Company increases Free Cash Flow by $45 million and is on
target to generate $180 million to $200 million in
2015
Highlights:
- Generated second quarter net sales of
$1.1 billion and Adjusted EBITDA of $90 million.
- Achieved Free Cash Flow of
$40 million year-to-date, representing a $45 million
increase over prior year.
- Narrows full-year 2015 guidance for net
sales to a range of $4.8 billion to $4.9 billion, and
Adjusted EBITDA to a range of $500 million to
$520 million.
- Declared quarterly dividend of $0.30
per share.
Quad/Graphics, Inc. (NYSE: QUAD) ("Quad/Graphics" or the
"Company") today reported results for its second quarter ending
June 30, 2015. The reported results include Brown Printing
Company ("Brown Printing") from the day of acquisition on
May 30, 2014. For full financial results, including
reconciliations of non-GAAP financial measures, please see the
accompanying information.
"We are pleased with our continued solid Free Cash Flow
generation, which is the foundation of our strong balance sheet and
enables us to deploy capital in ways that generate value for the
Company and our shareholders," said Joel Quadracci, Quad/Graphics
Chairman, President & Chief Executive Officer. "Our ability to
generate strong Free Cash Flow comes from ongoing strategic
investments in our core print platform, including technology,
automation and processes that drive productivity and efficiencies.
Our second quarter operating results reflect ongoing industry
headwinds, a sluggish advertising environment for publishers and a
less than robust retail environment, all of which impacted our
sales. As we continue on our transformational journey, we remain
committed to helping our clients perform better in today's rapidly
changing world through innovative and integrated solutions that
capitalize on print's ability to connect with other media channels
to drive engagement and response while also reducing overall
costs."
Net sales for the second quarter 2015 were $1.1 billion,
representing a 1.8% decrease from second quarter of 2014. Second
quarter Adjusted EBITDA was $90 million compared to
$102 million for the same period in 2014, and Adjusted EBITDA
margin was 8.4% compared to 9.3% in 2014. The Adjusted EBITDA
variance primarily reflects ongoing industry volume and pricing
pressures partially offset by incremental earnings from
acquisitions.
For the first six months of 2015, net sales were
$2.2 billion, representing a 0.7% decrease from the first six
months of 2014. Year-to-date Adjusted EBITDA was $191 million
as compared to $209 million for the same period in 2014, and
Adjusted EBITDA margin was 8.8% as compared to 9.5% in 2014. Free
Cash Flow was $40 million for the first six months of 2015, an
increase of $45 million over the prior year due to sustainable
improvements in the cash conversion process primarily impacting
working capital as well as the receipt of a $10 million
acquisition termination fee from Courier Corporation, which was
excluded from Adjusted EBITDA as a non-recurring gain.
"Based on our results thus far and expectations for the
remainder of 2015, we are narrowing guidance for net sales and
Adjusted EBITDA," said Dave Honan, Quad/Graphics Executive Vice
President and Chief Financial Officer. "We expect full-year 2015
net sales to be in the range of $4.8 billion to
$4.9 billion, narrowed from our prior guidance range of
$4.8 billion to $5.0 billion, and full-year 2015 Adjusted
EBITDA to be in the range of $500 million to
$520 million, narrowed from our prior guidance range of
$500 million to $540 million. We continue to believe
Quad/Graphics will be a significant Free Cash Flow generator and,
because of the sustainable improvements impacting working capital,
we remain confident in full-year 2015 Free Cash Flow guidance of
$180 million to $200 million. Going forward, we will
continue to maintain a strong balance sheet, which enables us to
pursue compelling investment opportunities, deleverage the balance
sheet through debt and pension liability reductions, and return
cash to our shareholders."
Quad/Graphics' next quarterly dividend of $0.30 per share will
be payable on September 18, 2015, to shareholders of record as
of September 7, 2015.
