Continued Recovery and Strong Execution Drives
4% Higher Net Sales with Organic Growth of 7% and Increased
Profitability Year-Over-Year; Company Reaffirms Full-Year
Outlook
Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”),
today reported results for the third quarter of 2021.
Recent Highlights
- Increased net sales by 4%, with 7% organic growth (excluding
the divestiture of the Company’s third-party logistics business),
from third quarter 2020 driven by higher print volumes, including
print segment share gains from new clients, as well as a continued
positive trend in Agency Solutions net sales.
- Increased net earnings from continuing operations by $12
million to $14 million during the third quarter of 2021 as compared
to 2020.
- Achieved a 6% increase in Adjusted EBITDA to $64 million during
the third quarter of 2021 as compared to 2020.
- Reduced net debt by $140 million or 15% over the past 12
months.
- Reaffirms full-year financial outlook for 2021 Net Sales,
Adjusted EBITDA and Debt Leverage.
- Amends and extends $1 billion bank debt agreement to November
2026.
Joel Quadracci, Chairman, President & CEO of Quad, said:
“Our third quarter results were strong with higher print volumes,
including print segment share gains from new clients, as well as a
continued positive trend in Agency Solutions, all of which
contributed to year-over-year organic growth of 7% in net sales.
Our integrated marketing offering continues to be a competitive
differentiator and a key driver behind our company’s overall
organic growth. We are proud that some of the world’s most
recognizable brands have chosen to partner with us for strategic
marketing solutions, reflecting the strength of our offering and
ability to deliver more value through reduced complexity, increased
efficiencies and enhanced marketing spend effectiveness across all
media channels. We continue to build out and invest in the talent,
technology, products and services that will further advance our
value as a marketing solutions partner.”
Quadracci continued: “Right now, businesses everywhere around
the globe are experiencing disruption from unprecedented supply
chain issues and mounting inflationary pressures. At Quad, we are
working thoughtfully and diligently to mitigate these impacts on
our business while successfully maintaining the high-quality,
responsive service on which our clients have come to depend. As
always, we will remain nimble and adapt to changes and challenges
while continuing our disciplined approach to managing all aspects
of our business to enhance our financial strength and create
shareholder value.”
Summary Results
Results for the three months ended September 30, 2021,
include:
- Net Sales — Net sales were $706 million in the third quarter of
2021, up 4% from the same period in 2020. Excluding the divestiture
of QuadExpress, a third-party logistics (3PL) business, organic net
sales increased 7% from 2020. The net sales increase during the
third quarter was due to a 10% increase in year-over-year print net
sales and an 8% increase in year-over-year Agency Solutions net
sales. Net sales increased in print and Agency Solutions primarily
driven by net sales growth from existing clients as well as print
segment share gains from new clients.
- Net Earnings From Continuing Operations — Net earnings from
continuing operations were $14 million or $0.27 diluted earnings
per share in the third quarter of 2021, an increase of $12 million
compared to the third quarter of 2020. Net earnings increased due
to higher profit from increased net sales, an $11 million gain from
the sale and leaseback of the West Allis, Wis. production facility
in the third quarter of 2021, and a $9 million net gain from
property insurance claims, partially offset by the negative impact
of cost inflation and $9 million of non-recurring temporary cost
savings in 2020 primarily related to salary reductions and
furloughs due to the COVID-19 pandemic.
- Adjusted EBITDA — Adjusted EBITDA was $64 million in the third
quarter of 2021, as compared to $61 million in the same period in
2020, while Adjusted EBITDA margin improved to 9.1% in 2021
compared to 8.9% in 2020. The increase in Adjusted EBITDA and
Adjusted EBITDA margin was driven by higher profit from increased
net sales and a $9 million net gain from property insurance claims,
partially offset by the negative impact of cost inflation and $9
million of temporary COVID-19 pandemic related cost savings in
2020.
Results for the nine months ended September 30, 2021,
include:
- Net Sales — Net sales were $2.1 billion in the nine months
ended September 30, 2021, up 1% from the same period in 2020.
Excluding recent divestitures, organic net sales increased 2%
compared to 2020. The net sales increase during the nine months
ended September 30, 2021 was due to a 13% increase in
year-over-year logistics net sales and a 9% increase in
year-over-year Agency Solutions net sales, while print net sales
were flat between years (which includes a 14% decrease in first
quarter net sales due to year-over-year impacts from the COVID-19
pandemic). Over the past six months, after annualizing the first
year of the COVID-19 pandemic’s impact on our business, organic net
sales have increased 13% over 2020 primarily from net sales growth
from existing clients and print segment share gains from new
clients.
- Net Earnings (Loss) From Continuing Operations — Net earnings
from continuing operations were $59 million or $1.12 diluted
earnings per share in the nine months ended September 30, 2021, an
increase of $80 million compared to the same period in 2020, which
recorded a net loss of $21 million or $0.41 diluted loss per share
from continuing operations. Net earnings increased due to higher
profit from increased net sales, a $52 million decrease in
restructuring, impairment, and transaction-related charges
(including a $24 million net gain from the sale of businesses) and
a $25 million gain from the sale and leaseback of the Chalfont,
Penn. and West Allis, Wis. production facilities. These increases
were partially offset by $39 million of non-recurring temporary
cost savings in 2020 primarily related to salary reductions and
furloughs due to the COVID-19 pandemic, a $12 million benefit in
2020 from a change in the vacation policy, and the negative impact
of cost inflation.
