Company Reaffirms 2013 Recurring Free Cash Flow in Excess of $360 million
Third Quarter Highlights:
- Generated Net Sales of $1.2 billion.
- Achieved Adjusted EBITDA of $154 million.
- Reaffirms 2013 guidance for Recurring Free Cash Flow in excess of $360 million.
- Narrows 2013 guidance for Net Sales to approximately $4.8 billion, and Adjusted EBITDA to approximately $580 million.
- Approves quarterly dividend of $0.30 per share.
SUSSEX, Wis. - Quad/Graphics, Inc. (NYSE: QUAD) today reported results for its third quarter ending September 30, 2013. The reported results include Vertis Holdings, Inc. from the day of acquisition on January 16, 2013. Prior year financial results do not include the acquisition ofVertis. For full financial results, including reconciliations of non-GAAP financial measures, please see the accompanying information.
“We are pleased to reaffirm annual guidance for Recurring Free Cash Flow, which is the foundation of our strong balance sheet and supports our disciplined capital deployment strategy,” said Joel Quadracci, Quad/Graphics Chairman, President & CEO. “Third-quarter volumes across our U.S. platform were as expected, but our results were adversely impacted by ongoing industry pressures, economic and political challenges in Latin America and a slower-than-expected turnaround in the underlying Vertis business. That said, the integration is going well and we remain confident in our process to drive future cost-savings, and improve the efficiency and productivity of our platform. Overall, we remain pleased with our strategic decision to acquire Vertis as we believe it will provide long-term value for our clients and shareholders.”
Net Sales for the third quarter 2013 increased to $1.2 billion versus $1.0 billion for the same period in 2012 primarily due to the Vertis acquisition. Third quarter 2013 Adjusted EBITDA was $154 million as compared to $155 million for the same period in 2012, and Adjusted EBITDA margin was 12.8% as compared to 14.9% for the same period in 2012. These results primarily reflect Vertis’ historically lower margin profile compared to Quad/Graphics’ core business as well as ongoing volume and pricing pressures.
For the first nine months of 2013, Net Sales were $3.4 billion versus $3.0 billion for the same period in 2012. Year-to-date Adjusted EBITDA was $379 million versus $393 million in 2012, and Adjusted EBITDA margin was 11.0% as compared to 13.2% for the same period in 2012. Recurring Free Cash Flow was $178 million for the first nine months of 2013 compared to $220 million for the same period in 2012 due to increased capital expenditures and lower net cash earnings during 2013.
“Our strong Recurring Free Cash Flow will allow us to continue to pay down debt and pension liabilities, invest in our business and pursue opportunities that will drive future value,” said John Fowler, Quad/Graphics Executive Vice President and Chief Financial Officer. “Further, given that we are now through the third quarter, we feel comfortable narrowing the guidance for Net Sales and Adjusted EBITDA. We currently forecast full-year 2013 Net Sales to be approximately$4.8 billion, narrowed from a prior guidance range of $4.8 billion to $5.0 billion, and full-year 2013 Adjusted EBITDA to be approximately $580 million, narrowed from a prior guidance range of $580 million to $610 million.”
Fowler continued, “Our quarter-end leverage ratio of 2.69x reflects the impact of the Vertisacquisition and our peak season for working capital. However, we expect to achieve a leverage ratio of approximately 2.5x by yearend. We continue to believe that operating in the 2.0x to 2.5x leverage range is the appropriate target, but at times, like this quarter, we may go above that range given economic changes, working capital seasonality, timing of investments and growth opportunities. As always, we are committed to our priorities to maintain a strong and flexible balance sheet; invest in our business; pursue profitable investment opportunities; and create long-term value for our shareholders and clients.”
Quad/Graphics’ quarterly dividend of $0.30 per share will be payable on December 20, 2013, to shareholders of record as of December 9, 2013.