Quad/Graphics Announces Preliminary 2015 Financial Results, 2016 Financial Guidance

Quad/Graphics, Inc. reported preliminary results for the year ending Dec. 31, 2015.

The company expects preliminary net sales for full-year 2015 to be approximately $4.65 billion and adjusted EBITDA to be at least $460 million, representing an approximate 10% adjusted EBITDA margin. The preliminary full-year adjusted EBITDA results are at least $10 million greater than the high end of the previous guidance range of $430 million to $450 million, primarily as a result of cost productivity improvements and earlier than expected impacts from the company’s previously announced $100 million cost reduction program.

“We are pleased with our operating performance in the fourth quarter resulting from improvements in manufacturing productivity and strong cost management,” said Joel Quadracci, Quad/Graphics chairman, president and CEO. “Our team was able to react quickly to increased pricing and volume pressure, and incrementally reduce our cost structure by $100 million on a run rate basis for 2016.

“This quick cost action allowed us to deliver stronger than expected results in the quarter and better position the company for success in 2016,” Quadracci added. “These activities required the complete coordination and dedication of our entire organization, and I want to thank all of our employees for their hard work and strong execution. As we move forward, we will continue to find new and creative ways to adapt to and evolve with changing industry conditions to meet our goal of being the industry’s high-quality and low-cost producer.”

Preliminary free cash flow is expected to be approximately $210 million for full-year 2015, and is $30 million greater than the high end of the previous guidance range of $165 million to $180 million. Free cash flow increased $56 million or 36% over the prior year due to sustainable improvements in the cash conversion process primarily impacting working capital. The company also expects the debt leverage ratio to be below 3.0x at Dec. 31, 2015, as compared to 3.09x at Sept. 30, 2015, due to the stronger free cash flow which was utilized to reduce debt levels during the fourth quarter.

The company provided the following 2016 preliminary financial guidance:
• Net sales of $4.4 billion to $4.6 billion.
• Adjusted EBITDA of $420 million to $460 million.
• Adjusted EBITDA margin of approximately 10% at the midpoint of guidance and flat with the expected 2015 margin.
• Free cash flow of $190 million to $230 million, flat with 2015 at the $210 million midpoint of guidance.

“We believe Quad/Graphics will continue to be a significant free cash flow generator into the future and, because of permanent improvements to our cost structure and working capital levels, our preliminary financial guidance for 2016 demonstrates our ability to deliver a sustainable level of free cash flow,” said Dave Honan, Quad/Graphics EVP and CFO. “Our strong cash flow and disciplined capital deployment strategy provides us the ability to continue maintaining a strong balance sheet, including further deleveraging the balance sheet through debt and pension liability reductions, while continuing to invest strategically in our business and return cash to our shareholders through our dividend, representing only 30% of our annual free cash flow.”