New Client Wins Drive Net Sales Growth of 1% or
Net Sales Growth of 3% Excluding Divestitures; Strong Cash Flows
Reduce Net Debt by $410 Million or 40% Over the Past Two Years and
Achieve Net Debt Leverage of 2.5x
Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”),
today reported results for the fourth quarter and full year ended
December 31, 2021.
Recent Highlights
- Increased Net Sales 1% (3% excluding divestitures) in 2021,
driven by higher print volumes, including print segment share gains
from new clients, growth in Agency Solutions Net Sales, and
increased pricing in response to inflationary cost pressures.
- Delivered $38 million of Net Earnings From Continuing
Operations in 2021 and Adjusted Diluted Earnings Per Share From
Continuing Operations of $0.60 per share in 2021 compared to $0.29
per share in 2020.
- Generated $137 million of Net Cash From Operating Activities
and Free Cash Flow of $87 million in 2021.
- Divested non-core assets, generating $166 million of cash
proceeds in 2021.
- Reduced Net Debt by $410 million or 40% over the past two
years, reaching Debt Leverage of 2.5x.
- Provides 2022 guidance with continued Net Sales growth of
3-7%.
“Our sales growth and strong execution helped us drive strong
full-year results, including a 3% increase in Net Sales excluding
divestitures. Those results were supported by higher print volumes,
including print segment share gains from new clients, continued
growth in Agency Solutions, and increased pricing in response to
inflationary cost pressures. These results validate our business
strategy as a marketing solutions partner with a complete
through-the-line offering – from innovation to execution – that
delivers more value to clients,” said Joel Quadracci, Chairman,
President & CEO of Quad.
“We were able to grow and diversify sales despite a challenging
operating and economic environment that included significant supply
chain disruptions, inflationary cost pressures and labor
shortages,” Quadracci continued. “We worked thoughtfully and
diligently to mitigate these impacts on our business while
prioritizing the health and well-being of our employees,
proactively managing our clients’ service expectations, providing
innovative solutions, and enhancing the financial health of the
Company. Notably, we have reduced Net Debt by 40% over the past two
years, and, with our strong balance sheet, we continue to invest
strategically in talent, technology, products and services to
accelerate our position as a marketing solutions partner.”
Quadracci concluded: “Looking ahead to 2022, we will build on
the strength of our unique offering as we continue to scale our
platform and innovatively address our clients’ ever-changing needs.
We will expand our relationships with existing clients, providing
them with more products and services, while also adding new clients
who are looking for a partner with a complete through-the-line
marketing offering. We also expect to expand in growth market
verticals, driven by our integrated marketing platform that removes
friction throughout the marketing process. Our focus remains clear:
helping brands and marketers reduce complexity, increase efficiency
and enhance marketing spend effectiveness.”
Summary Results
Results for the fourth quarter ended December 31, 2021,
include:
- Net Sales — Net Sales were $855 million in the fourth quarter
of 2021, up 1% from the same period in 2020. Excluding the
divestiture of QuadExpress, a third-party logistics (3PL) business,
Net Sales increased 5% from the fourth quarter of 2020. The Net
Sales increase during the fourth quarter was due to a 4% increase
in year-over-year print Net Sales and a 4% increase in
year-over-year Agency Solutions Net Sales. The Net Sales increase
in print and Agency Solutions was driven by Net Sales growth from
existing clients as well as print segment share gains from new
clients.
- Net Loss From Continuing Operations — Net Loss From Continuing
Operations was $21 million or $0.41 Diluted Loss Per Share in the
fourth quarter of 2021, an improvement of $65 million compared to
the fourth quarter of 2020, which recorded a Net Loss of $86
million or $1.69 Diluted Loss Per Share. This improvement was due
to lower restructuring, impairment and transaction-related charges,
and lower income tax expense.
- Adjusted EBITDA — Adjusted EBITDA was $56 million in the fourth
quarter of 2021, as compared to $64 million in the same period in
2020. The higher profit from increased Net Sales was more than
offset by cost inflation and the negative impact on labor
productivity and sales from supply chain disruptions.
