Quad/Graphics Reports Second Quarter and Year-to-Date June 2013 Results
Quad/Graphics Reports Second Quarter and Year-to-Date June 2013 Results
Company Generates $86 Million in Recurring Free Cash Flow in the Quarter and Reaffirms 2013 Annual Guidance
Second Quarter Highlights:
Generated net sales of $1.1 billion.
Achieved Adjusted EBITDA of $111 million.
Produced Recurring Free Cash Flow of $86 million.
Continued disciplined integration of Vertis Holdings, Inc. ("Vertis").
Reaffirms 2013 annual guidance of $4.8 billion to $5.0 billion in revenue, $580 million to $610 million in Adjusted EBITDA, and Recurring Free Cash Flow in excess of $360 million.
SUSSEX, Wis.--(BUSINESS WIRE)-- Quad/Graphics, Inc. (NYS: QUAD) ("Quad/Graphics" or the "Company") today reported results for its second quarter ending June 30, 2013. The reported results include Vertis from the day of acquisition on January 16, 2013. Prior year financial results do not include the acquisition of Vertis. For full financial results, including reconciliations of non-GAAP financial measures, please see the accompanying information.
"Our second quarter results were consistent with our expectations and we remain on track to achieve our 2013 objectives," said Joel Quadracci, Quad/Graphics Chairman, President & CEO. "We continue to be pleased with the Vertis acquisition and remain focused on integrating operations and driving future cost-savings, and improving efficiency and productivity in our platform. As always, we are committed to our priorities to maintain a strong and flexible balance sheet; invest in our business, which includes the pursuit of profitable investment opportunities; and create long-term value for our shareholders and clients."
Net sales for the second quarter 2013 increased to $1.1 billion versus $934 million for the same period in 2012 due to the Vertis acquisition. Second quarter 2013 Adjusted EBITDA was $111 million as compared to $112 million for the same period in 2012. Recurring Free Cash Flow was $86 million versus $60 million for the same period in 2012.
For the first six months of 2013, net sales were $2.2 billion versus $1.9 billion for the same period in 2012, representing a 16% increase due to the Vertis acquisition. Year-to-date Adjusted EBITDA was $225 million versus $238 million in 2012. Recurring Free Cash Flow was $206 million for the first six months of 2013 compared to $167 million for the same period in 2012, continuing a track record of solid cash flow generation.
"Our Adjusted EBITDA and Adjusted EBITDA margin of 10.0% were in line with our expectations and reflect Vertis' lower margin profile and increased seasonality, and ongoing industry pricing and volume pressures," said John Fowler, Quad/Graphics Executive Vice President and Chief Financial Officer. "We are pleased with our Recurring Free Cash Flow of $86 million, which was generated during a quarter that normally reflects lower volumes due to industry seasonality. Recurring Free Cash Flow is the foundation of our strong balance sheet and provides us with the flexibility and confidence to invest in our business and pursue value-added opportunities as they arise to ensure strong future cash flow."
Quad/Graphics' quarterly dividend of $0.30 per share will be payable on September 20, 2013, to shareholders of record as of September 9, 2013.
Quarterly Conference Call
Quad/Graphics (NYS: QUAD) will hold a conference call at 10 a.m. ET / 9 a.m. CT on Wednesday, August 7, to discuss second quarter 2013 results. To access the conference call, it is recommended that you listen via computer at: http://us.meeting-stream.com/quadgraphics_080713.
If for any reason you are unable to stream, you can listen to the audio via the telephone by calling:
Toll-Free: (877) 217-9946 (US/Canada)
Toll: (702) 696-4824 (International)
Conference ID: 13701303
The replay will be available for 30 days following the conference call. To access the replay via phone, please call (855) 859-2056 or (404) 537-3406 and enter the Conference ID number 13701303. To access the replay via the internet, please use the following link: http://us.meeting-stream.com/quadgraphics_080713. Registration is required for replay.
Forward-Looking Statements
This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding, among other things, our current expectations about the Company's future results, financial condition, goals, strategies, revenue, earnings, free cash flow, margins, prospects and/or outlook and are indicated by words or phrases such as "anticipate," "estimate," "expect," "project," "believe" and similar words or phrases. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those expressed in or implied by such forward-looking statements. Forward-looking statements are based largely on the Company's expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control.
