Quad/Graphics Posts Q4 Profit

Wednesday, March 06, 2013

SUSSEX, Wis. -- Fourth-Quarter and Full-Year Highlights:

  • Generated $1.1 billion in net sales during the fourth quarter and $4.1 billion in net sales for full-year 2012.
  • Achieved $174 million in fourth-quarter Adjusted EBITDA and $566 million in full-year Adjusted EBITDA.
  • Reported fourth quarter Adjusted EBITDA margin of 15.3% and full-year Adjusted EBITDA margin of 13.8%.
  • Generated $375 million in full-year Recurring Free Cash Flow, surpassing upwardly revised guidance of $340 million, partially benefitted by $15 million in lower capital expenditures that moved from 2012 into 2013.
  • Repaid $120 million in debt in 2012, maintaining the Company's yearend leverage of 2.39x within the targeted range of 2.0x to 2.5x.
  • Increased 2013 quarterly cash dividend by 20% to $0.30 per share.
  • On January 16, 2013, completed its acquisition of Vertis Holdings, Inc. ("Vertis") and began implementing integration plans to achieve efficiencies and cost-savings.

Quad/Graphics, Inc. today reported fourth quarter and full-year 2012 results that were in line with management's originally announced annual guidance with the exception of Recurring Free Cash Flow, which surpassed the Company's upwardly revised guidance. For full financial results, please see the accompanying information.

"Our fourth quarter and full-year 2012 results were as we expected, and we were especially pleased with our continued strong Recurring Free Cash Flow generation," said Joel Quadracci, Quad/GraphicsChairman, President & CEO. "Our ability to generate significant Recurring Free Cash Flow and maintain a strong balance sheet while simultaneously paying down debt has allowed us to remain flexible with how we deploy capital. We were able to return cash to our shareholders through a special$2 yearend dividend and also increase the 2013 quarterly cash dividend by 20% to $0.30 per share. Additionally, we were able to take advantage of the opportunity to acquire Vertis, which strengthens and expands our offering, allows us to better serve our clients while achieving additional efficiencies, and creates value for our shareholders."

Net sales for the fourth quarter 2012 were $1.1 billion versus $1.2 billion for the same period in 2011. Fourth quarter 2012 Adjusted EBITDA was $174 million compared to $187 million for the same period in 2011, and Adjusted EBITDA margin was 15.3% compared to 15.4% for the same period in 2011. The quarterly results reflect expected volume declines, pricing pressures on print and byproduct sales, and challenges in the book product line. Partially offsetting these impacts in the quarter were lower selling, general and administrative costs, and incremental synergy savings.

For the full-year 2012, net sales were $4.1 billion versus net sales of $4.3 billion for the previous year. Full-year 2012 Adjusted EBITDA was $566 million compared to $618 million for the previous year, and Adjusted EBITDA margin was 13.8% compared to 14.3% for the previous year. Recurring Free Cash Flow was $375 million compared to $340 million for the previous year, continuing the Company's track record of solid cash-flow generation.

"We continue to generate significant Recurring Free Cash Flow to support our disciplined capital deployment strategy, which we adjust based on current circumstances and what we think is best for shareholder value creation," said John Fowler, Executive Vice President & Chief Financial Officer. "We also continue to manage our debt to maintain a strong balance sheet, providing us with the ability to adjust to changing economic conditions. We repaid $120 million in debt in 2012. After payment of the regular dividend and special $2 yearend dividend, our yearend leverage ratio of 2.39x remains within our targeted range of 2.0x to 2.5x. On January 16, 2013, Quad/Graphics completed our acquisition of substantially all of the assets of Vertis, and we already have started integration activities to achieve cost savings and improve the overall efficiency and productivity of our platform, all while maintaining focus on serving clients well. It's worth noting that the acquisition of Vertis, after normalization of working capital, will not impact our leverage ratio."

As it relates to 2013 guidance, Quadracci said: "We anticipate our 2013 revenue, which will now include Vertis, to be approximately $4.8 billion to $5.0 billion. In addition, we expect 2013 Adjusted EBITDA to be $580 million to $610 million, and 2013 Recurring Free Cash Flow to be in excess of $360 million. As we move forward, we will continue working on initiatives to improve productivity and implement sustainable cost reductions to be the low-cost producer. We will also focus on maintaining a strong and flexible balance sheet to adjust to changing industry conditions while also investing in our business, pursuing profitable investment opportunities, and returning capital and creating long-term value for our shareholders."

Quad/Graphics' next quarterly dividend of $0.30 per share will be payable on March 29, 2013, to shareholders of record as of March 18, 2013.