World Color Press Inc. (previously Quebecor World Inc.) emerged from court protection in the U.S. and in Canada on July 21, 2009. World Color's successful restructuring allowed it to emerge as a stand-alone entity that is poised to resume and strengthen its role as a leading player in its industry.
"The Company's exit from creditor protection was an important milestone and would not have been possible without the tireless efforts of our employees and the support of our customers. During this time we strengthened our financial structure and made important strides in reducing our cost structure and introducing new customer solutions across our platform," said Jacques Mallette, President and CEO, World Color. "We have also continued to develop new integrated print solutions to ensure our customers get the best return on their investment. Going forward, we will be able to fully concentrate on strengthening our business to benefit all our stakeholders".
In the second quarter 2009, World Color generated consolidated revenues from continuing operations of $702.5 million compared to $975.5 million in the second quarter of 2008. Operating income in the second quarter of 2009 before impairment of assets, restructuring and other charges (Adjusted EBIT) was $5.5 million compared to $27.8 million in the second quarter of 2008. Adjusted earnings before interest, tax, depreciation and amortization (Adjusted EBITDA) was $58.0 million in the second quarter of 2009 compared to $92.7 million in the second quarter of 2008. The lower Adjusted EBITDA in the second quarter resulted primarily from lower volumes, mostly due to the North American recession and to a lesser extent negative price pressures.
In the second quarter, the Company generated $28.1 million of free cash flow compared to negative free cash flow of $23.3 million in the second quarter of 2008, excluding the proceeds from business disposals. This was largely due to higher cash provided from operating activities.
"During the quarter and year-to-date, we continued to further reduce our cost base and improve efficiencies. These efforts together with our solid customer base and stronger balance sheet will benefit us going forward," said Mr. Mallette.
World Color recently put in place cost reduction initiatives that are expected to realize in excess of $100 million in annualized cost savings. These measures include a significant program impacting wages, benefits and working conditions for union and non-union employees across the North American platform. These initiatives began to be implemented on April 19, 2009. In the second quarter, selling, general and administrative expenses decreased by 17% compared to the same period last year
On June 22, 2009, the creditors approved a plan of compromise and reorganization (the "Plan") under both the CCAA and Chapter 11. On June 30, 2009, the Plan was sanctioned by the Quebec Superior Court, and it was confirmed by the U.S. Bankruptcy Court on July 2, 2009. The Plan was implemented following various transactions that were completed on July 21, 2009. The implementation of the Plan also involved entering into a new exit financing credit facility of $800 million. At closing, the Company drew approximately $540 million on the new credit facilities from which it repaid in full its DIP credit facility. The Company expects its newly issued Common Shares, as well as Series I Warrants and Series II Warrants to be listed and begin trading on the Toronto Stock Exchange (TSX: WC) by the end of August. On July 21, 2009, the Company has changed its legal name to World Color Press Inc. and it will be launching a rebranding effort in September.
Second quarter net loss
For the second quarter ended June 30, 2009, World Color reported a net loss of $59.5 million, compared to a net loss from continuing operations of $77.7 million for the same period in 2008. These results incorporated impairment of assets, restructuring and other charges (IAROC), net of income taxes, of $2.5 million compared with $7.5 million for the same period in 2008, as well as reorganization items of $33.7 million which, net of income taxes, compared to $24.2 million in the second quarter of 2008.
Year to Date
For the first half of 2009, World Color reported a net loss from continuing operations of $185.4 million, compared to a net loss from continuing operations of $226.3 million for the same period in 2008. The results for the first half of 2009 incorporate IAROC, net of income taxes, of $12.9 million compared to $42.7 million in 2008, as well as reorganization items of $49.1 million which, net of income taxes, compared to $38.3 million in the first half of 2008. Consolidated operating revenues for the first half of 2009 were $1.46 billion compared to $1.99 billion in the same period of 2008. The lower operating revenues are due to decreased volume and price pressures.
Fresh Start Reporting
The Company will be required, under Canadian GAAP, to adopt "fresh start" financial reporting. Under fresh start financial reporting, the Company will undertake a comprehensive re-evaluation of its assets and liabilities as of July 31, 2009, the effective fresh start date, based on the enterprise value of $1.5 billion as established and confirmed in the Plan. The Company has prepared a Pro Forma Fresh Start Consolidated Balance Sheet as of June 30, 2009, which is included in the MD&A. The "fresh start" process will result in our becoming a new entity for financial reporting purposes and will mean that the financial statements of the new entity will not be comparable to any of our previously issued financial statements.
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