The factors that could cause actual results to materially differ include, among others: the impact of significant overcapacity in the highly competitive commercial printing industry, which creates downward pricing pressure and fluctuating demand for printing services; the inability of the Company to reduce costs and improve operating efficiency rapidly enough to meet market conditions; the impact of electronic media and similar technological changes including digital substitution by consumers; the impact of changing future economic conditions; the failure to renew long-term contracts with clients on favorable terms or at all; the failure of clients to perform under long-term contracts due to financial or other reasons or due to client consolidation; the failure to successfully identify, manage, complete and integrate acquisitions and investments, including the integration of the operations of Vertis Holdings, Inc.; the impact of changes in postal rates, service levels or regulations; the impact of fluctuations in costs and the availability of raw materials; the impact of increased business complexity as a result of the Company's entry into additional markets; the impact of regulatory matters and legislative developments or changes in laws, including changes in privacy and environmental laws; the ability of the Company to make the significant capital expenditures needed to remain technologically and economically competitive; the impact on Quad/Graphics class A common shareholders of a limited active market for Quad/Graphics common stock and the inability to independently elect directors or control decisions due to the class B common stock voting rights; and the other risk factors identified in the Company's most recent Annual Report on Form 10-K, as such may be amended or supplemented by subsequent Quarterly Reports on Form 10-Q or other reports filed with the Securities and Exchange Commission.
Except as required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
About Quad/Graphics
Quad/Graphics (NYS: QUAD) , a leading global printer and media channel integrator, is redefining print in today's multichannel media world by helping marketers and publishers capitalize on print's ability to complement and connect with other media channels. With consultative ideas, worldwide capabilities, leading-edge technology and single-source simplicity, Quad/Graphics has the resources and knowledge to help its clients maximize the revenue they derive from their marketing spend through channel integration, and minimize their total cost of production and distribution through a fully integrated national distribution network. The Company provides a diverse range of print solutions, media solutions and logistics services from multiple locations throughout North America, Latin America and Europe.
QUAD/GRAPHICS, INC. | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
For the Three Months Ended June 30, 2013 and 2012 | ||||||||||
(in millions, except per share data) | ||||||||||
(UNAUDITED) | ||||||||||
Three Months Ended June 30, | ||||||||||
2013 | 2012 | |||||||||
Net sales | $ | 1,110.8 | $ | 934.2 | ||||||
Cost of sales | 893.8 | 740.8 | ||||||||
Selling, general and administrative expenses | 105.1 | 80.6 | ||||||||
Depreciation and amortization | 87.9 | 84.7 | ||||||||
Restructuring, impairment and transaction-related charges | 29.2 | 37.7 | ||||||||
Total operating expenses | 1,116.0 | 943.8 | ||||||||
Operating loss | $ | (5.2 | ) | $ | (9.6 | ) | ||||
Interest expense | 21.3 | 20.7 | ||||||||
Loss before income taxes and equity in loss of unconsolidated entities | (26.5 | ) | (30.3 | ) | ||||||
Income tax benefit | (0.6 | ) | (10.3 | ) | ||||||
Loss before equity in loss of unconsolidated entities | (25.9 | ) | (20.0 | ) | ||||||
Equity in loss of unconsolidated entities | (1.7 | ) | (0.8 | ) | ||||||
Net loss | $ | (27.6 | ) | $ | (20.8 | ) | ||||
Net loss attributable to noncontrolling interests | 0.4 | — | ||||||||
Net loss attributable to Quad/Graphics common shareholders | $ | (27.2 | ) | $ | (20.8 | ) | ||||
Loss per share attributable to Quad/Graphics common shareholders: | ||||||||||
Basic and diluted | $ | (0.59 | ) | $ | (0.44 | ) | ||||
Weighted average number of common shares outstanding: | ||||||||||
Basic and diluted | 46.9 | 46.8 | ||||||||
QUAD/GRAPHICS, INC. | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
For the Six Months Ended June 30, 2013 and 2012 | ||||||||||