- Adjusted EBITDA — Adjusted EBITDA was $190 million in the nine
months ended September 30, 2021, as compared to $196 million in the
same period in 2020. The $6 million decrease was due to $39 million
of temporary COVID-19 pandemic related cost savings in 2020, a $12
million benefit in 2020 from a change in the vacation policy, and
the negative impact of cost inflation, partially offset by higher
profit from increased net sales and a $9 million net gain from
property insurance claims.
- Net Cash Provided by Operating Activities — Net cash provided
by operating activities decreased by $85 million to $22 million for
the nine months ended September 30, 2021, as compared to $107
million in the same period in 2020, primarily due to higher working
capital to support the seasonal net sales growth and strategically
increasing paper and materials inventory levels to serve our
clients during this period of worldwide supply chain disruption,
and $40 million of income tax refunds received during the third
quarter of 2020 due to the CARES Tax Act.
- Free Cash Flow — Free Cash Flow decreased by $76 million to
negative $20 million for the nine months ended September 30, 2021,
as compared to the same period in 2020, primarily due to the
decrease in Net Cash Provided by Operating Activities described
above, partially offset by a $9 million decrease in capital
expenditures. As a reminder, the Company historically generates the
majority of its Free Cash Flow in the fourth quarter of the year as
seasonal working capital build in the third quarter is realized in
the fourth quarter.
- Net Debt — Debt less cash and cash equivalents decreased by $74
million to $799 million as of September 30, 2021, as compared to
$873 million at December 31, 2020. The reduction was primarily due
to cash generated from asset sales, including the divestiture of
QuadExpress, a third-party logistics (3PL) business, and the sale
and leaseback of the Chalfont, Penn. and West Allis, Wis.
facilities. Over the past 12 months, Net Debt decreased $140
million, representing a 15% reduction in Net Debt. The Debt
Leverage Ratio improved 21 basis points to 3.14x at September 30,
2021, from 3.35x at December 31, 2020.
2021 Outlook
The Company reaffirms the following full-year 2021 financial
outlook:
Financial Metric
2021 Outlook
Annual Net Sales Change (1)
1% to 3% increase
Full-Year Adjusted EBITDA
$240 to $260 million
Year-End Debt Leverage Ratio (2)
Approximately 2.75x
(1) Annual Net Sales Change excludes the
Net Sales impact from the divestiture of QuadExpress, which was
sold on June 30, 2021.
(2) Debt Leverage Ratio is calculated at
the midpoint of the Adjusted EBITDA outlook
Dave Honan, Executive Vice President and CFO, concluded: “We
achieved strong operational and financial performance in the third
quarter as we grew Net Sales, Adjusted EBITDA and Adjusted EBITDA
margin despite significant challenges from inflationary costs and
supply chain disruptions. As we look to the fourth quarter, our
strong sales momentum and continued drive for operational
excellence provides us with the confidence to reaffirm our
full-year 2021 outlook. Additionally, we are pleased with the
continued long-term partnership and support of our bank group as
evidenced in the extension of our $1 billion bank debt agreement to
November 2026.”
Quarterly Conference Call
Quad will hold a conference call at 10 a.m. ET on Wednesday,
November 3, to discuss third quarter and year-to-date 2021 results.
As part of the conference call, Quad will conduct a question and
answer session. Investors are invited to email their questions in
advance to IR@quad.com.
Participants can pre-register for the webcast by navigating to
https://dpregister.com/sreg/10161221/eec196c88e.
Participants will be given a unique PIN to gain immediate access to
the call on November 3, bypassing the live operator. Participants
may pre-register at any time, including up to and after the call
start time.
Alternatively, participants without internet access may dial in
on the day of the call as follows:
- U.S. Toll-Free: 1-877-328-5508
- International Toll: 1-412-317-5424
An audio replay of the call will be posted on the Investors
section of Quad’s website shortly after the conference call ends.
In addition, telephone playback will also be available until
December 3, 2021, accessible as follows:
- U.S. Toll-Free: 1-877-344-7529
- International Toll: 1-412-317-0088
- Replay Access Code: 10158830
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include statements regarding,
among other things, our current expectations about the Company’s
future results, financial condition, sales, earnings, free cash
flow, margins, objectives, goals, strategies, beliefs, intentions,
plans, estimates, prospects, projections and outlook of the Company
and can generally be identified by the use of words or phrases such
as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,”
“plan,” “foresee,” “project,” “believe,” “continue” or the
negatives of these terms, variations on them and other similar
expressions. These forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause
actual results to be materially different from those expressed in
or implied by such forward-looking statements. Forward-looking
statements are based largely on the Company’s expectations and
judgments and are subject to a number of risks and uncertainties,
many of which are unforeseeable and beyond our control.
