multiemployer plans for 1995,
1996 and 1997 totaled $3,049, $3,185 and $3,352, 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 1995, 1996 and 1997 totaled $1,186, $1,044 and
$1,977, respectively.
F-22
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
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:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Actuarial present value of plan benefits:
Retirees............................................................... $ 15,349 $ 17,263
Fully eligible active plan participants................................ 2,274 6,783
Other active plan participants......................................... 8,503 20,619
--------- ---------
Total accumulated benefit obligation................................... 26,126 44,665
Unrecognized net deferrals............................................. 5,172 (584)
--------- ---------
Accrued postretirement benefits........................................ $ 31,298 $ 44,081
--------- ---------
--------- ---------
</TABLE>
The components of net periodic postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service Cost................................................. $ 511 $ 839 $ 1,365
Interest Cost................................................ 1,192 1,596 3,158
Amortization of unrecognized prior service cost.............. (1,289) (1,289) (1,289)
Amortization of unrecognized net gain........................ (194) -- --
--------- --------- ---------
Net periodic postretirement benefit cost..................... $ 220 $ 1,146 $ 3,234
--------- --------- ---------
--------- --------- ---------
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 7% and 5% at the end of 1996 and 1997,
respectively, after which it remains constant at 5%. A one percentage point
increase in the assumed health care cost trend rate would increase the
accumulated postretirement benefit obligation as of December 28, 1997 by $3,409
and the annual postretirement benefit expense by approximately $392. The assumed
discount rate used in determining the accumulated postretirement benefit
obligation was 8.0% and 7.5% in 1996 and 1997, respectively.
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.
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
F-23
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
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.
<TABLE>
<CAPTION>
NUMBER OF OPTION
OPTIONS PRICE
------------ -------------------
<S> <C> <C>
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
------------
Granted................................................. 804,000 $23.75 to $26.75
Exercised............................................... (12,000) $6.89
Rescinded/Canceled...................................... (45,365) $11.20 to $22.00
------------
Outstanding at December 28, 1997.......................... 3,308,940 $5.49 to $26.75
------------
</TABLE>
<TABLE>
<CAPTION>
RESERVED FOR
FUTURE
EXERCISABLE GRANTS
------------ -------------
<S> <C> <C>
December 31, 1995................................................ 2,810,910 1,434,680
December 29, 1996................................................ 1,655,640 1,155,405
December 28, 1997................................................ 1,861,934 396,770
</TABLE>
As permitted 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 share--basic and diluted amounts
for fiscal years 1995, 1996 and 1997, 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 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. For options granted during 1996 and 1997, 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 0.312 and 0.310 was used for 1996
and 1997, respectively.
The following weighted average assumptions were used in calculating the fair
value of the options granted in 1995, 1996 and 1997, respectively: risk-free
interest rates of 6.41%, 6.80% and 6.33%; an assumed dividend yield of zero; and
an expected life of the options of ten years.
F-24
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
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:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Net income:
As reported............................................... $ 9,877 $ 47,261 $ 57,219
Pro forma................................................. $ 9,746 $ 46,688 $ 55,893
Net income per common share--basic:
As reported............................................... $ 0.31 $ 1.40 $ 1.65
Pro forma................................................. $ 0.30 $ 1.39 $ 1.61
Net income per common share--diluted:
As reported............................................... $ 0.29 $ 1.35 $ 1.60
Pro forma................................................. $ 0.28 $ 1.34 $ 1.57
Weighted average fair value of options granted during the
year:..................................................... $ 7.01 $ 12.81 $ 14.39
</TABLE>
F-25
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
12. NET INCOME PER COMMON SHARE
The following represents the reconciliation between net income per common
share--basic and diluted: (In thousands, except per share data)
<TABLE>
<CAPTION>
PER
INCOME SHARES SHARE
--------- --------- ---------
<S> <C> <C> <C>
For the year ended 1995:
Net income per common share--basic........................... $ 9,877 32,218 $ 0.31
Effect of dilutive securities:
Stock options.............................................. -- 2,223
--------- ---------
Net income per common share--diluted......................... $ 9,877 34,441 $ 0.29
--------- ---------
--------- ---------
For the year ended 1996:
Net income per common share--basic........................... $ 47,261 33,642 $ 1.40
Effect of dilutive securities:
Stock options.............................................. -- 1,361
--------- ---------
Net income per common share--diluted......................... $ 47,261 35,003 $ 1.35
--------- ---------
--------- ---------
For the year ended 1997:
Net income per common share--basic........................... $ 57,219 34,773 $ 1.65
Effect of dilutive securities:
Stock options.............................................. -- 863
Convertible debt........................................... 1,264 815
--------- ---------
Net income per common share--diluted......................... $ 58,483 36,451 $ 1.60
--------- ---------
--------- ---------
</TABLE>
Options to purchase 429,000 shares of common stock were issued and
outstanding in 1997, but were not included in the computation of net income per
common share--diluted because the exercise price of the options was greater than
the average market price of the common shares.
13. TRANSACTIONS WITH AFFILIATES
The Company has incurred expenses of $850, $750 and $750 in 1995, 1996 and
1997, 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.
14. 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.
15. 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
F-26
<PAGE>
WORLD COLOR PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, DECEMBER 29, 1996 AND DECEMBER 28, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. STREAMLINING CHARGE (CONTINUED)
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 28, 1997,
substantially all of the amounts provided for as severance and other related
costs had been paid.
16. UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NET INCOME NET INCOME
PER PER
COMMON COMMON
SHARE- SHARE-
QUARTER ENDED NET SALES GROSS PROFIT NET INCOME BASIC DILUTED
- ----------------------------- ------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
March 31, 1996............... $ 329,111 $ 52,286 $ 5,939 $ 0.18 $ 0.17
June 30, 1996................ 342,266 57,942 6,056 0.18 0.17
September 29, 1996........... 487,804 96,406 19,217 0.57 0.55
December 29, 1996............ 482,231 85,648 16,049 0.48 0.46
------------- ------------ -----------
$ 1,641,412 $ 292,282 $ 47,261 $ 1.40 $ 1.35
------------- ------------ -----------
------------- ------------ -----------
March 30, 1997............... $ 458,351 $ 75,315 $ 6,903 $ 0.20 $ 0.20
June 29, 1997................ 425,647 76,052 6,580 0.19 0.19
September 28, 1997........... 557,268 110,701 22,873 0.68 0.66
December 28, 1997............ 539,959 105,219 20,863 0.55 0.53
------------- ------------ -----------
$ 1,981,225 $ 367,287 $ 57,219 $ 1.65 $ 1.60
------------- ------------ -----------
------------- ------------ -----------
</TABLE>
F-27
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Selling Stockholders have severally agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters, for whom Goldman,
Sachs & Co. ("Goldman Sachs") is acting as representative, has severally agreed
to purchase from the Selling Stockholders, the respective number of shares of
Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
U.S. UNDERWRITER STOCK
- ------------------------------------------------------------------------------- -------------
<S> <C>
Goldman, Sachs & Co. ..........................................................
Morgan Stanley & Co. Incorporated .............................................
Bear, Stearns & Co. Inc. ......................................................
BT Alex. Brown Incorporated ...................................................
Donaldson, Lufkin & Jenrette Securities Corporation ...........................
-------------
Total.................................................................. 9,000,000
-------------
-------------
</TABLE>
Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement" with the underwriters of
the international offering (the "International Underwriters" and, together with
the U.S. Underwriters, the "Underwriters") providing for the concurrent offer
and sale of 1,000,000 shares of Common Stock in an international offering
outside the United States. The initial public offering price and aggregate
underwriting discounts per share for the offerings will be identical. The
closing of the offering made hereby is a condition to the closing of the
international offering, and vice versa. The representative of the International
Underwriters is Goldman Sachs International.
Pursuant to an agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the offerings, each of the U.S.
Underwriters named herein has agreed, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will (a) offer, sell
or deliver shares of Common Stock, directly or indirectly, only in the United
States of America (including the States and District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction (the
"United States") and to U.S. persons, which term shall mean, for purposes of
this paragraph: (i) any individual who is a resident of the United States; or
(ii) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States, and (b)
cause any dealer to whom it may sell such shares at any concession to agree to
observe a similar restriction. Each of the International Underwriters has agreed
pursuant to the Agreement Between that, as a part of the distribution of the
shares offered as part of the international offering, and subject to certain
exceptions, it will (i) not, directly or indirectly, offer, sell or deliver
shares of Common Stock (a) in the United States or to any U.S. persons or (b) to
any person who it believes intends to reoffer, resell or deliver the shares in
the United States or to any U.S. persons and (ii) cause any dealer to whom it
may sell such shares at any concession to agree to observe a similar
restriction.
U-1
<PAGE>
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Selling Stockholders have severally granted the U.S. Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase up
to an aggregate of 1,350,000 additional shares of Common Stock, solely to cover
over-allotments, if any. If the U.S. Underwriters exercise such over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
10,000,000 shares of Common Stock offered hereby. The Selling Stockholders have
granted the International Underwriters a similar option exercisable for up to an
aggregate of 150,000 additional shares of Common Stock.
Each International Underwriter has represented and agreed that (i) it has
not offered or sold and, prior to the date six months after the date of issue of
the shares of Common Stock, will not offer or sell any shares of Common Stock to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom, and (iii) it has only issued or passed on, and
will only issue or pass on to any person in the United Kingdom, any investment
advertisement (within the meaning of the Financial Services Act 1986) relating
to the shares of Common Stock if that person falls within Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
In connection with the offerings, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offerings. Stabilizing transactions consists of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock that
they are required to purchase from the Selling Stockholders in the offerings.
The Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the Common
Stock sold in the offerings for their account may be reclaimed by the syndicate
if such shares of Common Stock are repurchased by the syndicate in stabilizing
or covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Common Stock, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the New York Stock Exchange, in the over-the-counter market or otherwise.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page thereof.
Each of the Company and its directors, executive officers and the KKR
Partnerships has agreed that, subject to certain exceptions, without the prior
written consent of Goldman Sachs on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of this Prospectus, offer,
pledge, sell, contract to sell or otherwise transfer, lend or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock. In addition, all shares
owned by, and all shares issuable upon the exercise of options held by, the
Company's
U-2
<PAGE>
management and former management are subject to lock-up restrictions for either
120 or 180 days after the date of this Prospectus.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Underwriters against certain liabilities,
including liabilities under the Security Act, or to contribute to payments that
the U.S. Underwriters and the International Underwriters may be required to make
in respect thereof.
The U.S. Underwriters and International Underwriters have provided from time
to time, and expect to provide in the future, investment banking services to the
Company and its affiliates (including certain of the Selling Stockholders) for
which such U.S. Underwriters and International Underwriters have received and
will receive customary fees and commissions. In addition, Bankers Trust Company
("BTC") is the Administrative Agent under, and Morgan Stanley & Co., Goldman
Sachs Credit Partners L.P., and BTC are or have been lenders under, the Credit
Agreement. Affiliates of Morgan Stanley & Co. and BT Alex. Brown Incorporated
are limited partners in certain KKR-controlled partnerships which have ownership
interests in the Company.
U-3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 3
Prospectus Summary.................... 4
Risk Factors.......................... 11
Use of Proceeds....................... 13
Price Range of Common Stock and
Dividend Policy..................... 13
Capitalization........................ 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 23
Management............................ 31
Principal and Selling Stockholders.... 33
Description of Capital Stock.......... 35
Certain United States Tax Consequences
to Non-United States Holders........ 37
Legal Matters......................... 40
Experts............................... 40
Index to Consolidated Financial
Statements.......................... F-1
Underwriting.......................... U-1
</TABLE>
10,000,000 SHARES
WORLD COLOR PRESS, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
[LOGO]
------------------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
All information contained herein is subject to completion or amendment.
