Achieves 19% Net Sales Increase From Q2 2020
and Raises Full-Year Outlook; Significantly Reduces Net Debt by
$120 Million Since December 31, 2020
Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”),
today reported results for the second quarter of 2021.
Recent Highlights
- Increased net sales by 19% from second quarter 2020 driven by
higher print, logistics and agency solutions sales, which rebounded
compared to the pandemic-impacted period in 2020, as well as print
segment share gains.
- Increased net earnings from continuing operations by $49
million to $34 million for the second quarter of 2021, compared to
a net loss from continuing operations of $15 million for the second
quarter of 2020.
- Achieved $60 million in Adjusted EBITDA during the second
quarter of 2021, flat with the prior year, despite a year-over-year
non-recurring benefit in 2020 of approximately $30 million in
temporary cost reductions.
- Increased cash provided by operating activities to $89 million
and Free Cash Flow to $62 million during the first six months of
2021, increases of $22 million and $33 million, respectively.
- Reduced Net Debt by $120 million year-to-date, improving the
Company’s Debt Leverage Ratio to 3.0x at June 30, 2021, from 3.35x
at December 31, 2020.
- Sold QuadExpress, a third-party logistics (3PL) business, for
$40 million, representing an Adjusted EBITDA multiple of over 8
times.
- Raises and expands full-year financial outlook for 2021 Net
Sales, Adjusted EBITDA and debt leverage.
“Thanks to strong operating and financial performance, our team
delivered second quarter results that exceeded our expectations,”
said Joel Quadracci, Chairman, President & CEO of Quad. “Our
net sales grew 19% as compared to the same period last year, driven
by organic growth and new business wins. This positive trend
reflects the hard work of our employees and the success our
integrated marketing offering is having in the marketplace. We
remain committed to providing value to clients through our unique
solutions, and will continue to establish and expand relationships
with premier brands and marketers.
“We also divested our 3PL brokered freight business,
QuadExpress, for a total consideration of $40 million, at the end
of June. This divestiture, which represented a small portion of our
global logistics business, was in line with our established
strategy to optimize our product and service portfolio and invest
in those parts of our business that can accelerate our growth and
position as a marketing solutions partner. We are pleased to have
found a great home for the QuadExpress team.
“As the ad market and broader economy continue to recover and
return to growth, our innovative team remains committed to
organically growing share, including new revenue from our expanded
marketing services product offering, while also attracting new
clients from new verticals. As always, we will remain nimble and
adapt to changing demand in the marketplace while maintaining our
disciplined approach to how we manage all aspects of our business
to enhance our financial strength and create shareholder value.
This includes continuing to build out and invest in the talent,
technology, products and services that will further advance our
strategy as a marketing solutions partner.”
Summary Results
Results for the three months ended June 30, 2021, include:
- Net Sales — Net sales were $694 million in the second quarter
of 2021, up 19% from the same period in 2020. Net sales increased
in print, logistics and agency solutions primarily driven by
organic growth, which rebounded compared to the pandemic-impacted
period in 2020, as well as print segment share gains from new
clients.
- Net Earnings (Loss) From Continuing Operations — Net earnings
from continuing operations were $34 million or $0.66 diluted
earnings per share from continuing operations in the second quarter
of 2021, an increase of $49 million compared to the second quarter
of 2020, which recorded a net loss of $15 million or $0.29 diluted
loss per share. Net earnings increased due to higher profit from a
19% increase in net sales, a $21 million gain on the sale of
QuadExpress in the second quarter of 2021, a $14 million gain from
the sale and leaseback of the Chalfont, Penn., production facility
in the second quarter of 2021, and $9 million of lower
restructuring, impairment and transaction-related charges,
partially offset by approximately $30 million in non-recurring
temporary cost savings in 2020 primarily related to salary
reductions and furloughs due to the COVID pandemic.
- Adjusted EBITDA — Adjusted EBITDA was $60 million in the second
quarter of 2021, consistent with the same period in 2020. Increased
net sales drove higher profit, offset by approximately $30 million
in 2020 COVID-related temporary cost reductions.
Results for the six months ended June 30, 2021, include:
- Net Sales — Net sales were $1.4 billion in the six months ended
June 30, 2021, down 1% from the same period in 2020, primarily due
to the impacts from the COVID-19 pandemic in the first quarter,
nearly offset by year-over-year increases in print, logistics and
agency solutions sales in the second quarter.
