Quad/Graphics Reports Second Quarter and Year-to-Date June 2013 Results

Tue Aug 6, 2013 5:00pm EDT

* Reuters is not responsible for the content in this press release.

Quad/Graphics Reports Second Quarter and Year-to-Date June 2013 Results

Company Generates $86 Million in Recurring Free Cash Flow in the Quarter and Reaffirms 2013 Annual Guidance

Second Quarter Highlights:

  • Generated net sales of $1.1 billion.
  • Achieved Adjusted EBITDA of $111 million.
  • Produced Recurring Free Cash Flow of $86 million.
  • Continued disciplined integration of Vertis Holdings, Inc. ("Vertis").
  • Reaffirms 2013 annual guidance of $4.8 billion to $5.0 billion in revenue, $580 million to $610 million in Adjusted EBITDA, and Recurring Free Cash Flow in excess of $360 million.

Quad/Graphics, Inc. (NYSE: QUAD) (“Quad/Graphics” or the “Company”) today reported results for its second quarter ending June 30, 2013. The reported results include Vertis from the day of acquisition on January 16, 2013. Prior year financial results do not include the acquisition of Vertis. For full financial results, including reconciliations of non-GAAP financial measures, please see the accompanying information.

“Our second quarter results were consistent with our expectations and we remain on track to achieve our 2013 objectives,” said Joel Quadracci, Quad/Graphics Chairman, President & CEO. “We continue to be pleased with the Vertis acquisition and remain focused on integrating operations and driving future cost-savings, and improving efficiency and productivity in our platform. As always, we are committed to our priorities to maintain a strong and flexible balance sheet; invest in our business, which includes the pursuit of profitable investment opportunities; and create long-term value for our shareholders and clients.”

Net sales for the second quarter 2013 increased to $1.1 billion versus $934 million for the same period in 2012 due to the Vertis acquisition. Second quarter 2013 Adjusted EBITDA was $111 million as compared to $112 million for the same period in 2012. Recurring Free Cash Flow was $86 million versus $60 million for the same period in 2012.

For the first six months of 2013, net sales were $2.2 billion versus $1.9 billion for the same period in 2012, representing a 16% increase due to the Vertis acquisition. Year-to-date Adjusted EBITDA was $225 million versus $238 million in 2012. Recurring Free Cash Flow was $206 million for the first six months of 2013 compared to $167 million for the same period in 2012, continuing a track record of solid cash flow generation.

“Our Adjusted EBITDA and Adjusted EBITDA margin of 10.0% were in line with our expectations and reflect Vertis' lower margin profile and increased seasonality, and ongoing industry pricing and volume pressures,” said John Fowler, Quad/Graphics Executive Vice President and Chief Financial Officer. “We are pleased with our Recurring Free Cash Flow of $86 million, which was generated during a quarter that normally reflects lower volumes due to industry seasonality. Recurring Free Cash Flow is the foundation of our strong balance sheet and provides us with the flexibility and confidence to invest in our business and pursue value-added opportunities as they arise to ensure strong future cash flow.”

Quad/Graphics' quarterly dividend of $0.30 per share will be payable on September 20, 2013, to shareholders of record as of September 9, 2013.

Quarterly Conference Call

Quad/Graphics (NYSE: QUAD) will hold a conference call at 10 a.m. ET / 9 a.m. CT on Wednesday, August 7, to discuss second quarter 2013 results. To access the conference call, it is recommended that you listen via computer at: http://us.meeting-stream.com/quadgraphics_080713.

If for any reason you are unable to stream, you can listen to the audio via the telephone by calling:

  • Toll-Free: (877) 217-9946 (US/Canada)
  • Toll: (702) 696-4824 (International)
  • Conference ID: 13701303

The replay will be available for 30 days following the conference call. To access the replay via phone, please call (855) 859-2056 or (404) 537-3406 and enter the Conference ID number 13701303. To access the replay via the internet, please use the following link: http://us.meeting-stream.com/quadgraphics_080713. Registration is required for replay.