The factors that could cause actual results to materially differ
include, among others: the negative impacts the coronavirus
(COVID-19) has had and will continue to have on the Company’s
business, financial condition, cash flows, results of operations
and supply chain, as well as the global economy in general
(including future uncertain impacts); the impact of decreasing
demand for printed materials and significant overcapacity in a
highly competitive environment creates downward pricing pressures
and potential underutilization of assets; the impact of digital
media and similar technological changes, including digital
substitution by consumers; the impact of increases in costs
(including labor and labor-related costs, energy costs, freight
rates and raw materials, including paper and the materials to
manufacture ink) and the impact of fluctuations in the availability
of raw materials, including paper and the materials to manufacture
ink; the impact of inflationary cost pressures and supply chain
shortages; the inability of the Company to reduce costs and improve
operating efficiency rapidly enough to meet market conditions; the
impact of the various restrictive covenants in the Company’s debt
facilities on the Company’s ability to operate its business, as
well as the uncertain negative impacts COVID-19 may have on the
Company’s ability to continue to be in compliance with these
restrictive covenants; the impact of increased business complexity
as a result of the Company’s transformation to a marketing
solutions partner; the impact negative publicity could have on our
business; the failure to successfully identify, manage, complete
and integrate acquisitions, investment opportunities or other
significant transactions, as well as the successful identification
and execution of strategic divestitures; the failure of clients to
perform under contracts or to renew contracts with clients on
favorable terms or at all; the impact of changing future economic
conditions; the fragility and decline in overall distribution
channels; the impact of changes in postal rates, service levels or
regulations, including delivery delays due to ongoing COVID-19
impacts on daily operational staffing at the United States Postal
Service; the failure to attract and retain qualified talent across
the enterprise; the impact of regulatory matters and legislative
developments or changes in laws, including changes in
cyber-security, privacy and environmental laws; significant capital
expenditures may be needed to maintain the Company’s platforms and
processes and to remain technologically and economically
competitive; the impact of risks associated with the operations
outside of the United States, including costs incurred or
reputational damage suffered due to improper conduct of its
employees, contractors or agents; the impact of an other than
temporary decline in operating results and enterprise value that
could lead to non-cash impairment charges due to the impairment of
property, plant and equipment and intangible assets; the impact on
the holders of Quad’s class A common stock of a limited active
market for such shares and the inability to independently elect
directors or control decisions due to the voting power of the class
B common stock; and the other risk factors identified in the
Company’s most recent Annual Report on Form 10-K, which may be
amended or supplemented by subsequent Quarterly Reports on Form
10-Q or other reports filed with the Securities and Exchange
Commission.
Except to the extent required by the federal securities laws,
the Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.
Non-GAAP Financial Measures
This press release contains financial measures not prepared in
accordance with generally accepted accounting principles (referred
to as Non-GAAP), specifically Adjusted EBITDA, Adjusted EBITDA
Margin, Free Cash Flow, Net Debt, Debt Leverage Ratio and Adjusted
Diluted Earnings (Loss) Per Share From Continuing Operations.
Adjusted EBITDA is defined as net earnings (loss) attributable to
Quad common shareholders excluding interest expense, income tax
expense (benefit), depreciation and amortization, restructuring,
impairment and transaction-related charges, gain from sale and
leaseback, loss from discontinued operations, net of tax, net
pension income, loss on debt extinguishment, equity in (earnings)
loss of unconsolidated entity, the Adjusted EBITDA for
unconsolidated equity method investments (calculated in a
consistent manner with the calculation for Quad) and net earnings
(loss) attributable to noncontrolling interests. Adjusted EBITDA
Margin is defined as Adjusted EBITDA divided by net sales. Free
Cash Flow is defined as net cash provided by operating activities
less purchases of property, plant and equipment. Debt Leverage
Ratio is defined as total debt and finance lease obligations less
cash and cash equivalents (Net Debt) divided by the last twelve
months of Adjusted EBITDA. Adjusted Diluted Earnings (Loss) Per
Share From Continuing Operations is defined as earnings (loss) from
continuing operations before income taxes and equity in (earnings)
loss of unconsolidated entity excluding restructuring, impairment
and transaction-related charges, gain from sale and leaseback, loss
on debt extinguishment, and adjusted for income tax expense at a
normalized tax rate, divided by diluted weighted average number of
common shares outstanding.
The Company believes that these Non-GAAP measures, when
presented in conjunction with comparable GAAP measures, provide
additional information for evaluating Quad’s performance and are
important measures by which Quad’s management assesses the
profitability and liquidity of its business. These Non-GAAP
measures should be considered in addition to, not as a substitute
for or superior to, net earnings (loss) as a measure of operating
performance or to cash flows provided by operating activities as a
measure of liquidity. These Non-GAAP measures may be different than
Non-GAAP financial measures used by other companies. Reconciliation
to the GAAP equivalent of these Non-GAAP measures are contained in
tabular form on the attached unaudited financial statements.
About Quad
Quad (NYSE: QUAD) is a worldwide marketing solutions partner
that leverages its 50-year heritage of platform excellence,
innovation, strong culture and social purpose to create a better
way for its clients, employees and communities. The Company’s
integrated marketing platform helps brands and marketers reduce
complexity, increase efficiency and enhance marketing spend
effectiveness. Quad provides its clients with unmatched scale for
client on-site services and expanded subject expertise in marketing
strategy, creative solutions, media deployment (which includes a
strong foundation in print) and marketing management services. With
a client-centric approach that drives the Company to continuously
evolve its offering, combined with leading-edge technology and
single-source simplicity, the Company has the resources and
knowledge to help a wide variety of clients in multiple vertical
industries, including retail, publishing, consumer technology,
consumer packaged goods, financial services, insurance, healthcare
and direct-to-consumer. Quad has multiple locations throughout
North America, South America and Europe, and strategic partnerships
in Asia and other parts of the world. For additional information
visit www.QUAD.com.