- Net Earnings (Loss) From Continuing Operations — Net earnings
from continuing operations were $45 million or $0.85 diluted
earnings per share from continuing operations in the six months
ended June 30, 2021, an increase of $69 million compared to the
same period in 2020, which recorded a net loss of $24 million or
$0.46 diluted loss per share. Net earnings were higher due to a $26
million decrease in restructuring, impairment, and
transaction-related charges, a $24 million increase from gains on
the sale of businesses, and a $14 million gain from the sale and
leaseback of the Chalfont, Penn., production facility in the second
quarter of 2021. These increases were partially offset by
approximately $30 million in non-recurring temporary cost savings
in 2020.
- Adjusted EBITDA — Adjusted EBITDA was $126 million in the six
months ended June 30, 2021, as compared to $135 million in the same
period in 2020. The strong second quarter net sales growth and
related Adjusted EBITDA impact partially offset the full year
impact of non-recurring benefits in 2020 primarily related to
approximately $30 million in temporary cost reductions and a $12
million benefit in 2020 from change in vacation policy.
- Net Cash Provided by Operating Activities — Net cash provided
by operating activities increased by $22 million to $89 million for
the six months ended June 30, 2021, as compared to $67 million in
the same period in 2020, primarily due to improvements in working
capital.
- Free Cash Flow — Free Cash Flow increased by $33 million to $62
million for the six months ended June 30, 2021, as compared to $29
million for the same period in 2020, primarily due to higher net
cash provided by operating activities as described above, and an
$11 million decrease in capital expenditures.
- Net Debt — Debt less cash and cash equivalents decreased by
$120 million to $753 million as of June 30, 2021, as compared to
$873 million at December 31, 2020. The reduction was primarily due
to $62 million in Free Cash Flow and cash generated from asset
sales, primarily related to the sale of QuadExpress. Over the past
twelve months, net debt decreased $225 million, representing a 23%
reduction in net debt. The Debt Leverage Ratio improved 35 basis
points to 3.0x at June 30, 2021, from 3.35x at December 31,
2020.
2021 Outlook
The Company provided the following 2021 financial outlook:
Previous Outlook
Current Outlook
Annual Net Sales Change (1)
Flat to down a low single-digit
percentage
1% to 3% increase
Full-Year Adjusted EBITDA
Not provided
$240 to $260 million
Year-End Debt Leverage Ratio (2)
At or near 3.0x
Approximately 2.75x
(1) Due to QuadExpress being sold on June
30, 2021, Annual Net Sales Change excludes QuadExpress sales for
the second half of 2020
(2) Debt Leverage Ratio is calculated at
the midpoint of the Adjusted EBITDA outlook
Dave Honan, Executive Vice President and CFO, concluded: “Our
performance in the first half of the year and, in particular, the
second quarter, surpassed our expectations. We have strong sales
momentum heading into the second half of 2021, providing the
foundation for our improved and expanded financial outlook for
fiscal 2021. Our full-year outlook increases our Net Sales outlook
to a 1% to 3% increase compared to 2020, and we expect further
significant reductions in debt in the second half of the year to
end 2021 with a Debt Leverage Ratio of approximately 2.75x.”
Quarterly Conference Call
Quad will hold a conference call at 10 a.m. ET on Wednesday,
August 4, to discuss second quarter and year-to-date 2021 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 can pre-register for the webcast by navigating to
https://dpregister.com/sreg/10155015/e6ee4a26aa.