<PAGE>
[INTERNATIONAL ALTERNATE PAGE]
SUBJECT TO COMPLETION DATED MAY 19, 1998
10,000,000 SHARES
[LOGO]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
Of the 10,000,000 shares of Common Stock offered, 1,000,000 shares are being
offered hereby in an international offering outside the United States and
9,000,000 shares are being offered in a concurrent offering in the United
States. The initial public offering price and the aggregate underwriting
discount per share will be identical for both offerings. See "Underwriting."
All of the shares of Common Stock offered hereby are being sold by Selling
Stockholders of the Company. The Selling Stockholders consist only of certain
KKR Partnerships that are limited partnerships affiliated with Kohlberg Kravis
Roberts & Co., L.P. See "The Company" and "Principal and Selling Stockholders."
The Company will not receive any of the proceeds from the sale of the shares
offered hereby.
The last reported sale price of the Common Stock, which is listed under the
symbol "WRC," on the New York Stock Exchange on May 18, 1998 was $31 1/4 per
share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
-----------------
THIS INTERNATIONAL PROSPECTUS IS INTENDED FOR USE ONLY IN CONNECTION WITH OFFERS
AND SALES OF THE COMMON STOCK OUTSIDE THE UNITED STATES AND IS NOT TO BE
SENT OR GIVEN TO ANY PERSON WITHIN THE UNITED STATES. THE COMMON STOCK
OFFERED HEREBY IS NOT BEING REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1993 FOR THE PURPOSE OF SALES OUTSIDE THE UNITED STATES.
-------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDERS(2)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Share....................................... $ $ $
Total (3)....................................... $ $ $
</TABLE>
- ---------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the Selling
Stockholders.
(3) The Selling Stockholders have granted the International Underwriters an
option for 30 days to purchase up to an additional 150,000 shares of Common
Stock at the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, the Selling
Stockholders have granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 1,350,000 shares of Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. If such options are exercised in full, the
total initial public offering price, underwriting discount and proceeds to
Selling Stockholders will be $ , $ and $ , respectively. See
"Underwriting."
-------------------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is
expected that the shares will be ready for delivery through the facilities of
DTC in New York, New York, on or about May , 1998 against payment therefor in
immediately available funds.
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS INTERNATIONAL LIMITED
BT ALEX. BROWN INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
-------------------
The date of this Prospectus is May , 1998.
<PAGE>
[International Alternate Page]
ART FOR INSIDE FRONT
COVER TO PROSPECTUS
Fold out the Company's logo
overlaid with examples of the Company's
magazine, catalog, commercial, book, direct mail and
directory customers
ART FOR INSIDE BACK
COVER TO PROSPECTUS
Map of United States indicating location of
48 Production and Distribution Facilities
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. SEE "UNDERWRITING."
<PAGE>
[INTERNATIONAL ALTERNATE PAGE]
UNDERWRITING
Subject to the terms and conditions of the International Underwriting
Agreement, the Selling Stockholders have severally agreed to sell to each of the
International Underwriters named below, and each of such International
Underwriters, for whom Goldman Sachs International is acting as representative,
has severally agreed to purchase from the Selling Stockholders the respective
number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
INTERNATIONAL UNDERWRITER STOCK
- --------------------------------------------------------------------------------------------------- -------------
<S> <C>
Goldman Sachs International........................................................................
Morgan Stanley & Co. International Limited.........................................................
Bear, Stearns International Limited................................................................
BT Alex. Brown International, a division of Bankers Trust International PLC........................
Donaldson, Lufkin & Jenrette International.........................................................
-------------
Total...................................................................................... 1,000,000
-------------
-------------
</TABLE>
Under the terms and conditions of the International Underwriting Agreement,
the International Underwriters are committed to take and pay for all of the
shares offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The International Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.
World Color and the Selling Stockholders have entered into an underwriting
agreement (the "U.S. Underwriting Agreement") with the underwriters of the U.S.
offering (the "U.S. Underwriters") providing for the concurrent offer and sale
of 9,000,000 shares of Common Stock in a U.S. offering. The initial public
offering price and aggregate underwriting discounts per share for the offerings
will be identical. The closing of the offering made hereby is a condition to the
closing of the U.S. offering, and vice versa. The representative of the U.S.
Underwriters is Goldman, Sachs & Co. ("Goldman Sachs")
Pursuant to an agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the offerings, each of the
International Underwriters named herein has agreed, as a part of the
distribution of the shares offered hereby and subject to certain exceptions, it
will (a) not offer, sell or deliver shares of Common Stock, directly or
indirectly the United States of America (including the States and District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction (the "United States") or U.S. persons, which term shall mean, for
purposes of this paragraph: (i) any individual who is a resident of the United
States; or (ii) any corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision thereof and
whose office most directly involved with the purchase is located in the United
States, and (b) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction. Each of the U.S.
Underwriters has agreed pursuant to the Agreement Between that, as a part of the
distribution of the shares offered as part of the U.S. offering, and subject to
certain exceptions, it will offer, sell or deliver the shares of Common Stock
offered, directly or indirectly, only in the United States and to U.S. persons.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The
U-1
<PAGE>
[INTERNATIONAL ALTERNATE PAGE]
price of any shares so sold shall be the initial public offering price, less an
amount not greater than the selling concession.
The Selling Stockholders have severally granted the International
Underwriters an option exercisable for 30 days after the date of this Prospectus
to purchase up to an aggregate of 150,000 additional shares of Common Stock,
solely to cover over-allotments, if any. If the International Underwriters
exercise such over-allotment option, the International Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 10,000,000 shares of Common
Stock offered hereby. The Selling Stockholders have granted the U.S.
Underwriters a similar option exercisable for up to an aggregate of 1,350,000
additional shares of Common Stock.
Each International Underwriter has represented and agreed that (i) it has
not offered or sold and, prior to the date six months after the date of issue of
the shares of Common Stock, will not offer or sell any shares of Common Stock to
persons in the United Kingdom, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom, and (iii) it has only issued or passed on, and
will only issue or pass on to any person in the United Kingdom, any investment
advertisement (within the meaning of the Financial Services Act 1986) relating
to the shares of Common Stock if that person falls within Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
In connection with the offerings, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offerings. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock that
they are required to purchase from the Selling Stockholders in the offerings.
The Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the Common
Stock sold in the offerings for their account may be reclaimed by the syndicate
if such shares of Common Stock are repurchased by the syndicate in stabilizing
or covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Common Stock, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the New York Stock Exchange, in the over-the-counter market or otherwise.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
Each of the Company and its directors, executive officers and the KKR
Partnerships has agreed that, subject to certain exceptions, without the prior
written consent of Goldman Sachs, on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of this Prospectus, offer,
pledge, sell, contract to sell or otherwise transfer, lend or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock. In addition, all shares
owned by, and all shares issuable upon the exercise of options held by, the
Company's
U-2
<PAGE>
[INTERNATIONAL ALTERNATE PAGE]
management and former management are subject to lock-up restrictions for either
120 or 180 days after the date of this Prospectus.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the U.S. Underwriters and the International Underwriters may be required to
make in respect thereof.
The U.S. Underwriters and International Underwriters have provided from time
to time, and expect to provide in the future, investment banking services to the
Company and its affiliates (including certain of the Selling Stockholders) for
which such U.S. Underwriters and International Underwriters have received and
will receive customary fees and commissions. In addition, Bankers Trust Company
("BTC") is the Administrative Agent under, and Morgan Stanley & Co., Goldman
Sachs Credit Partners L.P., and BTC are or have been lenders under, the Credit
Agreement. Affiliates of Morgan Stanley & Co. and BT Alex. Brown Incorporated
are limited partners in certain KKR-controlled partnerships which have ownership
interests in the Company.
U-3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[INTERNATIONAL ALTERNATE PAGE]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 3
Prospectus Summary.................... 4
Risk Factors.......................... 11
Use of Proceeds....................... 13
Price Range of Common Stock and
Dividend Policy..................... 13
Capitalization........................ 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 23
Management............................ 31
Principal and Selling Stockholders.... 33
Description of Capital Stock.......... 35
Certain United States Tax Consequences
to Non-United States Holders........ 37
Legal Matters......................... 40
Experts............................... 40
Index to Consolidated Financial
Statements.......................... F-1
Underwriting.......................... U-1
</TABLE>
10,000,000 SHARES
WORLD COLOR PRESS, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
[LOGO]
------------------------
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS INTERNATIONAL LIMITED
BT ALEX. BROWN INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of Common Stock registered hereby,
all of which expenses, except for the Commission registration fee, the National
Association of Securities Dealers, Inc. filing fee and the New York Stock
Exchange listing application fee, are estimates:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
- --------------------------------------------------------------- ----------
<S> <C>
Securities and Exchange Commission registration fee............ $ 112,165
National Association of Securities Dealers, Inc. filing fee.... 30,500
New York Stock Exchange listing application fee................ --
Accounting fees and expenses................................... 75,000
Legal fees and expenses........................................ 150,000
Printing and engraving fees and expenses....................... 200,000
Blue Sky fees and expenses..................................... 5,000
Transfer Agent fees and expenses............................... 10,000
Miscellaneous expenses......................................... 42,335
----------
Total.................................................... 625,000
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation. Reference is made to Section
102(b)(7) of the Delaware General Corporation Law (the "DGCL"), which enables a
corporation in its original certificate of incorporation or an amendment thereto
to eliminate or limit the personal liability of a director for violations of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payments of dividends of unlawful stock purchase or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit.
Reference is also made to Section 145 of the DGCL, which provides that a
corporation may indemnify any person, including an officer or director, who is,
or is threatened to be made, party to any threatened, pending or completed legal
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of such corporation or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the corporation's best interest and, for
criminal proceedings, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify any officer or director in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses that
such officer or director actually and reasonably incurred.
II-1
<PAGE>
Article VIII of the Amended and Restated By-laws of the Company (filed as
Exhibit 3.1)) provides for indemnification of the officers and directors to the
full extent permitted by applicable law.
The limited partnership agreements pursuant to which APC Associates, L.P.,
GR Associates, L.P., WCP Associates, L.P. and KKR Partners II, L.P. were
organized provide that such partnerships shall indemnify and hold harmless KKR
Associates, L.P., the general partner of each of such partnerships, against any
action, suit or proceeding to which it may be made a party or otherwise involved
or with which it shall be threatened by reason of its being the general partner
of such partnership except for liability arising out of any act or omission of
the general partner judicially determined to have been grossly negligent,
fraudulent or to have constituted wilful misconduct. The limited partnership
agreement of KKR Associates, L.P. provides substantially identical indemnity to
its general partners, which include, among others, Henry R. Kravis, George R.
Roberts and Scott M. Stuart, each of whom is a director of the Company.
Mr. Armstrong is indemnified for liabilities arising prior to February 2,
1996, pursuant to Merrill Lynch & Co.'s corporate charter which provides that,
to the extent he is not so indemnified by the Company, Mr. Armstrong will be
indemnified by Merrill Lynch & Co., in his capacity as a director of World Color
Press, Inc., to the fullest extent permitted by Delaware law.
ITEM 16. EXHIBITS.
(a) Exhibits:
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------
<C> <S>
*1.1 Form of U.S. Underwriting Agreement.
*1.2 Form of International Underwriting Agreement.
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.
3.2 Amended and Restated By-Laws of World Color Press, Inc., incorporated by
reference to Exhibit 3.2 to World Color's Annual Report on Form 10-K for the
fiscal year ended December 29, 1996.
+5.1 Opinion of Latham & Watkins regarding the legality of the securities being
registered.
