Summary of Q2 Earnings Call By Susan Kelly of Raine Consulting August 5, 2003 - Moore Wallace Inc. (TSX, NYSE: MWI) Mississauga, Ontario, and New York, NY, held their conference call for their second quarter 2003. Moore has recently been in the news with their Wallace merger announcement. On May 15th, 2003, Moore Corporation Ltd. acquired all of the outstanding shares of Wallace Computer Services Inc. For the second quarter 2003, Moore Wallace Corporation reported revenues of $650.1 million. The net earnings for the second quarter 2003 were $18.9 million, or $0.14 per diluted share. Topics: * CEO Comments * Financial Summary * Q&A CEO Comments: Mr. Mark Angelson, CEO of Moore Wallace, opened the call with the statement that they are pleased to report they are satisfied with their progress in the first 69 days of combined operations. In the last four months, they had appointed teams across 17 disciplines with representatives from each company. In the short term, they have combined the procurement and IT staffs and paid down some debt. They have also announced the closing of 10 locations and will move people and equipment to other locations where feasible. Of the 10 locations, 5 were from each company. The combined sales pipeline remains very strong. New opportunities exist with their commercial printing platform and geographic coverage where one-stop shopping is required. What was keeping the CEO awake at night was the insufficient bench strength. They had now hired some outside talent, and the CEO claims "we now have bench strength, and I believe we have the strongest management team in the entire printing industry." Financial Summary: Mr. Mark Hiltwein, Moore Wallace's Chief Financial Officer, reported additional financial performance indicators: * Operating margins have increased from 4.5% to 7.8% from the same quarter last year * Outsourcing business performed very well and helped the entire company maintain 31.2% gross profit margin as a percentage of sales versus 31.6% last year. * SG&A Expenses were reduced to 18.7% from 22.6%, same quarter last year, as a percentage of sales. * Net Cash was $34.6 million for second quarter. * Net debt has decreased to $918.2 million from $995.2 million; a reduction of $77 million since March 2003. * Organic growth decreased 2-3% for the second quarter 2003. * Capital expenditures for the quarter were $20 million or 3% of sales. * Guidance for earnings per share show third quarter at $0.23 and $0.30 for fourth quarter 2003. * Guidance has been raised to EPS of $0.93 per share for the full year 2003. Q&A 1. Analysts wanted more information about the timetable and progress of the integration. More specifically, they questioned if there were more than 10 plants to be rationalized over the next 12 months. Mark Angelson replied that "we're in the third inning and you cannot draw conclusions from that whether more closings are imminent." Tom Quinlan, EVP of Business Integration, commented that they "have identified the cost savings and are executing on these as we speak. We have combined sales assignments and consolidated sales offices. Sales leaders are working together to avoid market confusion." 2. No quantitative report was given about the cost savings, integration costs, or breaking out the margins by segment. The CFO said this report will come out in the next 8-10 business days. 3. A revenue decline in forms and labels is from moving sales regions around, and some customer caution in buying; however Moore Wallace executives stated there has been no fall out from the merger. The CEO says he is "feeling OK about revenues and a higher run rate will be back by 2004." Right now they have 950 sales executives and 1600 globally. 4. Moore Wallace was asked to comment on the Consolidated Graphics 07.23.03 announcement of their 7% drop in commercial printing sales. Moore Wallace would not comment. Commercial printing at Moore was flat year over year because of cross-selling activities plus the expansion of their national footprint. Out of the Fortune 500 companies, they work with 467. Editor's Note: Analysts probed on several occasions to get a handle on the real growth rate of the commercial printing industry but Moore Wallace would not comment. 5. Future acquisition targets were probed. Mark Angelson said that the number one priority is making the integration work. Where there is less integration work going on is where they will spend time figuring out how to grow the business through acquisitions. CEO comments: "Days of running businesses at 5x leverage are done and gone. Today it is more likely that leverage should be around 3x…and we are substantially lower than that. We are mindful of our obligations to everybody." 6. Outsourcing business grew by 7% by implementing large contracts. There are a number of large RFP's outstanding from financial institutions, telecommunications, healthcare, etc. "We are poised with our ability to leverage our platform and proprietary products to take advantage of this." says Angelson. ------------------------------------------------------------------------