Participants will be given a unique PIN to gain immediate access to
the call on August 4, 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
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 4, 2021, accessible as follows:
- U.S. Toll-Free: 1-877-344-7529
- International Toll: 1-412-317-0088
- Replay Access Code: 10158830
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 negative impacts the coronavirus
(COVID-19) has had and will continue to have on the Company’s
business, financial condition, cash flows, results of operations
and supply chain, as well as the global economy in general
(including future uncertain impacts); the impact of decreasing
demand for printed materials and significant overcapacity in a
highly competitive environment creates downward pricing pressures
and potential underutilization of assets; the impact of digital
media and similar technological changes, including digital
substitution by consumers; the impact of fluctuations in costs
(including labor and labor-related costs, energy costs, freight
rates and raw materials, including paper) and the impact of
fluctuations in the availability of raw materials, including paper;
the inability of the Company to reduce costs and improve operating
efficiency rapidly enough to meet market conditions; 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 increased business complexity as a result
of the Company’s transformation to a marketing solutions partner;
the impact negative publicity could have on our business; 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 failure of clients to
perform under contracts or to renew contracts with clients on
favorable terms or at all; the impact of changing future economic
conditions; the fragility and decline in overall distribution
channels; 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 failure to attract and retain qualified talent across
the enterprise; the impact of regulatory matters and legislative
developments or changes in laws, including changes in
cyber-security, privacy and environmental laws; significant capital
expenditures may be needed to maintain the Company’s platforms and
processes and to remain technologically and economically
competitive; the impact of risks associated with the operations
outside of the United States, including costs incurred or
reputational damage suffered due to improper conduct of its
employees, contractors or agents; 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 intangible assets; 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 From Continuing Operations.
Adjusted EBITDA is defined as net earnings (loss) attributable to
Quad common shareholders excluding interest expense, income tax
expense (benefit), depreciation and amortization, restructuring,
impairment and transaction-related charges, gain from sale and
leaseback, loss from discontinued operations, net of tax, net
pension income, loss on debt extinguishment, equity in (earnings)
loss of unconsolidated entity, the Adjusted EBITDA for
unconsolidated equity method investments (calculated in a
consistent manner with the calculation for Quad) and net earnings
(loss) attributable to noncontrolling interests. 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. 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 From Continuing Operations is defined as earnings (loss) from
continuing operations before income taxes and equity in (earnings)
loss of unconsolidated entity excluding restructuring, impairment
and transaction-related charges, gain from sale and leaseback, loss
on debt extinguishment, 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 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 worldwide marketing solutions partner
that leverages its 50-year heritage of platform excellence,
innovation, strong culture and social purpose to create a better
way for its clients, employees and communities. The Company’s
integrated marketing platform helps brands and marketers reduce
complexity, increase efficiency and enhance marketing spend
effectiveness. Quad provides its clients with unmatched scale for
client on-site services and expanded subject expertise in marketing
strategy, creative solutions, media deployment (which includes a
strong foundation in print) and marketing management services. With
a client-centric approach that drives the Company to continuously
evolve its offering, combined with leading-edge technology and