*23.1 Consent of Deloitte & Touche LLP.
+23.2 Consent of Latham & Watkins (included in Exhibit 5.1 hereto).
+24.1 Powers of Attorney (included above the signature block to the Registration
Statement).
</TABLE>
- ------------------------
* Filed herewith.
+ Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
II-2
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Greenwich, State of Connecticut on May 18, 1998.
WORLD COLOR PRESS, INC.
BY: /S/ JENNIFER L. ADAMS
------------------------------------------
Jennifer L. Adams
VICE CHAIRMAN,
CHIEF LEGAL AND ADMINISTRATIVE OFFICER AND
SECRETARY
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints jointly and severally, Jennifer L. Adams, Robert
G. Burton and Michael D. Helfand, and each one of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
any and all amendments to this Registration Statement (including post effective
amendments), and to sign any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all
post-effective amendments thereto, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------- ------------------------------- -------------
<C> <S> <C>
* Chairman of the Board of May 18, 1998
- ------------------------------------------- Directors, President and
Robert G. Burton Chief Executive Officer
(Principal Executive Officer)
* Executive Vice President, Chief May 18, 1998
- ------------------------------------------- Financial Officer (Principal
Michael D. Helfand Financial Officer and
Principal Accounting Officer)
* Vice Chairman, Group President May 18, 1998
- ------------------------------------------- and Director
Marc L. Reisch
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------- ------------------------------- -------------
<C> <S> <C>
* Director May 18, 1998
- -------------------------------------------
Gerald S. Armstrong
* Director May 18, 1998
- -------------------------------------------
Patrice M. Daniels
* Director May 18, 1998
- -------------------------------------------
Dr. Mark J. Griffin
* Director May 18, 1998
- -------------------------------------------
Henry R. Kravis
* Director May 18, 1998
- -------------------------------------------
Alexander Navab, Jr.
* Director May 18, 1998
- -------------------------------------------
George R. Roberts
* Director May 18, 1998
- -------------------------------------------
Scott M. Stuart
* By: /s/ JENNIFER L. ADAMS
- -------------------------------------------
Jennifer L. Adams
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------
<C> <S>
*1.1 Form of U.S. Underwriting Agreement.
*1.2 Form of International Underwriting Agreement.
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.
3.2 Amended and Restated By-Laws of World Color Press, Inc., incorporated by
reference to Exhibit 3.2 to World Color's Annual Report on Form 10-K for the
fiscal year ended December 29, 1996.
+5.1 Opinion of Latham & Watkins regarding the legality of the securities being
registered.
*23.1 Consent of Deloitte & Touche LLP.
+23.2 Consent of Latham & Watkins (included in Exhibit 5.1 hereto).
+24.1 Powers of Attorney (included above the signature block to the Registration
Statement).
</TABLE>
- ------------------------
* Filed herewith.
+ Previously filed.
<PAGE>
Exhibit 1.1
WORLD COLOR PRESS, INC.
Common Stock (par value $.01 per share)
Underwriting Agreement
May , 1998
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Certain stockholders named in Schedule II hereto (the "Selling
Stockholders") of World Color Press, Inc., a Delaware corporation (the
"Company"), propose, subject to the terms and conditions stated herein, to sell
to the U.S. Underwriters named in Schedule I hereto (the "U.S. Underwriters"),
for whom Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Bear, Stearns
& Co. Inc., BT Alex. Brown Incorporated and Donaldson, Lufkin & Jenrette
Securities Corporation are acting as representatives (the "Representatives"), an
aggregate of 9,000,000 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 1,350,000 additional shares (the "Optional Shares") of
Common Stock, par value $0.01 per share ("Common Stock"), of the Company (the
Firm Shares and the Optional Shares which the Underwriters elect to purchase
pursuant to Section 2 hereof are herein collectively called the "Shares").
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Selling
Stockholders of up to a total of 1,150,000 shares of Common Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International, Morgan
Stanley Dean Witter, Bear, Stearns International Limited, BT Alex. Brown
International and Donaldson, Lufkin & Jenrette International are acting as
representatives. The U.S. Underwriters and the International Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Common Stock between the two
syndicates.
Two forms of prospectus are to be used in connection with the offering
and sale of shares of Common Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the International Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages as included in the registration statement and amendments
thereto as mentioned below. Except as used in Section 2, 3, 4, 10 and 12 herein,
and except as the context may otherwise require, references herein to the Shares
shall include all the shares of Common Stock which may be sold pursuant to
either this Agreement or the International Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.
<PAGE>
The registration statement as amended at the time it becomes effective,
including any documents incorporated therein by reference and including the
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the "Securities Act"), is hereinafter referred to as the "Registration
Statement;" the U.S. prospectus and the international prospectus in the
respective forms first used to confirm sales of Shares, including any documents
incorporated therein by reference, are hereinafter collectively referred to as
the "Prospectus." If the Company has filed an abbreviated registration statement
to register additional shares of Common Stock pursuant to Rule 462(b) under the
Securities Act (the "Rule 462 Registration Statement"), then any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462 Registration Statement.
1. (a) The Company represents and warrants to, and agrees with,
each of the Underwriters that:
(i) When the Registration Statement becomes effective,
including at the date of any post-effec tive amendment, and at the
Closing Date, the Registration Statement will comply in all material
respects with the provisions of the Act, and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; the Prospectus and any supplements or
amendments thereto will not at the date of the Prospectus, at the date
of any such supplements or amendments and at the Closing Date contain
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the representations and warranties contained in this paragraph (a)
shall not apply to statements in or omissions from the Registration
Statement or the Prospectus (or any supplement or amendment to them)
made in reliance upon and in conformity with information relating to
the U.S. Underwriters furnished to the Company in writing by the U.S.
Underwriters or on their behalf with their consent expressly for use
therein.
(ii) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 or Rule 462 under the Act,
complied when so filed in all material respects with the Act.
(iii) The Company and each of the Company's "significant
subsidiaries" as such term is defined in Rule 1-02 of Regulation S-X
under the Act (each a "Subsidiary" and collectively, the
"Subsidiaries") has been duly organized, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to
carry on its business as it is currently being conducted, to own, lease
and operate its properties (and, with respect to the Company, to
execute, deliver and perform this Agreement), and each is duly
qualified and is in good standing as a foreign corporation authorized
to do business in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the business, results of operations or condition
(financial or otherwise) of the Company and its subsidiaries, taken as
a whole (a "Material Adverse Effect").
(iv) All of the issued and outstanding shares of capital stock
of, or other ownership interests in, each Subsidiary have been duly and
validly authorized and issued, and, as of the Closing Date, all of the
shares of capital stock of, or other ownership interests in, each
Subsidiary will be owned, directly or through Sub sidiaries, by the
Company free and clear of any security interest, mortgage, pledge,
claim, lien or encumbrance (each, a "Lien") other than (i) as created
by the Second Amended and Restated Credit Agreement dated as of June 6,
1997 among the Company, the Lenders party thereto and Bankers Trust
Company, as agent, as amended, and (ii) such other Liens as are not,
individually or in the aggregate, material to the Company and its
subsidiaries, taken as a whole. All such shares of capital stock are
fully paid and nonassessable and, on the Closing Date, will be fully
paid and nonassessable. On the Closing Date, there will be no
outstanding subscrip tions, rights, warrants, options, calls,
convertible securities or commitments of sale related to or entitling
any
2
<PAGE>
person to purchase or otherwise to acquire any shares of the capital
stock of, or other ownership interest in, any Subsidiary.
(v) All of the outstanding shares of Common Stock of the
Company (including the Shares) have been duly authorized and validly
issued and are fully paid, non-assessable and were not issued in
violation of any preemptive or similar rights.
(vi) The authorized capital stock of the Company, including
the Shares, conforms in all material respects to the description
thereof contained in the Prospectus.
(vii) Neither the Company nor any of its Subsidiaries is (a)
in violation of its respective charter or by-laws or (b) in default in
the performance of any obligation, agreement or condition contained in
any bond, debenture, note or any other evidence of indebtedness or in
any other agreement, indenture or instrument, to which the Company or
any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or their respective properties is bound except, with
respect to defaults referred to in clause (b), such as would not,
singly or in the aggregate, have a Material Adverse Effect, nor has any
event occurred which with notice or lapse of time or both would
constitute such a violation or default.
(viii) This Agreement and the International Underwriting
Agreement have been duly authorized and validly executed and delivered
by the Company.
(ix) Other than as described in the Registration Statement and
the Prospectus, there is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, pending
against the Company or any of its Subsidiaries or any of their
respective properties, which is required to be disclosed in the
Registration Statement and the Prospectus, or which could reasonably be
expected to have, singly or in the aggregate, a Material Adverse Effect
or which might materially and adversely affect the consummation of this
Agreement, the International Underwriting Agreement or the transactions
contemplated hereby and, to the Company's knowledge, no such
proceedings are threatened.
(x) No action has been taken and no statute, rule or
regulation or order has been enacted, adopted or issued by any
governmental agency or body which suspends the effectiveness of the
Registration Statement, prevents or suspends the use of any preliminary
prospectus or suspends the sale of the Shares in any jurisdiction
referred to in Section 5(j) hereof; no injunction, restraining order or
order of any nature by a Federal or state court of competent
jurisdiction has been issued with respect to the Company which would
prevent or suspend the sale of the Shares, the effectiveness of the
Registration Statement, or the use of any pre liminary prospectus in
any jurisdiction referred to in Section 5(j) hereof; and no action,
suit or proceeding is pending against or, to the Company's knowledge,
threatened against the Company or any of the Subsidiaries before any
court or arbitrator or any governmental body, agency or official,
domestic or foreign, which, if adversely determined, would in any
manner draw into question the validity of this Agreement, the
International Underwriting Agreement or the Shares.
(xi) Except as otherwise set forth in the Prospectus or such
as are not material to the business, financial condition or results of
operation of the Company and its subsidiaries taken as a whole, the
Company and each of its Subsidiaries has good title, free and clear of
all liens, claims, encumbrances and restrictions except liens for taxes
not yet due and payable, to all properties and assets described in the
Registration Statement as being owned by it except for liens, claims,
encumbrances and restrictions which would not, singly or in the
aggregate, have a Material Adverse Effect. All leases to which the
Company or any of its Subsidiaries is a party are valid and binding on
the Company or such Subsidiary and, to the Company's knowledge, on the
other party and, to the knowledge of the Company, no default has
occurred or is continuing thereunder, which might result in any
material adverse change in the business, financial condition or results
of operations of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Change").
3
<PAGE>
(xii) Deloitte & Touche LLP are independent public accountants
with respect to the Company as required by the Act. The financial
statements, together with the related schedules and notes set forth in
the Registration Statement and the Prospectus (and any amendment or
supplement thereto), comply as to form in all material respects with
the requirements of the Act and present fairly in all material respects
the consolidated financial position, results of operations and changes
in cash flows of the Company and its subsidiaries on the basis stated
in the Registration Statement at the respective dates or for the
respective periods to which they apply; such statements and the related
schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved, except as disclosed there in; and the other financial
and statistical information and data set forth in the Registration
Statement and the Prospectus (and any amendment or supplement thereto)
is, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and
records of the Company and its subsidiaries.
(xiii) Subsequent to the date of the most recent balance sheet
for the Company included in the Registration Statement and the
Prospectus, except as set forth in the Registration Statement and the
Prospectus, (i) neither the Company, nor any of the Subsidiaries, has
incurred any liabilities or obligations, direct or contingent, which
are material to the Company and the Subsidiaries taken as a whole, nor
entered into any transaction not in the ordinary course of business and
(ii) there has not been, singly or in the aggregate, any Material
Adverse Change or any development which may reasonably be expected to
involve a Material Adverse Change.