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, goals, strategies, revenue, earnings, free cash flow, margins, prospects and/or outlook and are indicated by words or phrases such as “anticipate,” “estimate,” “expect,” “project,” “believe” and similar words or phrases. 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 impact of significant overcapacity in the highly competitive commercial printing industry, which creates downward pricing pressure and fluctuating demand for printing services; the inability of the Company to reduce costs and improve operating efficiency rapidly enough to meet market conditions; the impact of electronic media and similar technological changes including digital substitution by consumers; the impact of changing future economic conditions; the failure to renew long-term contracts with clients on favorable terms or at all; the failure of clients to perform under long-term contracts due to financial or other reasons or due to client consolidation; the failure to successfully identify, manage, complete and integrate acquisitions and investments, including the integration of the operations of Vertis Holdings, Inc.; the impact of changes in postal rates, service levels or regulations; the impact of fluctuations in costs and the availability of raw materials; the impact of increased business complexity as a result of the Company's entry into additional markets; the impact of regulatory matters and legislative developments or changes in laws, including changes in privacy and environmental laws; the ability of the Company to make the significant capital expenditures needed to remain technologically and economically competitive; the impact on Quad/Graphics class A common shareholders of a limited active market for Quad/Graphics common stock and the inability to independently elect directors or control decisions due to the class B common stock voting rights; and the other risk factors identified in the Company's most recent Annual Report on Form 10-K, as such may be amended or supplemented by subsequent Quarterly Reports on Form 10-Q or other reports filed with the Securities and Exchange Commission.

Except as 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.

About Quad/Graphics

Quad/Graphics (NYSE: QUAD), a leading global printer and media channel integrator, is redefining print in today's multichannel media world by helping marketers and publishers capitalize on print's ability to complement and connect with other media channels. With consultative ideas, worldwide capabilities, leading-edge technology and single-source simplicity, Quad/Graphics has the resources and knowledge to help its clients maximize the revenue they derive from their marketing spend through channel integration, and minimize their total cost of production and distribution through a fully integrated national distribution network. The Company provides a diverse range of print solutions, media solutions and logistics services from multiple locations throughout North America, Latin America and Europe.

 
 
QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended June 30, 2013 and 2012

(in millions, except per share data)

(UNAUDITED)

   
Three Months Ended June 30,
2013     2012
Net sales $ 1,110.8 $ 934.2
 
Cost of sales 893.8 740.8
Selling, general and administrative expenses 105.1 80.6
Depreciation and amortization 87.9 84.7
Restructuring, impairment and transaction-related charges 29.2   37.7  
Total operating expenses 1,116.0 943.8
 
Operating loss $ (5.2 ) $ (9.6 )
 
Interest expense 21.3   20.7  
 
Loss before income taxes and equity in loss of unconsolidated entities (26.5 ) (30.3 )
 
Income tax benefit (0.6 ) (10.3 )
 
Loss before equity in loss of unconsolidated entities (25.9 ) (20.0 )
 
Equity in loss of unconsolidated entities (1.7 ) (0.8 )
 
Net loss $ (27.6 ) $ (20.8 )
 
Net loss attributable to noncontrolling interests 0.4    
 
Net loss attributable to Quad/Graphics common shareholders $ (27.2 ) $ (20.8 )
 
Loss per share attributable to Quad/Graphics common shareholders:
Basic and diluted $ (0.59 ) $ (0.44 )
 
Weighted average number of common shares outstanding:
Basic and diluted 46.9   46.8  
 
 

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2013 and 2012
(in millions, except per share data)
(UNAUDITED)
   
Six Months Ended June 30,
2013     2012
Net sales $ 2,240.3 $ 1,923.8
 
Cost of sales 1,803.6 1,513.7
Selling, general and administrative expenses 211.0 172.6
Depreciation and amortization 176.7 169.3
Restructuring, impairment and transaction-related charges 55.1   75.9  
Total operating expenses 2,246.4 1,931.5
 
