Quad/Graphics, Inc. today reported strong fourth quarter and full-year 2011 results that surpassed management's previously announced guidance. The reported results include the Company's Canadian operations, which are in the process of being sold, unless otherwise noted. References to pro forma results for 2010 treat the July 2, 2010, Worldcolor acquisition as if it occurred on January 1, 2010. For full financial results, please see the accompanying information.

“We are pleased with our 2011 fourth quarter results, which reflect our ongoing focus on improving productivity and aggressively managing costs, while continuing to pay down debt to strengthen our credit metrics and balance sheet,” said Joel Quadracci, Quad/Graphics Chairman, President & CEO. “Given our strong finish to the year, as well as the strength of our recurring free cash flow and lower risk profile that our recent leverage reduction has provided, we are pleased to declare a 25% increase in our quarterly dividend, which will be payable on March 23, 2012, to shareholders of record on March 12, 2012.”

Net sales for the fourth quarter 2011 were $1.31 billion, down from $1.39 billion for the same period in 2010. Fourth quarter 2011 Adjusted EBITDA was $197 million versus $224 million for the same period in 2010. These results were adversely impacted by volume and pricing pressures, primarily in Canada and in the U.S. retail insert and book product lines, as well as by higher bad debt provisions in 2011 and non-recurring gains in 2010. Offsetting these impacts were productivity improvements, and incremental synergy savings, which totaled $44 million during the quarter and $196 million since the Worldcolor acquisition.

For the full-year 2011, net sales were $4.67 billion versus pro forma net sales of $4.76 billion for the previous year. Adjusted EBITDA was $638 million for 2011 and, due to stronger fourth quarter performance, the Company surpassed revised 2011 guidance of $610 million to $625 million. Recurring Free Cash Flow was $340 million, exceeding original guidance of $260 million to $300 million and continuing a track record of solid cash flow generation.

The Company continues to manage its outstanding debt and pension liabilities to maintain a strong balance sheet that provides it with flexibility to adjust to changing economic conditions. “We are proud of the progress we have made to repay $163 million in debt during the fourth quarter of 2011, and $325 million since the Worldcolor acquisition,” said John Fowler, Executive Vice President & Chief Financial Officer. “Our year-end leverage ratio of 2.3x remains within our targeted range of 2.0x to 2.5x. Further, we believe our business will continue to generate significant cash flow to support our disciplined capital deployment strategy. As always, the priorities for that capital will be adjusted based on current circumstances and what we think is best for shareholder value creation. For example, our large debt paydown in the quarter, combined with our confidence in our ability to continue generating strong free cash flow, enables us to increase our cash dividend to shareholders, reinforcing our commitment to providing long-term shareholder returns.”

On February 7, 2012, the Company received authorization from the Canadian Competition Bureau to proceed with the sale of its Canadian business to Transcontinental, and expects the transaction to close shortly. Quad/Graphics entered into a definitive agreement with Transcontinental on July 12, 2011, to essentially exchange its Canadian assets (with the exception of its Vancouver, B.C., facility, which was not part of the original transaction) for Transcontinental's Mexican assets. Quad/Graphics completed the acquisition of the Mexican assets on September 8, 2011.

2012 Outlook

The Company remains cautious about 2012 given the ongoing transformation in the industry. “We anticipate our revenue to be approximately $4.0 billion, which excludes our discontinued operations in Canada that had 2011 revenues of $344 million,” Quadracci said. “In addition, we expect Adjusted EBITDA margin from continuing operations to be flat to slightly less than our 2011 Adjusted EBITDA margin of 14.3%, and Recurring Free Cash Flow to be in excess of $300 million. We will continue to aggressively manage what is within our control and make decisions that are in the best interests of our shareholders. We remain confident in our strategy to redefine print in a multichannel world. Through the dedication and hard work of our employees, we continue to transform our company, making it leaner, stronger and poised for long-term stability and success.”