single-source simplicity, the Company has the resources and
knowledge to help a wide variety of clients in multiple vertical
industries, including retail, publishing, consumer technology,
consumer packaged goods, financial services, insurance, healthcare
and direct-to-consumer. Quad has multiple locations throughout
North America, South America and Europe, and strategic partnerships
in Asia and other parts of the world. For additional information
visit www.QUAD.com.
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Three Months Ended June
30, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended June
30,
2021
2020
Net sales
$
693.9
$
584.5
Cost of sales
554.2
460.9
Selling, general and administrative
expenses
80.1
63.3
Gain from sale and leaseback
(13.7
)
—
Depreciation and amortization
38.7
46.7
Restructuring, impairment and
transaction-related charges
(13.4
)
16.4
Total operating expenses
645.9
587.3
Operating income (loss) from continuing
operations
48.0
(2.8
)
Interest expense
15.6
16.2
Net pension income
(3.5
)
(2.6
)
Loss on debt extinguishment
—
2.4
Earnings (loss) from continuing operations
before income taxes and equity in loss of unconsolidated entity
35.9
(18.8
)
Income tax expense (benefit)
1.3
(4.3
)
Earnings (loss) from continuing operations
before equity in loss of unconsolidated entity
34.6
(14.5
)
Equity in loss of unconsolidated
entity
0.2
0.5
Net earnings (loss) from continuing
operations
34.4
(15.0
)
Loss from discontinued operations, net of
tax
—
(8.7
)
Net earnings (loss)
34.4
(23.7
)
Less: net loss attributable to
noncontrolling interests
—
(0.2
)
Net earnings (loss) attributable to
Quad common shareholders
$
34.4
$
(23.5
)
Earnings (loss) per share attributable
to Quad common shareholders
Basic:
Continuing operations
$
0.67
$
(0.29
)
Discontinued operations
—
(0.17
)
Basic earnings (loss) per share
attributable to Quad common shareholders
$
0.67
$
(0.46
)
Diluted:
Continuing operations
$
0.66
$
(0.29
)
Discontinued operations
—
(0.17
)
Diluted earnings (loss) per share
attributable to Quad common shareholders
$
0.66
$
(0.46
)
Weighted average number of common
shares outstanding
Basic
51.3
50.7
Diluted
52.5
50.7
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Six Months Ended June 30,
2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Six Months Ended June
30,
2021
2020
Net sales
$
1,399.7
$
1,407.0
Cost of sales
1,114.0
1,108.6
Selling, general and administrative
expenses
160.6
162.9
Gain from sale and leaseback
(13.7
)
—
Depreciation and amortization
80.6
94.1
Restructuring, impairment and
transaction-related charges
(10.8
)
39.2
Total operating expenses
1,330.7
1,404.8
Operating income from continuing
operations
69.0
2.2
Interest expense
30.1
34.3
Net pension income
(7.6
)
(5.3
)
Loss on debt extinguishment
—
1.8
Earnings (loss) from continuing operations
before income taxes and equity in loss of unconsolidated entity
46.5
(28.6
)
Income tax expense (benefit)
1.8
(5.5
)
Earnings (loss) from continuing operations
before equity in loss of unconsolidated entity
44.7
(23.1
)
Equity in loss of unconsolidated
entity
0.1
0.5
Net earnings (loss) from continuing
operations
44.6
(23.6
)
Loss from discontinued operations, net of
tax
—
(12.5
)
Net earnings (loss)
44.6
(36.1
)
Less: net loss attributable to
noncontrolling interests
—
(0.2
)
Net earnings (loss) attributable to
Quad common shareholders
$
44.6
$
(35.9
)
Earnings (loss) per share attributable
to Quad common shareholders
Basic:
Continuing operations
$
0.87
$
(0.46
)
Discontinued operations
—
(0.25
)
Basic earnings (loss) per share
attributable to Quad common shareholders
$
0.87
$
(0.71
)
Diluted:
Continuing operations
$
0.85
$
(0.46
)
Discontinued operations
—
(0.25
)
Diluted earnings (loss) per share
attributable to Quad common shareholders
$
0.85
$
(0.71
)
Weighted average number of common
shares outstanding
Basic
51.3
50.6
Diluted
52.7
50.6
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
As of June 30, 2021 and December
31, 2020
(in millions)
(UNAUDITED)
June 30, 2021
December 31,
2020
ASSETS
Cash and cash equivalents
$
98.3
$
55.2
Receivables, less allowance for credit
losses
323.8
399.1
Inventories
168.6
170.2
Prepaid expenses and other current
assets
36.0
54.7
Total current assets
626.7
679.2
Property, plant and equipment—net
831.6
884.2
Operating lease right-of-use
assets—net
80.1
81.0
Goodwill
86.4
103.0
Other intangible assets—net
88.9
104.3
Equity method investment in unconsolidated
