Delivers Fifth Consecutive Quarter of Sales
Growth, Achieving Net Sales Growth of 9% or Net Sales Growth of 14%
Excluding Divestitures
Repurchased 1.7 Million Quad Shares Through
August 1, 2022
Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”),
today reported results for the second quarter ended June 30,
2022.
Recent Highlights
- Increased Net Sales 9% in the second quarter of 2022, or 14%
excluding divestitures, with growth in all product and service
offerings.
- Reported Net Earnings of $5 million and Adjusted EBITDA of $56
million in the second quarter of 2022, a decline from Net Earnings
of $34 million and Adjusted EBITDA of $63 million in the second
quarter of 2021, and an increase compared to Net Loss of $1 million
and Adjusted EBITDA of $49 million in the first quarter of
2022.
- Delivered Adjusted Diluted Earnings Per Share of $0.13 in both
the second quarter of 2022 and the second quarter of 2021.
- Increased investments in hiring and training labor,
inventories, and capital expenditures to protect clients from
ongoing supply chain disruptions, and to prepare for the seasonally
higher production period in the second half of the year.
- Paid remaining $209 million on the unsecured 7.00% senior notes
on May 2, 2022, while maintaining up to $298 million of liquidity
as of June 30, 2022.
- Repurchased 1.7 million shares of Class A common stock through
August 1, 2022.
- 2022 financial guidance remains unchanged.
Joel Quadracci, Chairman, President & CEO of Quad, said:
“Our second quarter Net Sales increase of 14% excluding
divestitures exceeded our expectations. This strong growth included
print segment share gains and Net Sales growth across all of our
offerings. Increasingly, brand owners and marketers are recognizing
our unique value as a marketing experience company. We have
architected a better way for our clients to deploy their marketing
through a discipline-led, integrated platform that addresses all
efforts – from idea to execution – and includes business strategy,
insights and analytics, technology solutions, managed services,
agency and studio solutions, media, print, in-store, and packaging.
We will continue to strategically invest in our platform excellence
to give our clients a more efficient, effective and frictionless
way to go to market and reach consumers, while enhancing our
competitive position to drive profitable growth.
“Our team continues to work diligently to mitigate the impacts
of macro-economic headwinds, including ongoing supply chain
constraints that impacted productivity and cost inflation. This
included implementing an additional price increase in mid-May. We
also made investments in the first half of the year to serve our
clients well and drive higher sales and profitability during our
seasonally busier second half of the year, where we see continued
strong demand.
“As we look forward, we remain focused on serving our clients
well, while enhancing Quad’s financial strength and driving
shareholder value, including repurchasing shares. We will continue
to prioritize growth while improving productivity and reducing debt
during 2022, consistent with our commitment to create a better,
more purposeful and sustainable way forward for all our
stakeholders.”
Summary Results
Results for the three months ended June 30, 2022, include:
- Net Sales — Net Sales were $758 million in the second quarter
of 2022, reflecting topline growth of 9% from the same period in
2021. Excluding the divestiture of QuadExpress, a third-party
logistics (3PL) business, Net Sales increased 14% from the second
quarter of 2021. Net Sales growth was achieved across all of our
offerings due to increased pricing in response to inflationary
pressures, print segment share gains and onboarding new clients in
Agency Solutions.
- Net Earnings and Adjusted EBITDA — Net Earnings were $5 million
in the second quarter of 2022 as compared to Net Earnings of $34
million in the second quarter of 2021. Adjusted EBITDA was $56
million in the second quarter of 2022, a decline from $63 million
of Adjusted EBITDA in the same period last year. Net Earnings
during the second quarter of 2021 were benefited by a $21 million
gain ($16 million, net of tax) from the sale of QuadExpress, and a
$14 million gain ($10 million, net of tax) from the sale and
leaseback of the Chalfont, Pennsylvania, facility.
- Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings
Per Share was $0.13 in the second quarter of 2022, consistent with
the second quarter of 2021.
Results for the six months ended June 30, 2022, include:
- Net Sales — Net Sales were $1.5 billion in the six months ended
June 30, 2022, up 7% from the same period in 2021, or up 12%
excluding the QuadExpress divestiture. Net Sales growth was
achieved across all of our offerings due to increased pricing in
response to inflationary pressures, print segment share gains and
onboarding new clients in Agency Solutions.
