Company Achieves Third Consecutive Quarter of
Improvement in Net Sales Trend; Strong Operating Performance Drives
Increases in Margin and Free Cash Flow, Enabling Further Debt
Reduction
Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”),
today reported results for the first quarter of 2021.
Recent Highlights
- Achieved third consecutive quarter of improvement in net sales
decline rate since the height of the pandemic.
- Achieved margin expansion and new business wins in agency
solutions and print, while continuing to align costs to demand
environment.
- Increased cash from operating activities to $73 million and
Free Cash Flow to $56 million, up from $45 million and $16 million
in 2020, respectively.
- Reduced Net Debt by $61 million during the first quarter and
improved the Debt Leverage Ratio to 3.24x at March 31, 2021.
- Maintained strong liquidity position with up to $463 million in
unused capacity under Quad’s revolving credit agreement and $81
million of cash on hand.
“We are very pleased with our performance during the first
quarter,” said Joel Quadracci, Chairman, President & CEO of
Quad. “Our team achieved a third straight quarter of improvement in
net sales decline rate, increased our adjusted EBITDA margin, and
drove higher cash flows. These positive trends included new
business wins in agency solutions and print, reflecting how well
our integrated marketing solutions offering is resonating in the
marketplace. We remain focused on growing segment share and
managing costs to drive strong cash flow, which will enable further
debt reduction.
“We continue to leverage our commitment to client focus,
platform excellence, innovation, strong culture and social purpose
to accelerate our competitive position as a worldwide marketing
solutions partner. Our integrated marketing platform creates
superior value for our clients by helping them reduce the
complexity of working with multiple agency partners and vendors,
increase efficiencies, and improve marketing spend effectiveness
across all channels. Our state-of-the-art offering and commitment
to innovation has allowed us to establish and expand relationships
with valued brands across top-performing verticals, including
consumer technology, healthcare, finance and consumer-packaged
goods. Our offering includes robust research capabilities to help
brands and marketers better understand the drivers of consumer
engagement and their purchasing journey, built on sound data and
analytics. Recently, we announced our expanded partnership with
Package InSight, an organization that studies brand packaging
performance, consumer attention and shelf impact, to enhance this
differentiating aspect of our offering.
“We will continue to remain nimble and adapt to the rapidly
evolving demand landscape as the economy re-opens. We will remain
disciplined in how we manage all aspects of our business, including
taking advantage of value-creating opportunities that will help
accelerate our transformation into higher margin products and
services, and enhance our financial strength and create shareholder
value. Notably, our strong culture and values include an enduring
focus on social and environmental matters, and the benefit that
this focus brings to the company and the communities we serve. For
example, our comprehensive and sustainable diversity, equity and
inclusion strategy is a moral and business imperative as it will
ensure we attract and retain the talent we need to successfully
compete and grow as a trusted marketing solutions partner.
Similarly, our long-standing focus on conserving raw materials,
minimizing waste and recycling make a meaningful impact on both the
environment and the value we create.”
Summary Results
Results for the three months ended March 31, 2021, include:
- Net Sales — Net sales were $706 million in the first quarter of
2021, down 14% from the same period in 2020, primarily due to the
economic impact from the COVID-19 pandemic, and ongoing print
industry volume pressures. The first quarter decline represents a
third quarter of sequential revenue improvement during the
pandemic, as compared to a 21% decline in the fourth quarter of
2020, a 28% decline in the third quarter of 2020 and a 38% decline
in the second quarter of 2020.
- Net Earnings (Loss) From Continuing Operations — Net earnings
from continuing operations were $10 million or $0.19 diluted
earnings per share in the first quarter of 2021, an increase of $19
million compared to the first quarter of 2020, which recorded a net
loss of $9 million or $0.17 diluted loss per share.
- Adjusted EBITDA — Adjusted EBITDA was $66 million in the first
quarter of 2021, as compared to $75 million in the same period in
2020, while Adjusted EBITDA margin improved to 9.3% in 2021, as
compared to 9.2% in 2020. The variance in Adjusted EBITDA to prior
year reflects the impact of the net sales decline and $18 million
of nonrecurring benefits realized in 2020, including a $12 million
benefit from a change in the hourly production employee vacation
policy, and a $6 million benefit in the cost of worker’s
compensation claims from improved production safety procedures.
These impacts were partially offset by savings from cost reduction
initiatives. Adjusted EBITDA margin improved 15 basis points driven
by cost savings initiatives more than offsetting the relative
percentage decline in sales.
- Net Cash Provided by Operating Activities — Net cash provided
by operating activities increased by $28 million to $73 million in
the first quarter of 2021, as compared to $45 million in the same
period in 2020, primarily due to improvements in working
capital.
