Though they have struggled to bring decentralized Worldcolor operations into the fold, Quad/Graphics executives told Wall Street analysts today they are off to "a fast start" in integrating the two companies.
The bad news of the former Worldcolor's structure is that its "previous acquisitions hadn't been integrated," resulting in "no common manufacturing platform or workflow process," "63 vacation policies" and "94 post-retirement healthcare programs," Quad executives said.
The good news is that Worldcolor had "very little corporate culture to change," they added. That's a huge contrast to Quad, where managers talk of "Quadracizing" almost everything and employees joke about drinking the Kool-Aid.
The executives' comments came during "Investor/Analyst Day" presentations in Wisconsin, which included a tour of the huge printing/mailing facility in Sussex, WI. (Quad posted two presentations on its Web site -- CEO/CFO Overview and Magazine-Catalog Business Overview.)
Quad said "things are progressing as we anticipated" and that projected synergy savings -- annualized $225 million within 24 months -- are "on target."
The printing industry, however, still faces "pricing headwinds due to overcapacity." Quad is putting a dent in that capacity by closing six North American printing plants during the second half of this year -- the "equivalent of closing a large printing company."
Along with shutdown of the former Worldcolor headquarters in Montreal, a 40% headcount reduction in the combined accounting operation, and other "right sizing," Quad is on track to shed nearly 3,000 positions since the July merger.
Some employees displaced from closing (mostly ex-Worldcolor) plants are being transferred to other (mostly legacy Quad) plants. And some customers of the closed plants reported frustrating waits at the peak of a tight paper market while trying to find out where their work was being moved and where their paper shipments should go.
Quad acknowledged that its first post-quarter merger was a bit rough financially, with sales down 2.8% versus what Quad and Worldcolor achieved as separate companies in the 3rd Quarter of 2009. Profitability was also down, with adjusted EBITDA slipping from 15.9% to 14.9%. Once all the post-merger synergies are in place, Quad projects that operating margin will rise to 18.8%, versus 12.6% for rival mega-print R.R. Donnelley.
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