Quarterly Conference Call
Quad/Graphics (NYSE: QUAD) will hold a conference call at 10
a.m. ET / 9 a.m. CT on Wednesday, August 5, to discuss second
quarter 2015 results.
Participants can pre-register for the webcast by navigating to
http://dpregister.com/10068158.
Participants will be given a unique PIN to gain immediate access to
the call on August 5, bypassing the live operator. Participants may
pre-register at any time, including up to and after the call start
time.
Alternatively, participants without internet access may dial in
on the day of the call as follows:
- U.S. Toll-Free: 1-877-328-5508
- International Toll: 1-412-317-5424
Telephone playback will be available beginning about one hour
after the conference call ends and will be accessible as
follows:
- U.S. Toll-Free: 1-877-344-7529
- International Toll: 1-412-317-0088
- Replay Access Code: 10068158
The playback will be available until September 7, 2015.
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, revenue, earnings, free cash
flow, margins, objectives, goals, strategies, beliefs, intentions,
plans, estimates, prospects, projections and outlook of the Company
and can generally be identified by the use of words or phrases such
as "may," "will," "expect," "intend," "estimate," "anticipate,"
"plan," "foresee," "project," "believe," "continue" or the
negatives of these terms, variations on them and other similar
expressions. 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 decreasing demand for printed
materials and significant overcapacity in the highly competitive
commercial printing industry creates downward pricing pressures;
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 of clients to perform under
contracts or to renew contracts with clients on favorable terms or
at all; the failure to successfully identify, manage, complete and
integrate acquisitions and investments; the impact of changes in
postal rates, service levels or regulations; the impact of
increased business complexity as a result of the Company's entry
into additional markets; the impact of fluctuations in costs
(including labor and labor-related costs, energy costs, freight
rates and raw materials) and the impact of fluctuations in the
availability of raw materials; the impact of regulatory matters and
legislative developments or changes in laws, including changes in
cyber-security, privacy and environmental laws; the impact on the
holders of Quad/Graphics class A common stock of a limited active
market for such shares and the inability to independently elect
directors or control decisions due to the voting power of the class
B common stock; the impact of risks associated with the operations
outside of the United States; significant capital expenditures may
be needed to maintain the Company’s platform and processes and to
remain technologically and economically competitive; 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 to the extent 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.
Non-GAAP Financial Measures
This press release contains financial measures not prepared in
accordance with generally accepted accounting principles (referred
to as Non-GAAP), specifically Adjusted EBITDA, Adjusted EBITDA
Margin and Free Cash Flow. Adjusted EBITDA is defined as net
earnings (loss) attributable to Quad/Graphics common shareholders
plus interest expense, income tax expense (if applicable),
depreciation and amortization, restructuring, impairment and
transaction-related charges, non-cash goodwill impairment charges,
and loss on debt extinguishment, and less income tax benefit (if
applicable). Adjusted EBITDA Margin is defined as Adjusted EBITDA
divided by net sales. Free Cash Flow is defined as net cash
provided by operating activities less purchases of property, plant
and equipment. These measures are presented to provide additional
information regarding Quad/Graphics' performance and because they
are important measures by which Quad/Graphics assesses the
profitability and liquidity of its business. These measures should
not be considered alternatives to net earnings (loss) as a measure
of operating performance or to cash flows provided by operating
activities as a measure of liquidity.
About Quad/Graphics
Quad/Graphics (NYSE: QUAD), a leading global provider of print
and media solutions, 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 a wide variety of clients
in distinct vertical industries, including but not limited to
retail, publishing, insurance, financial and healthcare. The
Company helps clients perform better in today's rapidly changing
world through innovative solutions that improve efficiencies,
reduce costs, lift response and increase revenue. Quad/Graphics
provides a diverse range of print and related products, services
and solutions from multiple locations throughout North America,
South America and Europe.