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Three Months Ended
September 30, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended September
30,
2021
2020
Net sales
$
706.1
$
679.3
Cost of sales
574.1
543.3
Selling, general and administrative
expenses
68.7
75.1
Gain from sale and leaseback
(10.8)
—
Depreciation and amortization
38.7
44.8
Restructuring, impairment and
transaction-related charges
7.4
9.8
Total operating expenses
678.1
673.0
Operating income from continuing
operations
28.0
6.3
Interest expense
15.0
17.9
Net pension income
(3.4)
(2.7)
Earnings (loss) from continuing operations
before income taxes and equity in (earnings) loss of unconsolidated
entity
16.4
(8.9)
Income tax expense (benefit)
2.3
(12.0)
Earnings from continuing operations before
equity in (earnings) loss of unconsolidated entity
14.1
3.1
Equity in (earnings) loss of
unconsolidated entity
(0.2)
0.4
Net earnings from continuing
operations
14.3
2.7
Loss from discontinued operations, net of
tax
—
(1.1)
Net earnings
14.3
1.6
Less: net earnings attributable to
noncontrolling interests
—
—
Net earnings attributable to Quad
common shareholders
$
14.3
$
1.6
Earnings (loss) per share attributable
to Quad common shareholders
Basic:
Continuing operations
$
0.28
$
0.05
Discontinued operations
—
(0.02)
Basic earnings (loss) per share
attributable to Quad common shareholders
$
0.28
$
0.03
Diluted:
Continuing operations
$
0.27
$
0.05
Discontinued operations
—
(0.02)
Diluted earnings (loss) per share
attributable to Quad common shareholders
$
0.27
$
0.03
Weighted average number of common
shares outstanding
Basic
51.3
50.7
Diluted
53.1
51.1
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Nine Months Ended
September 30, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Nine Months Ended September
30,
2021
2020
Net sales
$
2,105.8
$
2,086.3
Cost of sales
1,688.1
1,651.9
Selling, general and administrative
expenses
229.3
238.0
Gains from sale and leaseback
(24.5)
—
Depreciation and amortization
119.3
138.9
Restructuring, impairment and
transaction-related charges
(3.4)
49.0
Total operating expenses
2,008.8
2,077.8
Operating income from continuing
operations
97.0
8.5
Interest expense
45.1
52.2
Net pension income
(11.0)
(8.0)
Loss on debt extinguishment
—
1.8
Earnings (loss) from continuing operations
before income taxes and equity in (earnings) loss of unconsolidated
entity
62.9
(37.5)
Income tax expense (benefit)
4.1
(17.5)
Earnings (loss) from continuing operations
before equity in (earnings) loss of unconsolidated entity
58.8
(20.0)
Equity in (earnings) loss of
unconsolidated entity
(0.1)
0.9
Net earnings (loss) from continuing
operations
58.9
(20.9)
Loss from discontinued operations, net of
tax
—
(13.6)
Net earnings (loss)
58.9
(34.5)
Less: net loss attributable to
noncontrolling interests
—
(0.2)
Net earnings (loss) attributable to
Quad common shareholders
$
58.9
$
(34.3)
Earnings (loss) per share attributable
to Quad common shareholders
Basic:
Continuing operations
$
1.15
$
(0.41)
Discontinued operations
—
(0.27)
Basic earnings (loss) per share
attributable to Quad common shareholders
$
1.15
$
(0.68)
Diluted:
Continuing operations
$
1.12
$
(0.41)
Discontinued operations
—
(0.27)
Diluted earnings (loss) per share
attributable to Quad common shareholders
$
1.12
$
(0.68)
Weighted average number of common
shares outstanding
Basic
51.3
50.6
Diluted
52.8
50.6
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
As of September 30, 2021 and
December 31, 2020
(in millions)
(UNAUDITED)
September 30,
2021
December 31,
2020
ASSETS
Cash and cash equivalents
$
27.4
$
55.2
Receivables, less allowance for credit
losses
392.5
399.1
Inventories
240.9
170.2
Prepaid expenses and other current
assets
82.2
54.7
Total current assets
743.0
679.2
Property, plant and equipment—net
746.6
884.2
Operating lease right-of-use
assets—net
109.0
81.0
Goodwill
86.4
103.0
Other intangible assets—net
82.0
104.3
Equity method investment in unconsolidated
entity
2.5
2.6
Other long-term assets
72.5
73.4
Total assets
$
1,842.0
$
1,927.7
LIABILITIES AND SHAREHOLDERS’
EQUITY
Accounts payable
$
341.3
$
320.0
Other current liabilities
237.8
310.8
Short-term debt and current portion of
long-term debt
258.5
20.7
Current portion of finance lease
obligations
2.2
2.8
Current portion of operating lease
obligations
27.9
28.4
Total current liabilities
867.7
682.7
Long-term debt
563.8
902.7
Finance lease obligations
1.6
2.0
Operating lease obligations
83.1
54.5
Deferred income taxes
9.5
4.2
Other long-term liabilities
171.6
196.8
Total liabilities
1,697.3
1,842.9
Shareholders’ equity
Preferred stock
—
—
Common stock
1.4
1.4
Additional paid-in capital
838.1
833.1
Treasury stock, at cost
(13.6)
(13.1)
Accumulated deficit
(507.0)
(566.0)
Accumulated other comprehensive loss
(174.2)
(171.3)
Quad’s shareholders’ equity
144.7
84.1
Noncontrolling interests
—
0.7
Total shareholders’ equity and
noncontrolling interests
144.7
84.8
Total liabilities and shareholders’
equity
$
1,842.0
$
1,927.7
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the Nine Months Ended
September 30, 2021 and 2020
(in millions)
(UNAUDITED)
Nine Months Ended September
30,
2021
2020