Results for the year ended December 31, 2021, include:
- Net Sales — Net Sales were $3.0 billion in 2021, up 1% from
2020. Excluding divestitures, Net Sales increased 3% compared to
2020. The Net Sales increase in 2021 was due to a 1% increase in
year-over-year print Net Sales, a 12% increase in year-over-year
logistics Net Sales and a 7% increase in year-over-year Agency
Solutions Net Sales.
- Net Earnings (Loss) From Continuing Operations — Net Earnings
From Continuing Operations were $38 million or $0.71 Diluted
Earnings Per Share in 2021, compared to a Net Loss of $107 million
or $2.10 Diluted Loss Per Share From Continuing Operations in 2020.
Net Earnings From Continuing Operations increased due to higher
profit from increased net sales, a $105 million decrease in
restructuring, impairment, and transaction-related charges
(including a $24 million net gain from the sale of businesses and a
$23 million net gain from the sale of facilities), and a $25
million gain from the sale and leaseback of the Chalfont, Penn.,
and West Allis, Wis., 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 vacation policy, and the negative impact of cost inflation and
supply chain disruptions.
- Adjusted EBITDA — Adjusted EBITDA was $246 million in 2021, as
compared to $260 million in 2020. The decrease was due to the
non-recurrence of $39 million of temporary COVID-19
pandemic-related cost savings in 2020, a $12 million benefit in
2020 from a change in vacation policy, and the negative impact of
cost inflation and supply chain disruptions, partially offset by
higher profit from increased Net Sales and a $9 million net gain
from property insurance claims.
- Adjusted Diluted Earnings Per Share From Continuing Operations
— Adjusted Diluted Earnings Per Share From Continuing Operations
more than doubled from $0.29 per share in 2020 to $0.60 per share
in 2021 primarily due to lower depreciation and amortization, lower
interest expense and lower selling, general and administrative
expenses.
- Net Cash Provided by Operating Activities — Net Cash Provided
by Operating Activities decreased by $54 million to $137 million in
2021, as compared to 2020, primarily due to $40 million of income
tax refunds received during the third quarter of 2020 due to the
CARES Tax Act, as well as higher working capital to support Net
Sales growth and strategically increasing paper and materials
inventory levels to serve our clients.
- Free Cash Flow — Free Cash Flow decreased by $43 million to $87
million in 2021, as compared to 2020, primarily due to the $40
million CARES Tax Act refunds received in 2020 and higher working
capital needs in 2021, partially offset by an $11 million decrease
in capital expenditures.
- Net Debt — Debt less cash and cash equivalents decreased by
$249 million to $624 million at December 31, 2021, as compared to
$873 million at December 31, 2020. The reduction was primarily
achieved with the application of cash generated from asset sales
and cash provided by operating activities. Over the past two years
during the pandemic, Net Debt decreased $410 million or 40%. The
Debt Leverage Ratio improved 81 basis points to 2.54x at December
31, 2021, from 3.35x at December 31, 2020.
2022 Guidance
The Company provides the following 2022 financial guidance:
Financial Metric
2022 Guidance
Annual Net Sales Change (1)
3% to 7% increase
Full-Year Adjusted EBITDA
$230 to $270 million
Free Cash Flow
$70 to $100 million
Capital Expenditures
$55 to $65 million
Year-End Debt Leverage Ratio
(2)
Approximately 2.25x
(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 guidance.
Tony Staniak, CFO of Quad, concluded: “New client wins and
disciplined operational performance, despite significant supply
chain challenges, a tight labor and freight market, and
inflationary cost pressures, drove strong results in 2021 evidenced
by achieving or exceeding our 2021 guidance. We grew Net Sales
excluding divestitures by 3% in 2021 while increasing sales
diversification into our growth and higher-profitability offerings,
and at the mid-point of our 2022 guidance we expect an additional
5% sales growth in 2022. We also continue to be a strong Free Cash
Flow generator, and we used that cash along with proceeds from
asset sales to return to our long-term targeted leverage range of
2.0x to 2.5x.”