Operating loss from continuing operations $ (6.1 ) $ (7.7 )
 
Interest expense 43.2   42.1  
 
Loss from continuing operations before income taxes and equity in earnings (loss) of unconsolidated entities (49.3 ) (49.8 )
 
Income tax benefit (9.1 ) (44.1 )
 
Loss from continuing operations before equity in earnings (loss) of unconsolidated entities (40.2 ) (5.7 )
 
Equity in earnings (loss) of unconsolidated entities (1.5 ) 0.3  
 
Net loss from continuing operations $ (41.7 ) $ (5.4 )
 
Loss from discontinued operations, net of tax (1) (3.2 )
Gain on disposal of discontinued operations, net of tax   35.3  
 
Net earnings (loss) $ (41.7 ) $ 26.7
 
Net (earnings) loss attributable to noncontrolling interests 0.5   (0.1 )
 
Net earnings (loss) attributable to Quad/Graphics common shareholders $ (41.2 ) $ 26.6  
 
Earnings (loss) per share attributable to Quad/Graphics common shareholders:
Basic and diluted:
Continuing operations $ (0.89 ) $ (0.12 )
Discontinued operations   0.69  
Earnings (loss) per share attributable to Quad/Graphics common shareholders $ (0.89 ) $ 0.57  
 
Weighted average number of common shares outstanding:
Basic and diluted 46.9   46.8  

______________________________

(1)     Includes the results of the Canadian operations prior to the March 1, 2012 sale. Net loss from continuing operations and its components exclude the Canadian operations.
 
 

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2013 and December 31, 2012
(in millions)
(UNAUDITED)
       
June 30,
2013
December 31,
2012
ASSETS
Cash and cash equivalents $ 11.7 $ 16.9
Receivables, less allowances for doubtful accounts 601.1 585.1
Inventories 302.8 242.9
Prepaid expenses and other current assets 49.4 74.6
Deferred income taxes 77.9 55.7
Short-term restricted cash 7.5   14.8  
Total current assets 1,050.4   990.0  
 
Property, plant and equipment—net 1,974.4 1,926.4
Goodwill 766.4 768.6
Other intangible assets—net 220.1 229.9
Long-term restricted cash 48.7 45.7
Equity method investments in unconsolidated entities 60.9 72.0
Other long-term assets 66.0   66.3  
Total assets $ 4,186.9   $ 4,098.9  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 380.1 $ 285.8
Amounts owing in satisfaction of bankruptcy claims 2.5 9.3
Accrued liabilities 333.4 334.0
Short-term debt and current portion of long-term debt 136.7 113.3
Current portion of capital lease obligations 10.7   10.4  
Total current liabilities 863.4   752.8  
 
Long-term debt 1,309.0 1,211.7
Unsecured notes to be issued 18.3 23.8
Capital lease obligations 12.3 15.3
Deferred income taxes 376.3 363.9
Other long-term liabilities 454.7   495.7  
Total liabilities 3,034.0 2,863.2
 
Quad/Graphics common stock and other equity
Preferred stock
Common stock 1.4 1.4
Additional paid-in capital 977.9 985.6
Treasury stock, at cost (260.6 ) (279.3 )
Retained earnings 515.9 588.1
Accumulated other comprehensive loss (81.5 ) (60.4 )
 
Quad/Graphics common stock and other equity 1,153.1 1,235.4
 
Noncontrolling interests (0.2 ) 0.3  
 
Total common stock and other equity and noncontrolling interests 1,152.9   1,235.7  
 
Total liabilities and shareholders' equity $ 4,186.9   $ 4,098.9  
 
 

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2013 and 2012
(in millions)
(UNAUDITED)
   