(xiv) The execution, delivery and performance by the Company
of this Agreement, the International Underwriting Agreement, and the
consummation of the transactions contemplated hereby and thereby will
not require any consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental
body (except as such may be required under the Act or state securities
or Blue Sky laws, or by the NASD with regards to the underwriting
arrangements), except for con sents, approvals, authorizations or
orders which would not, singly or in the aggregate, have a Material
Adverse Effect, and will not conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the charter or
by-laws of the Company or any of its Subsidiaries or any agreement,
indenture or other instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries or their respective properties are bound, or violate or
conflict with any laws, administrative regulations or rulings or court
decrees applicable to the Company, any of its Subsidiaries or their
respective properties, except for such conflicts, violations or
breaches which would not, singly or in the aggregate, have a Material
Adverse Effect, and except for such conflicts, violations or breaches
as to which the Company has obtained the necessary consents or waivers.
(xv) The Company and each of the Subsidiaries possess all
certificates, consents, exemptions, orders, permits, licenses,
authorizations, or other approvals (each, an "Authorization") of and
from, and has made all declarations and filings with, all Federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, necessary or required
to own, lease, license and use its properties and assets and to conduct
its respective business in the manner described in the Prospectus,
except to the extent that the failure to obtain or file would not,
singly or in the aggregate, have a Material Adverse Effect; all such
Authorizations are valid and in full force and effect and the Company
and each of the Subsidiaries are in compliance with the terms and
conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto, except where the failure to be in
full force and effect or to be in compliance would not, singly or in
the aggregate, have a Material Adverse Effect.
(xvi) The Company is not (a) an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), or (b) a "holding company" or a
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"subsidiary company" of a holding company, or an "affiliate" thereof
within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(xvii) Except as disclosed in the Prospectus, there are no
holders of any security of the Company or any Subsidiary (debt or
equity) who have or will have any right to require the registration of
such security by virtue of the filing of the Registration Statement or
the execution by the Company of this Agreement or the International
Underwriting Agreement.
(xviii) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further documents
so filed and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(xix) The Company has not (i) taken, directly or indirectly,
any action designed to cause or to result in, or that has constituted
or which might reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (ii) since the initial
filing of the Registration Statement (A) sold, bid for, purchased, or
paid anyone any compensation for soliciting purchases of, the Shares or
(B) paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of the Company.
(xx) There are no contracts or other documents of a character
required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Act which have not been described in the
Prospectus or filed as exhibits to the Registration Statement.
(b) Representations, Warranties and Agreements of the Selling
Stockholders. Each Selling Stockholder severally represents and warrants (at and
as of the date hereof and at and as of each Time of Delivery as defined in
Section 4 hereof) to, and agrees with, each of the U.S. Underwriters that:
(i) Such Selling Stockholder holds the Shares being sold by
such Selling Stockholder hereunder and under the International
Underwriting Agreement, free and clear of all liens, encumbrances,
equities or claims; immediately prior to each Time of Delivery such
Selling Stockholder will hold the Shares being sold by such Selling
Stockholder hereunder and under the International Underwriting
Agreement on such date, free and clear of all liens, encumbrances,
equities or claims; and upon delivery of such Shares and payment
therefor pursuant hereto and the International Underwriting Agreement
assuming that such U.S. Underwriters and International Underwriters
purchase such Shares in good faith and without notice of any such lien,
encumbrance, equity or claim or other adverse claim within the meaning
of the Uniform Commercial Code as in effect in the State of New York,
the U.S. Underwriters and International Underwriters will hold such
Shares, free and clear of all liens, encumbrances, equities or claims,
arising as a result of action by the Selling Shareholders;
(ii) Such Selling Stockholder has full right, power and
authority to enter into this Agreement and the International
Underwriting Agreement; the execution, delivery and performance of this
Agreement and the
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International Underwriting Agreement and the consummation by such
Selling Stockholder of the transactions contemplated hereby and thereby
will not conflict with or result in breach or violation of any of the
terms or provisions of, or constitute a default under, (a) any
indenture, mortgage, deed of trust, loan agreement, stock option or
other employee benefit plan, or other agreement or instrument to which
such Selling Stockholder is a party or by which such Selling
Stockholder is bound or to which any of the property or assets of such
Selling Stockholder is subject, (b) nor will such action result in any
violation of the provisions of the charter, bylaws, deed of trust,
partnership agreement or other constituent documents, if any, relating
to such Selling Stockholder or any statute or any order, rule or
regulation of any court or government agency or body having
jurisdiction over such Selling Stockholder or any properties of such
Selling Stockholder, except in the case of clause (a) above, for such
conflicts, breaches or violations which would not, singly or in the
aggregate, have a Material Adverse Effect; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the execution,
delivery and performance by such Selling Stockholder of each of this
Agreement or the International Underwriting Agreement and the
consummation of the transactions contemplated hereby and thereby,
except for consents, approval, authorizations, orders, registrations or
qualifications which would not singly or in the aggregate, have a
Material Adverse Effect, and except the registration under the Act of
the Shares and such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by
the U.S. Underwriters and the International Underwriters or by the NASD
with regards to the U.S. Underwriting Agreement and the International
Underwriting Agreement; and this Agreement and the International
Underwriting Agreement have been duly authorized, executed and
delivered by the Selling Stockholders;
(iii) To the extent that any statements or omissions made in
the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto are made in reliance upon and in
conformity with information furnished in writing to the Company by such
Selling Stockholder expressly for use therein, the Registration
Statement and such Preliminary Prospectus do not, and the Prospectus
and any amendments or supplements thereto will not, as of the
applicable effective date or as of the applicable filing date, as the
case may be, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein no misleading; and
(iv) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
2. PURCHASE OF SHARES. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, each Selling Stockholder hereby, severally and not jointly, agrees to
sell the number of Firm Shares set forth opposite such Selling Stockholder's
name in Schedule II hereto to the several U.S. Underwriters and each of the U.S.
Underwriters, severally and not jointly, agrees to purchase the number of Firm
Shares set forth opposite that U.S. Underwriter's name in Schedule I hereto.
Each U.S. Underwriter shall be obligated to purchase from each Selling
Stockholder that number of Firm Shares which represents the same proportion of
the number of Firm Shares to be sold by each Selling Stockholder as the number
of Firm Shares set forth opposite the name of such U.S. Underwriter in Schedule
I represents of the total number of Firm Shares to be purchased by all of the
U.S. Underwriters pursuant to this Agreement. The respective purchase
obligations of the U.S. Underwriters with respect to the Firm Shares shall be
rounded among the U.S. Underwriters to avoid fractional shares, as the
Representatives may determine.
In addition, the Selling Stockholders grant to the U.S. Underwriters an
option to purchase an aggregate of up to 1,350,000 Optional Shares as set forth
in Schedule II hereto. Such option is granted solely for the purpose of covering
over-allotments in the sale of Firm Shares and is exercisable as provided in
Section 4 hereof. Optional Shares shall be purchased severally for the account
of the U.S. Underwriters in proportion to the number of Firm Shares set forth
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opposite the name of such U.S. Underwriters in Schedule I hereto. The respective
purchase obligations of each U.S. Underwriter with respect to the Optional
Shares shall be adjusted by the Representatives so that no U.S. Underwriter
shall be obligated to purchase Optional Shares other than in 100 share amounts.
The price of both the Firm Shares and any Optional Shares shall be $
per share.
The Selling Stockholders shall not be obligated to deliver any of the
Shares to be delivered on the First Delivery Date or the Second Time of Delivery
(as hereinafter defined), as the case may be, except upon payment for all the
Shares to be purchased on such Delivery Date as hereinafter provided.
3. Upon the authorization by you of the release of the Firm
Shares, the several U.S. Underwriters propose to offer the Firm Shares for sale
upon the terms and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each U.S. Underwriter
hereunder, in definitive form, and in such authorized denominations and
registered in such names as Goldman, Sachs & Co. may request upon at least
forty- eight hours' prior notice to the Selling Stockholders shall be delivered
by or on behalf of the Selling Stockholders to Goldman, Sachs & Co., through the
facilities of the Depository Trust Company ("DTC"), for the account of such U.S.
Underwriter, against payment by or on behalf of such U.S. Underwriter of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
accounts specified by each of the Selling Stockholders, as their interests may
appear, to Goldman, Sachs & Co. at least forty-eight hours in advance. The
Company will cause the certificates representing the Shares to be made available
for checking and packaging at least twenty-four hours prior to the Time of
Delivery (as defined below) with respect thereto at the office of DTC or its
designated custodian Goldman, Sachs & Co., 85 Broad Street, New York, New York
10004 (the "Designated Office"). The time and date of such delivery and payment
shall be, with respect to the Firm Shares, 9:30 a.m., New York time, on
............., 19.. or such other time and date as Goldman, Sachs & Co. and the
Selling Stockholders may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman,
Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Goldman, Sachs & Co. and the Selling Stockholders may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called
a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 8 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 8(n) hereof will be delivered at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022 (the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held at the
Closing Location at .......p.m., New York City time, on the New York Business
Day next preceding such Time of Delivery, at which meeting the final drafts of
the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this Section 4,
"New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the U.S. Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus prior to
the Time of Delivery which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed
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or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof; to file
promptly all reports and any definitive proxy or information statements required
to be filed by the Company with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for
so long as the delivery of a prospectus is required in connection with the
offering or sale of the Shares; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or Prospectus, of
the suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending any
such qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and the International
Underwriting Agreement and from time to time, to furnish the U.S. Underwriters
with copies of the Prospectus in New York City in such quantities as you may
reasonably request, and, if the delivery of a prospectus is required at any time
prior to the expiration of nine months after the time of issue of the Prospectus
in connection with the offering or sale of the Shares and if at such time any
events shall have occurred as a result of which the Prospectus as then amended
or supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be necessary
during such period to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the Prospectus in order
to comply with the Act or the Exchange Act, to notify you and upon your request
to file such document and to prepare and furnish without charge to each U.S.
Underwriter and to any dealer in securities as many copies as you may from time
to time reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any U.S. Underwriter is required to deliver a prospectus
in connection with sales of any of the Shares at any time nine months or more
after the time of issue of the Prospectus, upon your request but at the expense
of such U.S. Underwriter, to prepare and deliver to such U.S. Underwriter as
many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its security holders as
soon as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Act), an earnings statement of the Company and its subsidiaries (which need
not be audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of the
Company, Rule 158 under the Act);
(e) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholder's equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the effective date
of the Registration Statement), consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable detail;
(f) During a period of three years from the effective date of
the Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you
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(i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed;
(g) To use its best efforts to comply with the rules and
regulations of the New York Stock Exchange with respect to the offering of the
Shares; and
(h) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 9:30 A.M., Washington, D.C. time, on the business
day immediately following the date of this Agreement, and the Company shall at
the time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act.
(i) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdiction as you shall reasonably
request.
(j) The Company hereby agrees that, without the prior written
consent of Goldman, Sachs & Co. on behalf of the U.S. Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder or (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing.
6. FURTHER AGREEMENTS OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder agrees:
(a) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the Prospectus
not, directly or indirectly, to offer, sell, contract to sell or otherwise
transfer or dispose of any capital stock of the Company or securities
convertible or exchangeable or exercisable for capital stock of the Company
(other than Shares to be sold to the U.S. Underwriters and the International
Underwriters), without the prior written consent of the Representatives;
(b) That the obligations of such Selling Stockholder hereunder
shall not be terminated by any act of such Selling Stockholder, by operation of
law or, in the case of an individual, by the death or incapacity of such
individual Selling Stockholder or, in the case of a partnership, by the
termination of such partnership, or, in the case of a corporation, the
dissolution or liquidation of such corporation, or, in the case of a trust, by
the death or incapacity of any executor or trustee or the termination of such
trust or the occurrence of any other event;
(c) To deliver to you, as Representatives, prior to the First
Time of Delivery, a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof); and
(d) To advise the Representatives promptly of any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the accuracy of any of its representations or warranties
or its inability to perform the agreements and indemnities herein at any time
prior to payment being made to such Selling Stockholder on either Time of
Delivery and take such steps as may be reasonably requested by the
Representatives to remedy any such material adverse change or inability.
