Raises Full-Year Net Sales Guidance Range to
8%-10% Growth, Driven by Strong Execution and Continued Strong
Sales Momentum
Repurchased 3.1 Million Quad Shares
Year-to-Date — More Than 5% of Quad’s Total Shares Outstanding
Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”),
today reported results for the third quarter ended September 30,
2022.
Recent Highlights
- Achieved sixth consecutive quarter of year-over-year growth as
Net Sales increased 18% in the third quarter of 2022 compared to
the third quarter of 2021 due to print segment share gains,
increased pricing in response to inflationary cost pressures, and
increased sales in the Company’s international locations.
- Recognized Net Earnings of $14 million in both the third
quarter of 2022 and 2021, with 2021 Net Earnings including
non-recurring gains of $18 million, net of tax, from a property
insurance claim and a sale and leaseback of a production
facility.
- Increased Adjusted EBITDA to $69 million in the third quarter
of 2022 compared to Adjusted EBITDA of $55 million in the third
quarter of 2021, when excluding a $13 million property insurance
gain in 2021.
- Grew Adjusted Diluted Earnings Per Share to $0.32 compared to
Adjusted Diluted Earnings Per Share of $0.18 in the third quarter
of 2021.
- Raised net sales guidance from 3%-7% growth to 8%-10% growth;
narrowed other guidance within the previously provided ranges.
- Repurchased 3.1 million shares of Quad Class A common stock for
$10 million year-to-date, representing more than 5% of Quad’s
outstanding shares.
Joel Quadracci, Chairman, President & CEO of Quad, said:
“This quarter’s results, which include a sixth consecutive quarter
of Net Sales growth, exhibit the effectiveness of our business
strategy as we have transformed into a marketing experience, or MX,
company. The world’s best brands increasingly recognize the unique
value we provide through our holistic, multichannel,
through-the-line marketing solutions. As an MX company, we guide
brands through every effort intended to drive an action, from
consumer awareness and trust, to brand preference and purchase. We
will continue to strategically invest in our platform to give our
clients a more streamlined, flexible and frictionless way to go to
market and reach consumers while enhancing our competitive position
to drive profitable growth.
“As a result of investments we made in the first half of the
year, we are able to deliver industry-leading client service, and
drive sales and profitability higher during our seasonally busier
second half of the year. Additionally, our team continues to work
diligently to mitigate the impacts of persisting macro-economic
headwinds, such as cost inflation and supply chain constraints that
impact productivity. This includes implementing
inflation-offsetting price increases, the next of which will be
effective January 1, 2023.
“As we close out the year, we remain focused on serving our
clients effectively. We will continue to prioritize growth while
improving productivity and reducing debt, consistent with our
commitment to create a better, more purposeful and sustainable way
forward for all our stakeholders. We will remain nimble and adapt
to changes and challenges, while continuing our disciplined
approach to managing all aspects of our business to enhance our
financial strength and create shareholder value.”
Summary Results
Results for the three months ended September 30, 2022,
include:
- Net Sales — Net Sales were $830 million in the third quarter of
2022, reflecting top-line growth of 18% compared to the same period
in 2021. Net Sales growth was driven by print segment share gains,
increased pricing in response to inflationary cost pressures, and
increased sales in the Company’s international locations.
- Net Earnings — Net Earnings were $14 million in both the third
quarter of 2022 and the third quarter of 2021. Net Earnings during
the third quarter of 2021 included a $13 million property insurance
gain ($10 million, net of tax) and an $11 million gain from sale
and leaseback of a production facility ($8 million, net of tax).
Net Earnings, excluding the non-recurring gains, increased
primarily due to continued sales growth and proactive investments
made in labor, inventory and equipment during the first half of
2022 to increase production efficiency in the second half of 2022
during the Company’s seasonally higher production period.
- Adjusted EBITDA — Adjusted EBITDA was $69 million in the third
quarter of 2022, an increase of $14 million from $55 million of
Adjusted EBITDA in the same period last year, when excluding a $13
million property insurance gain in 2021.
- Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings
Per Share was $0.32 in the third quarter of 2022, a 78% increase
compared to $0.18 in the third quarter of 2021. This increase was
primarily due to increased recurring earnings and benefited by our
recent stock repurchases.