Quarterly Conference Call
Quad will hold a conference call at 10 a.m. ET on Wednesday,
February 23 to discuss fourth quarter and full-year 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/10163683/f151567008.
Participants will be given a unique PIN to gain immediate access to
the call on February 23, 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 March
23, 2022, accessible as follows:
- U.S. Toll-Free: 1-877-344-7529
- International Toll: 1-412-317-0088
- Replay Access Code: 8237187
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 impact of fluctuations 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 impact of decreasing demand for printed materials
and significant overcapacity in a highly competitive environment
creates downward pricing pressures and potential under-utilization
of assets; the negative impacts the COVID-19 pandemic has had and
will continue to have on the Company’s business, financial
condition, cash flows, results of operations and supply chain,
including rising inflationary cost pressures on raw materials,
distribution and labor, and future uncertain impacts; the failure
to attract and retain qualified talent across the enterprise; the
impact of increased business complexity as a result of the
Company’s transformation to a marketing solutions partner; the
impact of digital media and similar technological changes,
including digital substitution by consumers; the inability of the
Company to reduce costs and improve operating efficiency rapidly
enough to meet market conditions; 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 impact of a data-breach of
sensitive information, ransomware attack or other cyber incident on
the Company; the impact negative publicity could have on our
business; the impact of changing future economic conditions; the
failure of clients to perform under contracts or to renew contracts
with clients on favorable terms or at all; the fragility and
decline in overall distribution channels; 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 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 other intangible assets; the impact of risks
associated with the operations outside of the United States
(“U.S.”), including costs incurred or reputational damage suffered
due to improper conduct of its employees, contractors or agents;
significant investments may be needed to maintain the Company’s
platforms, processes, systems, client and product technology and
marketing and to remain technologically and economically
competitive; 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 regulatory matters and
legislative developments or changes in laws, including changes in
cyber-security, privacy and environmental laws; and 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, gains 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, gains 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
As a worldwide marketing solutions partner, Quad (NYSE: QUAD)
leverages its more than 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 removes friction throughout the
marketing process thereby helping brands and marketers reduce
complexity, increase efficiency and enhance marketing spend
effectiveness. Quad provides its clients with a complete
through-the-line marketing offering, providing unmatched scale for
on-site services and expanded subject expertise in marketing
strategy, creative solutions, media deployment and marketing
management services. With a client-centric approach that drives the
Company to continuously hone and evolve its offering, combined with
leading-edge technology, advanced data and analytics and
single-source simplicity, the Company has the resources and
knowledge to help a wide variety of clients target, more deeply
engage and grow audiences in multiple verticals, including those in
established and emerging industries, such as retail, publishing,
consumer technology, consumer packaged goods, financial services,
insurance, healthcare and direct-to-consumer.