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7. EXPENSES. The Selling Stockholders, jointly and severally, covenant
and agree with the several U.S. Underwriters and the International Underwriters
that the Selling Stockholders will pay or cause to be paid the following: (i)
the fees, disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the U.S. Underwriters and any dealers; (ii) the cost of delivering,
printing or producing any Agreement among Underwriters (U.S. Version), Agreement
among Underwriters (International Version), this Agreement, the International
Underwriting Agreement, the Agreement between U.S. and International
Underwriting Syndicates, any Selling Agreement, the Blue Sky Memorandum and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees and disbursements of counsel for the U.S.
Underwriters in connection with such qualification and in connection with the
Blue Sky Memorandum; (iii) the filing fees incident to securing any required
review by the National Association of Securities Dealers, Inc. of the terms of
the sale of the Shares; (iv) the cost of preparing stock certificates; (v) the
cost and charges of any transfer agent or registrar; (vi) any stock transfer
taxes payable in connection with sales of Shares to the U.S. Underwriter and
International Underwriters and (vii) all other costs and expenses incident to
the performance of the Company's and the Selling Stockholders' obligations
hereunder which are not otherwise specifically provided for in this Section 7.
It is understood, however, that, except as provided in this Section 7, Section 9
and Section 12 hereof, the U.S. Underwriters will pay all of their own costs and
expenses, including the fees of their counsel, stock transfer taxes on resale of
any of the Shares by them, and any advertising expenses in connection with any
offers they may make.
8. The obligations of the U.S. Underwriters hereunder, as to the Shares
to be delivered at each Time of Delivery, shall be subject, in their discretion,
to the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 9:30 A.M.,
Washington, D.C. time, on the business day immediately following the date of
this Agreement; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission; and all
requests for additional information on the part of the Commission shall have
been complied with to your reasonable satisfaction;
(b) The Underwriters shall have received on the Closing Date
an opinion of Latham & Watkins, counsel for the Company, dated the Closing Date,
to the effect that:
(1) the Company and its subsidiaries listed on
Exhibit A hereto (collectively, the "Ma terial Subsidiaries")
have each been duly incorporated and are validly existing and
in good standing under applicable corporate law of their
respective states of incorporation. The Company and its Mate
rial Subsidiaries each have the corporate power and authority
to own, lease and operate their respec tive properties and to
conduct their respective businesses as described in the
Registration Statement and the Prospectus;
(2) (x) all of the outstanding shares of Common Stock
(including the Shares) have been duly authorized and validly
issued and are fully paid, non-assessable and (y) to such
counsel's knowledge were not issued in violation of to any
preemptive or similar rights;
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(3) this Agreement and the International
Underwriting Agreement have been duly authorized, executed
and delivered by the Company;
(4) the Registration Statement has become effective
under the Act and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has
been issued under the Act and no proceedings for that purpose
have been initiated by the Commis sion; and any required
filing of the Prospectus pursuant to Rule 424(b) under the Act
has been made in accordance with Rule 424(b) and 430A under
the Act;
(5) the statements in the Prospectus under the
captions "Description of Capital Stock," "Certain United
States Tax Consequences to Non-United States Holders," and
"Underwriters" (but only statements that summarize the
provisions of this Agreement) insofar as such statements
consti tute a summary of legal matters, documents or
proceedings referred to therein, are accurate in all material
respects;
(6) the execution, delivery and performance by the
Company of this Agreement, the International Underwriting
Agreement compliance by the Company with all the provisions
hereof and the consummation of the transactions contemplated
hereby will not (A) to the best of such counsel's knowledge,
require any consent, approval, authorization or other order
of, or filing with, any federal, California, New York,
Illinois or District of Columbia court or governmental agency
or body (except such as have been obtained under the Act or
such as may be required under state securities or Blue Sky
laws, or by the NASD with regards to the underwriting
arrangements), (B) conflict with or consti tute a breach of
any of the terms or provisions of the certificate of
incorporation or by-laws of the Company or any of its
Subsidiaries or of any agreement or document filed as an
exhibit to the Regis tration Statement, or (C) violate or
conflict with any federal, California, New York, Illinois or
District of Columbia statute, rule or regulation applicable to
the Company or its subsidiaries or the General Corporation Law
of the State of the Delaware (other than federal or state
securities laws, which are specifically addressed elsewhere
herein), except for such conflicts and violations as to which
the Company has obtained the necessary consents or waivers;
(7) neither the Company nor any of the Subsidiaries
is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(8) to such counsel's knowledge, no consent,
approval, authorization or order of, or filing with, any
federal or New York court or governmental agency or body is
required for the sale of the Shares pursuant to the
Underwriting Agreement, except such as have been obtained
under the Act and such as may be required under state
securities laws in connection with the purchase and
distribution of such Securities by the Underwriters; and
(9) the Registration Statement and the Prospectus,
and any amendment or supplement thereto, comply as to form in
all material respects with the requirements for registration
statements on Form S-3 under the Act; it being understood,
however, that such counsel expresses no opinion with respect
to the financial statements, schedules and other financial
data included in the Registration Statement or the Prospectus.
In passing upon the compliance as to form of the Registration
Statement and the Prospectus, such counsel may state that it
has assumed that the statements made therein are correct and
complete.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company, and
representatives of the U.S. Underwriters and their counsel, at which the
contents of the Registration Statement and the Prospectus and related matters
were discussed and, although they are not passing upon, and do not assume any
responsibility for, the accuracy,
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completeness or fairness of the statements contained in the Registration
Statement and the Prospectus (except as set forth in paragraph (v) above) and
have not made any independent check or verification thereof, during the course
of such par ticipation, no facts came to their attention that caused them to
believe that the Registration Statement, at the time it became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus, as of its date or as of the Closing
Date, contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; it being understood
that such counsel shall express no belief with respect to the financial
statements, schedules and other financial data included in the Registration
Statement or the Prospectus.
In rendering the opinion set forth in paragraph (3) above, such counsel
may state that such opinion is subject to the following exceptions, limitations
and qualifications: (i) the effect of bankruptcy, insolvency, reorganization,
fraudulent transfers or obligations, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors; (ii) the effect of general principles of equity, whether enforcement
is considered in a proceeding in equity or law, and the discretion of the court
before which any proceeding therefor may be brought; and (iii) the
unenforceability under certain circumstances under law or court decisions of
provisions providing for the indemnification of or contribution to a party with
respect to a liability where such indemnification or contribution is contrary to
public policy.
Such opinion shall be rendered to the Representatives at the request of
the Company and shall so state therein.
(c) The Representatives shall have received on the Closing
Date an opinion, dated the Closing Date, of Jennifer L. Adams, Vice Chairman,
Chief Legal and Administrative Officer and Secretary of the Company,
to the effect that:
(1) to the best of such counsel's knowledge, (a)
there is no action, suit or proceeding before or by any court
or governmental agency or body pending against the Company or
any Subsid iary or any of their respective properties that is
required to be described in the Registration Statement or
Prospectus which is not so described as required and (b) there
is no contract or other document required to be described in
the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement or incorporated therein
which is not so described, filed or incorporated as required,
it being understood that such counsel need not express any
opinion as to the financial state ments, notes or schedules or
other financial data included therein;
(2) to such counsel's knowledge, the execution and
delivery of this Agreement by the Company does not violate any
order of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and
(3) to such counsel's knowledge, all of the
outstanding capital stock of each of the Subsidiaries is owned
of record, directly by the Company or by a subsidiary of the
Company, either directly or indirectly, free and clear of any
security interest, claim, lien or encumbrance, other than any
security interests which may be described in the Prospectus;
to such counsel's knowledge, there are no outstanding rights,
warrants or options to acquire, or instruments convertible
into or ex changeable for, any shares of capital stock or
other equity interest in any Subsidiary, except as may be
described in the Prospectus.
Such counsel shall also state that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company, and
representatives of the U.S. Underwriters and their counsel, at which the
contents of the Registration Statement and the Prospectus and related matters
were discussed and, although such counsel is not passing upon, and does not
assume any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement and
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the Prospectus and has not made any independent check or verification thereof,
during the course of such participation, no facts came to such counsel's
attention that caused such counsel to believe that the Registration Statement,
at the time it became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the Prospectus,
as of its date or as of the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; it being understood that such counsel shall express no
belief with respect to the financial statements, schedules and other financial
data included in the Registration Statement or the Prospectus.
(d) The U.S. Underwriters shall have received on the Closing
Date an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters, dated the Closing Date, reasonably satisfactory to them.
(e) Latham & Watkins, counsel to the Selling Stockholders,
shall have furnished to the Representatives their written opinion, addressed to
the U.S. Underwriters and the International Underwriters dated such Time of
Delivery, in form and substance satisfactory to the Representatives, to the
effect that:
(i) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by or on
behalf of each Selling Stockholder;
(ii) Each of the Selling Stockholders (together, the "Common
Stock Partnerships") has full right, partnership power and authority to
enter into this Agreement and the International Underwriting Agreement.
The execution, delivery and performance of this Agreement and the
International Underwriting Agreement and the consummation by such
Common Stock Partnership of the transactions contemplated hereby and
thereby will not result in any violation of the partnership agreement
relating to such Common Stock Partnership or any statute or any order,
rule or regulation known to such counsel, that in their experience is
normally applicable to transactions of the type contemplated by this
Agreement and the International Underwriting Agreement of any United
States federal or state court or governmental agency or body having
jurisdiction over such Common Stock Partnership or the property of such
Common Stock Partnership;
(iii) To the knowledge of such counsel, no consent, approval,
authorization, order, registration or qualification of or with any such
United States federal or state court or governmental agency or body is
required for the execution, delivery and performance by such Selling
Shareholder of this Agreement or the International Underwriting
Agreement and the consummation by such Selling Stockholder of the
transactions contemplated hereby and thereby, except as may be required
by the Act, the Exchange Act, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws or by the NASD in connection
with the purchase and distribution of the Shares by the U.S.
Underwriters and with regard to the underwriting arrangements; and
(iv) Upon delivery of the Shares listed on Schedule II (the
"Securities") hereto to the U.S. Underwriters indorsed to the U.S.
Underwriters or in blank in the State of New York and payment therefor
pursuant hereto, the U.S. Underwriters will acquire the Securities free
of any adverse claim, within the meaning of Section 8-102(a)(1) of the
Uniform Commercial Code as in effect in the State of New York, assuming
that the U.S. Underwriters acquired the Securities without notice of
any such adverse claim.
In rendering such an opinion, such counsel may (i) state that
such opinion is limited to matters governed by U.S. federal law, New York law
and the Delaware Revised Uniform Limited Partnership Act and (ii) rely as to
matters of fact upon the representations and warranties of the Selling
Stockholders contained herein as to the opinions set forth in clause (i) and
(iv) above.
