Quad/Graphics’ 1st Quarter 2010 was slightly worse than last year’s, and it expects to close some high-cost U.S. printing plants when it merges with Worldcolor this summer.
Those are among the revelations in a document the big Wisconsin-based printing company filed with the Securities and Exchange Commission Friday.
The document is being sent to Worldcolor shareholders in advance of their special meeting on June 25 to vote on a merger with Quad that would create the continent’s second largest printing company. A June 28 court hearing in Montreal could be the final step in consummating the deal now that all anti-trust hurdles have been cleared.
Quad/Graphics’ sales in the quarter ended March 31 were down 3% from the previous year, while its losses doubled to $8.5 million. The loss equaled about 2% of total sales, which is not bad considering the recession and the usual post-Christmas slowdown in printing. Worldcolor’s $59 million quarterly loss, after all, was more than 8% of its total revenue.
The “continued but somewhat lessened decline in demand for commercial printing due to the global economic recession” was the main reason for the sales decrease, Quad said. “Product sales also declined due to continued pricing pressures related to increased competition and industry overcapacity. These decreases were partially offset by an increase in recycling sales due to increased prices received on recycled paper.”
Some of the estimated $225 million in annual cost savings that Quad expects the merger to produce will come “from commercial printing capacity consolidation into lower cost, more modern and efficient printing facilities from certain high cost facilities (primarily in the United States).”
Other sources of savings it cites are increased purchasing volume, “elimination of redundant administrative costs (including the consolidation of the corporate headquarters),” and “better utilization of shipping, distribution and warehousing logistics" as a result of the plant consolidations.
Worldcolor projects the savings will be even higher -- $285 million – apparently because it “estimated greater procurement synergies than Quad/Graphics” did.
Privately held Quad has historically been tight-lipped about its financial status and results, but the process of acquiring Worldcolor and going public is forcing it to reveal more. Still, the First Quarter data are less detailed than what a public company usually releases and were not accompanied by a press release, which is why Quad’s quarterly results have not appeared in newspapers or the trade press.
(“No news release, no news coverage,” a journalist friend told me in explaining the impact of the news media’s budget cuts on business-news coverage. But because Dead Tree Edition is published by a somewhat obsessive hobbyist rather than a real journalist, we continue to read and report on actual source documents. How quaint!)
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