Results for the nine months ended September 30, 2022,
include:
- Net Sales — Net Sales were $2.3 billion in the nine months
ended September 30, 2022, up 11% from the same period in 2021, or
up 14% excluding the impact of the QuadExpress divestiture. Net
Sales growth was achieved due to print segment share gains,
increased pricing in response to inflationary cost pressures, and
increased sales in the Company’s international locations.
- Net Earnings and Adjusted EBITDA — Net Earnings were $18
million in the nine months ended September 30, 2022, as compared to
Net Earnings of $59 million in the same period in 2021. The
decrease was primarily due to non-recurring gains in 2021,
including $25 million in gains from the sale and leaseback of two
production facilities ($18 million, net of tax) and a $13 million
property insurance gain ($10 million, net of tax). Adjusted EBITDA
was $173 million in the nine months ended September 30, 2022, a
decline from $201 million of Adjusted EBITDA in the same period in
2021. The decline was primarily due to cost inflation, investments
made in hiring and training labor in the first half of 2022 in
advance of the peak production season in the second half of the
year, the negative impact of supply chain disruptions on the
Company’s productivity and a $13 million property insurance gain in
2021, partially offset by increased earnings from Net Sales
growth.
- Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings
Per Share was $0.49 in the nine months ended September 30, 2022, as
compared to $0.50 in the nine months ended September 30, 2021.
- Net Cash Provided by (Used in) Operating Activities and Free
Cash Flow — Net Cash Used in Operating Activities was $30 million
for the nine months ended September 30, 2022, compared to Net Cash
Provided by Operating Activities of $22 million during the same
period in 2021. Free Cash Flow for the nine months was negative $80
million, a decrease of $60 million compared to the same period last
year. The decline in Free Cash Flow was primarily driven by higher
working capital in 2022, including increased receivables from
higher Net Sales and increased inventory levels from higher costs
on commodities as well as supply chain challenges with resulting
longer lead times. The decrease in Free Cash Flow also was due to
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 $91
million to $715 million at September 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. When removing the impacts of seasonality, over the past 12
months Net Debt decreased $84 million, representing a reduction of
over 10% in Net Debt. The Debt Leverage Ratio increased 68 basis
points to 3.07x at September 30, 2022, from 2.39x at December 31,
2021.
2022 Guidance
The Company increased its Net Sales
outlook and narrowed its remaining full-year 2022 guidance as
follows:
Financial Metric
Previous 2022 Guidance
Range
Updated 2022 Guidance
Range
Annual Net Sales Change (1)
3% to 7% increase
8% to 10% increase
Full-Year Adjusted EBITDA
$230 to $270 million
$235 to $255 million
Free Cash Flow
$70 to $100 million
$70 to $90 million
Year-End Debt Leverage Ratio (2)
Approximately 2.25x
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, concluded: “Our focus on reimagining
the marketing experience for our clients continues to drive
top-line growth, including segment share gains and new client wins,
and as a result, we are raising our full-year Net Sales guidance
range to 8% to 10% growth. The proactive investments we made in
labor, inventory and equipment during the first half of 2022 are
proving effective during our seasonally higher production period in
the second half of the year, as evidenced by the year-over-year and
sequential increase in quarterly Adjusted EBITDA. We are positioned
to achieve higher year-over-year earnings in the fourth quarter as
well, despite ongoing challenges from inflationary costs and supply
chain disruptions. From a capital allocation perspective, we
repurchased 3.1 million shares of our common stock for $10 million
year-to-date, which is more than 5% of Quad’s total common stock.
The fourth quarter is expected to generate strong Free Cash Flow
and our focus will be on debt reduction to achieve our year-end
debt leverage guidance of approximately 2.25x, which is in the
middle of our long-term desired debt leverage range of 2.0-2.5x. We
will remain dynamic in our ability to adapt to changing economic
environments as necessary to continue enhancing our financial
strength.”