- Net Earnings and Adjusted EBITDA — Net Earnings were $4 million
in the six months ended June 30, 2022, as compared to Net Earnings
of $45 million in the six months ended 2021. The decrease is
primarily due to $35 million ($26 million, net of tax) of gains in
2021 on the sale of QuadExpress, and sale and leaseback of the
Chalfont, Pennsylvania, facility. Adjusted EBITDA was $105 million
in the six months ended June 30, 2022, a decline from $133 million
of Adjusted EBITDA in the same period in 2021. These declines were
primarily due to the negative impact of supply chain disruptions on
our productivity, investments in hiring and training labor in
advance of the peak production season during the second half of the
year, and cost inflation, which was partially offset by Net Sales
growth.
- Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings
Per Share was $0.17 in the six months ended June 30, 2022, as
compared to $0.31 in the six months ended June 30, 2021.
- Net Cash Provided by (Used in) Operating Activities and Free
Cash Flow — Net Cash Used in Operating Activities was $24 million
in the six months ended June 30, 2022, as compared to Net Cash
Provided by Operating Activities of $89 million during the same
period in 2021. Free Cash Flow decreased $119 million from last
year to negative $57 million in the six months ended June 30, 2022.
The decline in Free Cash Flow was primarily driven by higher
working capital in 2022 including increased inventory levels from
higher costs on commodities and supply chain challenges with
resulting longer lead times. Inventory levels have been proactively
increased to prepare for the seasonally higher production period in
the second half of the year. The decrease in Free Cash Flow was
also due to lower profitability in the first half of the year and
higher capital expenditures. As a reminder, the Company
historically generates the majority of its Free Cash Flow in the
fourth quarter of the year.
- Net Debt — Debt less cash and cash equivalents increased by $60
million to $684 million at June 30, 2022, as compared to $624
million at December 31, 2021, primarily due to investments in
working capital, talent and equipment to enable continued sales
growth.
2022 Guidance
The Company’s full-year 2022 financial guidance is unchanged and
is as follows:
Financial Metric
2022 Guidance
Annual Net Sales Change (1)
3% to 7% increase
Full-Year Adjusted EBITDA
$230 to $270 million
Free Cash Flow
$70 to $100 million
Capital Expenditures
$55 to $65 million
Year-End Debt Leverage Ratio (2)
Approximately 2.25x
(1)
Annual Net Sales Change excludes the Net
Sales impact from the divestiture of QuadExpress, which was sold on
June 30, 2021.
(2)
Debt Leverage Ratio is calculated at the
midpoint of the Adjusted EBITDA guidance.
Tony Staniak, CFO of Quad, said: “We continue to deliver a
one-of-a-kind marketing experience to our clients and achieved a
fifth consecutive quarter of Net Sales growth. We are poised to
serve our clients well while growing sales and profitability in the
second half of 2022 due to client demand of our through-the-line
marketing offering, combined with our proactive measures to hire
and train labor, and build inventory levels heading into our peak
production period. We are also pleased to show Quad’s value as an
investment by repurchasing 1.7 million shares through August 1,
2022, and will pursue additional opportunities to repurchase shares
during the remainder of the year under a Rule 10b5-1 repurchase
plan. We are on track to achieve our full-year 2022 financial
guidance, and while Annual Net Sales growth has the potential to
exceed the guidance range, we remain cautious in the current
macroeconomic environment and are not increasing the Net Sales
guidance range at this time. We are closely monitoring the economy
and are prepared to adjust as necessary to achieve our year-end
debt leverage guidance, and continue enhancing our financial
strength.”
Quarterly Conference Call
Quad will hold a conference call at 10 a.m. ET on Wednesday,
August 3, to discuss second quarter and year-to-date 2022 results.
As part of the conference call, Quad will conduct a
question-and-answer session. Investors are invited to email their
questions in advance to IR@quad.com.
Participants may pre-register for the webcast by navigating to
https://dpregister.com/sreg/10168342/f36f9cc470.
Participants will be given a unique PIN to gain immediate access to
the call on August 3, bypassing the live operator. Participants may
pre-register at any time, including up to and after the call start
time.
Alternatively, participants 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
An audio replay of the call will be posted on the Investors
section of Quad’s website shortly after the conference call ends.