Six Months Ended June 30,
2013     2012
OPERATING ACTIVITIES
Net earnings (loss) $ (41.7 ) $ 26.7
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization 176.7 169.3
Impairment charges 9.7 14.1
Deferred income taxes (10.0 ) (25.5 )
Gain on disposal of discontinued operations, net of tax (35.3 )
Other non-cash adjustments to net earnings (loss) 18.4 9.0
Changes in operating assets and liabilities—net of acquisitions 63.8   12.2  
 
Net Cash Provided by Operating Activities 216.9   170.5  
 
INVESTING ACTIVITIES
Purchases of property, plant and equipment (69.7 ) (54.2 )
Cost investment in unconsolidated entities (2.5 ) (18.1 )
Proceeds from the sale of property, plant and equipment 6.2 10.0
Transfers from restricted cash 4.3 11.4
Deposit refunded related to business exchange transaction 50.0
Purchase price payments on business exchange transaction (4.2 )
Acquisition of Vertis—net of cash acquired (235.4 )
Acquisition of other businesses—net of cash acquired (1.5 ) (6.6 )
 
Net Cash Used in Investing Activities (298.6 ) (11.7 )
 
FINANCING ACTIVITIES
Payments of long-term debt (44.0 ) (35.9 )
Payments of capital lease obligations (4.8 ) (15.9 )
Borrowings on revolving credit facilities 805.1 65.1
Payments on revolving credit facilities (645.7 ) (142.6 )
Bankruptcy claim payments on unsecured notes to be issued (4.3 ) (11.1 )
Proceeds from issuance of common stock 1.7
Payment of cash dividends (28.1 ) (23.4 )
 
Net Cash Provided by (Used in) Financing Activities 79.9   (163.8 )
 
Effect of exchange rates on cash and cash equivalents (3.4 ) (3.0 )
 
Net Decrease in Cash and Cash Equivalents (5.2 ) (8.0 )
 
Cash and Cash Equivalents at Beginning of Period 16.9   25.6  
 
Cash and Cash Equivalents at End of Period $ 11.7   $ 17.6  
 

The condensed consolidated statements of cash flows include the cash flows of the Canadian operations prior to the March 1, 2012 sale.

 
 

QUAD/GRAPHICS, INC.

SEGMENT FINANCIAL INFORMATION
For the Three and Six Months Ended June 30, 2013 and 2012
(in millions)
(UNAUDITED)
             
Restructuring,
Impairment and
Operating Transaction-Related
Net Sales Income/(Loss) Charges
Three months ended June 30, 2013
United States Print and Related Services $ 1,005.9 $ 25.9 $ 14.8
International 104.9   (7.7 ) 3.9
Total operating segments 1,110.8 18.2 18.7
Corporate   (23.4 ) 10.5
Total $ 1,110.8   $ (5.2 ) $ 29.2
 
Three months ended June 30, 2012
United States Print and Related Services $ 808.6 $ 22.7 $ 18.1
International 125.6   (9.8 ) 7.6
Total operating segments 934.2 12.9 25.7
Corporate   (22.5 ) 12.0
Total $ 934.2   $ (9.6 ) $ 37.7
 
Six months ended June 30, 2013
United States Print and Related Services $ 2,015.1 $ 48.0 $ 30.5
International 225.2   (7.2 ) 5.0
Total operating segments 2,240.3 40.8 35.5
Corporate   (46.9 ) 19.6
Total $ 2,240.3   $ (6.1 ) $ 55.1
 
Six months ended June 30, 2012
United States Print and Related Services $ 1,671.9 $ 56.4 $ 32.4
International 251.9   (18.0 ) 18.1
Total operating segments 1,923.8 38.4 50.5
Corporate   (46.1 ) 25.4
Total $ 1,923.8   $ (7.7 ) $ 75.9
 

Results from the Canadian operations sold on March 1, 2012 are excluded from the segment financial information presented above.

Restructuring, impairment and transaction-related charges are included in Operating Income/(Loss) above.