entity
2.6
2.6
Other long-term assets
72.8
73.4
Total assets
$
1,789.1
$
1,927.7
LIABILITIES AND SHAREHOLDERS’
EQUITY
Accounts payable
$
313.7
$
320.0
Other current liabilities
226.0
310.8
Short-term debt and current portion of
long-term debt
257.7
20.7
Current portion of finance lease
obligations
2.7
2.8
Current portion of operating lease
obligations
26.6
28.4
Total current liabilities
826.7
682.7
Long-term debt
589.0
902.7
Finance lease obligations
1.7
2.0
Operating lease obligations
55.5
54.5
Deferred income taxes
7.4
4.2
Other long-term liabilities
176.7
196.8
Total liabilities
1,657.0
1,842.9
Shareholders’ equity
Preferred stock
—
—
Common stock
1.4
1.4
Additional paid-in capital
836.4
833.1
Treasury stock, at cost
(13.6
)
(13.1
)
Accumulated deficit
(521.3
)
(566.0
)
Accumulated other comprehensive loss
(170.8
)
(171.3
)
Quad’s shareholders’ equity
132.1
84.1
Noncontrolling interests
—
0.7
Total shareholders’ equity and
noncontrolling interests
132.1
84.8
Total liabilities and shareholders’
equity
$
1,789.1
$
1,927.7
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the Six Months Ended June 30,
2021 and 2020
(in millions)
(UNAUDITED)
Six Months Ended June
30,
2021
2020
OPERATING ACTIVITIES
Net earnings (loss)
$
44.6
$
(36.1
)
Adjustments to reconcile net earnings
(loss) to net cash provided by operating activities:
Depreciation and amortization
80.6
94.1
Impairment charges
1.7
15.5
Settlement loss on pension plans
0.6
—
Loss on debt extinguishment
—
1.8
Stock-based compensation
4.7
5.6
Gain on the sale or disposal of property,
plant and equipment
(23.3
)
(0.9
)
(Gain) loss on the sale of businesses
(20.9
)
2.9
Deferred income taxes
2.1
6.8
Other non-cash adjustments to net loss
1.5
1.8
Changes in operating assets and
liabilities—net of acquisitions and divestitures
(2.7
)
(24.3
)
Net cash provided by operating
activities
88.9
67.2
INVESTING ACTIVITIES
Purchases of property, plant and
equipment
(27.2
)
(38.0
)
Cost investment in unconsolidated
entities
(0.7
)
—
Proceeds from the sale of property, plant
and equipment
35.0
4.0
Proceeds from the sale of businesses
39.0
40.1
Acquisition of businesses—net of cash
acquired
—
(1.8
)
Other investing activities
(0.2
)
1.8
Net cash provided by investing
activities
45.9
6.1
FINANCING ACTIVITIES
Proceeds from issuance of long-term
debt
—
0.1
Payments of long-term debt
(83.0
)
(56.3
)
Payments of finance lease obligations
(1.6
)
(5.1
)
Borrowings on revolving credit
facilities
120.1
311.7
Payments on revolving credit
facilities
(114.5
)
(312.4
)
Payments of debt issuance costs and
financing fees
—
(2.7
)
Changes in ownership of noncontrolling
interests
(1.9
)
(6.4
)
Equity awards redeemed to pay employees’
tax obligations
(1.1
)
(1.0
)
Payment of cash dividends
(1.4
)
(9.5
)
Other financing activities
(8.1
)
0.1
Net cash used in financing activities
(91.5
)
(81.5
)
Effect of exchange rates on cash and cash
equivalents
(0.2
)
(0.3
)
Net increase (decrease) in cash and cash
equivalents
43.1
(8.5
)
Cash and cash equivalents at beginning of
period
55.2
78.7
Cash and cash equivalents at end of
period
$
98.3
$
70.2
The Condensed Consolidated Statements of Cash Flows include the
cash flows related to the United States Book business for the six
months ended June 30, 2020.
QUAD/GRAPHICS, INC.
SEGMENT FINANCIAL INFORMATION
For the Three and Six Months
Ended June 30, 2021 and 2020
(in millions)
(UNAUDITED)
Net Sales
Operating
Income (Loss) from Continuing
Operations
Restructuring,
Impairment and
Transaction-Related
Charges (1)
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
)
Three months ended June 30,
2020
United States Print and Related
Services
$
526.5
$
8.3
$
13.4
International
58.0
(0.7
)
2.8
Total operating segments
584.5
7.6
16.2
Corporate
—
(10.4
)
0.2
Total
$
584.5
$
(2.8
)
$
16.4
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
)
Six months ended June 30, 2020
United States Print and Related
Services
$
1,263.1
$
24.6
$
34.2
International
143.9
(0.4
)
4.1
Total operating segments
1,407.0
24.2
38.3
Corporate
—
(22.0
)
0.9
Total
$
1,407.0
$
2.2
$
39.2
________________________________
(1) Restructuring, impairment and transaction-related charges
are included within operating income (loss) from continuing
operations.
The segment information contained in the above table does not
include the operating results related to the United States Book
business for the three and six months ended June 30, 2020.