In addition, telephone playback will also be available until
September 3, 2022, accessible as follows:
- U.S. Toll-Free: 1-877-344-7529
- International Toll: 1-412-317-0088
- Replay Access Code: 4494102
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, sales, 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 fluctuations in costs
(including labor and labor-related costs, energy costs, freight
rates and raw materials, including paper and the materials to
manufacture ink) and the impact of fluctuations in the availability
of raw materials, including paper and the materials to manufacture
ink; the impact of inflationary cost pressures and supply chain
shortages, as well as rising interest rates; the impact of
decreasing demand for printed materials and significant
overcapacity in a highly competitive environment creates downward
pricing pressures and potential under-utilization of assets; the
negative impacts the COVID-19 pandemic has had and will continue to
have on the Company’s business, financial condition, cash flows,
results of operations and supply chain, including rising
inflationary cost pressures on raw materials, distribution and
labor, and future uncertain impacts; the failure to attract and
retain qualified talent across the enterprise; the impact of
increased business complexity as a result of the Company’s
transformation to a marketing experience company; the impact of
digital media and similar technological changes, including digital
substitution by consumers; the inability of the Company to reduce
costs and improve operating efficiency rapidly enough to meet
market conditions; the impact of changes in postal rates, service
levels or regulations, including delivery delays due to ongoing
COVID-19 impacts on daily operational staffing at the United States
Postal Service; the impact of a data-breach of sensitive
information, ransomware attack or other cyber incident on the
Company; the impact negative publicity could have on our business;
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 fragility and decline in
overall distribution channels; the failure to successfully
identify, manage, complete and integrate acquisitions, investment
opportunities or other significant transactions, as well as the
successful identification and execution of strategic divestitures;
the impact of an other than temporary decline in operating results
and enterprise value that could lead to non-cash impairment charges
due to the impairment of property, plant and equipment and other
intangible assets; the impact of risks associated with the
operations outside of the United States (“U.S.”), including costs
incurred or reputational damage suffered due to improper conduct of
its employees, contractors or agents, and geopolitical events like
war or terrorism; significant investments may be needed to maintain
the Company’s platforms, processes, systems, client and product
technology and marketing and to remain technologically and
economically competitive; the impact of the various restrictive
covenants in the Company’s debt facilities on the Company’s ability
to operate its business, as well as the uncertain negative impacts
COVID-19 may have on the Company’s ability to continue to be in
compliance with these restrictive covenants; 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’s 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; and the other risk
factors identified in the Company’s most recent Annual Report on
Form 10-K, which 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, Free Cash Flow, Net Debt, Debt Leverage Ratio and Adjusted
Diluted Earnings (Loss) Per Share. Adjusted EBITDA is defined as
net earnings (loss) excluding interest expense, income tax expense
(benefit), depreciation and amortization, restructuring, impairment
and transaction-related charges, gains from sale and leaseback,
loss on debt extinguishment, equity in loss of unconsolidated
entity, and the Adjusted EBITDA for unconsolidated equity method
investments (calculated in a consistent manner with the calculation
for Quad). Adjusted EBITDA Margin is defined as Adjusted EBITDA
divided by net sales. Free Cash Flow is defined as net cash
provided by (used in) operating activities less purchases of
property, plant and equipment. Debt Leverage Ratio is defined as
total debt and finance lease obligations less cash and cash
equivalents (Net Debt) divided by the last twelve months of
Adjusted EBITDA. Adjusted Diluted Earnings (Loss) Per Share is
defined as earnings (loss) before income taxes and equity in loss
of unconsolidated entity excluding restructuring, impairment and
transaction-related charges and gain from sale and leaseback, and
adjusted for income tax expense at a normalized tax rate, divided
by diluted weighted average number of common shares
outstanding.
The Company believes that these Non-GAAP measures, when
presented in conjunction with comparable GAAP measures, provide
additional information for evaluating Quad’s performance and are
important measures by which Quad’s management assesses the
profitability and liquidity of its business. These Non-GAAP
measures should be considered in addition to, not as a substitute
for or superior to, net earnings (loss) as a measure of operating
performance or to cash flows provided by (used in) operating
activities as a measure of liquidity. These Non-GAAP measures may
be different than Non-GAAP financial measures used by other
companies. Reconciliation to the GAAP equivalent of these Non-GAAP
measures are contained in tabular form on the attached unaudited
financial statements.
About Quad
Quad (NYSE: QUAD) is a global marketing experience company that
helps brands reimagine their marketing to be more streamlined,
impactful, flexible, and frictionless. Quad’s strategic priorities
are powered by three key competitive advantages that include
integrated marketing platform excellence, innovation, and culture
and social purpose. The company’s integrated marketing platform is
powered by a set of core disciplines including business strategy,
insights and analytics, technology solutions, managed services,
agency and studio solutions, media, print, in-store, and
packaging.