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Three Months Ended
December 31, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended December
31,
2021
2020
Net sales
$
854.6
$
843.3
Cost of sales
701.8
682.9
Selling, general and administrative
expenses
96.7
97.1
Depreciation and amortization
38.0
42.7
Restructuring, impairment and
transaction-related charges
22.3
75.1
Total operating expenses
858.8
897.8
Operating loss from continuing
operations
(4.2
)
(54.5
)
Interest expense
14.5
16.6
Net pension income
(3.5
)
(2.5
)
Loss on debt extinguishment
0.7
—
Loss from continuing operations before
income taxes and equity in earnings of unconsolidated entity
(15.9
)
(68.6
)
Income tax expense
5.4
17.8
Loss from continuing operations before
equity in earnings of unconsolidated entity
(21.3
)
(86.4
)
Equity in earnings of unconsolidated
entity
(0.2
)
(0.7
)
Net loss from continuing
operations
(21.1
)
(85.7
)
Loss from discontinued operations, net of
tax
—
(8.3
)
Net loss
(21.1
)
(94.0
)
Less: net earnings attributable to
noncontrolling interests
—
—
Net loss attributable to Quad common
shareholders
$
(21.1
)
$
(94.0
)
Loss per share attributable to Quad
common shareholders
Basic and diluted:
Continuing operations
$
(0.41
)
$
(1.69
)
Discontinued operations
—
(0.16
)
Basic and diluted loss per share
attributable to Quad common shareholders
$
(0.41
)
$
(1.85
)
Weighted average number of common
shares outstanding
Basic and Diluted
51.3
50.7
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Years Ended December 31,
2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Year Ended December
31,
2021
2020
Net sales
$
2,960.4
$
2,929.6
Cost of sales
2,389.9
2,334.8
Selling, general and administrative
expenses
326.0
335.1
Gains from sale and leaseback
(24.5
)
—
Depreciation and amortization
157.3
181.6
Restructuring, impairment and
transaction-related charges
18.9
124.1
Total operating expenses
2,867.6
2,975.6
Operating income (loss) from continuing
operations
92.8
(46.0
)
Interest expense
59.6
68.8
Net pension income
(14.5
)
(10.5
)
Loss on debt extinguishment
0.7
1.8
Earnings (loss) from continuing operations
before income taxes and equity in (earnings) loss of unconsolidated
entity
47.0
(106.1
)
Income tax expense
9.5
0.3
Earnings (loss) from continuing operations
before equity in (earnings) loss of unconsolidated entity
37.5
(106.4
)
Equity in (earnings) loss of
unconsolidated entity
(0.3
)
0.2
Net earnings (loss) from continuing
operations
37.8
(106.6
)
Loss from discontinued operations, net of
tax
—
(21.9
)
Net earnings (loss)
37.8
(128.5
)
Less: net loss attributable to
noncontrolling interests
—
(0.2
)
Net earnings (loss) attributable to
Quad common shareholders
$
37.8
$
(128.3
)
Earnings (loss) per share attributable
to Quad common shareholders
Basic:
Continuing operations
$
0.74
$
(2.10
)
Discontinued operations
—
(0.43
)
Basic earnings (loss) per share
attributable to Quad common shareholders
$
0.74
$
(2.53
)
Diluted:
Continuing operations
$
0.71
$
(2.10
)
Discontinued operations
—
(0.43
)
Diluted earnings (loss) per share
attributable to Quad common shareholders
$
0.71
$
(2.53
)
Weighted average number of common
shares outstanding
Basic
51.3
50.6
Diluted
53.0
50.6
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
As of December 31, 2021 and
2020
(in millions)
(UNAUDITED)
December 31, 2021
December 31, 2020
ASSETS
Cash and cash equivalents
$
179.9
$
55.2
Receivables, less allowances for credit
losses
362.0
399.1
Inventories
226.2
170.2
Prepaid expenses and other current
assets
41.0
54.7
Total current assets
809.1
679.2
Property, plant and equipment—net
727.0
884.2