OPERATING ACTIVITIES
Net earnings (loss)
$
58.9
$
(34.5)
Adjustments to reconcile net earnings
(loss) to net cash provided by operating activities:
Depreciation and amortization
119.3
138.9
Impairment charges
2.0
15.7
Settlement charges on pension plans
0.8
—
Loss on debt extinguishment
—
1.8
Stock-based compensation
6.6
8.2
Gain from property insurance claims
(13.3)
(4.2)
Gain on the sale or disposal of property,
plant and equipment
(34.4)
(2.3)
Gain on the sale of businesses
(20.9)
(0.1)
Deferred income taxes
3.9
27.2
Other non-cash adjustments to net loss
2.2
2.8
Changes in operating assets and
liabilities—net of acquisitions and divestitures
(103.0)
(46.1)
Net cash provided by operating
activities
22.1
107.4
INVESTING ACTIVITIES
Purchases of property, plant and
equipment
(41.6)
(50.7)
Cost investment in unconsolidated
entities
(0.9)
(0.5)
Proceeds from the sale of property, plant
and equipment
67.1
6.0
Proceeds from the sale of businesses
39.0
47.1
Proceeds from property insurance
claims
4.0
4.8
Acquisition of businesses—net of cash
acquired
—
(2.0)
Other investing activities
(0.2)
2.3
Net cash provided by investing
activities
67.4
7.0
FINANCING ACTIVITIES
Proceeds from issuance of long-term
debt
—
1.0
Payments of long-term debt
(109.1)
(69.5)
Payments of finance lease obligations
(2.4)
(6.5)
Borrowings on revolving credit
facilities
214.1
341.9
Payments on revolving credit
facilities
(207.2)
(347.3)
Payments of debt issuance costs and
financing fees
—
(2.7)
Changes in ownership of noncontrolling
interests
(1.9)
(6.4)
Equity awards redeemed to pay employees’
tax obligations
(1.1)
(1.0)
Payment of cash dividends
(1.4)
(9.5)
Other financing activities
(8.1)
0.1
Net cash used in financing activities
(117.1)
(99.9)
Effect of exchange rates on cash and cash
equivalents
(0.2)
(0.3)
Net (decrease) increase in cash and cash
equivalents
(27.8)
14.2
Cash and cash equivalents at beginning of
period
55.2
78.7
Cash and cash equivalents at end of
period
$
27.4
$
92.9
The Condensed Consolidated Statements of
Cash Flows include the cash flows related to the discontinued
United States Book business for the nine months ended September 30,
2020.
QUAD/GRAPHICS, INC.
SEGMENT FINANCIAL INFORMATION
For the Three and Nine Months
Ended September 30, 2021 and 2020
(in millions)
(UNAUDITED)
Net Sales
Operating Income (Loss) from
Continuing Operations
Restructuring, Impairment and
Transaction-Related Charges (1)
Three months ended September 30,
2021
United States Print and Related
Services
$
624.3
$
36.1
$
7.3
International
81.8
3.6
0.1
Total operating segments
706.1
39.7
7.4
Corporate
—
(11.7)
—
Total
$
706.1
$
28.0
$
7.4
Three months ended September 30,
2020
United States Print and Related
Services
$
607.2
$
20.0
$
3.8
International
72.1
(1.7)
5.2
Total operating segments
679.3
18.3
9.0
Corporate
—
(12.0)
0.8
Total
$
679.3
$
6.3
$
9.8
Nine months ended September 30,
2021
United States Print and Related
Services
$
1,869.8
$
124.4
$
(6.1)
International
236.0
8.1
1.8
Total operating segments
2,105.8
132.5
(4.3)
Corporate
—
(35.5)
0.9
Total
$
2,105.8
$
97.0
$
(3.4)
Nine months ended September 30,
2020
United States Print and Related
Services
$
1,870.3
$
44.6
$
38.0
International
216.0
(2.1)
9.3
Total operating segments
2,086.3
42.5
47.3
Corporate
—
(34.0)
1.7
Total
$
2,086.3
$
8.5
$
49.0
______________________________
(1)
Restructuring, impairment and
transaction-related charges are included within operating income
(loss) from continuing operations.
The segment information contained in the
above table does not include the operating results related to the
discontinued United States Book business for the three and nine
months ended September 30, 2020.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
EBITDA, EBITDA MARGIN, ADJUSTED
EBITDA AND ADJUSTED EBITDA MARGIN
For the Three Months Ended
September 30, 2021 and 2020
(in millions, except margin
data)
(UNAUDITED)
Three Months Ended September
30,
2021
2020
Net earnings attributable to Quad common
shareholders
$
14.3
$
1.6
Interest expense
15.0
17.9
Income tax expense (benefit)
2.3
(12.0)
Depreciation and amortization
38.7
44.8
EBITDA (Non-GAAP)
$
70.3
$
52.3
EBITDA Margin (Non-GAAP)
10.0
%
7.7
%
Restructuring, impairment and
transaction-related charges (1)
7.4
9.8
Gain from sale and leaseback (2)
(10.8)
—
Loss from discontinued operations, net of
tax (3)
—
1.1
Net pension income (4)
(3.4)
(2.7)
Other (5)
0.6
0.2
Adjusted EBITDA (Non-GAAP)
$
64.1
$
60.7
Adjusted EBITDA Margin
(Non-GAAP)
9.1
%
8.9
%
______________________________
(1)
Operating results from continuing
operations for the three months ended September 30, 2021 and 2020,
were affected by the following restructuring, impairment and
transaction-related charges:
Three Months Ended September
30,
2021
2020
Employee termination charges (a)
$
1.0
$
3.3
Impairment charges (b)
0.3
—
Transaction-related charges (c)
—
0.9
Integration costs (d)
—
0.2
Other restructuring charges (e)
6.1
5.4
Restructuring, impairment and
transaction-related charges
$
7.4
$
9.8
______________________________
(a)
Employee termination charges were related
to workforce reductions through separation programs and facility
consolidations.