Serving over 4,600 clients, Quad has more than 15,000 people
working in 14 countries around the world.
Please visit quad.com for more information.
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Three Months Ended June
30, 2022 and 2021
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended June
30,
2022
2021
Net sales
$
757.7
$
693.9
Cost of sales
618.1
554.2
Selling, general and administrative
expenses
86.9
80.1
Gain from sale and leaseback
—
(13.7
)
Depreciation and amortization
35.3
38.7
Restructuring, impairment and
transaction-related charges
3.2
(13.4
)
Total operating expenses
743.5
645.9
Operating income
14.2
48.0
Interest expense
10.9
15.6
Net pension income
(3.1
)
(3.5
)
Earnings before income taxes and equity in
loss of unconsolidated entity
6.4
35.9
Income tax expense
1.1
1.3
Earnings before equity in loss of
unconsolidated entity
5.3
34.6
Equity in loss of unconsolidated
entity
—
0.2
Net earnings
$
5.3
$
34.4
Earnings per share
Basic
$
0.10
$
0.67
Diluted
$
0.10
$
0.66
Weighted average number of common
shares outstanding
Basic
52.1
51.3
Diluted
54.1
52.5
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Six Months Ended June 30,
2022 and 2021
(in millions, except per share
data)
(UNAUDITED)
Six Months Ended June
30,
2022
2021
Net sales
$
1,501.9
$
1,399.7
Cost of sales
1,237.7
1,114.0
Selling, general and administrative
expenses
166.0
160.6
Gain from sale and leaseback
—
(13.7
)
Depreciation and amortization
71.8
80.6
Restructuring, impairment and
transaction-related charges
6.8
(10.8
)
Total operating expenses
1,482.3
1,330.7
Operating income
19.6
69.0
Interest expense
20.2
30.1
Net pension income
(6.3
)
(7.6
)
Earnings before income taxes and equity in
loss of unconsolidated entity
5.7
46.5
Income tax expense
1.4
1.8
Earnings before equity in loss of
unconsolidated entity
4.3
44.7
Equity in loss of unconsolidated
entity
—
0.1
Net earnings
$
4.3
$
44.6
Earnings per share
Basic
$
0.08
$
0.87
Diluted
$
0.08
$
0.85
Weighted average number of common
shares outstanding
Basic
51.8
51.3
Diluted
53.8
52.7
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
As of June 30, 2022 and December
31, 2021
(in millions)
(UNAUDITED) June
30, 2022
December 31,
2021
ASSETS
Cash and cash equivalents
$
11.8
$
179.9
Receivables, less allowance for credit
losses
344.5
362.0
Inventories
278.5
226.2
Prepaid expenses and other current
assets
47.6
41.0
Total current assets
682.4
809.1
Property, plant and equipment—net
695.7
727.0
Operating lease right-of-use
assets—net
126.4
125.7
Goodwill
86.4
86.4
Other intangible assets—net
61.3
75.3
Other long-term assets
71.7
66.5
Total assets
$
1,723.9
$
1,890.0
LIABILITIES AND SHAREHOLDERS’
EQUITY
Accounts payable
$
379.8
$
367.3
Other current liabilities
257.5
314.3
Short-term debt and current portion of
long-term debt
49.9
245.6
Current portion of finance lease
obligations
1.0
1.8
Current portion of operating lease
obligations
29.2
28.1
Total current liabilities
717.4
957.1
Long-term debt
643.9
554.9
Finance lease obligations
1.1
1.4
Operating lease obligations
100.3
99.8
Deferred income taxes
13.6
11.9
Other long-term liabilities
109.3
128.1
Total liabilities
1,585.6
1,753.2
Shareholders’ equity
Preferred stock
—
—
Common stock
1.4
1.4
Additional paid-in capital
839.6
839.3
Treasury stock, at cost
(14.5
)
(14.9
)
Accumulated deficit
(523.5
)
(527.8
)
Accumulated other comprehensive loss
(164.7
)
(161.2
)
Total shareholders’ equity
138.3
136.8
Total liabilities and shareholders’
equity
$
1,723.9
$
1,890.0
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the Six Months Ended June 30,
2022 and 2021
(in millions)
(UNAUDITED)
Six Months Ended June
30,
2022
2021
OPERATING ACTIVITIES
Net earnings
$
4.3
$
44.6
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation and amortization
71.8
80.6
Impairment charges
0.1
1.7
Settlement charges on pension plans
—
0.6
Stock-based compensation
3.8
4.7
Gain on the sale of businesses