Operating lease right-of-use
assets—net
125.7
81.0
Goodwill
86.4
103.0
Other intangible assets—net
75.3
104.3
Equity method investment in unconsolidated
entity
—
2.6
Other long-term assets
66.5
73.4
Total assets
$
1,890.0
$
1,927.7
LIABILITIES AND SHAREHOLDERS’
EQUITY
Accounts payable
$
367.3
$
320.0
Other current liabilities
314.3
310.8
Short-term debt and current portion of
long-term debt
245.6
20.7
Current portion of finance lease
obligations
1.8
2.8
Current portion of operating lease
obligations
28.1
28.4
Total current liabilities
957.1
682.7
Long-term debt
554.9
902.7
Finance lease obligations
1.4
2.0
Operating lease obligations
99.8
54.5
Deferred income taxes
11.9
4.2
Other long-term liabilities
128.1
196.8
Total liabilities
1,753.2
1,842.9
Shareholders’ Equity
Preferred stock
—
—
Common stock
1.4
1.4
Additional paid-in capital
839.3
833.1
Treasury stock, at cost
(14.9
)
(13.1
)
Accumulated deficit
(527.8
)
(566.0
)
Accumulated other comprehensive loss
(161.2
)
(171.3
)
Quad’s shareholders’ equity
136.8
84.1
Noncontrolling interests
—
0.7
Total shareholders’ equity and
noncontrolling interests
136.8
84.8
Total liabilities and shareholders’
equity
$
1,890.0
$
1,927.7
QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the Years Ended December 31,
2021 and 2020
(in millions)
(UNAUDITED)
Year Ended December
31,
2021
2020
OPERATING ACTIVITIES
Net earnings (loss)
$
37.8
$
(128.5
)
Adjustments to reconcile net earnings
(loss) to net cash provided by operating activities:
Depreciation and amortization
157.3
181.6
Impairment charges
34.9
75.6
Reclassification of foreign currency
translation adjustments
(2.7
)
—
Settlement charges on pension plans
0.9
—
Loss on debt extinguishment
0.7
1.8
Stock-based compensation
6.2
10.6
Gain on the sale or disposal of property,
plant and equipment
(49.0
)
(1.8
)
(Gain) loss on the sale of businesses
(20.9
)
3.5
Gain from property insurance claims
(13.4
)
(4.7
)
Deferred income taxes
5.3
48.5
Other non-cash adjustments to net earnings
(loss)
2.7
2.8
Changes in operating assets and
liabilities - net of acquisitions and divestitures
(23.3
)
0.8
Net cash provided by operating
activities
136.5
190.2
INVESTING ACTIVITIES
Purchases of property, plant and
equipment
(50.0
)
(61.0
)
Cost investment in unconsolidated
entities
(1.4
)
(0.5
)
Proceeds from the sale of property, plant
and equipment
126.3
7.4
Proceeds from the sale of businesses
39.7
61.3
Proceeds from property insurance
claims
15.0
4.8
Acquisition of businesses—net of cash
acquired
—
(2.2
)
Other investing activities
(0.2
)
(0.1
)
Net cash provided by investing
activities
129.4
9.7
FINANCING ACTIVITIES
Proceeds from issuance of long-term
debt
15.9
1.0
Payments of long-term debt
(139.5
)
(177.9
)
Payments of finance lease obligations
(3.0
)
(7.4
)
Borrowings on revolving credit
facilities
445.1
350.6
Payments on revolving credit
facilities
(440.5
)
(351.7
)
Payments of debt issuance costs and
financing fees
(5.9
)
(2.7
)
Change in ownership of noncontrolling
interests
(1.9
)
(22.4
)
Equity awards redeemed to pay employees’
tax obligations
(1.1
)
(1.0
)
Payment of cash dividends
(1.4
)
(9.5
)
Other financing activities
(8.6
)
(2.6
)
Net cash used in financing activities
(140.9
)
(223.6
)
Effect of exchange rates on cash and cash
equivalents
(0.3
)
0.2
Net increase (decrease) in cash and cash
equivalents
124.7
(23.5
)
Cash and cash equivalents at beginning of
year
55.2
78.7
Cash and cash equivalents at end of
year
$
179.9
$
55.2
The Condensed Consolidated Statements of
Cash Flows include the cash flows related to the discontinued
United States Book business for the year ended December 31,
2020.
QUAD/GRAPHICS, INC.
