Quad/Graphics Reports 3Q 2015, Year-to-Date Results

Quad/Graphics Inc. has reported results for its third quarter ending Sept. 30, 2015.
 
Net sales for the third quarter 2015 were $1.2 billion, representing a 6.5% decrease from the third quarter of 2014. Third quarter Adjusted EBITDA was $117 million compared to $151 million for the same period in 2014, and Adjusted EBITDA margin was 10.1% compared to 12.2% in 2014. The Adjusted EBITDA variance primarily reflects an acceleration of ongoing industry pressures and lower productivity.
 
For the first nine months of 2015, net sales were $3.3 billion, representing a 2.8% decrease from the first nine months of 2014. Year-to-date Adjusted EBITDA was $308 million as compared to $360 million for the same period in 2014, and Adjusted EBITDA margin was 9.2% as compared to 10.5% in 2014. Free Cash Flow was $68 million for the first nine months of 2015, an increase of $106 million over the prior year due to sustainable improvements in the cash conversion process primarily reducing ongoing working capital needs.
 
Net loss during the third quarter of 2015 was $552 million and in the nine months ended Sept. 30, 2015, was $633 million, and includes a $775 million non-cash goodwill impairment charge ($533 million net of tax).
 
“Our third quarter financial performance was challenging and below our expectations due to a greater-than-expected pullback in industry volumes and pricing pressures that accelerated in the quarter, as well as lower productivity levels in our manufacturing platform,” Joel Quadracci, chairman, president and CEO of Quad/Graphics, said.
 
“We are taking swift and decisive action to address the volume and pricing pressures, and are announcing a $100 million cost reduction program to bring our cost structure in line with revenues,” Quadracci added. “This program includes reducing excess manufacturing capacity through plant closures, intensifying our focus on productivity, reducing SG&A costs and implementing a new streamlined organizational structure. We have a long-standing commitment to being the industry’s low-cost producer and these actions are a continuation of that commitment.
 
“As always, we remain committed to our strategic goals to transform Quad/Graphics, including strengthening the core print categories that generate a significant amount of Free Cash Flow to support growth opportunities,” Quadracci continued. “Recently, we acquired Specialty Finishing, an Omaha-based packaging manufacturer with a loyal blue-chip customer base that has enjoyed eight straight years of consecutive sales growth. This acquisition, along with the April 2015 acquisition of Copac, have increased the scale and geographic footprint of our QuadPackaging division, enabling us to more effectively compete for large-volume or multi-location clients across the United States, in addition to Europe, South America, Central America and Asia, where we also have packaging capabilities.”
 
“Based on the recent pullback in industry volumes and pricing pressures that accelerated in the quarter, as well as lower manufacturing productivity, we are reducing our financial outlook for full-year 2015,” noted Dave Honan, Quad/Graphics EVP and CFO. “However, we believe Quad/Graphics will achieve a 12% increase year-over-year in Free Cash Flow at the midpoint of our updated guidance, despite lower-than-expected Adjusted EBITDA, due primarily to sustainable reductions in working capital.”
 
Quad/Graphics’ next quarterly dividend of $0.30 per share will be payable on Dec. 18, 2015, to shareholders of record as of Dec. 7, 2015.