(b)
Impairment charges were for certain
property, plant and equipment no longer being utilized in
production as a result of facility consolidations.
(c)
Transaction-related charges consisted of
professional service fees related to business acquisition and
divestiture activities.
(d)
Integration costs were primarily costs
related to the integration of acquired companies.
(e)
Other restructuring charges include costs
to maintain and exit closed facilities, as well as lease exit
charges, and are presented net of gains on the sale of facilities
and businesses.
(2)
The Company executed a sale and leaseback of its West Allis,
Wisconsin facility resulting in a $10.8 million gain during the
three months ended September 30, 2021.
(3)
Loss from discontinued operations, net of tax, for the three months
ended September 30, 2020, includes the results of operations for
the Company’s United States Book business. During the third quarter
of 2019, the Company made the decision to sell its United States
Book business. Accordingly, the Company applied discontinued
operations treatment for the intended sale of its United States
Book business in all periods presented, as required by United
States GAAP. The Company successfully completed the sale of its
United States Book business in 2020.
(4)
As required by United States GAAP, pension components other than
service cost are required to be excluded from operating income. The
Company has also excluded pension income from the calculation of
Adjusted EBITDA, which is reflected in all periods presented.
(5)
Other includes the following items: (a) the equity in (earnings)
loss of unconsolidated entity, which includes the results of
operations for an investment in an entity where Quad has the
ability to exert significant influence, but not control, and is
accounted for using the equity method of accounting; (b) the
Adjusted EBITDA for unconsolidated equity method investments, which
was calculated in a consistent manner with the calculation above
for Quad; and (c) the net earnings (loss) attributable to
noncontrolling interests, which is the portion of the net earnings
(loss) not owned by Quad for an investment where Quad has a
controlling financial interest.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share from
Continuing Operations. The Company believes that these Non-GAAP
measures, when presented in conjunction with comparable GAAP
measures, provide additional information for evaluating Quad’s
performance and are important measures by which Quad’s management
assesses the profitability and liquidity of its business. These
Non-GAAP measures should be considered in addition to, not as a
substitute for or superior to, net earnings (loss) as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity. These Non-GAAP measures may
be different than Non-GAAP financial measures used by other
companies.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
EBITDA, EBITDA MARGIN, ADJUSTED
EBITDA AND ADJUSTED EBITDA MARGIN
For the Nine Months Ended
September 30, 2021 and 2020
(in millions, except margin
data)
(UNAUDITED)
Nine Months Ended September
30,
2021
2020
Net earnings (loss) attributable to Quad
common shareholders
$
58.9
$
(34.3)
Interest expense
45.1
52.2
Income tax expense (benefit)
4.1
(17.5)
Depreciation and amortization
119.3
138.9
EBITDA (Non-GAAP)
$
227.4
$
139.3
EBITDA Margin (Non-GAAP)
10.8
%
6.7
%
Restructuring, impairment and
transaction-related charges (1)
(3.4)
49.0
Gains from sale and leaseback (2)
(24.5)
—
Loss from discontinued operations, net of
tax (3)
—
13.6
Net pension income (4)
(11.0)
(8.0)
Loss on debt extinguishment (5)
—
1.8
Other (6)
1.1
0.3
Adjusted EBITDA (Non-GAAP)
$
189.6
$
196.0
Adjusted EBITDA Margin
(Non-GAAP)
9.0
%
9.4
%
______________________________
(1)
Operating results from continuing
operations for the nine months ended September 30, 2021 and 2020,
were affected by the following restructuring, impairment and
transaction-related charges:
Nine Months Ended September
30,
2021
2020
Employee termination charges (a)
$
8.5
$
25.4
Impairment charges (b)
2.0
4.2
Transaction-related charges (c)
0.4
1.7
Integration costs (d)
—
1.3
Other restructuring charges (income)
(e)
(14.3)
16.4
Restructuring, impairment and
transaction-related charges
$
(3.4)
$
49.0
______________________________________
(a)
Employee termination charges were related
to workforce reductions through separation programs and facility
consolidations.
(b)
Impairment charges were for certain
property, plant and equipment no longer being utilized in
production as a result of facility consolidations.
(c)
Transaction-related charges consisted of
professional service fees related to business acquisition and
divestiture activities.
(d)
Integration costs were primarily costs
related to the integration of acquired companies.
(e)
Other restructuring charges include costs
to maintain and exit closed facilities, as well as lease exit
charges, and are presented net of gains or losses on the sale of
facilities and businesses. A $20.9 million gain on the sale of a
business and a $2.9 million loss on the sale of a business were
included in other restructuring charges during the nine months
ended September 30, 2021 and 2020, respectively.
(2)
The Company executed sale and leaseback transactions of its
Chalfont, Pennsylvania and West Allis, Wisconsin facilities
resulting in $24.5 million in gains during the nine months ended
September 30, 2021.
(3)
Loss from discontinued operations, net of tax, for the nine months
ended September 30, 2020, includes the results of operations for
the Company’s United States Book business. During the third quarter
of 2019, the Company made the decision to sell its United States
Book business. Accordingly, the Company applied discontinued
operations treatment for the intended sale of its United States
Book business in all periods presented, as required by United
States GAAP. The Company successfully completed the sale of its
United States Book business in 2020.