- Free Cash Flow — Free Cash Flow increased by $40 million to $56
million in the first quarter of 2021, as compared to $16 million in
the same period in 2020, primarily due to higher net cash provided
by operating activities as described above and a $12 million
decrease in capital expenditures.
Dave Honan, Executive Vice President and CFO, concluded: “Our
commitment to disciplined cost management and productivity
improvements drove a higher Adjusted EBITDA margin and, when
combined with new agency and print business wins, helped us deliver
solid financial results despite the impact of the pandemic. This
included a substantial increase in our Free Cash Flow, which
enabled us to reduce Net Debt by $61 million and improve our Debt
Leverage Ratio to 3.24x. We will continue to use our strong Free
Cash Flow, in addition to proceeds from asset sales, to further
reduce debt, and we expect to further improve our Debt Leverage
Ratio to be at or near 3.0x by the end of 2021.”
Quarterly Conference Call
Quad will hold a conference call at 10 a.m. ET on Wednesday, May
5, to discuss first quarter 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/10155015/e6ee4a26aa.
Participants will be given a unique PIN to gain immediate access to
the call on May 5, 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 June
5, 2021, accessible as follows:
- U.S. Toll-Free: 1-877-344-7529
- International Toll: 1-412-317-0088
- Replay Access Code: 10155015
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 the
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 fluctuations in costs
(including labor and labor-related costs, energy costs, freight
rates and raw materials) and the impact of fluctuations in the
availability of raw materials; 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; 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, (loss) earnings from
discontinued operations, net of tax, net pension income, loss
(gain) 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, loss (gain) 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 March
31, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended March
31,
2021
2020
Net sales
$
705.8
$
822.5
Cost of sales
559.8
647.7
Selling, general and administrative
expenses
80.5
99.6
Depreciation and amortization
41.9
47.4
Restructuring, impairment and
transaction-related charges
2.6
22.8
Total operating expenses
684.8
817.5
Operating income from continuing
operations
21.0
5.0
Interest expense
14.5
18.1
Net pension income
(4.1)
(2.7)
Gain on debt extinguishment
—
(0.6)
Earnings (loss) from continuing operations
before income taxes and equity in earnings of unconsolidated
entity
10.6
(9.8)
Income tax expense (benefit)
0.5
(1.2)
Earnings (loss) from continuing operations
before equity in earnings of unconsolidated entity
10.1
(8.6)
Equity in earnings of unconsolidated
entity
(0.1)
—
Net earnings (loss) from continuing
operations
10.2
(8.6)
Loss from discontinued operations, net of
tax
—
(3.8)
Net earnings (loss)
10.2
(12.4)
Less: net loss attributable to
noncontrolling interests
—
—
Net earnings (loss) attributable to
Quad common shareholders
$
10.2
$
(12.4)
Earnings (loss) per share attributable
to Quad common shareholders
Basic:
Continuing operations
$
0.20
$
(0.17)
Discontinued operations
—
(0.08)
Basic earnings (loss) per share
attributable to Quad common shareholders
$
0.20
$
(0.25)
Diluted:
Continuing operations
$
0.19
$
(0.17)
Discontinued operations
—
(0.08)
Diluted earnings (loss) per share
attributable to Quad common shareholders
$
0.19
$
(0.25)
Weighted average number of common
shares outstanding
Basic
51.4
50.5
Diluted
52.8
50.5
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
As of March 31, 2021 and December
31, 2020
(in millions)
(UNAUDITED)
March 31, 2021
December 31,
2020
ASSETS
Cash and cash equivalents
$
80.6
$
55.2
Receivables, less allowance for credit
losses
340.3
399.1
Inventories
162.0
170.2
Prepaid expenses and other current
assets
50.8
54.7
Total current assets
633.7
679.2
Property, plant and equipment—net
850.7
884.2
Operating lease right-of-use
assets—net
78.7
81.0
Goodwill
103.0
103.0
Other intangible assets—net
95.9
104.3
Equity method investment in unconsolidated
entity
2.5
2.6
Other long-term assets
72.7
73.4
Total assets
$
1,837.2
$
1,927.7
LIABILITIES AND SHAREHOLDERS’
EQUITY
Accounts payable
$
330.0
$
320.0
Other current liabilities
251.5
310.8
Short-term debt and current portion of
long-term debt
16.8
20.7
Current portion of finance lease
obligations
2.7
2.8
Current portion of operating lease
obligations
27.7
28.4
Total current liabilities
628.7
682.7
Long-term debt
871.3
902.7
Finance lease obligations
1.8
2.0
Operating lease obligations
53.0
54.5
Deferred income taxes
5.1
4.2