SEGMENT FINANCIAL INFORMATION
For the Three Months and Years
Ended December 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 December 31,
2021
United States Print and Related
Services
$
758.8
$
38.7
$
(8.4
)
International
95.8
(24.2
)
29.5
Total operating segments
854.6
14.5
21.1
Corporate
—
(18.7
)
1.2
Total
$
854.6
$
(4.2
)
$
22.3
Three months ended December 31,
2020
United States Print and Related
Services
$
757.3
$
(42.9
)
$
72.1
International
86.0
1.3
2.9
Total operating segments
843.3
(41.6
)
75.0
Corporate
—
(12.9
)
0.1
Total
$
843.3
$
(54.5
)
$
75.1
Year ended December 31, 2021
United States Print and Related
Services
$
2,628.6
$
163.1
$
(14.5
)
International
331.8
(16.1
)
31.3
Total operating segments
2,960.4
147.0
16.8
Corporate
—
(54.2
)
2.1
Total
$
2,960.4
$
92.8
$
18.9
Year ended December 31, 2020
United States Print and Related
Services
$
2,627.6
$
1.7
$
110.1
International
302.0
(0.8
)
12.2
Total operating segments
2,929.6
0.9
122.3
Corporate
—
(46.9
)
1.8
Total
$
2,929.6
$
(46.0
)
$
124.1
______________________________
(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 year ended December 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
December 31, 2021 and 2020
(in millions)
(UNAUDITED)
Three Months Ended December
31,
2021
2020
Net loss attributable to Quad common
shareholders
$
(21.1
)
$
(94.0
)
Interest expense
14.5
16.6
Income tax expense
5.4
17.8
Depreciation and amortization
38.0
42.7
EBITDA (Non-GAAP)
$
36.8
$
(16.9
)
EBITDA Margin (Non-GAAP)
4.3
%
(2.0
)%
Restructuring, impairment and
transaction-related charges (1)
22.3
75.1
Loss from discontinued operations, net of
tax (2)
—
8.3
Net pension income (3)
(3.5
)
(2.5
)
Loss on debt extinguishment (4)
0.7
—
Other (5)
0.1
0.4
Adjusted EBITDA (Non-GAAP)
$
56.4
$
64.4
Adjusted EBITDA Margin
(Non-GAAP)
6.6
%
7.6
%
______________________________
(1)
Operating results for the three
months ended December 31, 2021 and 2020, were affected by the
following restructuring, impairment and transaction-related
charges:
Three Months Ended December
31,
2021
2020
Employee termination charges (a)
$
1.4
$
9.3
Impairment charges (b)
32.9
59.9
Transaction-related charges (c)
0.2
(0.3
)
Integration costs (d)
—
0.6
Other restructuring charges (e)
(12.2
)
5.6
Restructuring, impairment and transaction-related charges
$
22.3
$
75.1
______________________________
(a)
Employee termination charges were
related to workforce reductions through facility consolidations and
separation programs.
(b)
Impairment charges were primarily
for certain property, plant and equipment no longer being utilized
in production as a result of facility consolidations, as well as
other capacity reduction and strategic divestiture activities,
including $32.1 million of impairment charges related to the
Company’s decision to sell the investment in Brazil during the
three months ended December 31, 2021 and $56.6 million of
impairment charges for property, plant and equipment in Oklahoma
City, Oklahoma during the three months ended December 31, 2020.
(c)
Transaction-related charges
consisted primarily of professional service fees and adjustments
related to business acquisition and divestiture activities.
(d)
Integration costs were primarily
related to the integration of acquired companies.
(e)
Other restructuring charges
includes costs to maintain and exit closed facilities, as well as
lease exit charges, and is presented net of gains on the sale of
facilities.
(2)
Loss from discontinued
operations, net of tax, 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.
(4)
The $0.7 million loss on debt
extinguishment recorded during the year ended December 31, 2021,
relates to a $0.5 million loss on debt extinguishment recorded
during the fourth quarter of 2021, primarily related to the
repurchase of the Company’s unsecured 7.0% senior notes due May 1,
2022, and a $0.2 million loss on debt extinguishment from the fifth
amendment to the Company’s April 28, 2014 Senior Secured Credit
Facility, completed on November 2, 2021.
