Quad/Graphics Reports Mixed Results for Quarter, Fiscal YearMarch 9, 2011
The company continues to make significant progress in the integration.
“We moved quickly, but deliberately, to focus on each and every customer as we transitioned work to new plants,” said Quadracci. “Moving each title is a very exacting process as no two titles and no two issues within a title are the same. We focused heavily on sustainable, repeatable processes, training and multi-point communication, and ensured that there were appropriate timelines and resources in place. During our busiest season of the year, we transitioned nearly 400 titles from closing facilities onto our more efficient and modern platform with minimal disruption to customers.
“To date, we retained 97 percent of revenues associated with those transitioned titles and are very pleased with and thankful for our customers’ support throughout this process. We believe that our high retention rate is a significant achievement and speaks to the thoughtful planning and preparation that has gone into our integration. We also successfully managed the costs and timeline as we ramped down the plants we are closing.”
By year end 2010, the company had closed six North American plants and Worldcolor’s Montreal headquarters. In early 2011, it already announced or completed two additional North American plant closures. The impact of these and other restructuring actions will result in the closure of approximately 3.6 million square feet of manufacturing and warehousing space, and a gross reduction of 4,400 employees. Currently, the company has realized a net reduction of approximately 3,000 full-time equivalent employees.
“Overall, the integration process is moving forward as expected, but we are not finished as this is a 24-month journey,” Quadracci stated. “We are now confident that we’ll achieve somewhat more than the $225 million in synergy savings on an annual run-rate basis within 24 months of closing the Worldcolor acquisition. We continue looking for additional cost-savings opportunities to build upon our integration synergy savings.”
“We are in the midst of a complex integration with many moving pieces,” Fowler added. “In addition, the company we acquired was in a downward trajectory as a result of its bankruptcy. Given these facts, we are making an exception to our limited guidance policy and will provide adjusted EBITDA guidance for 2011.
“We anticipate full year 2011 Adjusted EBITDA to be slightly in excess of $700 million, and will be dependent on the extent to which volumes and the competitive pricing environment affect the economic recovery in the print market. Additionally, as we make further progress on our integration and other cost reduction efforts, we expect that there will be frictional costs associated with those activities, as was the case in 2010.”
Quadracci affirmed that the company will continue to invest in opportunities to expand its print and print-related products and services as well as grow diversified and profitable streams of revenue. “We have a clear vision for building our business by leveraging our strengths and core competencies to help our customers and prospective customers,” he said. “We will continue to move the business forward through strategic initiatives that enhance our service offering, benefit our clients and their business goals, and create shareholder value.”
For the three months ended Dec. 31, 2010, as reported net sales were $1.385 billion compared to $1,361 billion in the same period in 2009. Adjusted EBITDA and Adjusted EBITDA margin were $224.2 million and 16.2 percent compared to $235.5 million and 17.3 percent in the same period in 2009.
As reported, 2010 net income attributable to common shareholders in the three months was $26.6 million vs. $36.1 million in the same period in 2009. The fourth quarter results include restructuring, impairment and transaction-related charges of $50.9 million and $1.2 million in 2010 and 2009, respectively. Excluding the effects of restructuring, impairment and transaction-related charges and utilizing a 39 percent pro forma normalized effective tax rate in both years, net earnings would have been $64.3 million or $1.33 diluted earnings per share in the three months ended December 31, 2010, versus net earnings of $23.9 million in the same period last year.
For the 12 months ended Dec. 31, 2010, pro forma net sales were $4.765 billion compared to $4.873 billion in the same period in 2009. Pro forma Adjusted EBITDA and Pro forma Adjusted EBITDA margin were $671.9 million and 14.1 percent compared to $653.1 million and 13.4 percent in the same period in 2009. Net sales were $3,392 million compared to as $1,789 million in the same period of 2009. Adjusted EBITDA was $503.0 million compared to $326.3 million in the same period in 2009.
As reported, 2010 net loss attributable to common shareholders in the 12 months was $250.1 million vs. $52.8 million in the same period of 2009. The year-to-date results include restructuring, impairment and transaction-related charges of $162.5 million and $11.2 million in 2010 and 2009, respectively, as well as a $200.5 million non-cash tax adjustment in 2010. Excluding the effects of restructuring, impairment and transaction-related charges, and utilizing a 39 percent pro forma normalized effective tax rate in both years, net earnings would have been $86.2 million for the full year 2010 vs. $42.3 million in the same period in 2009.
Quad/Graphics (NYSE: QUAD) is a global provider of print and related multichannel solutions for consumer magazines, special interest publications, catalogs, retail inserts and circulars, direct mail products, books and directories. Headquartered in Sussex, Wis. (just west of Milwaukee), the Company has approximately 25,000 full-time equivalent employees working from approximately 60 print-production facilities as well as other support locations throughout the United States, Canada, Latin America and Europe. As a printing industry innovator, Quad/Graphics (www.QG.com) is redefining the power of print in today’s multimedia world by helping its clients use print as the foundation of multichannel communications strategies to drive their top-line revenues.
Source: Financial release.