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
For the Three Months Ended June 30, 2015
and 2014
(in millions, except per share data)
(UNAUDITED)
Three Months Ended June 30, 2015
2014 Net sales $ 1,079.0 $ 1,099.0 Cost of sales
876.7 892.9 Selling, general and administrative expenses 110.4
100.4 Depreciation and amortization 83.4 85.3 Restructuring,
impairment and transaction-related charges 34.3 19.9
Total operating expenses 1,104.8 1,098.5
Operating income
(loss) $ (25.8 ) $ 0.5
Interest expense 21.6 23.5 Loss on debt extinguishment —
6.0 Loss before income taxes and equity in
loss of unconsolidated entities (47.4 ) (29.0 ) Income tax
benefit (3.8 ) (9.6 ) Loss before equity in loss of
unconsolidated entities (43.6 ) (19.4 ) Equity in loss of
unconsolidated entities (1.5 ) (3.4 )
Net loss
attributable to Quad/Graphics common shareholders $
(45.1 ) $ (22.8 ) Loss
per share attributable to Quad/Graphics common shareholders:
Basic and diluted $ (0.94 ) $ (0.48 )
Weighted average
number of common shares outstanding: Basic and diluted 47.9
47.5
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
For the Six Months Ended June 30, 2015 and
2014
(in millions, except per share data)
(UNAUDITED)
Six Months Ended June 30, 2015
2014 Net sales $ 2,187.0 $ 2,201.8 Cost of sales
1,772.1 1,785.5 Selling, general and administrative expenses 220.1
203.9 Depreciation and amortization 164.7 169.1 Restructuring,
impairment and transaction-related charges 44.4 31.8 Goodwill
impairment 23.3 — Total operating expenses 2,224.6
2,190.3
Operating income (loss) $ (37.6
) $ 11.5 Interest expense 44.1 44.4
Loss on debt extinguishment — 6.0 Loss before
income taxes and equity in loss of unconsolidated entities (81.7 )
(38.9 ) Income tax benefit (4.8 ) (10.8 ) Loss before
equity in loss of unconsolidated entities (76.9 ) (28.1 )
Equity in loss of unconsolidated entities (3.4 ) (3.8 )
Net loss $ (80.3 ) $
(31.9 ) Net loss attributable to
noncontrolling interests — 0.3
Net loss
attributable to Quad/Graphics common shareholders $
(80.3 ) $ (31.6 ) Loss
per share attributable to Quad/Graphics common shareholders
Basic and diluted $ (1.68 ) $ (0.67 )
Weighted average
number of common shares outstanding Basic and diluted 47.8
47.4
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2015 and December 31,
2014
(in millions)
(UNAUDITED)
June 30, 2015 December 31,
2014 ASSETS Cash and cash equivalents $ 13.6 $ 9.6
Receivables, less allowances for doubtful accounts 610.2 766.2
Inventories 289.4 287.8 Prepaid expenses and other current assets
48.6 39.1 Deferred income taxes 69.3 48.4 Restricted cash 30.7
31.2 Total current assets 1,061.8 1,182.3
Property, plant and equipment—net 1,802.9 1,855.5
Goodwill 775.2 775.5 Other intangible assets—net 157.3 149.1 Equity
method investments in unconsolidated entities 18.6 42.0 Other
long-term assets 65.4 52.8 Total assets $ 3,881.2
$ 4,057.2
LIABILITIES AND SHAREHOLDERS'
EQUITY Accounts payable $ 327.9 $ 406.9 Amounts owing in
satisfaction of bankruptcy claims 1.4 1.4 Accrued liabilities 318.0
358.1 Short-term debt and current portion of long-term debt 100.3
92.0 Current portion of capital lease obligations 4.4 4.2
Total current liabilities 752.0 862.6
Long-term debt 1,367.0 1,299.7 Unsecured notes to be issued 7.4 9.0
Capital lease obligations 9.1 9.7 Deferred income taxes 407.2 384.4
Other long-term liabilities 312.5 339.3 Total
liabilities 2,855.2 2,904.7 Shareholders' equity Preferred
stock — — Common stock 1.4 1.4 Additional paid-in capital 954.8
971.3 Treasury stock, at cost (194.2 ) (218.8 ) Retained earnings
