Net sales for the first quarter ended March 31, 2017, were $1.0 billion, a 4.2% decrease. Organic sales declined 2.8% due to ongoing industry volume and pricing pressures after excluding pass-through paper sales (-1.2% impact) and foreign exchange (-0.2% impact).
Net earnings improved to $25 million and diluted earnings per share improved to $0.49 during the three months ended March 31, 2017. First quarter 2017 non-GAAP adjusted EBITDA increased $2 million to $122 million compared to $120 million in 2016, and adjusted EBITDA margin improved to 12.2% from 11.5% in 2016.
“Our results for the first quarter of 2017 were in-line with our expectations and we are pleased with our performance,” said Joel Quadracci, Quad/Graphics chairman, president and CEO. “We continued to drive EBITDA enhancement through our disciplined approach to sustainable cost reductions and productivity improvements while maintaining our focus on revenue.
“As we look forward to the remainder of 2017, we will continue to be the industry’s high-quality, low-cost producer to minimize the impact of industry pressures and economic uncertainty,” Quadracci noted. “Further, we expect to generate strong free cash flow, which will support value-creating opportunities, including enhancing and expanding our services to provide a unique offering in the marketplace. We will also continue to redefine our company as a marketing services provider that helps brand owners market more efficiently and effectively using our strong print foundation in combination with other media channels.”
GAAP net cash provided by operating activities was $63 million for the quarter ended March 31, 2017, a decrease of $49 million from 2016. Free cash flow was $40 million compared with $86 million for the previous year. The decrease in cash provided by operating activities and free cash flow was as expected. This decrease over prior year was due to reduced benefits from ongoing working capital improvements, partially offset by a reduction in capital expenditures.
“Our first quarter results were as expected and we remain on track to deliver our 2017 financial guidance,” said Dave Honan, Quad/Graphics EVP and CFO. “Looking ahead, we remain focused on generating sustainable strong free cash flow to continue strengthening our balance sheet through debt reduction and improving our debt leverage ratio, which is 2.29x as of the end of the first quarter and well within our long-term targeted range of 2.0x to 2.5x.”