—
(20.9
)
Gain on the sale or disposal of property,
plant and equipment
(1.2
)
(23.3
)
Deferred income taxes
1.1
2.1
Other non-cash adjustments to net
earnings
1.2
1.5
Changes in operating assets and
liabilities—net of acquisitions and divestitures
(104.6
)
(2.7
)
Net cash provided by (used in) operating
activities
(23.5
)
88.9
INVESTING ACTIVITIES
Purchases of property, plant and
equipment
(33.5
)
(27.2
)
Cost investment in unconsolidated
entities
(2.7
)
(0.7
)
Proceeds from the sale of property, plant
and equipment
3.2
35.0
Proceeds from the sale of a business
—
39.0
Other investing activities
1.8
(0.2
)
Net cash provided by (used in) investing
activities
(31.2
)
45.9
FINANCING ACTIVITIES
Payments of current and long-term debt
(222.1
)
(83.0
)
Payments of finance lease obligations
(1.5
)
(1.6
)
Borrowings on revolving credit
facilities
344.2
120.1
Payments on revolving credit
facilities
(229.8
)
(114.5
)
Proceeds from issuance of long-term
debt
1.1
—
Changes in ownership of noncontrolling
interests
—
(1.9
)
Purchases of treasury stock
(0.9
)
—
Equity awards redeemed to pay employees’
tax obligations
(2.5
)
(1.1
)
Payment of cash dividends
(1.4
)
(1.4
)
Other financing activities
(0.3
)
(8.1
)
Net cash used in financing activities
(113.2
)
(91.5
)
Effect of exchange rates on cash and cash
equivalents
(0.2
)
(0.2
)
Net increase (decrease) in cash and cash
equivalents
(168.1
)
43.1
Cash and cash equivalents at beginning of
period
179.9
55.2
Cash and cash equivalents at end of
period
$
11.8
$
98.3
QUAD/GRAPHICS, INC.
SEGMENT FINANCIAL INFORMATION
For the Three and Six Months
Ended June 30, 2022 and 2021
(in millions)
(UNAUDITED)
Net Sales
Operating
Income (Loss)
Restructuring,
Impairment and
Transaction-Related
Charges (1)
Three months ended June 30,
2022
United States Print and Related
Services
$
649.4
$
19.9
$
1.6
International
108.3
6.2
1.3
Total operating segments
757.7
26.1
2.9
Corporate
—
(11.9
)
0.3
Total
$
757.7
$
14.2
$
3.2
Three months ended June 30,
2021
United States Print and Related
Services
$
610.9
$
55.8
$
(14.5
)
International
83.0
3.0
0.9
Total operating segments
693.9
58.8
(13.6
)
Corporate
—
(10.8
)
0.2
Total
$
693.9
$
48.0
$
(13.4
)
Six months ended June 30, 2022
United States Print and Related
Services
$
1,300.5
$
31.7
$
3.3
International
201.4
9.9
2.9
Total operating segments
1,501.9
41.6
6.2
Corporate
—
(22.0
)
0.6
Total
$
1,501.9
$
19.6
$
6.8
Six months ended June 30, 2021
United States Print and Related
Services
$
1,245.5
$
88.3
$
(13.4
)
International
154.2
4.5
1.7
Total operating segments
1,399.7
92.8
(11.7
)
Corporate
—
(23.8
)
0.9
Total
$
1,399.7
$
69.0
$
(10.8
)
______________________________
(1)
Restructuring, impairment and
transaction-related 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, 2022 and 2021
(in millions, except margin
data)
(UNAUDITED)
Three Months Ended June
30,
2022
2021
Net earnings
$
5.3
$
34.4
Interest expense
10.9
15.6
Income tax expense
1.1
1.3
Depreciation and amortization
35.3
38.7
EBITDA (Non-GAAP)
$
52.6
$
90.0
EBITDA Margin (Non-GAAP)
6.9
%
13.0
%
Restructuring, impairment and
transaction-related charges (1)
3.2
(13.4
)
Gain from sale and leaseback (2)
—
(13.7
)
Other (3)
—
0.3
Adjusted EBITDA (Non-GAAP) (4)
$
55.8
$
63.2
Adjusted EBITDA Margin
(Non-GAAP)
7.4
%
9.1
%
______________________________
(1)
Operating results for the three months
ended June 30, 2022 and 2021, were affected by the following
restructuring, impairment and transaction-related charges:
Three Months Ended June
30,
2022
2021
Employee termination charges (a)
$
0.5
$
2.8
Impairment charges (b)
—
0.9
Transaction-related charges (c)
0.3
0.2
Other restructuring charges (income)
(d)
2.4
(17.3
)
Restructuring, impairment and
transaction-related charges
$
3.2
$
(13.4
)
______________________________
(a)
Employee termination charges were related
to workforce reductions through separation programs and facility
consolidations.