403.7 515.2 Accumulated other comprehensive loss (139.7 ) (116.6 )
Total shareholders' equity 1,026.0 1,152.5
Total liabilities and shareholders' equity $ 3,881.2 $
4,057.2
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
For the Six Months Ended June 30, 2015 and 2014
(in millions)
(UNAUDITED)
Six Months Ended June 30, 2015
2014 OPERATING ACTIVITIES Net loss $ (80.3 ) $ (31.9
) Adjustments to reconcile net loss to net cash provided by
operating activities: Depreciation and amortization 164.7 169.1
Impairment charges 24.1 3.1 Goodwill impairment 23.3 — Loss on debt
extinguishment — 6.0 Stock-based compensation 5.9 8.6 Deferred
income taxes (10.1 ) (14.9 ) Other non-cash adjustments to net loss
5.3 5.9 Changes in operating assets and liabilities—net of
acquisitions (9.5 ) (67.0 )
Net Cash Provided by
Operating Activities 123.4 78.9
INVESTING ACTIVITIES Purchases of property, plant and
equipment (83.3 ) (83.6 ) Cost investment in unconsolidated
entities (1.2 ) (4.1 ) Proceeds from the sale of property, plant
and equipment 2.5 0.4 Proceeds from the sale of cost investment in
unconsolidated entities 3.5 — Transfers from restricted cash 0.5
7.4 Acquisition of businesses—net of cash acquired (79.9 ) (107.8 )
Net Cash Used in Investing Activities (157.9
) (187.7 ) FINANCING ACTIVITIES
Proceeds from issuance of long-term debt — 1,047.0 Payments of
long-term debt (44.6 ) (710.0 ) Payments of capital lease
obligations (2.4 ) (4.4 ) Borrowings on revolving credit facilities
793.2 675.0 Payments on revolving credit facilities (678.5 ) (844.4
) Payments of debt issuance costs — (14.3 ) Bankruptcy claim
payments on unsecured notes to be issued (0.1 ) (7.4 ) Sale of
stock for options exercised 2.2 1.3 Shares withheld from employees
for the tax obligation on equity grants (1.6 ) (1.0 ) Tax benefit
(expense) on equity award activity 1.6 (0.8 ) Payment of cash
dividends (30.1 ) (29.3 )
Net Cash Provided by Financing
Activities 39.7 111.7 Effect
of exchange rates on cash and cash equivalents (1.2 ) 1.4
Net Increase in Cash and Cash Equivalents 4.0
4.3 Cash and Cash Equivalents at
Beginning of Period 9.6 13.1
Cash and Cash
Equivalents at End of Period $ 13.6
$ 17.4
QUAD/GRAPHICS, INC.
SEGMENT FINANCIAL INFORMATION For the Three and Six Months Ended
June 30, 2015 and 2014 (in millions) (UNAUDITED)
Restructuring, Impairment and
Operating Transaction-Related Goodwill Net
Sales Income (Loss)
Charges (1)
Impairment (1)
Three months ended June 30, 2015 United States Print and
Related Services $ 985.7 $ 12.6 $ 8.1 $ — International 93.3
(27.9 ) 24.5 — Total operating segments 1,079.0 (15.3 ) 32.6
— Corporate — (10.5 ) 1.7 — Total $ 1,079.0 $
(25.8 ) $ 34.3 $ —
Three months ended June 30,
2014 United States Print and Related Services $ 988.3 $ 15.1 $
15.8 $ — International 110.7 (0.9 ) 0.2 — Total
operating segments 1,099.0 14.2 16.0 — Corporate — (13.7 )
3.9 — Total $ 1,099.0 $ 0.5 $ 19.9 $ —
Six months ended June 30, 2015 United States Print
and Related Services $ 1,995.0 $ 30.3 $ 22.7 $ — International
192.0 (55.4 ) 27.4 23.3 Total operating segments
2,187.0 (25.1 ) 50.1 23.3 Corporate — (12.5 ) (5.7 ) — Total
$ 2,187.0 $ (37.6 ) $ 44.4 $ 23.3
Six
months ended June 30, 2014 United States Print and Related
Services $ 1,974.5 $ 37.4 $ 25.3 $ — International 227.3
(0.8 ) 0.7 — Total operating segments 2,201.8 36.6 26.0 —
Corporate — (25.1 ) 5.8 — Total $ 2,201.8 $
11.5 $ 31.8 $ —
______________________________
(1) Restructuring, impairment and transaction-related
charges and non-cash goodwill impairment charges are included
within operating income (loss).
