Quad Announces $100M Cost Reduction Program; First Closures Announced
Breaking news from Printing Impressions:
(In a Wednesday morning conference call with investors, Joel Quadracci—chairman, president and CEO of Quad/Graphics—announced that the company will be closing plants in Augusta, Georgia, and East Greenville, Pennsylvania, by the end of this year. The moves are part of the company's ongoing quest to bring its cost structure in line with expected lower revenues, company spokesperson Claire Ho told Printing Impressions. Impacted workers may be able to relocate within the organization, particularly in Wisconsin, where experienced printing workers are difficult to find. The firm employs about 250 in Augusta, a 650,000-square-foot retail insert and catalog manufacturing operation, and another 400 at the Pennsylvania plant.)
SUSSEX, Wis.—November 4, 2015—Quad/Graphics Inc. has reported results for its third quarter ending Sept. 30, 2015.
Commenting on Quad/Graphics' third quarter and year-to-date September 2015 results, Joel Quadracci, chairman, president and CEO of Quad/Graphics, said, "Our third quarter financial performance was challenging and below our expectations due to a greater-than-expected pullback in industry volumes and pricing pressures that accelerated in the quarter, as well as lower productivity levels in our manufacturing platform."
Quadracci continued, "We are taking swift and decisive action to address the volume and pricing pressures, and are announcing a $100 million cost reduction program to bring our cost structure in line with revenues. This program includes reducing excess manufacturing capacity through plant closures, intensifying our focus on productivity, reducing SG&A costs and implementing a new streamlined organizational structure. We have a long-standing commitment to being the industry’s low-cost producer and these actions are a continuation of that commitment. Quad/Graphics is focused on realizing improved efficiencies and cost-savings while contributing to an overall better client experience."
Quadracci continued, "As always, we remain committed to our strategic goals to transform Quad/Graphics, including strengthening the core print categories that generate a significant amount of Free Cash Flow to support growth opportunities. Recently, we acquired Specialty Finishing, an Omaha-based packaging manufacturer with a loyal blue-chip customer base that has enjoyed eight straight years of consecutive sales growth. This acquisition, along with the April 2015 acquisition of Copac, have increased the scale and geographic footprint of our QuadPackaging division, enabling us to more effectively compete for large-volume or multi-location clients across the United States, in addition to Europe, South America, Central America and Asia, where we also have packaging capabilities."
Net sales for the third quarter 2015 were $1.2 billion, representing a 6.5 percent decrease from the third quarter of 2014. Third quarter Adjusted EBITDA was $117 million compared to $151 million for the same period in 2014, and Adjusted EBITDA margin was 10.1 percent compared to 12.2 percent in 2014. The Adjusted EBITDA variance primarily reflects an acceleration of ongoing industry pressures and lower productivity.
For the first nine months of 2015, net sales were $3.3 billion, representing a 2.8 percent decrease from the first nine months of 2014. Year-to-date Adjusted EBITDA was $308 million as compared to $360 million for the same period in 2014, and Adjusted EBITDA margin was 9.2 percent as compared to 10.5 percent in 2014. Free Cash Flow was $68 million for the first nine months of 2015, an increase of $106 million over the prior year due to sustainable improvements in the cash conversion process primarily reducing ongoing working capital needs.
Net loss during the third quarter of 2015 was $552 million and in the nine months ended Sept. 30, 2015, was $633 million, and includes a $775 million non-cash goodwill impairment charge ($533 million net of tax).
"Based on the recent pullback in industry volumes and pricing pressures that accelerated in the quarter, as well as lower manufacturing productivity, we are reducing our financial outlook for full-year 2015," noted Dave Honan, Quad/Graphics executive vice president and chief financial officer. "However, we believe Quad/Graphics will achieve a 12 percent increase year-over-year in Free Cash Flow at the midpoint of our updated guidance, despite lower-than-expected Adjusted EBITDA, due primarily to sustainable reductions in working capital."
2015 guidance is as follows:
Honan concluded, "We will continue to find ways to reduce our cost structure while generating the strong Free Cash Flow that is the foundation of our historically strong balance sheet. Our continued strong Free Cash Flow enables us to deploy capital in ways that generate value for our Company and our shareholders, including returning cash to our shareholders through our quarterly dividend."
Quad/Graphics' next quarterly dividend of $0.30 per share will be payable on Dec. 18, 2015, to shareholders of record as of Dec. 7, 2015.
Quad/Graphics (NYSE: QUAD), a leading global provider of print and media solutions, 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 a wide variety of clients in distinct vertical industries, including but not limited to retail, publishing, insurance, financial and healthcare. The company helps clients perform better in today’s rapidly changing world through innovative solutions that improve efficiencies, reduce costs, lift response and increase revenue. Quad/Graphics provides a diverse range of print and related products, services and solutions from multiple locations throughout North America, Latin America and Europe, and strategic partnerships in Asia and other parts of the world.