March 10, 2010 J.S. Eliezer Associates, Inc. News
Printing News
Quad/Graphics Files with SEC to Take Over World Color
On March 5th, Quad filed a 246-page prospectus with the SEC, regarding the takeover of World Color Press Inc. Quad expects to deliver $225 million of pre-tax annualized savings within 2 years of the deal, at a one-time cost of approximately $200 million. They will accomplish this through better management, optimizing plant and machine utilization, and mailing and logistics utilization and savings. Quad reported 2009 net sales of $1.78 billion with income of $112.4 million. World Color reported 2009 operating revenues of $3.07 billion with a net loss of $154 million. (Folio)
Supply News
Catalyst Paper Hopes to Restart Elks Fall BC Mill
Catalyst has proposed a plan that could restart 2 specialty paper machines at the Elk Falls paper mill. It would require the CEP union to accept labor cost, all in, of $40/hour, with wage and benefit changes similar to what management and staff have already taken. To date, 63% of eligible mill workers took severance, with an average payout of $57,000. The Elk Falls mill is located in Richmond, BC with annual capacity of 153,000 tons of uncoated mechanical specialty paper and 373,000 tons of newsprint. (Catalyst Press Release)
Demand News
J. Crew Reports 4Q Direct and Retail Sales Up
In 4Q, J. Crew reported Direct sales up 13% to $139.2 million and Retail up 23% to $311.1 million, with same-store sales rising 17%. Net income was positive at $40.4, vs. a loss of -$13.5 million in 4Q 2008. For the year, sales increased 11% to $1.56 billion and income more than doubled to $123.4 million. They are looking to expand, opening 15 new stores and going more international by putting their products up on Net-a-Porter, a London based on-line retailer selling designer women’s apparel. (WSJ and Direct)
Both Print and Digital Advertising Expected to Grow in 2010
According to a survey conducted by research firm, Outsell, digital advertising ($119.6 billion) will exceed print ($111.5 billion) for the first time, however, both will increase in 2010. Magazine ad spending is expected to increase 1.9% to $9.4 billion, including a 4.2% increase for consumer titles and 1% for B-to-B titles. B-to-B advertisers see cross-media marketing as most effective, combining 3+ methods. (Folio and Forbes)
Postal News
USPS Finalizes New “Droop” Test Rule
In February, the USPS published a final rule regarding eligibility for commercial flats failing the deflection or “droop” test, with revised mailing standards and price eligibility. The new deflection standards allow 1” less vertical droop. Basic standards take effect June 7th with price consequences effective Oct 3rd. Hamilton Davis, executive director of the American Catalog Mailers Association, believes that penalties to be issued of 25-45% of postage paid, are too high and that the test is still too subjective. He is asking for a precertification process, so that millions of copies are not printed before finding that they do not pass for deflection. USPS representative, Yvonne Yoerge stated that it is important to test postproduction pieces, because of variation present in production. (MultiChannel Merchant)
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