Quarterly Conference Call
Quad will hold a conference call at 10 a.m. ET on Wednesday,
November 2, to discuss third 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/10170526/f41d0988a0. Participants will
be given a unique PIN to gain immediate access to the call on
November 2, 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
December 2, 2022, accessible as follows:
- U.S. Toll-Free: 1-877-344-7529
- International Toll: 1-412-317-0088
- Replay Access Code: 1227790
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 and 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 earnings 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
earnings of unconsolidated entity excluding restructuring,
impairment and transaction-related charges and gains 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
September 30, 2022 and 2021
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended September
30,
2022
2021
Net sales
$
829.9
$
706.1
Cost of sales
673.5
574.1
Selling, general and administrative
expenses
90.8
68.7
Gain from sale and leaseback
—
(10.8
)
Depreciation and amortization
34.8
38.7
Restructuring, impairment and
transaction-related charges
5.6
7.4
Total operating expenses
804.7
678.1
Operating income
25.2
28.0
Interest expense
12.1
15.0
Net pension income
(3.2
)
(3.4
)
Earnings before income taxes and equity in
earnings of unconsolidated entity
16.3
16.4
Income tax expense
2.6
2.3
Earnings before equity in earnings of
unconsolidated entity
13.7
14.1
Equity in earnings of unconsolidated
entity
—
(0.2
)
Net earnings
$
13.7
$
14.3
Earnings per share
Basic
$
0.27
$
0.28
Diluted
$
0.27
$
0.27
Weighted average number of common
shares outstanding
Basic
50.1
51.3
Diluted
51.6
53.1
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Nine Months Ended
September 30, 2022 and 2021
(in millions, except per share
data)
(UNAUDITED)
Nine Months Ended September
30,
2022
2021
Net sales
$
2,331.8
$
2,105.8
Cost of sales
1,911.2
1,688.1
Selling, general and administrative
expenses
256.8
229.3
Gains from sale and leaseback
—
(24.5
)
Depreciation and amortization
106.6
119.3
Restructuring, impairment and
transaction-related charges
12.4
(3.4
)
Total operating expenses
2,287.0
2,008.8
Operating income
44.8
97.0
Interest expense
32.3
45.1
Net pension income
(9.5
)
(11.0
)
Earnings before income taxes and equity in
earnings of unconsolidated entity
22.0
62.9
Income tax expense
4.0
4.1
Earnings before equity in earnings of
unconsolidated entity
18.0
58.8
Equity in earnings of unconsolidated
entity
—
(0.1
)
Net earnings
$
18.0
$
58.9
Earnings per share
Basic
$
0.35
$
1.15
Diluted
$
0.34
$
1.12
Weighted average number of common
shares outstanding
Basic
51.2
51.3
Diluted
53.0
52.8
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
As of September 30, 2022 and
December 31, 2021
(in millions)
(UNAUDITED) September
30, 2022
December 31,
2021
ASSETS
Cash and cash equivalents
$
14.0
$
179.9
Receivables, less allowance for credit
losses
399.2
362.0
Inventories
323.2
226.2
Prepaid expenses and other current
assets
42.4
41.0
Total current assets
778.8
809.1
Property, plant and equipment—net
681.8
727.0
Operating lease right-of-use
assets—net
118.5
125.7
Goodwill
86.4
86.4
Other intangible assets—net
54.0
75.3
Other long-term assets
74.2
66.5
Total assets
$
1,793.7
$
1,890.0
LIABILITIES AND SHAREHOLDERS’
EQUITY
Accounts payable
$
446.5
$
367.3
Other current liabilities
237.8
314.3
Short-term debt and current portion of