(4)
As required by United States GAAP, pension components other than
service cost are required to be excluded from operating income. The
Company has also excluded pension income from the calculation of
Adjusted EBITDA, which is reflected in all periods presented.
(5)
The $1.8 million loss on debt extinguishment recorded during the
nine months ended September 30, 2020, primarily relates to the
repurchase of the Company’s unsecured 7.0% senior notes due May 1,
2022.
(6)
Other includes the following items: (a) the equity in (earnings)
loss of unconsolidated entity, which includes the results of
operations for an investment in an entity where Quad has the
ability to exert significant influence, but not control, and is
accounted for using the equity method of accounting; (b) the
Adjusted EBITDA for unconsolidated equity method investments, which
was calculated in a consistent manner with the calculation above
for Quad; and (c) the net earnings (loss) attributable to
noncontrolling interests, which is the portion of the net earnings
(loss) not owned by Quad for an investment where Quad has a
controlling financial interest.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share from
Continuing Operations. The Company believes that these Non-GAAP
measures, when presented in conjunction with comparable GAAP
measures, provide additional information for evaluating Quad’s
performance and are important measures by which Quad’s management
assesses the profitability and liquidity of its business. These
Non-GAAP measures should be considered in addition to, not as a
substitute for or superior to, net earnings (loss) as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity. These Non-GAAP measures may
be different than Non-GAAP financial measures used by other
companies.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
FREE CASH FLOW
For the Nine Months Ended
September 30, 2021 and 2020
(in millions)
(UNAUDITED)
Nine Months Ended September
30,
2021
2020
Net cash provided by operating
activities
$
22.1
$
107.4
Less: purchases of property, plant and
equipment
(41.6)
(50.7)
Free Cash Flow (Non-GAAP)
$
(19.5)
$
56.7
______________________________
The above calculation of Free Cash Flow includes the cash flows
related to the discontinued United States Book business for the
nine months ended September 30, 2020.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share from
Continuing Operations. The Company believes that these Non-GAAP
measures, when presented in conjunction with comparable GAAP
measures, provide additional information for evaluating Quad’s
performance and are important measures by which Quad’s management
assesses the profitability and liquidity of its business. These
Non-GAAP measures should be considered in addition to, not as a
substitute for or superior to, net earnings (loss) as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity. These Non-GAAP measures may
be different than Non-GAAP financial measures used by other
companies.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
DEBT LEVERAGE RATIO
As of September 30, 2021 and
December 31, 2020
(in millions, except ratio)
(UNAUDITED)
September 30,
2021
December 31,
2020
Total debt and finance lease obligations
on the condensed consolidated balance sheets
$
826.1
$
928.2
Less: Cash and cash equivalents
27.4
55.2
Net Debt (Non-GAAP)
$
798.7
$
873.0
Divided by: trailing twelve months
Adjusted EBITDA (Non-GAAP) (1)
$
254.0
$
260.4
Debt Leverage Ratio (Non-GAAP)
3.14
x
3.35
x
______________________________
(1)
The calculation of Adjusted EBITDA for the
trailing twelve months ended September 30, 2021, and December 31,
2020, was as follows:
Add
Subtract
Trailing Twelve Months
Ended
Year Ended
Nine Months Ended
December 31, 2020 (a)
September 30,
2021
September 30,
2020
September 30,
2021
Net earnings (loss) attributable to Quad
common shareholders
$
(128.3)
$
58.9
$
(34.3)
$
(35.1)
Interest expense
68.8
45.1
52.2
61.7
Income tax expense (benefit)
0.3
4.1
(17.5)
21.9
Depreciation and amortization
181.6
119.3
138.9
162.0
EBITDA (Non-GAAP)
$
122.4
$
227.4
$
139.3
$
210.5
Restructuring, impairment and
transaction-related charges
124.1
(3.4)
49.0
71.7
Loss from discontinued operations, net of
tax
21.9
—
13.6
8.3
Net pension income
(10.5)
(11.0)
(8.0)
(13.5)
Gains from sale and leaseback
—
(24.5)
—
(24.5)
Loss on debt extinguishment
1.8
—
1.8
—
Other (b)
0.7
1.1
0.3
1.5
Adjusted EBITDA (Non-GAAP)
$
260.4
$
189.6
$
196.0
$
254.0
______________________________
(a)
Financial information for the year ended
December 31, 2020, is included as reported in the Company’s 2020
Annual Report on Form 10-K filed with the SEC on February 24,
2021.