Other long-term liabilities
184.2
196.8
Total liabilities
1,744.1
1,842.9
Shareholders’ equity
Preferred stock
—
—
Common stock
1.4
1.4
Additional paid-in capital
835.5
833.1
Treasury stock, at cost
(13.2)
(13.1)
Accumulated deficit
(555.8)
(566.0)
Accumulated other comprehensive loss
(175.5)
(171.3)
Quad’s shareholders’ equity
92.4
84.1
Noncontrolling interests
0.7
0.7
Total shareholders’ equity and
noncontrolling interests
93.1
84.8
Total liabilities and shareholders’
equity
$
1,837.2
$
1,927.7
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the Three Months Ended March
31, 2021 and 2020
(in millions)
(UNAUDITED)
Three Months Ended March
31,
2021
2020
OPERATING ACTIVITIES
Net earnings (loss)
$
10.2
$
(12.4)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
41.9
47.4
Impairment charges
0.8
3.8
Gain on debt extinguishment
—
(0.6)
Stock-based compensation
3.0
2.8
Loss on the sale of a businesses
—
2.9
Gain on the sale or disposal of property,
plant and equipment
(7.0)
(0.8)
Deferred income taxes
0.1
12.6
Other non-cash adjustments to net loss
0.5
0.6
Changes in operating assets and
liabilities—net of acquisitions and divestitures
23.4
(11.6)
Net cash provided by operating
activities
72.9
44.7
INVESTING ACTIVITIES
Purchases of property, plant and
equipment
(16.9)
(29.0)
Cost investment in unconsolidated
entities
(0.3)
—
Proceeds from the sale of property, plant
and equipment
11.4
3.6
Proceeds from the sale of businesses
—
41.3
Acquisition of businesses—net of cash
acquired
—
(1.6)
Other investing activities
(0.2)
—
Net cash (used in) provided by investing
activities
(6.0)
14.3
FINANCING ACTIVITIES
Payments of long-term debt
(33.9)
(43.9)
Payments of finance lease obligations
(0.8)
(3.1)
Borrowings on revolving credit
facilities
4.4
204.8
Payments on revolving credit
facilities
(5.7)
(76.7)
Equity awards redeemed to pay employees’
tax obligations
(1.1)
(1.0)
Payment of cash dividends
(1.4)
(9.5)
Other financing activities
(2.9)
0.1
Net cash (used in) provided by financing
activities
(41.4)
70.7
Effect of exchange rates on cash and cash
equivalents
(0.1)
(0.6)
Net increase in cash and cash
equivalents
25.4
129.1
Cash and cash equivalents at beginning of
period
55.2
78.7
Cash and cash equivalents at end of
period
$
80.6
$
207.8
The Condensed Consolidated Statements of Cash Flows include the
cash flows related to the United States Book business for the three
months ended March 31, 2020.
QUAD/GRAPHICS, INC.
SEGMENT FINANCIAL INFORMATION
For the Three Months Ended March
31, 2021 and 2020
(in millions)
(UNAUDITED)
Net Sales
Operating Income (Loss) from
Continuing Operations
Restructuring, Impairment and
Transaction-Related Charges (1)
Three months ended March 31,
2021
United States Print and Related
Services
$
634.6
$
32.5
$
1.1
International
71.2
1.5
0.8
Total operating segments
705.8
34.0
1.9
Corporate
—
(13.0)
0.7
Total
$
705.8
$
21.0
$
2.6
Three months ended March 31,
2020
United States Print and Related
Services
$
736.6
$
16.3
$
20.8
International
85.9
0.3
1.3
Total operating segments
822.5
16.6
22.1
Corporate
—
(11.6)
0.7
Total
$
822.5
$
5.0
$
22.8
______________________________
(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 United States Book
business for the three months ended March 31, 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 March
31, 2021 and 2020
(in millions, except margin
data)
(UNAUDITED)
Three Months Ended March
31,
2021
2020
Net earnings (loss) attributable to Quad
common shareholders
$
10.2
$
(12.4)
Interest expense
14.5
18.1
Income tax expense (benefit)
0.5
(1.2)
Depreciation and amortization
41.9
47.4
EBITDA (Non-GAAP)
$
67.1
$
51.9
EBITDA Margin (Non-GAAP)
9.5
%
6.3
%
Restructuring, impairment and
transaction-related charges (1)
2.6
22.8
Loss from discontinued operations, net of
tax (2)
—
3.8
Net pension income (3)
(4.1)
(2.7)
Gain on debt extinguishment (4)
—
(0.6)
Other (5)
0.2
0.2
Adjusted EBITDA (Non-GAAP)
$
65.8
$
75.4
Adjusted EBITDA Margin
(Non-GAAP)
9.3
%
9.2
%
______________________________
(1)
Operating results from continuing
operations for the three months ended March 31, 2021 and 2020, were
affected by the following restructuring, impairment and
transaction-related charges:
Three Months Ended March
31,
2021
2020
Employee termination charges (a)
$
4.7
$
12.6
Impairment charges (b)
0.8
2.5
Transaction-related charges (c)
0.2
0.5
Integration costs (d)
—
0.7
Other restructuring charges (income)
(e)
(3.1)
6.5
Restructuring, impairment and
transaction-related charges
$
2.6
$
22.8
______________________________________
(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. Gains included in other restructuring charges were
$7.8 million and $0.8 million during the three months ended March
31, 2021 and 2020, respectively.