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, 2021 and 2020
(in millions, except margin
data)
(UNAUDITED)
Three Months Ended June
30,
2021
2020
Net earnings (loss) attributable to Quad
common shareholders
$
34.4
$
(23.5
)
Interest expense
15.6
16.2
Income tax expense (benefit)
1.3
(4.3
)
Depreciation and amortization
38.7
46.7
EBITDA (Non-GAAP)
$
90.0
$
35.1
EBITDA Margin (Non-GAAP)
13.0
%
6.0
%
Restructuring, impairment and
transaction-related charges (1)
(13.4
)
16.4
Gain from sale and leaseback (2)
(13.7
)
—
Loss from discontinued operations, net of
tax (3)
—
8.7
Net pension income (4)
(3.5
)
(2.6
)
Loss on debt extinguishment (5)
—
2.4
Other (6)
0.3
(0.1
)
Adjusted EBITDA (Non-GAAP)
$
59.7
$
59.9
Adjusted EBITDA Margin
(Non-GAAP)
8.6
%
10.2
%
______________________________
(1)
Operating results from continuing
operations for the three months ended June 30, 2021 and 2020, were
affected by the following restructuring, impairment and
transaction-related charges:
Three Months Ended June
30,
2021
2020
Employee termination charges (a)
$
2.8
$
9.5
Impairment charges (b)
0.9
1.7
Transaction-related charges (c)
0.2
0.3
Integration costs (d)
—
0.4
Other restructuring charges (income)
(e)
(17.3
)
4.5
Restructuring, impairment and
transaction-related charges
$
(13.4
)
$
16.4
______________________________
(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)
Integration costs were primarily costs related to the integration
of acquired companies.
(e)
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, PA plant resulting in a $13.7 million
gain during the three months ended June 30, 2021.
(3)
Loss from discontinued
operations, net of tax, for the three months ended June 30, 2020,
includes the results of operations for the Company’s United States
Book business. During the third quarter of 2019, the Company made
the decision to sell its United States Book business. Accordingly,
the Company applied discontinued operations treatment for the
intended sale of its United States Book business in all periods
presented, as required by United States GAAP. The Company
successfully completed the sale of its United States Book business
in 2020.
(4)
As required by United States
GAAP, pension components other than service cost are required to be
excluded from operating income. The Company has also excluded
pension income from the calculation of Adjusted EBITDA, which is
reflected in all periods presented.
(5)
The $2.4 million loss on debt
extinguishment recorded during the three months ended June 30,
2020, relates to the fourth amendment to the Company’s April 28,
2014 Senior Secured Credit Facility, completed on June 29,
2020.
(6)
Other includes the following
items: (a) the equity in (earnings) 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; (b) the Adjusted EBITDA for unconsolidated equity
method investments, which was calculated in a consistent manner
with the calculation above for Quad; and (c) the net earnings
(loss) attributable to noncontrolling interests, which is the
portion of the net earnings (loss) not owned by Quad for an
investment where Quad has a controlling financial interest.
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 from
Continuing Operations. 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 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,
2021 and 2020
(in millions, except margin
data)
(UNAUDITED)
Six Months Ended June
30,
2021
2020
Net earnings (loss) attributable to Quad
common shareholders
$
44.6
$
(35.9
)
Interest expense
30.1
34.3
Income tax expense (benefit)
1.8
(5.5
)
Depreciation and amortization
80.6
94.1
EBITDA (Non-GAAP)
$
157.1
$
87.0
EBITDA Margin (Non-GAAP)
11.2
%
6.2
%
Restructuring, impairment and
transaction-related charges (1)
(10.8
)
39.2
Gain from sale and leaseback (2)
(13.7
)
—
Loss from discontinued operations, net of
tax (3)
—
12.5
Net pension income (4)
(7.6
)
(5.3
)
Loss on debt extinguishment (5)
—
1.8
Other (6)
0.5
0.1
Adjusted EBITDA (Non-GAAP)
$
125.5
$
135.3
Adjusted EBITDA Margin
(Non-GAAP)
9.0
%
9.6
%
______________________________
(1)
Operating results from continuing
operations for the six months ended June 30, 2021 and 2020, were
affected by the following restructuring, impairment and
transaction-related charges:
Six Months Ended June
30,
2021
2020
Employee termination charges (a)
$
7.5
$
22.1
Impairment charges (b)
1.7
4.2
Transaction-related charges (c)
0.4
0.8
Integration costs (d)
—
1.1
Other restructuring charges (income)
(e)
(20.4
)
11.0
Restructuring, impairment and
transaction-related charges
$
(10.8
)
$
39.2
______________________________________
(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)
Integration costs were primarily
costs related to the integration of acquired companies.
(e)
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. A $20.9 million gain on the sale
of a business and a $2.9 million loss on the sale of a business
were included in other restructuring charges during the six months
ended June 30, 2021 and 2020, respectively.