long-term debt
52.7
245.6
Current portion of finance lease
obligations
0.9
1.8
Current portion of operating lease
obligations
28.7
28.1
Total current liabilities
766.6
957.1
Long-term debt
674.6
554.9
Finance lease obligations
1.1
1.4
Operating lease obligations
93.3
99.8
Deferred income taxes
15.8
11.9
Other long-term liabilities
104.6
128.1
Total liabilities
1,656.0
1,753.2
Shareholders’ equity
Preferred stock
—
—
Common stock
1.4
1.4
Additional paid-in capital
840.6
839.3
Treasury stock, at cost
(23.4
)
(14.9
)
Accumulated deficit
(509.8
)
(527.8
)
Accumulated other comprehensive loss
(171.1
)
(161.2
)
Total shareholders’ equity
137.7
136.8
Total liabilities and shareholders’
equity
$
1,793.7
$
1,890.0
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the Nine Months Ended
September 30, 2022 and 2021
(in millions)
(UNAUDITED)
Nine Months Ended September
30,
2022
2021
OPERATING ACTIVITIES
Net earnings
$
18.0
$
58.9
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation and amortization
106.6
119.3
Impairment charges
0.6
2.0
Settlement charges on pension plans
—
0.8
Stock-based compensation
4.9
6.6
Gain from a property insurance claim
—
(13.3
)
Gain on the sale of a business
—
(20.9
)
Gain on the sale or disposal of property,
plant and equipment
(1.7
)
(34.4
)
Deferred income taxes
3.2
3.9
Other non-cash adjustments to net
earnings
1.7
2.2
Changes in operating assets and
liabilities—net of acquisitions and divestitures
(163.6
)
(103.0
)
Net cash provided by (used in) operating
activities
(30.3
)
22.1
INVESTING ACTIVITIES
Purchases of property, plant and
equipment
(49.5
)
(41.6
)
Cost investment in unconsolidated
entities
(2.9
)
(0.9
)
Proceeds from the sale of property, plant
and equipment
4.0
67.1
Proceeds from the sale of a business
—
39.0
Proceeds from a property insurance
claim
—
4.0
Other investing activities
1.8
(0.2
)
Net cash provided by (used in) investing
activities
(46.6
)
67.4
FINANCING ACTIVITIES
Payments of current and long-term debt
(228.1
)
(109.1
)
Payments of finance lease obligations
(1.8
)
(2.4
)
Borrowings on revolving credit
facilities
669.7
214.1
Payments on revolving credit
facilities
(516.1
)
(207.2
)
Proceeds from issuance of debt
2.1
—
Changes in ownership of noncontrolling
interests
—
(1.9
)
Purchases of treasury stock
(10.0
)
—
Equity awards redeemed to pay employees’
tax obligations
(2.5
)
(1.1
)
Payment of cash dividends
(1.4
)
(1.4
)
Other financing activities
(0.5
)
(8.1
)
Net cash used in financing activities
(88.6
)
(117.1
)
Effect of exchange rates on cash and cash
equivalents
(0.4
)
(0.2
)
Net decrease in cash and cash
equivalents
(165.9
)
(27.8
)
Cash and cash equivalents at beginning of
period
179.9
55.2
Cash and cash equivalents at end of
period
$
14.0
$
27.4
QUAD/GRAPHICS, INC.
SEGMENT FINANCIAL INFORMATION
For the Three and Nine Months
Ended September 30, 2022 and 2021
(in millions)
(UNAUDITED)
Net Sales
Operating Income
(Loss)
Restructuring,
Impairment and Transaction-Related Charges
(1)
Three months ended September 30,
2022
United States Print and Related
Services
$
713.1
$
33.3
$
3.8
International
116.8
5.6
1.6
Total operating segments
829.9
38.9
5.4
Corporate
—
(13.7
)
0.2
Total
$
829.9
$
25.2
$
5.6
Three months ended September 30,
2021
United States Print and Related
Services
$
624.3
$
36.1
$
7.3
International
81.8
3.6
0.1
Total operating segments
706.1
39.7
7.4
Corporate
—
(11.7
)
—
Total
$
706.1
$
28.0
$
7.4