(b)
Impairment charges were for certain
property, plant and equipment no longer being utilized in
production as a result of facility consolidations.
(c)
Transaction-related charges consisted of
professional service fees related to business acquisition and
divestiture activities.
(d)
Other restructuring charges include costs
to maintain and exit closed facilities, as well as lease exit
charges, and are presented net of gains on the sale of facilities
and businesses, including a $20.9 million gain on the sale of a
business during the three months ended June 30, 2021.
(2)
The Company executed a sale and leaseback of its Chalfont,
Pennsylvania facility resulting in a $13.7 million gain during the
three months ended June 30, 2021.
(3)
Other includes the following items: (a) the equity in loss of
unconsolidated entity, which includes the results of operations for
an investment in an entity where Quad has the ability to exert
significant influence, but not control, and is accounted for using
the equity method of accounting; and (b) the Adjusted EBITDA for
unconsolidated equity method investments, which was calculated in a
consistent manner with the calculation above for Quad.
(4)
The Company made a change in its definition of Adjusted EBITDA to
include net pension income. This change is reflected in both
periods presented.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share. The
Company believes that these Non-GAAP measures, when presented in
conjunction with comparable GAAP measures, provide additional
information for evaluating Quad’s performance and are important
measures by which Quad’s management assesses the profitability and
liquidity of its business. These Non-GAAP measures should be
considered in addition to, not as a substitute for or superior to,
net earnings (loss) as a measure of operating performance or to
cash flows provided by (used in) operating activities as a measure
of liquidity. These Non-GAAP measures may be different than
Non-GAAP financial measures used by other companies.
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,
2022 and 2021
(in millions, except margin
data)
(UNAUDITED)
Six Months Ended June
30,
2022
2021
Net earnings
$
4.3
$
44.6
Interest expense
20.2
30.1
Income tax expense
1.4
1.8
Depreciation and amortization
71.8
80.6
EBITDA (Non-GAAP)
$
97.7
$
157.1
EBITDA Margin (Non-GAAP)
6.5
%
11.2
%
Restructuring, impairment and
transaction-related charges (1)
6.8
(10.8
)
Gain from sale and leaseback (2)
—
(13.7
)
Other (3)
—
0.5
Adjusted EBITDA (Non-GAAP) (4)
$
104.5
$
133.1
Adjusted EBITDA Margin
(Non-GAAP)
7.0
%
9.5
%
______________________________
(1)
Operating results for the six months ended
June 30, 2022 and 2021, were affected by the following
restructuring, impairment and transaction-related charges:
Six Months Ended June
30,
2022
2021
Employee termination charges (a)
$
1.6
$
7.5
Impairment charges (b)
0.1
1.7
Transaction-related charges (c)
0.5
0.4
Other restructuring charges (income)
(d)
4.6
(20.4
)
Restructuring, impairment and
transaction-related charges
$
6.8
$
(10.8
)
______________________________________
(a)
Employee termination charges were related
to workforce reductions through separation programs and facility
consolidations.
(b)
Impairment charges were for certain
property, plant and equipment no longer being utilized in
production as a result of facility consolidations.
(c)
Transaction-related charges consisted of
professional service fees related to business acquisition and
divestiture activities.
(d)
Other restructuring charges include costs
to maintain and exit closed facilities, as well as lease exit
charges, and are presented net of gains or losses on the sale of
facilities and businesses, including a $20.9 million gain on the
sale of a business during the six months ended June 30, 2021.
(2)
The Company executed a sale and leaseback of its Chalfont,
Pennsylvania facility resulting in a $13.7 million gain during the
six months ended June 30, 2021.
(3)
Other includes the following items: (a) the equity in loss of
unconsolidated entity, which includes the results of operations for
an investment in an entity where Quad has the ability to exert
significant influence, but not control, and is accounted for using
the equity method of accounting; and (b) the Adjusted EBITDA for
unconsolidated equity method investments, which was calculated in a
consistent manner with the calculation above for Quad.