(2)
The Company executed a sale and
leaseback of its Chalfont, PA plant resulting in a $13.7 million
gain during the six months ended June 30, 2021.
(3)
Loss from discontinued
operations, net of tax, for the six months ended June 30, 2020,
includes the results of operations for the Company’s United States
Book business. During the third quarter of 2019, the Company made
the decision to sell its United States Book business. Accordingly,
the Company applied discontinued operations treatment for the
intended sale of its United States Book business in all periods
presented, as required by United States GAAP. The Company
successfully completed the sale of its United States Book business
in 2020.
(4)
As required by United States
GAAP, pension components other than service cost are required to be
excluded from operating income. The Company has also excluded
pension income from the calculation of Adjusted EBITDA, which is
reflected in all periods presented.
(5)
The $1.8 million loss on debt
extinguishment recorded during the six months ended June 30, 2020,
primarily relates to the repurchase of the Company’s unsecured 7.0%
senior notes due May 1, 2022.
(6)
Other includes the following
items: (a) the equity in (earnings) 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; (b) the Adjusted EBITDA for unconsolidated equity
method investments, which was calculated in a consistent manner
with the calculation above for Quad; and (c) the net earnings
(loss) attributable to noncontrolling interests, which is the
portion of the net earnings (loss) not owned by Quad for an
investment where Quad has a controlling financial interest.
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 from
Continuing Operations. 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 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,
2021 and 2020
(in millions)
(UNAUDITED)
Six Months Ended June
30,
2021
2020
Net cash provided by operating
activities
$
88.9
$
67.2
Less: purchases of property, plant and
equipment
(27.2
)
(38.0
)
Free Cash Flow (Non-GAAP)
$
61.7
$
29.2
______________________________
The above calculation of Free Cash Flow includes the cash flows
related to the United States Book business for the six months ended
June 30, 2020.
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 from
Continuing Operations. 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 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, 2021 and December
31, 2020
(in millions, except ratio)
(UNAUDITED)
June 30, 2021
December 31,
2020
Total debt and finance lease obligations
on the condensed consolidated balance sheets
$
851.1
$
928.2
Less: Cash and cash equivalents
98.3
55.2
Net Debt (Non-GAAP)
$
752.8
$
873.0
Divided by: trailing twelve months
Adjusted EBITDA (Non-GAAP) (1)
$
250.6
$
260.4
Debt Leverage Ratio (Non-GAAP)
3.00
x
3.35
x
______________________________ (1)
The calculation of Adjusted EBITDA for the trailing twelve
months ended June 30, 2021, and December 31, 2020, was as
follows:
Add
Subtract
Trailing Twelve Months
Ended
Year Ended
Six Months Ended
December 31, 2020 (a)
June 30, 2021
June 30, 2020
June 30, 2021
Net earnings (loss) attributable to Quad
common shareholders
$
(128.3
)
$
44.6
$
(35.9
)
$
(47.8
)
Interest expense
68.8
30.1
34.3
64.6
Income tax expense (benefit)
0.3
1.8
(5.5
)
7.6
Depreciation and amortization
181.6
80.6
94.1
168.1
EBITDA (Non-GAAP)
$
122.4
$
157.1
$
87.0
$
192.5
Restructuring, impairment and
transaction-related charges
124.1
(10.8
)
39.2
74.1
Loss from discontinued operations, net of
tax
21.9
—
12.5
9.4
Net pension income
(10.5
)
(7.6
)
(5.3
)
(12.8
)
Gain from sale and leaseback
—
(13.7
)
—
(13.7
)
Loss on debt extinguishment
1.8
—
1.8
—
Other (b)
0.7
0.5
0.1
1.1
Adjusted EBITDA (Non-GAAP)
$
260.4
$
125.5
$
135.3
$
250.6
______________________________ (a)
Financial information for the year ended December 31, 2020, is
included as reported in the Company’s 2020 Annual Report on Form
10-K filed with the SEC on February 24, 2021.
(b)
Other is comprised of equity in (earnings) loss of
unconsolidated entity, Adjusted EBITDA for unconsolidated equity
method investments and net earnings (loss) attributable to
noncontrolling interests.