Nine months ended September 30,
2022
United States Print and Related
Services
$
2,013.6
$
65.0
$
7.1
International
318.2
15.5
4.5
Total operating segments
2,331.8
80.5
11.6
Corporate
—
(35.7
)
0.8
Total
$
2,331.8
$
44.8
$
12.4
Nine months ended September 30,
2021
United States Print and Related
Services
$
1,869.8
$
124.4
$
(6.1
)
International
236.0
8.1
1.8
Total operating segments
2,105.8
132.5
(4.3
)
Corporate
—
(35.5
)
0.9
Total
$
2,105.8
$
97.0
$
(3.4
)
________________________
(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
September 30, 2022 and 2021
(in millions, except margin
data)
(UNAUDITED)
Three Months Ended September
30,
2022
2021
Net earnings
$
13.7
$
14.3
Interest expense
12.1
15.0
Income tax expense
2.6
2.3
Depreciation and amortization
34.8
38.7
EBITDA (Non-GAAP)
$
63.2
$
70.3
EBITDA Margin (Non-GAAP)
7.6
%
10.0
%
Restructuring, impairment and
transaction-related charges (1)
5.6
7.4
Gain from sale and leaseback (2)
—
(10.8
)
Other (3)
—
0.6
Adjusted EBITDA (Non-GAAP) (4)
$
68.8
$
67.5
Adjusted EBITDA Margin
(Non-GAAP)
8.3
%
9.6
%
_________________________
(1) Operating results for the three months
ended September 30, 2022 and 2021, were affected by the following
restructuring, impairment and transaction-related charges:
Three Months Ended September
30,
2022
2021
Employee termination charges (a)
$
1.2
$
1.0
Impairment charges (b)
0.5
0.3
Transaction-related charges (c)
0.3
—
Integration costs (d)
0.4
—
Other restructuring charges (income)
(e)
3.2
6.1
Restructuring, impairment and
transaction-related charges
$
5.6
$
7.4
______________________ (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. (2) The Company executed a sale and leaseback of
its West Allis, Wisconsin facility resulting in a $10.8 million
gain during the three months ended September 30, 2021. (3) Other
includes the following items: (a) the equity in earnings 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 Nine Months Ended
September 30, 2022 and 2021
(in millions, except margin
data)
(UNAUDITED)
Nine Months Ended September
30,
2022
2021
Net earnings
$
18.0
$
58.9
Interest expense
32.3
45.1
Income tax expense
4.0
4.1
Depreciation and amortization
106.6
119.3
EBITDA (Non-GAAP)
$
160.9
$
227.4
EBITDA Margin (Non-GAAP)
6.9
%
10.8
%
Restructuring, impairment and
transaction-related charges (1)
12.4
(3.4
)
Gains from sale and leaseback (2)
—
(24.5
)
Other (3)
—
1.1
Adjusted EBITDA (Non-GAAP) (4)
$
173.3
$
200.6
Adjusted EBITDA Margin
(Non-GAAP)
7.4
%
9.5
%
______________________________
(1) Operating results for the nine months
ended September 30, 2022 and 2021, were affected by the following
restructuring, impairment and transaction-related charges:
Nine Months Ended September
30,
2022
2021
Employee termination charges (a)
$
2.8
$
8.5
Impairment charges (b)
0.6
2.0
Transaction-related charges (c)
0.8
0.4
Integration costs (d)
0.4
—
Other restructuring charges (income)
(e)
7.8
(14.3
)
Restructuring, impairment and
transaction-related charges
$
12.4
$
(3.4
)
______________________________________
(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 or losses on the sale of
facilities and businesses, including a $20.9 million gain on the
sale of a business during the nine months ended September 30,
2021.
(2) The Company executed sale and
leaseback transactions of its Chalfont, Pennsylvania and West
Allis, Wisconsin facilities resulting in $24.5 million in gains
during the nine months ended September 30, 2021.
