Business News

Quad/Graphics Reports 2nd Quarter 2010 Results

Wednesday 11. August 2010 - Quad/Graphics, Inc. (NYSE: QUAD) ("Quad/Graphics" or the "Company"), today reported results for its second quarter ending June 30, 2010. The Company completed its acquisition of World Color Press Inc. ("Worldcolor") on July 2, 2010; accordingly, the second quarter results for pre-acquisition Quad/Graphics will be shown as "on a stand-alone basis as reported" and the results for the combined company will be presented as "Pro Forma" as if the acquisition had taken place on January 1, 2009.

— Second Quarter 2010 Pro Forma Adjusted EBITDA of $148.3 million
compared to $116.6 million in second quarter 2009

— Second Quarter 2010 Pro Forma Adjusted EBITDA margin improved to 13.8%
from 10.6% in second quarter 2009

— Second Quarter 2010 Pro Forma Net Sales of $1.08 billion compared to
$1.1 billion in second quarter 2009
“We successfully completed the Worldcolor acquisition and the transition to a public company, which were both very complex transactions,” said Joel Quadracci, Chairman, President & CEO of Quad/Graphics. “Following the closing of the acquisition on July 2, we immediately began the integration process. We have hit the ground running and believe we are on target with our plan to achieve the previously announced $225 million in synergies within 24 months of closing and our team is properly incentivized to achieve more. Already we have made significant progress in consolidating and streamlining our processes and corporate services. Last week we announced the closing of four plants and accelerated the timeline of another. This is a key first step in creating what we believe to be one of the most efficient platforms in the industry, which we expect will create tremendous cash flows and value for our shareholders.”
“Pro Forma and as reported results in the second quarter were as expected,” said John Fowler, Executive VP & CFO of Quad/Graphics. “Worldcolor continued to reduce its cost structure in anticipation of the corporate level support and shared services the acquisition would provide. Quad/Graphics invested in the additional labor in the United States required to ensure its operations and infrastructure were ready for the integration immediately after closing. We did this with the knowledge that we were maintaining a higher administrative and manufacturing cost base than we would normally have done for the revenue run rate during the quarter. Even with this higher cost base, we still achieved a 27% improvement in Pro Forma Adjusted EBITDA on essentially flat net sales, compared to the second quarter of 2009.”
Three Months
For the three months ended June 30, 2010, Pro Forma net sales were $1.08 billion compared to $1.1 billion in the second quarter of 2009. Pro Forma Adjusted EBITDA and Adjusted EBITDA margin were $148.3 million and 13.8% compared to $116.6 million and 10.6% in the same period in 2009. On a stand-alone basis, as reported net sales for the second quarter of 2010 were $394.3 million compared to $388.8 million in the same period of 2009. On a stand-alone basis, Adjusted EBITDA and Adjusted EBITDA margin were $57.3 million and 14.5% compared to $60.6 million and 15.6% in the second quarter of 2009.
On a stand-alone basis, as reported net loss attributable to common shareholders in the first three months was $35.7 million, or ($1.27) per share, versus a loss of $7.2 million or ($0.25) per share in the same period in 2009. The results for the second quarter of 2010 include $31.3 million in total charges primarily consisting of $25.6 million for restructuring and impairment charges (of which $24.4 million is non-cash) associated with the previously announced consolidation plan at the Company’s Poland operations and $4.9 million in transaction-related costs associated with the Worldcolor acquisition and the recently completed public company registration process. Excluding the effects of restructuring, impairment, and transaction-related charges in both years, the net loss would have been $4.6 million or ($0.16) per share in the first three months of 2010 versus a net loss of $4.7 million or ($0.17) per share in the same period last year.
Year-to-Date
For the six months ended June 30, 2010, Pro Forma net sales were $2.17 billion compared to $2.27 billion in the first half of 2009. Pro Forma Adjusted EBITDA and Adjusted EBITDA margin were $288.5 million and 13.3% compared to $220.3 million and 9.7% in the same period in 2009. On a stand-alone basis, as reported net sales in the first six months of 2010 were $797.9 million compared to $804.3 million in the same period of 2009. On a stand-alone basis, Adjusted EBITDA and Adjusted EBITDA margin were $119.6 million and 15.0% compared to $128.4 million and 16.0% in the first half of 2009.
On a stand-alone basis, as reported net loss attributable to common shareholders in the first six months was $44.2 million, or ($1.57) per share, versus a net loss of $11.7 million or ($0.41) per share in the same period of 2009. The results for the first six months of 2010 include $37.6 million in total charges primarily consisting of $25.6 million in restructuring and impairment charges associated with the Poland consolidation and $11.1 million in transaction-related costs. Excluding the effects of restructuring, impairment and transaction-related charges in both years, the net loss would have been $6.8 million or ($0.24) per share in the first six months of 2010 versus a loss of $3.1 million or ($0.11) per share in the same period last year.
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures, specifically Adjusted EBITDA and Adjusted EBITDA margin. They are presented to provide additional information regarding Quad/Graphics’ performance and because both are important measures by which Quad/Graphics gauges the profitability and assesses the performance of its business. These measures should not be considered alternatives to net earnings (loss) as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.