 
 

QUAD/GRAPHICS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES
EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin
For the Three Months Ended June 30, 2013 and 2012
(in millions)
(UNAUDITED)
     
Three Months Ended June 30,
2013     2012
Net loss attributable to Quad/Graphics common shareholders $ (27.2 ) $ (20.8 )
 
Interest expense 21.3 20.7
Income tax benefit (0.6 ) (10.3 )
Depreciation and amortization 87.9   84.7  
 
EBITDA (Non-GAAP) $ 81.4 $ 74.3
EBITDA Margin (Non-GAAP) 7.3 % 8.0 %
 
Restructuring, impairment and transaction-related charges (1) 29.2   37.7  
 
Adjusted EBITDA (Non-GAAP) $ 110.6   $ 112.0  
Adjusted EBITDA Margin (Non-GAAP) 10.0 % 12.0 %

______________________________

(1)     Operating results for the three months ended June 30, 2013 and 2012 were affected by the following restructuring, impairment and transaction-related charges:
     
Three Months Ended June 30,
2013     2012
Employee termination charges (a) $ 4.3 $ 10.2
Impairment charges (b) 6.0 5.7
Transaction-related charges (c) 0.2 0.8
Integration costs (d) 9.7 11.2
Other restructuring charges, net (e) 9.0   9.8
Restructuring, impairment and transaction-related charges $ 29.2   $ 37.7

______________________________

    (a)     Employee termination charges were related to workforce reductions through facility consolidations and involuntary separation programs.
(b) Impairment charges were for certain buildings 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 related to preparing existing facilities to meet new production requirements resulting from work transferring from closed plants, as well as other costs related to the integration of the acquired companies.
(e) Other restructuring charges, net, were primarily from costs to maintain and exit closed facilities, as well as lease exit charges.
 

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures, specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Recurring Free Cash Flow and Adjusted Diluted Earnings Per Share. They are presented to provide additional information regarding Quad/Graphics' performance and because they are important measures by which Quad/Graphics assesses the profitability and liquidity of its business. These measures should not be considered alternatives to net earnings (loss) as a measure of operating performance or to cash flows provided by operating activities as a measure of liquidity.

 
 

QUAD/GRAPHICS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES
EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin
For the Six Months Ended June 30, 2013 and 2012
(in millions)
(UNAUDITED)
     
Six Months Ended June 30,
2013     2012
Net earnings (loss) attributable to Quad/Graphics common shareholders $ (41.2 ) $ 26.6
 
Interest expense 43.2 42.1
Income tax benefit (9.1 ) (44.1 )
Depreciation and amortization 176.7   169.3  
 
EBITDA (Non-GAAP) $ 169.6 $ 193.9
EBITDA Margin (Non-GAAP) 7.6 % 10.1 %
 
Restructuring, impairment and transaction-related charges (1) 55.1 75.9
Loss from discontinued operations, net of tax 3.2
Gain on disposal of discontinued operations, net of tax   (35.3 )
 
Adjusted EBITDA from continuing operations (Non-GAAP) $ 224.7   $ 237.7  
Adjusted EBITDA Margin from continuing operations (Non-GAAP) 10.0 % 12.4 %

______________________________

(1)     Operating results from continuing operations for the six months ended June 30, 2013 and 2012 were affected by the following restructuring, impairment and transaction-related charges:
   
Six Months Ended June 30,
2013     2012
Employee termination charges (a) $ 7.7 $ 20.6
Impairment charges (b) 9.7 14.1
Transaction-related charges (c) 3.2 2.3
Integration costs (d) 15.1 23.1
Gain on collection of note receivable (e) (2.4 )
Other restructuring charges, net (f) 19.4   18.2  
Restructuring, impairment and transaction-related charges from continuing operations $ 55.1   $ 75.9  

______________________________

    (a)     Employee termination charges were related to workforce reductions through facility consolidations and involuntary separation programs.
(b) Impairment charges were for certain buildings 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 related to preparing existing facilities to meet new production requirements resulting from work transferring from closed plants, as well as other costs related to the integration of the acquired companies.
(e) Gain on the collection of a note receivable for the six months ended June 30, 2012 was related to a settlement of a disputed pre-acquisition Worldcolor note receivable. This non-recurring gain was excluded from the calculation of Adjusted EBITDA.
(f) Other restructuring charges, net, were primarily from costs to maintain and exit closed facilities, as well as lease exit charges.
 