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES EBITDA, EBITDA MARGIN,
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN For the Three Months
Ended June 30, 2015 and 2014 (in millions) (UNAUDITED)
Three Months Ended June 30, 2015 2014
Net loss attributable to Quad/Graphics common shareholders $ (45.1
) $ (22.8 ) Interest expense 21.6 23.5 Income tax benefit
(3.8 ) (9.6 ) Depreciation and amortization 83.4 85.3
EBITDA (Non-GAAP) $ 56.1 $ 76.4 EBITDA Margin (Non-GAAP) 5.2
% 7.0 % Restructuring, impairment and transaction-related
charges (1) 34.3 19.9 Loss on debt extinguishment — 6.0
Adjusted EBITDA (Non-GAAP) $
90.4 $ 102.3 Adjusted EBITDA
Margin (Non-GAAP) 8.4 % 9.3 %
______________________________
(1) Operating results for the three months ended June 30,
2015 and 2014, were affected by the following restructuring,
impairment and transaction-related charges:
Three Months
Ended June 30, 2015 2014 Employee
termination charges (a) $ 7.4 $ 12.7 Impairment charges (b) 17.8
2.0 Transaction-related charges (c) 1.0 0.7 Integration costs (d)
2.0 1.9 Other restructuring charges (e) 6.1 2.6
Restructuring, impairment and transaction-related charges $ 34.3
$ 19.9
______________________________
(a) Employee termination charges were related to
workforce reductions through facility consolidations and
involuntary separation programs. (b)
Impairment charges were for certain
buildings and equipment no longer being utilized in production as a
result of facility consolidations, as well as the Chile equity
method investment.
(c) Transaction-related charges consisted of professional service
fees related to business acquisition and divestiture activities.
(d) Integration costs were primarily related to preparing existing
facilities to meet new production requirements resulting from work
transferring from closed plants, as well as other costs related to
the integration of the acquired companies. (e) Other restructuring
charges were primarily from costs to maintain and exit closed
facilities, as well as lease exit charges.
In addition to financial measures prepared in accordance with
generally accepted accounting principles (GAAP), this earnings
announcement also contains non-GAAP financial measures,
specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted
EBITDA Margin, Free Cash Flow, Debt Leverage Ratio and Adjusted
Diluted Loss Per Share. They are presented to provide additional
information regarding Quad/Graphics' performance and because they
are important measures by which Quad/Graphics assesses the
profitability and liquidity of its business. These measures should
not be considered alternatives to net loss as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES EBITDA, EBITDA MARGIN,
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN For the Six Months Ended
June 30, 2015 and 2014 (in millions) (UNAUDITED)
Six
Months Ended June 30, 2015 2014 Net loss
attributable to Quad/Graphics common shareholders $ (80.3 ) $ (31.6
) Interest expense 44.1 44.4 Income tax benefit (4.8 ) (10.8
) Depreciation and amortization 164.7 169.1
EBITDA (Non-GAAP) $ 123.7 $ 171.1 EBITDA Margin (Non-GAAP) 5.7 %
7.8 % Restructuring, impairment and transaction-related
charges (1) 44.4 31.8 Loss on debt extinguishment — 6.0 Goodwill
impairment (2) 23.3 —
Adjusted EBITDA
(Non-GAAP) $ 191.4 $ 208.9
Adjusted EBITDA Margin (Non-GAAP) 8.8 %
9.5 %
______________________________
(1) Operating results for the six months ended June 30, 2015
and 2014, were affected by the following restructuring, impairment
and transaction-related charges:
Six Months Ended June
30, 2015 2014 Employee termination charges
(a) $ 12.5 $ 18.7 Impairment charges (b) 24.1 3.1
Transaction-related charges (c) 1.8 1.3 Courier termination fee (d)
(10.0 ) — Integration costs (e) 3.8 4.6 Other restructuring charges
(f) 12.2 4.1 Restructuring, impairment and
transaction-related charges $ 44.4 $ 31.8
______________________________
(a) Employee termination charges were related to
workforce reductions through facility consolidations and
involuntary separation programs. (b)
Impairment charges were primarily for
certain land, building, machinery and equipment no longer being
utilized in production as a result of facility consolidations, as
well as the Company's Argentina subsidiaries restructuring
proceedings, and the Chile equity method investment.