(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 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 Years Ended December 31,
2021 and 2020
(in millions)
(UNAUDITED)
Year Ended December
31,
2021
2020
Net earnings (loss) attributable to Quad
common shareholders
$
37.8
$
(128.3
)
Interest expense
59.6
68.8
Income tax expense
9.5
0.3
Depreciation and amortization
157.3
181.6
EBITDA (Non-GAAP)
$
264.2
$
122.4
EBITDA Margin (Non-GAAP)
8.9
%
4.2
%
Restructuring, impairment and
transaction-related charges (1)
18.9
124.1
Gains from sale and leaseback (2)
(24.5
)
—
Loss from discontinued operations, net of
tax (3)
—
21.9
Net pension income (4)
(14.5
)
(10.5
)
Loss on debt extinguishment (5)
0.7
1.8
Other (6)
1.2
0.7
Adjusted EBITDA (Non-GAAP)
$
246.0
$
260.4
Adjusted EBITDA Margin
(Non-GAAP)
8.3
%
8.9
%
_________________________________
(1)
Operating results for the years
ended December 31, 2021 and 2020, were affected by the following
restructuring, impairment and transaction-related charges:
Year Ended December
31,
2021
2020
Employee termination charges (a)
$
9.9
$
34.7
Impairment charges (b)
34.9
64.1
Transaction-related charges (c)
0.6
1.4
Integration costs (d)
—
1.9
Other restructuring charges (e)
(26.5
)
22.0
Restructuring, impairment and
transaction-related charges
$
18.9
$
124.1
________________________________________________
(a)
Employee termination charges were
related to workforce reductions through facility consolidations and
separation programs.
(b)
Impairment charges were primarily
for certain property, plant and equipment no longer being utilized
in production as a result of facility consolidations, as well as
other capacity reduction and strategic divestiture activities,
including $32.1 million of impairment charges related to the
Company’s decision to sell the investment in Brazil during the year
ended December 31, 2021 and $56.6 million of impairment charges for
property, plant and equipment in Oklahoma City, Oklahoma during the
year ended December 31, 2020.
(c)
Transaction-related charges
consisted of professional service fees related to business
acquisition and divestiture activities.
(d)
Integration costs were primarily
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 is presented net of gains on the sale of
facilities and businesses.
(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 year ended December 31, 2021.
(3)
Loss from discontinued
operations, net of tax, 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.
(5)
The $0.7 million loss on debt
extinguishment recorded during the year ended December 31, 2021,
relates to a $0.5 million loss on debt extinguishment recorded
during the fourth quarter of 2021, primarily related to the
repurchase of the Company’s unsecured 7.0% senior notes due May 1,
2022, and a $0.2 million loss on debt extinguishment from the fifth
amendment to the Company’s April 28, 2014 Senior Secured Credit
Facility, completed on November 2, 2021. The $1.8 million loss on
debt extinguishment recorded during the year ended December 31,
2020, relates to a $2.4 million loss on debt extinguishment from
the fourth amendment to the Company’s April 28, 2014 Senior Secured
Credit Facility, completed on June 29, 2020, partially offset by a
$0.6 million gain on debt extinguishment recorded during the first
quarter of 2020, primarily related 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 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 Years Ended December 31,
2021 and 2020
(in millions)
(UNAUDITED)
Year Ended December
31,
2021
2020
Net cash provided by operating
activities
$
136.5
$
190.2
Less: purchases of property, plant and
equipment
(50.0
)
(61.0
)
Free Cash Flow (Non-GAAP)
$
86.5
$
129.2
The above calculation of Free Cash Flow includes the cash flows
related to the United States Book business for the year ended
December 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 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
NET DEBT AND DEBT LEVERAGE
RATIO
As of December 31, 2021 and
2020
(in millions, except ratio)
(UNAUDITED)
December 31, 2021
December 31, 2020
Total debt and finance lease obligations
on the condensed consolidated balance sheets
$
803.7
$
928.2
Less: Cash and cash equivalents
179.9
55.2
Net Debt (Non-GAAP)
$
623.8
$
873.0
Divided by: Adjusted EBITDA for the year
ended (Non-GAAP)
$
246.0
$
260.4
Debt Leverage Ratio (Non-GAAP)