(3) Other includes the following items:
(a) the equity in earnings 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 Nine Months Ended
September 30, 2022 and 2021
(in millions)
(UNAUDITED)
Nine Months Ended September
30,
2022
2021
Net cash provided by (used in) operating
activities
$
(30.3
)
$
22.1
Less: purchases of property, plant and
equipment
(49.5
)
(41.6
)
Free Cash Flow (Non-GAAP)
$
(79.8
)
$
(19.5
)
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 September 30, 2022 and
December 31, 2021
(in millions, except ratio)
(UNAUDITED)
September 30,
2022
December 31,
2021
Total debt and finance lease obligations
on the condensed consolidated balance sheets
$
729.3
$
803.7
Less: Cash and cash equivalents
14.0
179.9
Net Debt (Non-GAAP)
$
715.3
$
623.8
Divided by: trailing twelve months
Adjusted EBITDA (Non-GAAP) (1)
$
233.2
$
260.5
Debt Leverage Ratio (Non-GAAP)
3.07 x
2.39 x
______________________________
(1) The calculation of Adjusted EBITDA for
the trailing twelve months ended September 30, 2022, and December
31, 2021, was as follows:
Add
Subtract
Trailing Twelve Months
Ended
Year Ended
Nine Months Ended
December 31, 2021
(a)
September 30,
2022
September 30,
2021
September 30,
2022
Net earnings (loss)
$ 37.8
$ 18.0
$ 58.9
$ (3.1)
Interest expense
59.6
32.3
45.1
46.8
Income tax expense
9.5
4.0
4.1
9.4
Depreciation and amortization
157.3
106.6
119.3
144.6
EBITDA (Non-GAAP)
$ 264.2
$ 160.9
$ 227.4
$ 197.7
Restructuring, impairment and
transaction-related charges
18.9
12.4
(3.4)
34.7
Gains from sale and leaseback
(24.5)
—
(24.5)
—
Loss on debt extinguishment
0.7
—
—
0.7
Other (b)
1.2
—
1.1
0.1
Adjusted EBITDA (Non-GAAP) (c)
$ 260.5
$ 173.3
$ 200.6
$ 233.2
______________________________
(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
earnings 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 all 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
September 30, 2022 and 2021
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended September
30,
2022
2021
Earnings before income taxes and equity in
earnings of unconsolidated entity
$
16.3
$
16.4
Restructuring, impairment and
transaction-related charges
5.6
7.4
Gain from sale and leaseback
—
(10.8
)
Adjusted net earnings, before income taxes
(Non-GAAP)
21.9
13.0
Income tax expense at 25% normalized tax
rate
5.5
3.3
Adjusted net earnings (Non-GAAP)
$
16.4
$
9.7
Basic weighted average number of common
shares outstanding
50.1
51.3
Plus: effect of dilutive equity incentive
instruments
1.5
1.8
Diluted weighted average number of common
shares outstanding
51.6
53.1
Adjusted diluted earnings per share
(Non-GAAP) (1)
$
0.32
$
0.18
Diluted earnings per share (GAAP)
$
0.27
$
0.27
Restructuring, impairment and
transaction-related charges per share
0.11
0.13
Gain from sale and leaseback per share
—
(0.20
)
Income tax expense from condensed
consolidated statement of operations per share
0.05
0.04
Income tax expense at 25% normalized tax
rate per share
(0.11
)
(0.06
)
Adjusted diluted earnings per share
(Non-GAAP) (1)
$
0.32
$
0.18
______________________________
(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 earnings 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 Nine Months Ended
September 30, 2022 and 2021
(in millions, except per share
data)
(UNAUDITED)
Nine Months Ended September
30,
2022
2021
Earnings before income taxes and equity in
earnings of unconsolidated entity
$
22.0
$
62.9
Restructuring, impairment and
transaction-related charges
12.4
(3.4
)
Gains from sale and leaseback
—
(24.5
)
Adjusted net earnings, before income taxes
(Non-GAAP)
34.4
35.0
Income tax expense at 25% normalized tax
rate
8.6
8.8
Adjusted net earnings (Non-GAAP)
$
25.8
$
26.2
Basic weighted average number of common
shares outstanding
51.2
51.3
Plus: effect of dilutive equity incentive
instruments
1.8
1.5
Diluted weighted average number of common
shares outstanding
53.0
52.8
Adjusted diluted earnings per share
(Non-GAAP) (1)
$
0.49
$
0.50
Diluted earnings per share (GAAP)
$
0.34
$
1.12
Restructuring, impairment and
transaction-related charges per share
0.23
(0.07
)
Gains from sale and leaseback per
share
—
(0.46
)
Income tax expense from condensed
consolidated statement of operations per share
0.08
0.08
Income tax expense at 25% normalized tax
rate per share
(0.16
)
(0.17
)
Adjusted diluted earnings per share
(Non-GAAP) (1)
$
0.49
$
0.50
______________________________
(1) Adjusted diluted earnings per share
excludes the following: (i) restructuring, impairment and
transaction-related charges; (ii) gains from sale and leaseback;
(iii) discrete income tax items; and (iv) equity in earnings 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/20221101006156/en/
Investor Relations Contact Tony Staniak CFO, Quad
414-566-2162 astaniak@quad.com Media Contact Claire Ho
Director of Corporate Communications, Quad 414-566-2955
cho@quad.com
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