(c) Transaction-related charges consisted of professional service
fees related to business acquisition and divestiture activities.
(d) Quad/Graphics received $10.0 million from Courier Corporation
("Courier") during the six months ended June 30, 2015, as a result
of the termination of the acquisition of Courier by Quad/Graphics.
This non-recurring gain was excluded from the calculation of
Adjusted EBITDA. (e) Integration costs were primarily related to
preparing existing facilities to meet new production requirements
resulting from work transferring from closed plants, as well as
other costs related to the integration of acquired companies. (f)
Other restructuring charges were primarily from costs to maintain
and exit closed facilities, as well as lease exit charges. (2)
A $23.3 million non-cash goodwill impairment charge was
recorded during the six months ended June 30, 2015, within the
Latin America reporting unit in the International segment,
triggered primarily by the Company's Argentina subsidiaries
restructuring proceedings.
In addition to financial measures prepared in accordance with
generally accepted accounting principles (GAAP), this earnings
announcement also contains non-GAAP financial measures,
specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted
EBITDA Margin, Free Cash Flow, Debt Leverage Ratio and Adjusted
Diluted Loss Per Share. They are presented to provide additional
information regarding Quad/Graphics' performance and because they
are important measures by which Quad/Graphics assesses the
profitability and liquidity of its business. These measures should
not be considered alternatives to net loss as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES FREE CASH FLOW For the
Six Months Ended June 30, 2015 and 2014 (in millions) (UNAUDITED)
Six Months Ended June 30, 2015
2014 Net cash provided by operating activities $ 123.4 $
78.9 Less: purchases of property, plant and equipment (83.3
) (83.6 )
Free Cash Flow (Non-GAAP) $
40.1 $ (4.7 )
In addition to financial measures prepared in accordance with
generally accepted accounting principles (GAAP), this earnings
announcement also contains non-GAAP financial measures,
specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted
EBITDA Margin, Free Cash Flow, Debt Leverage Ratio and Adjusted
Diluted Loss Per Share. They are presented to provide additional
information regarding Quad/Graphics' performance and because they
are important measures by which Quad/Graphics assesses the
profitability and liquidity of its business. These measures should
not be considered alternatives to net loss as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES DEBT LEVERAGE RATIO As
of June 30, 2015 and December 31, 2014 (in millions, except ratio)
(UNAUDITED)
June 30, 2015 December
31, 2014 Total debt and capital lease obligations on the
condensed consolidated balance sheets $ 1,480.8 $ 1,405.6
Divided by: Trailing twelve months Adjusted EBITDA for
Quad/Graphics (Non-GAAP) (1) $ 525.1 $ 542.6 Pro forma Adjusted
EBITDA for Brown Printing (Non-GAAP) (2) — 5.2
Trailing twelve months Adjusted EBITDA (Non-GAAP) $ 525.1 $ 547.8
Debt Leverage Ratio (Non-GAAP) 2.82
x 2.57 x
______________________________
(1) The calculation of Adjusted EBITDA for Quad/Graphics for
the trailing twelve months ended June 30, 2015, and December 31,
2014, was as follows:
Add
Subtract
Trailing Twelve Months
Ended
Year Ended Six Months Ended December 31,
June 30, June 30, June 30, 2014
2015 2014 2015 Net earnings (loss)