(b)
Other is comprised of equity in (earnings)
loss of unconsolidated entity, Adjusted EBITDA for unconsolidated
equity method investments and net earnings (loss) attributable to
noncontrolling interests.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share from
Continuing Operations. The Company believes that these Non-GAAP
measures, when presented in conjunction with comparable GAAP
measures, provide additional information for evaluating Quad’s
performance and are important measures by which Quad’s management
assesses the profitability and liquidity of its business. These
Non-GAAP measures should be considered in addition to, not as a
substitute for or superior to, net earnings (loss) as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity. These Non-GAAP measures may
be different than Non-GAAP financial measures used by other
companies.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
ADJUSTED DILUTED EARNINGS PER
SHARE FROM CONTINUING OPERATIONS
For the Three Months Ended
September 30, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended September
30,
2021
2020
Earnings (loss) from continuing operations
before income taxes and equity in (earnings) loss of unconsolidated
entity
$
16.4
$
(8.9)
Restructuring, impairment and
transaction-related charges
7.4
9.8
Gain from sale and leaseback
(10.8)
—
Adjusted net earnings from continuing
operations, before income taxes (Non-GAAP)
13.0
0.9
Income tax expense at 25% normalized tax
rate
3.3
0.2
Adjusted net earnings from continuing
operations (Non-GAAP)
$
9.7
$
0.7
Basic weighted average number of common
shares outstanding
51.3
50.7
Plus: effect of dilutive equity incentive
instruments (Non-GAAP)
1.8
0.4
Diluted weighted average number of common
shares outstanding (Non-GAAP)
53.1
51.1
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.18
$
0.01
Diluted earnings (loss) per share from
continuing operations (GAAP)
$
0.27
$
0.05
Restructuring, impairment and
transaction-related charges per share
0.13
0.19
Gain from sale and leaseback per share
(0.20)
—
Income tax expense (benefit) from
condensed consolidated statement of operations per share
0.04
(0.23)
Income tax expense at 25% normalized tax
rate per share
(0.06)
—
Other items from condensed consolidated
statement of operations per share (2)
—
—
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.18
$
0.01
______________________________
(1)
Adjusted diluted earnings per share from
continuing operations excludes the following: (i) the results
operations for the United States Book business; (ii) restructuring,
impairment and transaction-related charges; (iii) gain from sale
and leaseback; (iv) loss on debt extinguishment; (v) discrete
income tax items; (vi) equity in loss of unconsolidated entity; and
(vii) net earnings (loss) attributable to noncontrolling
interests.
(2)
Other items from condensed consolidated
statement of operations per share is comprised of the diluted loss
per share impacts of equity in (earnings) loss of unconsolidated
entity and net earnings (loss) attributable to noncontrolling
interests.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share from
Continuing Operations. The Company believes that these Non-GAAP
measures, when presented in conjunction with comparable GAAP
measures, provide additional information for evaluating Quad’s
performance and are important measures by which Quad’s management
assesses the profitability and liquidity of its business. These
Non-GAAP measures should be considered in addition to, not as a
substitute for or superior to, net earnings (loss) as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity. These Non-GAAP measures may
be different than Non-GAAP financial measures used by other
companies.
QUAD/GRAPHICS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
ADJUSTED DILUTED EARNINGS PER
SHARE FROM CONTINUING OPERATIONS
For the Nine Months Ended
September 30, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Nine Months Ended September
30,
2021
2020
Earnings (loss) from continuing operations
before income taxes and equity in (earnings) loss of unconsolidated
entity
$
62.9
$
(37.5)
Restructuring, impairment and
transaction-related charges
(3.4)
49.0
Gains from sale and leaseback
(24.5)
—
Loss on debt extinguishment
—
1.8
Adjusted net earnings from continuing
operations, before income taxes (Non-GAAP)
35.0
13.3
Income tax expense at 25% normalized tax
rate
8.8
3.3
Adjusted net earnings from continuing
operations (Non-GAAP)
$
26.2
$
10.0
Basic weighted average number of common
shares outstanding
51.3
50.6
Plus: effect of dilutive equity incentive
instruments (Non-GAAP)
1.5
0.4
Diluted weighted average number of common
shares outstanding (Non-GAAP)
52.8
51.0
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.50
$
0.20
Diluted earnings (loss) per share from
continuing operations (GAAP)
$
1.12
$
(0.41)
Restructuring, impairment and
transaction-related charges per share
(0.07)
0.96
Gains from sale and leaseback per
share
(0.46)
—
Loss on debt extinguishment per share
—
0.04
Income tax expense (benefit) from
condensed consolidated statement of operations per share
0.08
(0.34)
Income tax expense at 25% normalized tax
rate per share
(0.17)
(0.06)
Other items from condensed consolidated
statement of operations per share (2)
—
0.01
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.50
$
0.20
______________________________
(1)
Adjusted diluted earnings per share from
continuing operations excludes the following: (i) the results of
operations for the United States Book business; (ii) restructuring,
impairment and transaction-related charges; (iii) gain from sale
and leaseback; (iv) loss on debt extinguishment; (v) discrete
income tax items; (vi) equity in loss of unconsolidated entity; and
(vii) net earnings attributable to noncontrolling interests.
(2)
Other items from condensed consolidated
statement of operations per share is comprised of the diluted loss
per share impacts of equity in (earnings) loss of unconsolidated
entity and net earnings (loss) attributable to noncontrolling
interests.
In addition to financial measures prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), this earnings announcement also contains Non-GAAP
financial measures, specifically EBITDA, EBITDA Margin, Adjusted
EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Net Debt, Debt
Leverage Ratio and Adjusted Diluted Earnings (Loss) Per Share from
Continuing Operations. The Company believes that these Non-GAAP
measures, when presented in conjunction with comparable GAAP
measures, provide additional information for evaluating Quad’s
performance and are important measures by which Quad’s management
assesses the profitability and liquidity of its business. These
Non-GAAP measures should be considered in addition to, not as a
substitute for or superior to, net earnings (loss) as a measure of
operating performance or to cash flows provided by operating
activities as a measure of liquidity. These Non-GAAP measures may
be different than Non-GAAP financial measures used by other
companies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211102006301/en/
Investor Relations Contact Katie Krebsbach Investor
Relations Manager, Quad 414-566-4247 kkrebsbach@quad.com Media
Contact Claire Ho Director of Corporate Communications, Quad
414-566-2955 cho@quad.com
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