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(f) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the effective
date of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Deloitte & Touche LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to you,
to the effect set forth in Annex I hereto (the executed copy of the letter
delivered prior to the execution of this Agreement is attached as Annex I(a)
hereto and a draft of the form of letter to be delivered on the effective date
of any post-effective amendment to the Registration Statement and as of each
Time of Delivery is attached as Annex I(b) hereto);
(g) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock (except for
any increase due to the exercise of stock options which were outstanding as of
May [ ]) or long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in Clause (i) or (ii), is in the judgment of the Representatives so
material and adverse as to make it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered at such Time
of Delivery on the terms and in the manner contemplated in the Prospectus;
(h) On or after the date hereof (i), no downgrading shall have
occurred in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities;
(i) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the Company's securities on the New York Stock
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(j) The Shares at such Time of Delivery shall have been duly
listed on the New York Stock Exchange;
(k) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each of its directors and executive
officers, substantially to the effect set forth in Subsection 6(a) hereof in
form and substance satisfactory to you;
(l) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on the New
York Business Day next succeeding the date of this Agreement; and
(m) The Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of Delivery certificates
of officers of the Company and of the Selling Stockholders, respectively,
satisfactory to you as to the accuracy of the representations and warranties of
the Company and the Selling Stockholders, respectively, herein at and as of such
Time of Delivery, as to the performance by the Company and the Selling
Stockholders of all of their respective obligations hereunder to be performed at
or prior to such Time of Delivery, and
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as to such other matters as you may reasonably request, and the Company shall
have furnished or caused to be furnished certificates as to the matters set
forth in subsection (a) and (g) of this Section.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company shall indemnify
and hold harmless each U.S. Underwriter and each person, if any, who controls
any U.S. Underwriter within the meaning of the Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Shares in connection herewith), to which that
U.S. Underwriter or controlling person may become subject, under the Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse each U.S. Underwriter and each such controlling person for any
legal or other expenses reasonably incurred by that U.S. Underwriter or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; PROVIDED, HOWEVER, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or in any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any U.S. Underwriter through the
Representatives expressly for use therein; and PROVIDED, FURTHER, that as to any
Preliminary Prospectus this indemnity agreement shall not inure to the benefit
of any U.S. Underwriter or any person controlling that U.S. Underwriter on
account of any loss, claim, damage, liability or action arising from the sale of
Shares to any person by that U.S. Underwriter if that U.S. Underwriter failed to
send or give a copy of the Prospectus, as the same may be amended or
supplemented, to that person within the time required by the Act, and the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary Prospectus was corrected
in the Prospectus, unless such failure resulted from non-compliance by the
Company with Section 5(c) hereof. For purposes of the last proviso to the
immediately preceding sentence, the term "Prospectus" shall not be deemed to
include the documents incorporated therein by reference, and no Underwriter
shall be obligated to send or give any supplement or amendment to any document
incorporated by reference in any Preliminary Prospectus or the Prospectus to any
person. The foregoing indemnity agreement is in addition to any liability which
the Company may otherwise have to any U.S. Underwriter or to any controlling
person of that U.S. Underwriter.
(b) The Selling Stockholders (subject to the limitation on
indemnity contained in the last section of this Section 9(b)) severally and not
jointly, shall indemnify and hold harmless each U.S. Underwriter and each
person, if any, who controls any U.S. Underwriter within the meaning of the Act,
from and against any loss, claim, damage or liability, joint or several, or
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Shares in
connection herewith), to which that U.S. Underwriter or controlling person may
become subject, under the Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information furnished in writing to the
Company by such Selling Stockholder expressly for use therein, and shall
reimburse each U.S. Underwriter and each such controlling person for any legal
or other expenses reasonably incurred by that U.S. Underwriter or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred, PROVIDED, HOWEVER, that as to any Preliminary Prospectus this
indemnity agreement shall not inure to the benefit of any U.S. Underwriter or
any person controlling that U.S. Underwriter on account of any loss, claim,
damage, liability or action arising from the sale of Shares to any person by
that U.S. Underwriter if that U.S. Underwriter failed to send or give a copy of
the Prospectus, as the same may be amended or supplemented, to that person
within the time required by the Act, and the untrue statement or alleged
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<PAGE>
untrue statement of a material fact or omission or alleged omission to state a
material fact in such Preliminary Prospectus was corrected in the Prospectus,
unless such failure resulted from non-compliance by the Company with Section
5(c) hereof. For purposes of the last proviso to the immediately preceding
sentence the term "Prospectus" shall not be deemed to include the documents
incorporated therein by reference, and no Underwriter shall be obligated to send
or give any supplement or amendment to any document incorporated by reference in
any Preliminary Prospectus or the Prospectus to any person other than a person
to whom such Underwriter had delivered such incorporated document or documents
in response to a written request therefor. The foregoing indemnity agreement is
in addition to any liability which the Selling Stockholders may otherwise have
to any U.S. Underwriter or any controlling person of that U.S. Underwriter. The
aggregate liability of any Selling Stockholder to indemnify the U.S.
Underwriters and any controlling persons of the U.S. Underwriters pursuant to
the foregoing indemnity agreement shall not exceed the proceeds received by such
Selling Stockholder from the Shares sold by it pursuant to this Agreement.
(c) Each U.S. Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement, each person, if any, who
controls the Company within the meaning of the Act and each Selling Stockholder
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or any such director, officer or
controlling person or such Selling Stockholder may become subject, under the Act
or otherwise, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
that U.S. Underwriter through the Representatives expressly for use therein, and
shall reimburse the Company, any such director, officer or controlling person
and such Selling Stockholder for any legal or other expenses reasonably incurred
by the Company, any such director, officer or controlling person or such Selling
Stockholder in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any U.S. Underwriter may otherwise have to the Company or any such
director, officer or controlling person.
(d) Promptly after receipt by an indemnified party under
subsection (a) ,(b) or (c) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably, satisfactory to such indemnified party and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(e) If the indemnification provided for this in Section 9
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 9 (a), 9 (b) or 9(c) hereof in respect of any
loss,
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claim, liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one hand and the
U.S. Underwriters on the other from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law or if
the indemnified party failed to give the notice required under Section 9(d)
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Selling Stockholders on the one hand and the U.S. Underwriters
on the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholders on the one hand and the U.S. Underwriters
on the other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares purchased
under this Agreement (before deducting expenses) received by each of the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the U.S. Underwriters with respect to the Shares purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company, the Selling Stockholders or the U.S. Underwriters, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Selling
Stockholders and the U.S. Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 9(e) were to be determined
by pro rata allocation (even if the U.S. Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 9(e)
shall be deemed to include, for purposes of this Section 9(e), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9 (e), no U.S. Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public was offered to the
public exceeds the amount of any damages which such U.S. Underwriter has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission, and no Selling Stockholder shall be
required to contribute any amount in excess of the amount by which the proceeds
received by such Selling Stockholder from the Shares sold by it pursuant to this
Agreement exceeds the amount of any damages which such Selling Stockholder has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The U.S. Underwriters' obligations to contribute as provided
in this Section 9(e) are several in proportion to their respective underwriting
obligations and not joint.
(f) Each Selling Stockholder severally confirms, and each of
the U.S. Underwriters agrees that the information (other than the percentage of
shares owned) pertaining to each Selling Stockholder under the caption
"Principal and Selling Stockholders" in the Prospectus constitutes the only
information furnished in writing to the Company by such Selling Stockholder
expressly for the use in the Registration Statement and Prospectus.
10. (a) If any U.S. Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any U.S. Underwriter you do not arrange
for the purchase of such Shares, the Selling Stockholders shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Selling
Stockholders that you have so arranged for the purchase of such Shares, or the
Selling Stockholders notify you that they have so arranged for the purchase of
such Shares, you or the Selling Stockholders shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees
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to file promptly any amendments to the Registration Statement or the Prospectus
which in your opinion may thereby be made necessary.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting U.S. Underwriter or U.S. Underwriters by
you and the Selling Stockholders as provided in subsection (a) above, the
aggregate number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of all the Shares to be purchased at such
Time of Delivery, then the Selling Stockholders shall have the right to require
each non-defaulting U.S. Underwriter to purchase the number of Shares which such
U.S. Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting U.S. Underwriter to purchase its pro
rata share (based on the number of Shares which such U.S. Underwriter agreed to
purchase hereunder) of the Shares of such defaulting U.S. Underwriter or U.S.
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting U.S. Underwriter or U.S. Underwriters by
you and the Selling Stockholders as provided in subsection (a) above, the
aggregate number of such Shares which remains unpurchased exceeds one-eleventh
of the aggregate number of all of the Shares to be purchased at such Time of
Delivery, or if the Selling Stockholders shall not exercise the right described
in subsection (b) above to require non-defaulting U.S. Underwriters to purchase
Shares of a defaulting U.S. Underwriter or U.S. Underwriters, then this
Agreement (or, with respect to the Second Time of Delivery, the obligations of
the U.S. Underwriters to purchase and of the Selling Stockholders to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company or the Selling Stockholders, except
for the expenses to be borne by the Company and the Selling Stockholders and the
Underwriters as provided in Section 7 hereof and the indemnity and contribution
agreements in Section 9 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
11. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
U.S. Underwriters, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company, or any of the Selling Stockholders, or any
officer or director or controlling person of the Company, or any controlling
person of any Selling Stockholder, and shall survive delivery of and payment for
the Shares.
12. If this Agreement shall be terminated pursuant to Section 10
hereof, neither the Company nor the Selling Stockholders shall then be under any
liability to any U.S. Underwriter except as provided in Sections 7 and 9 hereof;
but, if for any other reason (other than by reason of Section 8(i) hereof) any
Shares are not delivered by or on behalf of the Selling Stockholders as provided
herein, each of the Selling Stockholders pro rata (based on the number of Shares
to be sold by such Selling Stockholder hereunder) will reimburse the U.S.
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
U.S. Underwriters in making preparations for the purchase, sale and delivery of
the Shares not so delivered, but the Company and the Selling Stockholders shall
then be under no further liability to any U.S. Underwriter in respect of the
Shares not so delivered except as provided in Sections 7 and 9 hereof.
13. In all dealings hereunder, you shall act on behalf of each of the
U.S. Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any U.S. Underwriter
made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
18
<PAGE>
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives at in care of Goldman,
Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 9(d) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
or the Selling Stockholders by you on request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
14. This Agreement shall be binding upon, and inure solely to the
benefit of, the U.S. Underwriters, the Company and the Selling Stockholders and,
to the extent provided in Sections 9 and 11 hereof, the officers and directors
of the Company and each person who controls the Company, any Selling Stockholder
or any U.S. Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
U.S. Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
15. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
16. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
17. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company and
each of the Selling Stockholders. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company and the Selling Stockholders for examination, upon
request, but without warranty on your part as to the authority of the signers
thereof.
19
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power-of-Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
WORLD COLOR PRESS, INC.
By:
----------------------------------------
Name:
Title:
APC ASSOCIATES, L.P.
KKR Associates, general partner
By:
----------------------------
Name:
Title: General Partner
GR ASSOCIATES, L.P.
KKR Associates, general partner
By:
---------------------------
Name:
Title: General Partner
WCP ASSOCIATES, L.P.
KKR Associates, general partner
By:
---------------------------
Name:
Title: General Partner
20
<PAGE>
KKR PARTNERS II, L.P.
KKR Associates, general partner
By:
-----------------------------
Name:
Title: General Partner
Accepted as of the date hereof :
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
By:
-----------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
21
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
<S> <C> <C>
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Total
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
<S> <C> <C>
The Company........................................................
The Selling Stockholder(s):
APC Associates, L.P.(a)
GR Associates, L.P.(b)
WCP Associates, L.P.(c)
KKR Partners II, L.P.(d)
Total.....................................................
(a) This Selling Stockholder is represented by Latham & Watkins.
(b) This Selling Stockholder is represented by Latham & Watkins.
(c) This Selling Stockholder is represented by Latham & Watkins.
(d) This Selling Stockholder is represented by Latham & Watkins.