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures, specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Recurring Free Cash Flow and Adjusted Diluted Earnings Per Share. They are presented to provide additional information regarding Quad/Graphics' performance and because they are important measures by which Quad/Graphics assesses the profitability and liquidity of its business. These measures should not be considered alternatives to net earnings (loss) as a measure of operating performance or to cash flows provided by operating activities as a measure of liquidity.

 
 

QUAD/GRAPHICS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES
RECURRING FREE CASH FLOW
For the Six Months Ended June 30, 2013 and 2012
(in millions)
(UNAUDITED)
     
Six Months Ended June 30,
2013     2012
Net cash provided by operating activities $ 216.9 $ 170.5
 
Add back non-recurring payments:
Restructuring payments, net (1) 51.0 43.1
Worldcolor bankruptcy payments 7.7   7.9  
 
Recurring cash flows provided by operating activities 275.6 221.5
 
Less: purchases of property, plant and equipment (69.7 ) (54.2 )
 
Recurring Free Cash Flow $ 205.9   $ 167.3  

______________________________

(1)     Restructuring payments are shown net of cash receipts related to non-recurring restructuring transactions. For the six months ended June 30, 2013, restructuring payments were $51.0 million. For the six months ended June 30, 2012, restructuring payments were $57.8 million (consisting of $56.9 million in payments for continuing operations and $0.9 million for Canadian discontinued operations) and were reduced for a $14.7 million non-recurring collection of a disputed pre-acquisition Worldcolor note receivable.
 

Recurring Free Cash Flow includes the cash flows of the Canadian operations prior to the March 1, 2012 sale.

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures, specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Recurring Free Cash Flow and Adjusted Diluted Earnings Per Share. They are presented to provide additional information regarding Quad/Graphics' performance and because they are important measures by which Quad/Graphics assesses the profitability and liquidity of its business. These measures should not be considered alternatives to net earnings (loss) as a measure of operating performance or to cash flows provided by operating activities as a measure of liquidity.

 
 

QUAD/GRAPHICS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES
Adjusted Diluted Earnings Per Share
For the Three Months Ended June 30, 2013 and 2012
(in millions, except per share data)
(UNAUDITED)
   
Three Months Ended June 30,
2013     2012
Loss before income taxes and equity in loss of unconsolidated entities $ (26.5 ) $ (30.3 )
 
Restructuring, impairment and transaction-related charges 29.2   37.7  
2.7 7.4
 
Income tax expense at 40% normalized tax rate 1.1   3.0  
1.6 4.4
 
Equity in loss of unconsolidated entities (1.7 ) (0.8 )
Net loss attributable to noncontrolling interests 0.4    
 
Adjusted net earnings (Non-GAAP) $ 0.3   $ 3.6  
 
Basic weighted average number of common shares outstanding 46.9 46.8
Plus: effect of dilutive equity incentive instruments (Non-GAAP) 0.8   0.1  
Diluted weighted average number of common shares outstanding (Non-GAAP) 47.7   46.9  
 
Adjusted Diluted Earnings Per Share (Non-GAAP) (1) $ 0.01   $ 0.08  
 
 
Diluted Loss Per Share (GAAP) $ (0.59 ) $ (0.44 )
Restructuring, impairment and transaction-related charges per share 0.61 0.80
Income tax benefit from condensed consolidated statement of operations per share (0.01 ) (0.22 )
Income tax expense at 40% normalized tax rate per share (0.02 ) (0.06 )
Allocation to participating securities per share (2) 0.01
GAAP to Non-GAAP diluted impact per share 0.01    
Adjusted Diluted Earnings Per Share (Non-GAAP) (1) $ 0.01   $ 0.08  

______________________________

(1)     Adjusted Diluted Earnings Per Share excludes: (i) restructuring, impairment and transaction-related charges and (ii) discrete income tax items.
 