(4)
The Company made a change in its definition of Adjusted EBITDA to
include net pension income. This change is reflected in both
periods presented.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share. The
Company believes that these Non-GAAP measures, when presented in
conjunction with comparable GAAP measures, provide additional
information for evaluating Quad’s performance and are important
measures by which Quad’s management assesses the profitability and
liquidity of its business. These Non-GAAP measures should be
considered in addition to, not as a substitute for or superior to,
net earnings (loss) as a measure of operating performance or to
cash flows provided by (used in) operating activities as a measure
of liquidity. These Non-GAAP measures may be different than
Non-GAAP financial measures used by other companies.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
FREE CASH FLOW
For the Six Months Ended June 30,
2022 and 2021
(in millions)
(UNAUDITED)
Six Months Ended June
30,
2022
2021
Net cash provided by (used in) operating
activities
$
(23.5
)
$
88.9
Less: purchases of property, plant and
equipment
(33.5
)
(27.2
)
Free Cash Flow (Non-GAAP)
$
(57.0
)
$
61.7
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share. The
Company believes that these Non-GAAP measures, when presented in
conjunction with comparable GAAP measures, provide additional
information for evaluating Quad’s performance and are important
measures by which Quad’s management assesses the profitability and
liquidity of its business. These Non-GAAP measures should be
considered in addition to, not as a substitute for or superior to,
net earnings (loss) as a measure of operating performance or to
cash flows provided by (used in) operating activities as a measure
of liquidity. These Non-GAAP measures may be different than
Non-GAAP financial measures used by other companies.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
DEBT LEVERAGE RATIO
As of June 30, 2022 and December
31, 2021
(in millions, except ratio)
(UNAUDITED)
June 30, 2022
December 31,
2021
Total debt and finance lease obligations
on the condensed consolidated balance sheets
$
695.9
$
803.7
Less: Cash and cash equivalents
11.8
179.9
Net Debt (Non-GAAP)
$
684.1
$
623.8
Divided by: trailing twelve months
Adjusted EBITDA (Non-GAAP) (1)
$
231.9
$
260.5
Debt Leverage Ratio (Non-GAAP)
2.95
x
2.39
x
______________________________
(1)
The calculation of Adjusted EBITDA for the
trailing twelve months ended June 30, 2022, and December 31, 2021,
was as follows:
Add
Subtract
Trailing Twelve Months
Ended
Year Ended
Six Months Ended
December 31,
2021 (a)
June 30, 2022
June 30, 2021
June 30, 2022
Net earnings (loss)
$
37.8
$
4.3
$
44.6
$
(2.5
)
Interest expense
59.6
20.2
30.1
49.7
Income tax expense
9.5
1.4
1.8
9.1
Depreciation and amortization
157.3
71.8
80.6
148.5
EBITDA (Non-GAAP)
$
264.2
$
97.7
$
157.1
$
204.8
Restructuring, impairment and
transaction-related charges
18.9
6.8
(10.8
)
36.5
Gains from sale and leaseback
(24.5
)
—
(13.7
)
(10.8
)
Loss on debt extinguishment
0.7
—
—
0.7
Other (b)
1.2
—
0.5
0.7
Adjusted EBITDA (Non-GAAP) (c)
$
260.5
$
104.5
$
133.1
$
231.9
______________________________
(a)
Financial information for the year ended
December 31, 2021, is included as reported in the Company’s 2021
Annual Report on Form 10-K filed with the SEC on February 23,
2022.
(b)
Other is comprised of equity in loss of
unconsolidated entity and Adjusted EBITDA for unconsolidated equity
method investments.