attributable to Quad/Graphics common shareholders $ 18.6 $ (80.3 )
$ (31.6 ) $ (30.1 ) Interest expense 92.9 44.1 44.4 92.6 Income tax
expense (benefit) 20.2 (4.8 ) (10.8 ) 26.2 Depreciation and
amortization 336.4 164.7 169.1 332.0
EBITDA (Non-GAAP) $ 468.1 $ 123.7 $ 171.1 $ 420.7 Restructuring,
impairment and transaction-related charges 67.3 44.4 31.8 79.9
Goodwill impairment — 23.3 — 23.3 Loss on debt extinguishment 7.2
— 6.0 1.2 Adjusted EBITDA (Non-GAAP) $
542.6 $ 191.4 $ 208.9 $ 525.1 (2)
As permitted by our April 28, 2014 $1.6 billion senior
secured credit facility, we included certain pro forma financial
information related to the acquisition of Brown Printing when
calculating the Debt Leverage Ratio as of December 31, 2014. As the
acquisition of Brown Printing was completed on May 30, 2014, the
$5.2 million pro forma Adjusted EBITDA represents the period from
January 1, 2014 to May 29, 2014. Adjusted EBITDA for Brown Printing
was calculated in a consistent manner with the calculation above
for Quad/Graphics. Brown Printing's financial information has been
consolidated within Quad/Graphics' financial results since the date
of acquisition. If the five months of pro forma Adjusted EBITDA for
Brown Printing was not included in the calculation, the Company's
Debt Leverage Ratio would have been 2.59x as of December 31, 2014.
In addition to financial measures prepared in accordance with
generally accepted accounting principles (GAAP), this earnings
announcement also contains non-GAAP financial measures,
specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted
EBITDA Margin, Free Cash Flow, Debt Leverage Ratio and Adjusted
Diluted Loss Per Share. They are presented to provide additional
information regarding Quad/Graphics' performance and because they
are important measures by which Quad/Graphics assesses the
profitability and liquidity of its business. These measures should
not be considered alternatives to net loss as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES ADJUSTED DILUTED LOSS
PER SHARE For the Three Months Ended June 30, 2015 and 2014 (in
millions, except per share data) (UNAUDITED)
Three Months
Ended June 30, 2015 2014 Loss before
income taxes and equity in loss of unconsolidated entities $ (47.4
) $ (29.0 ) Restructuring, impairment and
transaction-related charges 34.3 19.9 Loss on debt extinguishment —
6.0 (13.1 ) (3.1 ) Income tax benefit at 40%
normalized tax rate (5.2 ) (1.2 ) (7.9 ) (1.9 ) Equity in
loss of unconsolidated entities (1.5 ) (3.4 ) Adjusted net
loss (Non-GAAP) $ (9.4 ) $ (5.3 ) Basic weighted average
number of common shares outstanding 47.9 47.5 Plus: effect of
dilutive equity incentive instruments — — Diluted
weighted average number of common shares outstanding 47.9
47.5
Adjusted Diluted Loss Per Share
(Non-GAAP) (1) $ (0.20 ) $
(0.11 ) Diluted Loss Per Share (GAAP) $
(0.94 ) $ (0.48 ) Restructuring, impairment and transaction-related
charges per share 0.72 0.42 Loss on debt extinguishment per share —
0.13 Income tax benefit from condensed consolidated statement of
operations per share (0.08 ) (0.20 ) Income tax benefit at 40%
normalized tax rate per share 0.11 0.03 GAAP to Non-GAAP diluted
impact per share (0.01 ) (0.01 )
Adjusted Diluted Loss Per Share
(Non-GAAP) (1) $ (0.20 ) $
(0.11 )
______________________________
(1) Adjusted Diluted Loss Per Share excludes: (i)
restructuring, impairment and transaction-related charges, (ii) the
loss on debt extinguishment and (iii) discrete income tax items.