(in millions, except per share data) | ||||||||||
(UNAUDITED) | ||||||||||
Six Months Ended June 30, | ||||||||||
2013 | 2012 | |||||||||
Net sales | $ | 2,240.3 | $ | 1,923.8 | ||||||
Cost of sales | 1,803.6 | 1,513.7 | ||||||||
Selling, general and administrative expenses | 211.0 | 172.6 | ||||||||
Depreciation and amortization | 176.7 | 169.3 | ||||||||
Restructuring, impairment and transaction-related charges | 55.1 | 75.9 | ||||||||
Total operating expenses | 2,246.4 | 1,931.5 | ||||||||
Operating loss from continuing operations | $ | (6.1 | ) | $ | (7.7 | ) | ||||
Interest expense | 43.2 | 42.1 | ||||||||
Loss from continuing operations before income taxes and equity in earnings (loss) of unconsolidated entities | (49.3 | ) | (49.8 | ) | ||||||
Income tax benefit | (9.1 | ) | (44.1 | ) | ||||||
Loss from continuing operations before equity in earnings (loss) of unconsolidated entities | (40.2 | ) | (5.7 | ) | ||||||
Equity in earnings (loss) of unconsolidated entities | (1.5 | ) | 0.3 | |||||||
Net loss from continuing operations | $ | (41.7 | ) | $ | (5.4 | ) | ||||
Loss from discontinued operations, net of tax (1) | — | (3.2 | ) | |||||||
Gain on disposal of discontinued operations, net of tax | — | 35.3 | ||||||||
Net earnings (loss) | $ | (41.7 | ) | $ | 26.7 | |||||
Net (earnings) loss attributable to noncontrolling interests | 0.5 | (0.1 | ) | |||||||
Net earnings (loss) attributable to Quad/Graphics common shareholders | $ | (41.2 | ) | $ | 26.6 | |||||
Earnings (loss) per share attributable to Quad/Graphics common shareholders: | ||||||||||
Basic and diluted: | ||||||||||
Continuing operations | $ | (0.89 | ) | $ | (0.12 | ) | ||||
Discontinued operations | — | 0.69 | ||||||||
Earnings (loss) per share attributable to Quad/Graphics common shareholders | $ | (0.89 | ) | $ | 0.57 | |||||
Weighted average number of common shares outstanding: | ||||||||||
Basic and diluted | 46.9 | 46.8 | ||||||||
______________________________
(1) | Includes the results of the Canadian operations prior to the March 1, 2012 sale. Net loss from continuing operations and its components exclude the Canadian operations. |
QUAD/GRAPHICS, INC. | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
As of June 30, 2013 and December 31, 2012 | ||||||||||
(in millions) | ||||||||||
(UNAUDITED) | ||||||||||
June 30, | December 31, | |||||||||
ASSETS | ||||||||||
Cash and cash equivalents | $ | 11.7 | $ | 16.9 | ||||||
Receivables, less allowances for doubtful accounts | 601.1 | 585.1 | ||||||||
Inventories | 302.8 | 242.9 | ||||||||
Prepaid expenses and other current assets | 49.4 | 74.6 | ||||||||
Deferred income taxes | 77.9 | 55.7 | ||||||||
Short-term restricted cash | 7.5 | 14.8 | ||||||||
Total current assets | 1,050.4 | 990.0 | ||||||||
Property, plant and equipment—net | 1,974.4 | 1,926.4 | ||||||||
Goodwill | 766.4 | 768.6 | ||||||||
Other intangible assets—net | 220.1 | 229.9 | ||||||||
Long-term restricted cash | 48.7 | 45.7 | ||||||||
Equity method investments in unconsolidated entities | 60.9 | 72.0 | ||||||||
Other long-term assets | 66.0 | 66.3 | ||||||||
Total assets | $ | 4,186.9 | $ | 4,098.9 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
Accounts payable | $ | 380.1 | $ | 285.8 | ||||||
Amounts owing in satisfaction of bankruptcy claims | 2.5 | 9.3 | ||||||||
Accrued liabilities | 333.4 | 334.0 | ||||||||
Short-term debt and current portion of long-term debt | 136.7 | 113.3 | ||||||||
Current portion of capital lease obligations | 10.7 | 10.4 | ||||||||
Total current liabilities | 863.4 | 752.8 | ||||||||
Long-term debt | 1,309.0 | 1,211.7 | ||||||||
Unsecured notes to be issued | 18.3 | 23.8 | ||||||||
Capital lease obligations | 12.3 | 15.3 | ||||||||
Deferred income taxes | 376.3 | 363.9 | ||||||||
Other long-term liabilities | 454.7 | 495.7 | ||||||||
Total liabilities | 3,034.0 | 2,863.2 | ||||||||
Quad/Graphics common stock and other equity | ||||||||||
Preferred stock | — | — | ||||||||
Common stock | 1.4 | 1.4 | ||||||||
Additional paid-in capital | 977.9 | 985.6 | ||||||||
Treasury stock, at cost | (260.6 | ) | (279.3 | ) | ||||||
Retained earnings | 515.9 | 588.1 | ||||||||
Accumulated other comprehensive loss | (81.5 | ) | (60.4 | ) | ||||||
Quad/Graphics common stock and other equity | 1,153.1 | 1,235.4 | ||||||||
Noncontrolling interests | (0.2 | ) | 0.3 | |||||||
Total common stock and other equity and noncontrolling interests | 1,152.9 | 1,235.7 | ||||||||