(2)
Loss from discontinued
operations, net of tax, for the three months ended March 31, 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.
(3)
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.
(4)
The $0.6 million gain on debt
extinguishment recorded during the three months ended March 31,
2020, primarily relates to the repurchase of the Company’s
unsecured 7.0% senior notes due May 1, 2022.
(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
FREE CASH FLOW
For the Three Months Ended March
31, 2021 and 2020
(in millions)
(UNAUDITED)
Three Months Ended March
31,
2021
2020
Net cash provided by operating
activities
$
72.9
$
44.7
Less: purchases of property, plant and
equipment
(16.9)
(29.0)
Free Cash Flow (Non-GAAP)
$
56.0
$
15.7
______________________________
The above calculation of Free Cash Flow includes the cash flows
related to the United States Book business for the three months
ended March 31, 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 March 31, 2021 and December
31, 2020
(in millions, except ratio)
(UNAUDITED)
March 31, 2021
December 31,
2020
Total debt and finance lease obligations
on the condensed consolidated balance sheets
$
892.6
$
928.2
Less: Cash and cash equivalents
80.6
55.2
Net Debt (Non-GAAP)
$
812.0
$
873.0
Divided by: trailing twelve months
Adjusted EBITDA (Non-GAAP) (1)
$
250.8
$
260.4
Debt Leverage Ratio (Non-GAAP)
3.24
x
3.35
x
______________________________
(1)
The calculation of Adjusted EBITDA for the
trailing twelve months ended March 31, 2021, and December 31, 2020,
was as follows:
Add
Subtract
Trailing Twelve Months
Ended
Year Ended
Three Months Ended
December 31, 2020 (a)
March 31, 2021
March 31, 2020
March 31, 2021
Net earnings (loss) attributable to Quad
common shareholders
$
(128.3)
$
10.2
$
(12.4)
$
(105.7)
Interest expense
68.8
14.5
18.1
65.2
Income tax expense (benefit)
0.3
0.5
(1.2)
2.0
Depreciation and amortization
181.6
41.9
47.4
176.1
EBITDA (Non-GAAP)
$
122.4
$
67.1
$
51.9
$
137.6
Restructuring, impairment and
transaction-related charges
124.1
2.6
22.8
103.9
Loss from discontinued operations, net of
tax
21.9
—
3.8
18.1
Net pension income
(10.5)
(4.1)
(2.7)
(11.9)
(Gain) loss on debt extinguishment
1.8
—
(0.6)
2.4
Other (b)
0.7
0.2
0.2
0.7
Adjusted EBITDA (Non-GAAP)
$
260.4
$
65.8
$
75.4
$
250.8
______________________________
(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 March
31, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended March
31,
2021
2020
Earnings (loss) from continuing operations
before income taxes and equity in earnings of unconsolidated
entity
$
10.6
$
(9.8)
Restructuring, impairment and
transaction-related charges
2.6
22.8
Gain on debt extinguishment
—
(0.6)
Adjusted net earnings from continuing
operations, before income taxes (Non-GAAP)
13.2
12.4
Income tax expense at 25% normalized tax
rate
3.3
3.1
Adjusted net earnings from continuing
operations (Non-GAAP)
$
9.9
$
9.3
Basic weighted average number of common
shares outstanding
51.4
50.5
Plus: effect of dilutive equity incentive
instruments (Non-GAAP)
1.4
0.6
Diluted weighted average number of common
shares outstanding (Non-GAAP)
52.8
51.1
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.19
$
0.18
Diluted earnings (loss) per share from
continuing operations (GAAP)
$
0.19
$
(0.17)
Restructuring, impairment and
transaction-related charges per share
0.05
0.44
Gain on debt extinguishment per share
—
(0.01)
Income tax expense (benefit) from
condensed consolidated statement of operations per share
0.01
(0.02)
Income tax expense at 25% normalized tax
rate per share
(0.06)
(0.06)
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.19
$
0.18
______________________________
(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 on debt
extinguishment; (iv) discrete income tax items; (v) equity in loss
of unconsolidated entity; and (vi) net earnings 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/20210504006188/en/
Investor Relations Contact Katie Krebsbach Investor
Relations Lead, 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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