</TABLE>
23
<PAGE>
ANNEX I
DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been furnished to the representatives of the Underwriters (the
"Representatives")and are attached hereto;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which are attached hereto;
and on the basis of specified procedures including inquiries of
officials of the Company who have responsibility for financial and
accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i)
below comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations, nothing came to their attention that
caused them to believe that the unaudited condensed consolidated
financial statements do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the foregoing procedures that
caused them to believe that this information does not conform in all
material respects with the disclosure requirements of Items 301, 302,
402 and 503(d), respectively, of Regulation S-K;
A-1
<PAGE>
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus and/or
included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in
the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Exchange Act as it applies to Form 10-Q and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the
Prospectus or included in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus, for
them to be conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and
any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial
statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent
fiscal year;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited
condensed financial statements referred to in Clause (A) and
any unaudited income statement data and balance sheet items
included in the Prospectus and referred to in Clause (B) were
not determined on a basis substantially consistent with the
basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest balance sheet included or incorporated
by reference in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts
shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in
A-2
<PAGE>
each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the
Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Prospectus (excluding documents incorporated by reference) or in
Part II of, or in exhibits and schedules to, the Registration Statement
specified by the Representatives or in documents incorporated by
reference in the Prospectus specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
A-3
<PAGE>
Exhibit 1.2
WORLD COLOR PRESS, INC.
Common Stock (par value $.01 per share)
UNDERWRITING AGREEMENT (INTERNATIONAL VERSION)
May __, 1998
Goldman Sachs International
Morgan Stanley & Co. International Limited
Bear, Stearns International Limited
BT Alex. Brown International,
a division of Bankers Trust International PLC
Donaldson, Lufkin & Jenrette International
As representatives of the several International Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court
133 Fleet Street
London EC4A 2BB, England
Ladies and Gentlemen:
Certain stockholders named in Schedule II hereto (the "Selling
Stockholders") of World Color Press, Inc., a Delaware corporation (the
"Company"), propose, subject to the terms and conditions stated herein, to sell
to the International Underwriters named in Schedule I hereto (the "International
Underwriters"), for whom Goldman Sachs International, Morgan Stanley Dean
Witter, Bear, Stearns International Limited, BT Alex. Brown International and
Donaldson, Lufkin & Jenrette International are acting as representatives ("Lead
Managers") an aggregate of 1,000,000 shares (the "Firm Shares") and, at the
election of the International Underwriters, up to 150,000 additional shares (the
"Optional Shares") of Common Stock par value $.01 per share ("Common Stock") of
the Company (the Firm Shares and the Optional Shares which the International
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares").
It is understood and agreed to by all parties that the Company and
the Selling Stockholders are concurrently entering into an agreement, a copy
of which is attached hereto (the
<PAGE>
"U.S. Underwriting Agreement"), providing for the sale by the Selling
Stockholders of up to a total of 10,350,000 shares of Common Stock (the "U.S.
Shares"), including the overallotment option thereunder, through arrangements
with certain underwriters in the United States (the "U.S. Underwriters"), for
whom Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Bear Stearns & Co.
Inc., BT Alex Brown Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation are acting as representatives. Anything herein or therein to the
contrary notwithstanding, the respective closings under this Agreement and the
U.S. Underwriting Agreement are hereby expressly made conditional on one
another. The International Underwriters hereunder and the U.S. Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Common Stock between the two
syndicates and for consultation by the representatives hereunder with Goldman,
Sachs & Co. prior to exercising the rights of the International Underwriters
under Section 7 hereof.
Two forms of prospectus are to be used in connection with the offering
and sale of shares of Common Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the U.S. Shares. The latter
form of prospectus will be identical to the former except for certain substitute
pages as included in the registration statement and amendments thereto as
mentioned below. Except as used in Section 2, 3, 4, 10 and 12 herein, and except
as context may otherwise require, references herein to the Shares shall include
all of the shares of Common Stock which may be sold pursuant to either this
Agreement or the U.S. Underwriting Agreement, and references herein to any
prospectus whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international versions
thereof.
In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the International
Underwriters or to Goldman, Sachs & Co. shall be to the addressees of this
Agreement and to Goldman Sachs International ("GSI"), and, in general, all such
provisions and defined terms shall be applied MUTATIS MUTANDIS as if the
incorporated provisions were set forth in full herein having regard to their
context in this Agreement as opposed to the U.S. Underwriting Agreement.
The registration statement as amended at the time it becomes effective,
including any documents incorporated therein by reference and including the
information (if any) deemed to
2
<PAGE>
be part of the registration statement at the time of effectiveness pursuant to
Rule 430A under the Securities Act of 1933, as amended (the "Securities Act"),
is hereinafter referred to as the "Registration Statement;" the U.S. prospectus
and the international prospectus in the respective forms first used to confirm
sales of Shares, including any documents incorporated therein by reference, are
hereinafter collectively referred to as the "Prospectus." If the Company has
filed an abbreviated registration statement to register additional shares of
Common Stock pursuant to Rule 462(b) under the Securities Act (the "Rule 462
Registration Statement"), then any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462 Registration Statement.
1. The Company and each of the several Selling Stockholders hereby make to
the International Underwriters the same respective representations, warranties
and agreements as are set forth in Section 1 of the U.S. Underwriting Agreement,
which Section is incorporated herein by this reference.
2. PURCHASE OF SHARES. On the basis of the representations and warranties
contained in, and subject to the terms and conditions of, this Agreement, each
Selling Stockholder hereby, severally and not jointly, agrees to sell the number
of Firm Shares set forth opposite such Selling Stockholder's name in Schedule II
hereto to the several International Underwriters and each of the International
Underwriters, severally and not jointly, agrees to purchase the number of Firm
Shares set forth opposite that International Underwriter's name in Schedule I
hereto. Each International Underwriter shall be obligated to purchase from each
Selling Stockholder that number of Firm Shares which represents the same
proportion of the number of Firm Shares to be sold by each Selling Stockholder
as the number of Firm Shares set forth opposite the name of such International
Underwriter in Schedule I represents of the total number of Firm Shares to be
purchased by all of the International Underwriters pursuant to this Agreement.
The respective purchase obligations of the International Underwriters with
respect to the Firm Shares shall be rounded among the International Underwriters
to avoid fractional shares, as the International Representatives may determine.
In addition, the Selling Stockholders grant to the International
Underwriters an option to purchase an aggregate of up to 150,000 Optional Shares
as set forth in Schedule II hereto. Such option is granted solely for the
purpose of covering over-allotments in the sale of Firm Shares and is
exercisable as provided in Section 4 hereof. Optional Shares shall be purchased
severally for the account of the International Underwriters in proportion to the
number of Firm Shares set forth opposite the name of such International
Underwriters in Schedule I hereto. The respective purchase obligations of each
International Underwriter with respect to the Optional Shares shall be adjusted
by the Representatives so that no International Underwriter shall be obligated
to purchase Optional Shares other than in 100 share amounts.
The price of both the Firm Shares and any Optional Shares shall be
$ per share.
3
<PAGE>
The Selling Stockholders shall not be obligated to deliver any of the
Shares to be delivered on the First Delivery Date or the Second Time of Delivery
(as hereinafter defined), as the case may be, except upon payment for all the
Shares to be purchased on such Delivery Date as hereinafter provided.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several International Underwriters propose to offer the Firm Shares for sale
upon the terms and conditions set forth in the Prospectus and in the forms of
Agreement among International Underwriters and Selling Agreements, which have
been previously submitted to the Company by you. Each International Underwriter
hereby makes to and with the Company and the Selling Stockholders the
representations and agreements of such International Underwriter as a member of
the selling group contained in Sections 3(d) and 3(e) of the form of Selling
Agreements.
4. (a) The Shares to be purchased by each International Underwriter
hereunder, in definitive form, and in such authorized denominations and
registered in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Selling Stockholders shall be delivered
by or on behalf of the Selling Stockholders to Goldman, Sachs & Co., through the
facilities of the Depository Trust Company ("DTC"), for the account of such
International Underwriter, against payment by or on behalf of such International
Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the accounts specified by each of the Selling Stockholders,
as their interests may appear, to Goldman, Sachs & Co. at least forty-eight
hours in advance. The Company will cause the certificates representing the
Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto at
the office of DTC or its designated custodian Goldman, Sachs & Co., 85 Broad
Street, New York, New York 10004 (the "Designated Office"). The time and date of
such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m.,
New York City time, on ........., 19.. or such other time and date as Goldman,
Sachs & Co. and the Selling Stockholders may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York time, on the date specified
by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of
the Underwriters' election to purchase such Optional Shares, or such other time
and date as Goldman, Sachs & Co. and the Selling Stockholders may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".
At each Time of Delivery, each at the Selling Stockholders will pay, or
cause to be paid, the commission payable at such Time of Delivery to the
Underwriters under Section 2 hereof
4
<PAGE>
by wire transfer of Federal (same-day) funds [(16 to the account specified by
Goldman, Sachs & Co.]
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 8 of the U.S. Underwriting Agreement,
including the cross-receipt for the Shares and any additional documents
requested by the International Underwriters pursuant to Section 8(n) of the U.S.
Underwriting Agreement, will be delivered at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022 (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at such Time of Delivery. A meeting will be held at the Closing Location at
..............p.m., New York City time, on the New York Business Day next
preceding such Time of Delivery, at which meeting the final s of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. The Company hereby makes with the International Underwriters the same
agreements as are set forth in Section 5 of the U.S. Underwriting Agreement,
which Section is incorporated herein by this reference.
6. The Selling Stockholders hereby makes with the International
Underwriters the same agreements as are set forth in Section 6 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this reference.
7. The Selling Stockholders and the International Underwriters hereby agree
with respect to certain expenses on the same terms as are set forth in Section 7
of the U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
8. Subject to the provisions of the Agreement between Syndicates, the
obligations of the International Underwriters hereunder shall be subject, in
their discretion, at each Time of Delivery to the condition that all
representations and warranties and other statements of the Company, and the
Selling Stockholders herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company and the Selling Stockholders shall have
performed all of their respective obligations hereunder theretofore to be
performed, and additional conditions identical to those set forth in Section 8
of the U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company shall indemnify and
hold harmless each International Underwriter and each person, if any, who
controls any International Underwriter within the meaning of the Act, from and
against any loss, claim, damage or
5
<PAGE>
liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to
purchases and sales of Shares in connection herewith), to which that
International Underwriter or controlling person may become subject, under the
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse each International Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by that
International Underwriter or controlling person in connection with investigating
or defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or in
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any International
Underwriter through the International Representatives expressly for use therein;
and provided, further, that as to any Preliminary Prospectus this indemnity
agreement shall not inure to the benefit of any International Underwriter or any
person controlling that International Underwriter on account of any loss, claim,
damage, liability or action arising from the sale of Shares to any person by
that International Underwriter if that International Underwriter failed to send
or give a copy of the Prospectus, as the same may be amended or supplemented, to
that person within the time required by the Act, and the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact in such Preliminary Prospectus was corrected in the
Prospectus, unless such failure resulted from non-compliance by the Company with
Section 5(c) of the U.S. Underwriting Agreement. For purposes of the last
proviso to the immediately preceding sentence, the term "Prospectus" shall not
be deemed to include the documents incorporated therein by reference, and no
International Underwriter shall be obligated to send or give any supplement or
amendment to any document incorporated by reference in any Preliminary
Prospectus or the Prospectus to any person. The foregoing indemnity agreement is
in addition to any liability which the Company may otherwise have to any
International Underwriter or to any controlling person of that International
Underwriter.