(2) Represents the impact of dividends distributed to non-vested stock option holders in accordance with the two-class method of calculating GAAP earnings per share.
 

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures, specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Recurring Free Cash Flow and Adjusted Diluted Earnings Per Share. They are presented to provide additional information regarding Quad/Graphics' performance and because they are important measures by which Quad/Graphics assesses the profitability and liquidity of its business. These measures should not be considered alternatives to net earnings (loss) as a measure of operating performance or to cash flows provided by operating activities as a measure of liquidity.

 
 

QUAD/GRAPHICS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES
Adjusted Diluted Earnings Per Share
For the Six Months Ended June 30, 2013 and 2012
(in millions, except per share data)
(UNAUDITED)
   
Six Months Ended June 30,
2013     2012
Loss from continuing operations before income taxes and equity in earnings (loss) of unconsolidated entities $ (49.3 ) $ (49.8 )
 
Restructuring, impairment and transaction-related charges 55.1   75.9  
5.8 26.1
 
Income tax expense at 40% normalized tax rate 2.3   10.4  
3.5 15.7
 
Equity in earnings (loss) of unconsolidated entities (1.5 ) 0.3
Net (earnings) loss attributable to noncontrolling interests 0.5   (0.1 )
 
Adjusted net earnings from continuing operations (Non-GAAP) $ 2.5   $ 15.9  
 
Basic weighted average number of common shares outstanding 46.9 46.8
Plus: effect of dilutive equity incentive instruments (Non-GAAP) 0.8   0.2  
Diluted weighted average number of common shares outstanding (Non-GAAP) 47.7   47.0  
 
Adjusted Diluted Earnings Per Share From Continuing Operations (Non-GAAP) (1) $ 0.05   $ 0.34  
 
 
Diluted Loss Per Share From Continuing Operations (GAAP) $ (0.89 ) $ (0.12 )
Restructuring, impairment and transaction-related charges per share 1.16 1.61
Income tax benefit from condensed consolidated statement of operations per share (0.19 ) (0.94 )
Income tax expense at 40% normalized tax rate per share (0.05 ) (0.22 )
Allocation to participating securities per share (2) 0.01
GAAP to Non-GAAP diluted impact per share 0.01   0.01  
Adjusted Diluted Earnings Per Share From Continuing Operations (Non-GAAP) (1) $ 0.05   $ 0.34  

______________________________

(1)     Adjusted Diluted Earnings Per Share excludes: (i) the results of the Canadian discontinued operations, (ii) the gain on disposal of the Canadian discontinued operations, (iii) restructuring, impairment and transaction-related charges and (iv) discrete income tax items.
 
(2) Represents the impact of dividends distributed to non-vested stock option holders in accordance with the two-class method of calculating GAAP earnings per share.
 

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures, specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Recurring Free Cash Flow and Adjusted Diluted Earnings Per Share. They are presented to provide additional information regarding Quad/Graphics' performance and because they are important measures by which Quad/Graphics assesses the profitability and liquidity of its business. These measures should not be considered alternatives to net earnings (loss) as a measure of operating performance or to cash flows provided by operating activities as a measure of liquidity.

Investor Relations Contact:
Quad/Graphics
Kelly Vanderboom
Vice President & Treasurer
414-566-2464
Kelly.Vanderboom@qg.com
or
Media Contact:
Quad/Graphics
Claire Ho
Director of Corporate Communications
414-566-2955
Claire.Ho@qg.com