Worldcolor Q3 Sales Fall 23%
World Color reports net income climbed to $13.3 million, compared to a net loss from continuing operations of $63.6 million in the prior year.
Source: Worldcolor -- Graphic Arts Online, November 12, 2009
Montréal, Canada - Worldcolor (TSX: WC, WC.U) reported increased combined consolidated adjusted earnings before interest, tax, depreciation and amortization (adjusted EBITDA) in the third quarter of 2009 compared to the same period in the prior year, highlighting the Company's efforts to improve efficiencies and to align its cost structure with the current challenging economic environment.
In the third quarter of 2009, Worldcolor generated combined consolidated revenues from continuing operations of $769.9 million compared to $993.6 million in the third quarter of 2008. Combined consolidated operating income in the third quarter of 2009 before impairment of assets, restructuring and other charges was $51.5 million compared to $33.7 million in the third quarter of 2008. Combined consolidated adjusted EBITDA was $103.4 million in the third quarter of 2009 compared to $94.2 million in the third quarter of 2008. The higher adjusted EBITDA in the quarter resulted from increased operational efficiencies and ongoing cost-containment initiatives. In the third quarter of 2009 cost of sales decreased by 26% compared to the third quarter of 2008 while revenues in the third quarter 2009 decreased by 23% compared to the same period last year. For the third quarter ended September 30, 2009, Worldcolor reported a combined consolidated net income of $13.3 million, compared to a net loss from continuing operations of $63.6 million for the same period in 2008. These results incorporated impairment of assets, restructuring and other charges (IAROC), net of income taxes, of $8.9 million compared with $5.1 million for the same period in 2008, as well as reorganization items of $13.0 million which, net of income taxes, compared to $24.0 million in the third quarter of 2008. In addition to the improvement in operating income, the Company benefited from reduced financial expense mainly due to gains on foreign exchange and lower interest expenses post emergence from creditor protection in July, 2009. With $52.9 million of cash on hand and access to a $350 million credit facility, of which $85 million was drawn on September 30, 2009, the Company believes it has adequate liquidity to achieve its operational goals going forward.
"The new Worldcolor is making a satisfactory beginning. The quarter-over-quarter improvement in profitability exceeded our expectations. It is spread across most of our businesses and was achieved despite generally lower volumes related to the difficult global economy and reduced advertising spending in North America," said Mark Angelson, Chairman and CEO of Worldcolor. "We have important work ahead, but we see many opportunities to improve our business and our industry position. We will continue to take a disciplined and rigorous approach to improving operational efficiencies through cost-reductions across our entire platform."
The Company recently announced new and renewed agreements with important customers including USA Weekend, Pace Communications, Macmillan and ABA Publishing. Worldcolor continues to expand and diversify its product offerings including services that allow publishers and retailers to repurpose content in a timely manner, across multiple platforms to reach the greatest audience and to maximize the return on their advertising spend.
"We are encouraged by the positive response we have received from our customers and other stakeholders. We are focused on proactive relationships with customers and continue to make progress in renewing existing partnerships and beginning new ones," commented Mr. Angelson.
Year-to-Date
For the three quarters of
2009, Worldcolor reported a combined consolidated net loss from continuing
operations of $172.1 million, compared to a net loss from continuing operations
of $289.9 million for the same period in 2008. The results for the three
quarters of 2009 incorporate IAROC, net of income taxes, of $21.8 million
compared to $47.8 million for the same period in 2008 as well as reorganization
items of $62.1 million which, net of income taxes, compared to $62.3 million in
the first three quarters of 2008. Combined consolidated revenues for the first
three quarters of 2009 were $2.22 billion compared to $2.98 billion for the same
period in 2008. The lower revenues are mainly due to decreased volume in
addition to price erosion.
Fresh Start Reporting and combined financial
results
Upon emergence from protection under the Companies'
Creditors Arrangement Act in Canada ("CCAA") and Chapter 11 in the United
States, the Company is required to adopt "fresh start" financial accounting.
Under fresh start accounting, the Company undertook a comprehensive
re-evaluation of its assets and liabilities based on the estimated enterprise
value of $1.5 billion as established in the Plan of Reorganization. Enterprise
value is generally defined to be the Company's estimated fair value at the Fresh
Start date, less cash and cash equivalents. As a result of Fresh Start
accounting Worldcolor, the Successor, became a new entity for financial
reporting purposes. Accordingly, the Consolidated Financial Statements of the
Successor on or after August 1, 2009 are not comparable to the Consolidated
Financial Statements of the Predecessor prior to that date. However, for the
readers' convenience the current financial results for the two periods have been
combined in this news release.
Use of Non-GAAP Measures
In the discussion
of our 2009 results, we use certain financial measures that are not calculated
in accordance with Canadian generally accepted accounting principles (GAAP) or
United States GAAP to assess our financial performance, including EBITDA
(earnings before interest, tax, depreciation and amortization), Adjusted EBITDA,
Adjusted EBIT, and free cash flow. We use such non-GAAP financial measures
because we believe that they are meaningful measures of our performance. Our
method of calculating these non-GAAP financial measures may differ from the
methods used by other companies and, as a result, the non-GAAP financial
measures presented in this press release may not be comparable to other
similarly titled measures disclosed by other companies. We provide a
reconciliation of these non-GAAP financial measures to the most directly
comparable GAAP financial measures in Figure 4, "Reconciliation of non-GAAP
Measures" of our third quarter 2009 management's discussion and analysis filed
with the Canadian securities regulatory authorities at www.sedar.com and furnished to the United
States Securities and Exchange Commission at www.sec.gov. A copy of our third quarter 2009
management's discussion and analysis is also available on the Company's website
at www.worldcolor.com.
Cautionary Note
In connection with its
insolvency proceedings, the Company was required to prepare projected financial
information to demonstrate to the U.S. Bankruptcy Court the feasibility of its
Plan of Reorganization and its ability to continue operations upon emergence
from bankruptcy protection. The Company filed projected financial information
with the U.S. Bankruptcy Court as part of its Third Amended Disclosure
Statement. The Company's financial and operating results for periods prior to
August 1, 2009, being the effective date of the adoption by the Company of
fresh-start accounting after the implementation of its Plan of Reorganization,
are not necessarily indicative of its financial performance for any future
period, and there is no guarantee that the Company will achieve its projected
financial performance for the remainder of 2009 or other future periods set
forth in the Third Amended Disclosure Statement. The Company is in no way
updating or reaffirming any projections.
There are numerous factors that can affect the performance of the Company's business, including the risks and uncertainties described in the Company's most recent Annual Report on Form 20-F and quarterly financial statements and corresponding management's discussion and analysis furnished to the SEC on Form 6-K, including under the captions "Forward Looking Statements" and "Risk Factors." As they relate to projected financial information filed with the U.S. Bankruptcy Court, see Appendix D to the Company's Third Amended Disclosure Statement, "Financial Projections; Notes to Financial Projections", for cautionary language regarding the projections.
About Worldcolor
Worldcolor is an industry
leader in providing high-value and comprehensive print, digital and related
services to retailers, catalogers, publishers, branded-goods companies and other
businesses worldwide. Founded in 1903, Worldcolor's products include advertising
inserts and circulars, catalogs, direct mail products, magazines, books,
directories, digital premedia, logistics and mail list technologies. During its
century-long existence, Worldcolor has had a rich tradition of leadership and
excellence. Its team of approximately 20,000 employees is focused on helping
clients meet their needs from facilities located in the U.S., Canada, Argentina,
Brazil, Chile, Colombia, Mexico and Peru. More information about Worldcolor can
be found on its Web site at www.worldcolor.com
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