(b) The Selling Stockholders (subject to the limitation on indemnity
contained in the last section of this Section 9(b)) severally and not jointly,
shall indemnify and hold harmless each International Underwriter and each
person, if any, who controls any International Underwriter within the meaning of
the Act, from and against any loss, claim, damage or liability, joint or
several, or action in respect thereof (including but not limited to, any loss,
claim, damage, liability or action relating to purchases and sales of Shares in
connection
6
<PAGE>
herewith), to which that International Underwriter or controlling person may
become subject, under the Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information furnished in writing to the
Company by such Selling Stockholder expressly for use therein, and shall
reimburse each International Underwriter and each such controlling person for
any legal or other expenses reasonably incurred by that International
Underwriter or controlling person in connection with investigating or defending
or preparing to defend against any such loss, claim, damage, liability or action
as such expenses are incurred, provided, however, that as to any Preliminary
Prospectus this indemnity agreement shall not inure to the benefit of any
International Underwriter or any person controlling that International
Underwriter on account of any loss, claim, damage, liability or action arising
from the sale of Shares to any person by that International Underwriter if that
International Underwriter failed to send or give a copy of the Prospectus, as
the same may be amended or supplemented, to that person within the time required
by the Act, and the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact in such
Preliminary Prospectus was corrected in the Prospectus unless such failure
resulted from non-compliance by the Company with Section 5(c) of the U.S.
Underwriting Agreement. For purposes of the last proviso to the immediately
preceding sentence the term "Prospectus" shall not be deemed to include the
documents incorporated therein by reference, and no International Underwriter
shall be obligated to send or give any supplement or amendment to any document
incorporated by reference in any Preliminary Prospectus or the Prospectus to any
person other than a person to whom such International Underwriter had delivered
such incorporated document or documents in response to a written request
therefor. The foregoing indemnity agreement is in addition to any liability
which the Selling Stockholders may otherwise have to any International
Underwriter or any controlling person of that International Underwriter. The
aggregate liability of any Selling Stockholder to indemnify the International
Underwriters and any controlling persons of the International Underwriters
pursuant to the foregoing indemnity agreement shall not exceed the proceeds
received by such Selling Stockholder from the Shares sold by it pursuant to this
Agreement.
(c) Each International Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement, each person, if any, who
controls the Company within the meaning of the Act and each Selling Stockholder
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or any such director, officer or
controlling person or such Selling Stockholder may become subject, under the Act
or
7
<PAGE>
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
that International Underwriter through the Representatives expressly for use
therein, and shall reimburse the Company, any such director, officer or
controlling person and such Selling Stockholder for any legal or other expenses
reasonably incurred by the Company, any such director, officer or controlling
person or such Selling Stockholder in connection with investigating or defending
or preparing to defend against any such loss, claim, damage, liability or action
as such expenses are incurred. The foregoing indemnity agreement is in addition
to any liability which any International Underwriter may otherwise have to the
Company or any such director, officer or controlling person.
(d) Promptly after receipt by an indemnified party under subsection (a)
,(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably, satisfactory to such indemnified party, and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(e) If the indemnification provided for this in Section 9 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 9 (a), 9 (b)
8
<PAGE>
or 9(c) hereof in respect of any loss, claim, liability, or any action in
respect thereof, referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Company and the
Selling Stockhold ers on the one hand and the International Underwriters on the
other from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law or if the indemnified party
failed to give the notice required under Section 9(d) hereof, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the Selling
Stockholders on the one hand and the International Underwriters on the other
with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the International Underwriters on the
other with respect to such offering shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by each of the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the International Underwriters with respect to the Shares purchased under
this Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company, the Selling Stockholders or the International Underwriters, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Selling Stockholders and the International Underwriters agree that it would not
be just and equitable if contributions pursuant to this Section 9(e) were to be
determined by pro rata allocation (even if the International Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 9(e) shall be deemed to include, for purposes of this
Section 9(e), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 9 (e), no International
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public was offered to the public exceeds the amount of any damages which
such International Underwriter has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission, and no Selling Stockholder shall be required to contribute any amount
in excess of the amount by which the proceeds received by such Selling
Stockholder from the Shares sold by it pursuant to this Agreement exceeds the
amount of any damages which such Selling Stockholder has otherwise paid or
become liable to pay by reason of any untrue or
9
<PAGE>
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The International Underwriters' obligations to
contribute as provided in this Section 9(e) are several in proportion to their
respective underwriting obligations and not joint.
(f) Each Selling Stockholder severally confirms, and each of the
International Underwriters agrees that the information (other than the
percentage of shares owned) pertaining to each Selling Stockholder under the
caption "Principal and Selling Stockholders" in the Prospectus constitutes the
only information furnished in writing to the Company by such Selling Stockholder
expressly for the use in the Registration Statement and Prospectus.
10. (a) If any International Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any International Underwriter you do not
arrange for the purchase of such Shares, the Selling Stockholders shall be
entitled to a further period of thirty-six hours within which to procure another
party or other parties satisfactory to you to purchase such Shares on such
terms. In the event that, within the respective prescribed periods, you notify
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Selling Stockholders notify you that they have so arranged for
the purchase of such Shares, you or the Selling Stockholders shall have the
right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting International Underwriter or International Underwriters
by you and the Selling Stockholders as provided in subsection (a) above, the
aggregate number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of all the Shares to be purchased at such
Time of Delivery, then the Selling Stockholders shall have the right to require
each non-defaulting International Underwriter to purchase the number of shares
which such International Underwriter agreed to purchase hereunder at such Time
of Delivery and, in addition, to require each non-defaulting International
Underwriter to purchase its pro rata share (based on the number of Shares which
such International Underwriter agreed to purchase hereunder) of the Shares of
such defaulting International Underwriter or International Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting International Underwriter from liability for its default.
10
<PAGE>
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting International Underwriter or International Underwriters
by you and the Selling Stockholders as provided in subsection (a) above, the
aggregate number of such Shares which remains unpurchased exceeds one-eleventh
of the aggregate number of all the Shares to be purchased at such Time of
Delivery, or if the Selling Stockholders shall not exercise the right described
in subsection (b) above to require non-defaulting International Underwriters to
purchase Shares of a defaulting International Underwriter or International
Underwriters, then this Agreement (or, with respect to the Second Time of
Delivery, the obligations of the International Underwriters to purchase and of
the Selling Stockholders to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting International Underwriter or
the Company or the Selling Stockholders, except for the expenses to be borne by
the Company and the Selling Stockholders and the International Underwriters as
provided in Section 7 hereof and the indemnity and contribution agreements in
Section 9 hereof; but nothing herein shall relieve a defaulting International
Underwriter from liability for its default.
11. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Stockholders and the several
International Underwriters, as set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of any International Underwriter or any
controlling person of any International Underwriter, or the Company or any of
the Selling Stockholders, or any officer or director or controlling person of
the Company or any controlling person of any Selling Stockholders, and shall
survive delivery of and payment for the Shares.
12. If this Agreement shall be terminated pursuant to Section 10 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any International Underwriter except as provided in Section 7 and
Section 9 hereof; but, if for any other reason (other than by reason of Section
8(i) of the U.S. Underwriting Agreement), any Shares are not delivered by or on
behalf of the Selling Stockholders as provided herein, each of the Selling
Stockholders pro rata (based on the number of Shares to be sold by such Selling
Stockholder hereunder) will reimburse the International Underwriters through GSI
for all out-of-pocket expenses approved in writing by GSI, including fees and
disbursements of counsel, reasonably incurred by the International Underwriters
in making preparations for the purchase, sale and delivery of the Shares not so
delivered, but the Company and the Selling Stockholders shall then be under no
further liability to any International Underwriter in respect of the Shares not
so delivered except as provided in Sections 7 and 9 hereof.
13. In all dealings hereunder, you shall act on behalf of each of the
International Underwriters, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
International Underwriter made or given by you jointly
11
<PAGE>
or by GSI on behalf of you as the representatives of the International
Underwriters; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be
in writing, and if to the International Underwriters shall be delivered or sent
by mail, telex or facsimile transmission to the International Underwriters at in
care of GSI, Peterborough Court, 133 Fleet Street, London EC4A 2BB, England,
Attention: Equity Capital Markets, Telex No. 94012165, facsimile transmission
No. (071) 774-1550; if to any Selling Stockholder shall be delivered or sent by
mail, telex or facsimile transmission to counsel for such Selling Stockholder at
its address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an International Underwriter pursuant to Section
9(d) hereof shall be delivered or sent by mail, telex or facsimile transmission
to such International Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholders by GSI on request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
14. This Agreement shall be binding upon, and inure solely to the benefit
of, the International Underwriters, the Company and the Selling Stockholders
and, to the extent provided in Sections 9 and 11 hereof, the officers and
directors of the Company and each person who controls the Company, any Selling
Stockholder or any International Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any International Underwriter shall be deemed a successor
or assign by reason merely of such purchase.
15. Time shall be of the essence of this Agreement.
16. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
17. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please
sign and return to us counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the International Underwriters, this letter and such
acceptance hereof shall constitute a binding
12
<PAGE>
agreement among each of the International Underwriters, the Company and each of
the Selling Stockholders. It is understood that your acceptance of this letter
on behalf of each of the International Underwriters is pursuant to the authority
set forth in a form of Agreement among International Underwriters, the form of
which shall be furnished to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
13
<PAGE>
Any person executing and delivering this Agreement as
Attorney-in-Fact for a Selling Stockholder represents by so doing that he has
been duly appointed as Attorney-in-Fact by such Selling Stockholder pursuant to
a validly existing and binding Power of Attorney which authorizes such
Attorney-in-Fact to take such action.
Very truly yours,
WORLD COLOR PRESS
By:
-------------------------------------
Name:
Title:
APC ASSOCIATES, L.P.
KKR Associates, general partner
By:
-------------------------------------
Name:
Title: General Partner
GR ASSOCIATES, L.P.
KKR Associates, general partner
By:
-------------------------------------
Name:
Title: General Partner
WCP ASSOCIATES, L.P.
KKR Associates, general partner
By:
-------------------------------------
Name:
Title: General Partner
14
<PAGE>
KKR PARTNERS II, L.P.
KKR Associates, general partner
By:
-------------------------------------
Name:
Title: General Partner
Accepted as of the date hereof:
Goldman Sachs International
Morgan Stanley & Co. International Limited
Bear, Stearns International Limited
BT Alex. Brown International,
a division of Bankers Trust International PLC
Donaldson, Lufkin & Jenrette International
By: Goldman Sachs International
By: ...............................
(Attorney-in-fact)
On behalf of each of the International Underwriters
15
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
-----------
<S> <C> <C>
Goldman, Sachs & Co....................................
Bear, Stearns International Limited....................
Morgan Stanley & Co. International Limited.............
BT Alex. Brown International, a division of Bankers Trust
International PLC......................................
Donaldson, Lufkin & Jenrette International.............
Total
</TABLE>
16
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
<S> <C> <C>
The Company............................................
The Selling Stockholder(s):
APC Associates, L.P. (a).......................
GR Associates, L.P.(b).........................
WCP Associates, L.P.(c)........................
KKR Partners II, L.P.(d).......................
Total
</TABLE>
(A) This Selling Stockholder is represented by Latham & Watkins.
(b) This Selling Stockholder is represented by Latham & Watkins.
(c) This Selling Stockholder is represented by Latham & Watkins.
(d) This Selling Stockholder is represented by Latham & Watkins.
17
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-51311 of World Color Press, Inc. on Form S-3 of our report dated February 4,
1998, appearing in the Prospectus, which is part of this Registration Statement,
and to the incorporation by reference of our reports dated February 4, 1998,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
World Color Press, Inc. for the year ended December 28, 1997.
We also consent to the reference to us under the headings "Summary Financial
Data" and "Experts" in such Prospectus, which is part of this Registration
Statement.
DELOITTE & TOUCHE LLP
New York, New York
May 18, 1998