(c)
The Company made a change in its
definition of Adjusted EBITDA to include net pension income. This
change is reflected in both periods presented.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share. The
Company believes that these Non-GAAP measures, when presented in
conjunction with comparable GAAP measures, provide additional
information for evaluating Quad’s performance and are important
measures by which Quad’s management assesses the profitability and
liquidity of its business. These Non-GAAP measures should be
considered in addition to, not as a substitute for or superior to,
net earnings (loss) as a measure of operating performance or to
cash flows provided by (used in) operating activities as a measure
of liquidity. These Non-GAAP measures may be different than
Non-GAAP financial measures used by other companies.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
ADJUSTED DILUTED EARNINGS PER
SHARE
For the Three Months Ended June
30, 2022 and 2021
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended June
30,
2022
2021
Earnings before income taxes and equity in
loss of unconsolidated entity
$
6.4
$
35.9
Restructuring, impairment and
transaction-related charges
3.2
(13.4
)
Gain from sale and leaseback
—
(13.7
)
Adjusted net earnings, before income taxes
(Non-GAAP)
9.6
8.8
Income tax expense at 25% normalized tax
rate
2.4
2.2
Adjusted net earnings (Non-GAAP)
$
7.2
$
6.6
Basic weighted average number of common
shares outstanding
52.1
51.3
Plus: effect of dilutive equity incentive
instruments
2.0
1.2
Diluted weighted average number of common
shares outstanding
54.1
52.5
Adjusted diluted earnings per share
(Non-GAAP) (1)
$
0.13
$
0.13
Diluted earnings per share (GAAP)
$
0.10
$
0.66
Restructuring, impairment and
transaction-related charges per share
0.06
(0.26
)
Gain from sale and leaseback per share
—
(0.26
)
Income tax expense from condensed
consolidated statement of operations per share
0.02
0.02
Income tax expense at 25% normalized tax
rate per share
(0.05
)
(0.03
)
Adjusted diluted earnings per share
(Non-GAAP) (1)
$
0.13
$
0.13
______________________________
(1)
Adjusted diluted earnings per share
excludes the following: (i) restructuring, impairment and
transaction-related charges; (ii) gain from sale and leaseback;
(iii) discrete income tax items; and (iv) equity in loss of
unconsolidated entity.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share. The
Company believes that these Non-GAAP measures, when presented in
conjunction with comparable GAAP measures, provide additional
information for evaluating Quad’s performance and are important
measures by which Quad’s management assesses the profitability and
liquidity of its business. These Non-GAAP measures should be
considered in addition to, not as a substitute for or superior to,
net earnings (loss) as a measure of operating performance or to
cash flows provided by (used in) operating activities as a measure
of liquidity. These Non-GAAP measures may be different than
Non-GAAP financial measures used by other companies.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
ADJUSTED DILUTED EARNINGS PER
SHARE
For the Six Months Ended June 30,
2022 and 2021
(in millions, except per share
data)
(UNAUDITED)
Six Months Ended June
30,
2022
2021
Earnings before income taxes and equity in
loss of unconsolidated entity
$
5.7
$
46.5
Restructuring, impairment and
transaction-related charges
6.8
(10.8
)
Gain from sale and leaseback
—
(13.7
)
Adjusted net earnings, before income taxes
(Non-GAAP)
12.5
22.0
Income tax expense at 25% normalized tax
rate
3.1
5.5
Adjusted net earnings (Non-GAAP)
$
9.4
$
16.5
Basic weighted average number of common
shares outstanding
51.8
51.3
Plus: effect of dilutive equity incentive
instruments
2.0
1.4
Diluted weighted average number of common
shares outstanding
53.8
52.7
Adjusted diluted earnings per share
(Non-GAAP) (1)
$
0.17
$
0.31
Diluted earnings per share (GAAP)
$
0.08
$
0.85
Restructuring, impairment and
transaction-related charges per share
0.13
(0.20
)
Gain from sale and leaseback per share
—
(0.26
)
Income tax expense from condensed
consolidated statement of operations per share
0.02
0.03
Income tax expense at 25% normalized tax
rate per share
(0.06
)
(0.11
)
Adjusted diluted earnings per share
(Non-GAAP) (1)
$
0.17
$
0.31
______________________________
(1)
Adjusted diluted earnings per share
excludes the following: (i) restructuring, impairment and
transaction-related charges; (ii) gain from sale and leaseback;
(iii) discrete income tax items; and (iv) equity in loss of
unconsolidated entity.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share. The
Company believes that these Non-GAAP measures, when presented in
conjunction with comparable GAAP measures, provide additional
information for evaluating Quad’s performance and are important
measures by which Quad’s management assesses the profitability and
liquidity of its business. These Non-GAAP measures should be
considered in addition to, not as a substitute for or superior to,
net earnings (loss) as a measure of operating performance or to
cash flows provided by (used in) operating activities as a measure
of liquidity. These Non-GAAP measures may be different than
Non-GAAP financial measures used by other companies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220802006057/en/
Investor Relations Contact Katie Krebsbach Investor
Relations Manager, Quad 414-566-4247 kkrebsbach@quad.com Media
Contact Claire Ho Director of Corporate Communications, Quad
414-566-2955 cho@quad.com
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