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 from
Continuing Operations. 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 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 FROM CONTINUING OPERATIONS
For the Three Months Ended June
30, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended June
30,
2021
2020
Earnings (loss) from continuing operations
before income taxes and equity in loss of unconsolidated entity
$
35.9
$
(18.8
)
Restructuring, impairment and
transaction-related charges
(13.4
)
16.4
Gain from sale and leaseback
(13.7
)
—
Loss on debt extinguishment
—
2.4
Adjusted net earnings from continuing
operations, before income taxes (Non-GAAP)
8.8
—
Income tax expense at 25% normalized tax
rate
2.2
—
Adjusted net earnings from continuing
operations (Non-GAAP)
$
6.6
$
—
Basic weighted average number of common
shares outstanding
51.3
50.7
Plus: effect of dilutive equity incentive
instruments (Non-GAAP)
1.2
0.3
Diluted weighted average number of common
shares outstanding (Non-GAAP)
52.5
51.0
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.13
$
—
Diluted earnings (loss) per share from
continuing operations (GAAP)
$
0.66
$
(0.29
)
Restructuring, impairment and
transaction-related charges per share
(0.26
)
0.32
Gain from sale and leaseback per share
(0.26
)
—
Loss on debt extinguishment per share
—
0.05
Income tax benefit from condensed
consolidated statement of operations per share
0.02
(0.08
)
Income tax expense at 25% normalized tax
rate per share
(0.03
)
—
Other items from condensed consolidated
statement of operations per share (2)
—
—
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.13
$
—
______________________________ (1)
Adjusted diluted earnings per share from continuing operations
excludes the following: (i) the results operations for the United
States Book business; (ii) restructuring, impairment and
transaction-related charges; (iii) gain from sale and leaseback;
(iv) loss on debt extinguishment; (v) discrete income tax items;
(vi) equity in loss of unconsolidated entity; and (vii) net
earnings (loss) attributable to noncontrolling interests.
(2)
Other items from condensed consolidated statement of operations
per share is comprised of the diluted loss per share impacts of
equity in (earnings) loss of unconsolidated entity and net earnings
(loss) attributable to noncontrolling interests.
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 from
Continuing Operations. 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 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 FROM CONTINUING OPERATIONS
For the Six Months Ended June 30,
2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Six Months Ended June
30,
2021
2020
Earnings (loss) from continuing operations
before income taxes and equity in loss of unconsolidated entity
$
46.5
$
(28.6
)
Restructuring, impairment and
transaction-related charges
(10.8
)
39.2
Gain from sale and leaseback
(13.7
)
—
Loss on debt extinguishment
—
1.8
Adjusted net earnings from continuing
operations, before income taxes (Non-GAAP)
22.0
12.4
Income tax expense at 25% normalized tax
rate
5.5
3.1
Adjusted net earnings from continuing
operations (Non-GAAP)
$
16.5
$
9.3
Basic weighted average number of common
shares outstanding
51.3
50.6
Plus: effect of dilutive equity incentive
instruments (Non-GAAP)
1.4
0.4
Diluted weighted average number of common
shares outstanding (Non-GAAP)
52.7
51.0
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.31
$
0.18
Diluted earnings (loss) per share from
continuing operations (GAAP)
$
0.85
$
(0.46
)
Restructuring, impairment and
transaction-related charges per share
(0.20
)
0.77
Gain from sale and leaseback per share
(0.26
)
—
Loss on debt extinguishment per share
—
0.03
Income tax expense (benefit) from
condensed consolidated statement of operations per share
0.03
(0.11
)
Income tax expense at 25% normalized tax
rate per share
(0.11
)
(0.06
)
Other items from condensed consolidated
statement of operations per share (2)
—
0.01
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.31
$
0.18
______________________________
(1)
Adjusted diluted earnings per share from continuing operations
excludes the following: (i) the results of operations for the
United States Book business; (ii) restructuring, impairment and
transaction-related charges; (iii) gain from sale and leaseback;
(iv) loss on debt extinguishment; (v) discrete income tax items;
(vi) equity in loss of unconsolidated entity; and (vii) net
earnings attributable to noncontrolling interests.
(2)
Other items from condensed consolidated statement of operations
per share is comprised of the diluted loss per share impacts of
equity in (earnings) loss of unconsolidated entity and net earnings
(loss) attributable to noncontrolling interests.
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 from
Continuing Operations. 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 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/20210803006047/en/
Investor Relations Contact Katie Krebsbach Investor
Relations Manager 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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