2.54 x
3.35 x
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 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
December 31, 2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Three Months Ended December
31,
2021
2020
Loss from continuing operations before
income taxes and equity in earnings of unconsolidated entity
$
(15.9
)
$
(68.6
)
Restructuring, impairment and
transaction-related charges
22.3
75.1
Loss on debt extinguishment
0.7
—
Adjusted net earnings from continuing
operations, before income taxes (Non-GAAP)
7.1
6.5
Income tax expense at 25% normalized tax
rate
1.8
1.6
Adjusted net earnings from continuing
operations (Non-GAAP)
$
5.3
$
4.9
Basic weighted average number of common
shares outstanding
51.3
50.7
Plus: effect of dilutive equity incentive
instruments (Non-GAAP)
2.2
0.7
Diluted weighted average number of common
shares outstanding (Non-GAAP)
53.5
51.4
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.10
$
0.10
Diluted loss per share from continuing
operations (GAAP)
$
(0.41
)
$
(1.69
)
Restructuring, impairment and
transaction-related charges per share
0.42
1.46
Income tax expense from condensed
consolidated statement of operations per share
0.11
0.35
Income tax expense at 25% normalized tax
rate per share
(0.02
)
(0.02
)
Other items from condensed consolidated
statement of operations per share (2)
—
—
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.10
$
0.10
______________________________
(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) loss on debt
extinguishment; (iv) discrete income tax items; (v) equity in
earnings of unconsolidated entity; and (vi) net earnings
attributable to noncontrolling interests.
(2)
Other items from condensed consolidated
statement of operations per share is comprised of the diluted
earnings (loss) per share impacts of equity in earnings of
unconsolidated entity and 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 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 Years Ended December 31,
2021 and 2020
(in millions, except per share
data)
(UNAUDITED)
Year Ended December
31,
2021
2020
Earnings (loss) from continuing operations
before income taxes and equity in (earnings) loss of unconsolidated
entity
$
47.0
$
(106.1
)
Restructuring, impairment and
transaction-related charges
18.9
124.1
Gains from sale and leaseback
(24.5
)
—
Loss on debt extinguishment
0.7
1.8
Adjusted net earnings from continuing
operations, before income taxes (Non-GAAP)
42.1
19.8
Income tax expense at 25% normalized tax
rate
10.5
5.0
Adjusted net earnings from continuing
operations (Non-GAAP)
$
31.6
$
14.8
Basic weighted average number of common
shares outstanding
51.3
50.6
Plus: effect of dilutive equity incentive
instruments (Non-GAAP)
1.7
0.5
Diluted weighted average number of common
shares outstanding (Non-GAAP)
53.0
51.1
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.60
$
0.29
Diluted earnings (loss) per share from
continuing operations (GAAP)
$
0.71
$
(2.10
)
Restructuring, impairment and
transaction-related charges per share
0.36
2.43
Gains from sale and leaseback per
share
(0.46
)
—
Loss on debt extinguishment per share
0.01
0.04
Income tax expense from condensed
consolidated statement of operations per share
0.18
0.02
Income tax expense at 25% normalized tax
rate per share
(0.20
)
(0.10
)
Other items from condensed consolidated
statement of operations per share (2)
—
—
Adjusted diluted earnings per share
from continuing operations (Non-GAAP) (1)
$
0.60
$
0.29
______________________________
(1)
Adjusted diluted earnings per
share from continuing operations excludes the following: (i) the
results for the United States Book business; (ii) restructuring,
impairment and transaction-related charges; (iii) gains from sale
and leaseback; (iv) loss on debt extinguishment; (v) discrete
income tax items; (vi) equity in (earnings) loss of unconsolidated
entity; and (vii) net loss attributable to noncontrolling
interests.
(2)
Other items from condensed
consolidated statement of operations per share is comprised of the
diluted earnings (loss) per share impacts of equity in (earnings)
loss of unconsolidated entity and net 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 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/20220222006054/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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