In addition to financial measures prepared in accordance with
generally accepted accounting principles (GAAP), this earnings
announcement also contains non-GAAP financial measures,
specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted
EBITDA Margin, Free Cash Flow, Debt Leverage Ratio and Adjusted
Diluted Loss Per Share. They are presented to provide additional
information regarding Quad/Graphics' performance and because they
are important measures by which Quad/Graphics assesses the
profitability and liquidity of its business. These measures should
not be considered alternatives to net loss as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES ADJUSTED DILUTED LOSS
PER SHARE For the Six Months Ended June 30, 2015 and 2014 (in
millions, except per share data) (UNAUDITED)
Six Months
Ended June 30, 2015 2014 Loss before
income taxes and equity in loss of unconsolidated entities $ (81.7
) $ (38.9 ) Restructuring, impairment and
transaction-related charges 44.4 31.8 Loss on debt extinguishment —
6.0 Goodwill impairment 23.3 — (14.0 ) (1.1 )
Income tax benefit at 40% normalized tax rate (5.6 ) (0.4 ) (8.4 )
(0.7 ) Equity in loss of unconsolidated entities (3.4 ) (3.8
) Net loss attributable to noncontrolling interests — 0.3
Adjusted net loss (Non-GAAP) $ (11.8 ) $ (4.2 )
Basic weighted average number of common shares outstanding
47.8 47.4 Plus: effect of dilutive equity incentive instruments —
— Diluted weighted average number of common shares
outstanding 47.8 47.4
Adjusted Diluted Loss
Per Share (Non-GAAP) (1) $ (0.25 )
$ (0.09 ) Diluted Loss Per Share
(GAAP) $ (1.68 ) $ (0.67 ) Restructuring, impairment and
transaction-related charges per share 0.93 0.67 Loss on debt
extinguishment per share — 0.13 Goodwill impairment per share 0.49
— Income tax benefit from condensed consolidated statement of
operations per share (0.10 ) (0.23 ) Income tax benefit at 40%
normalized tax rate per share 0.12 0.01 Allocation to participating
securities per share (2) — 0.01 GAAP to Non-GAAP diluted impact per
share (0.01 ) (0.01 )
Adjusted Diluted Loss Per Share
(Non-GAAP) (1) $ (0.25 ) $
(0.09 )
______________________________
(1) Adjusted Diluted Loss Per Share excludes: (i)
restructuring, impairment and transaction-related charges, (ii)
non-cash goodwill impairment charges, (iii) the loss on debt
extinguishment and (iv) discrete income tax items. (2) Represents
the impact of dividends distributed to non-vested stock option
holders in accordance with the two-class method of calculating GAAP
earnings per share.
In addition to financial measures prepared in accordance with
generally accepted accounting principles (GAAP), this earnings
announcement also contains non-GAAP financial measures,
specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted
EBITDA Margin, Free Cash Flow, Debt Leverage Ratio and Adjusted
Diluted Loss Per Share. They are presented to provide additional
information regarding Quad/Graphics' performance and because they
are important measures by which Quad/Graphics assesses the
profitability and liquidity of its business. These measures should
not be considered alternatives to net loss as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150804007022/en/
Investor Relations Contact:Quad/GraphicsKyle Egan,
414-566-2482Manager of Treasury and Investor
RelationsKyle.Egan@qg.comorMedia
Contact:Quad/GraphicsClaire Ho, 414-566-2955Director of
Corporate CommunicationsClaire.Ho@qg.com
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