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Quad/Graphics Reports First Quarter 2012 Results

Stocks in this article: QUAD

Quad/Graphics cautions that the foregoing list of risks, uncertainties and other factors is not exhaustive and you should carefully consider the other factors detailed from time to time in Quad/Graphics' filings with the United States Securities and Exchange Commission and other uncertainties and potential events when reviewing the Company's forward-looking statements.

Because forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on such statements, which speak only as of the date of this press release. Except to the extent required by the federal securities laws, Quad/Graphics undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About Quad/Graphics

Quad/Graphics (NYSE: QUAD) is a global provider of print and related multichannel solutions for consumer magazines, special interest publications, catalogs, retail inserts/circulars, direct mail, books, directories, and commercial and specialty products, including in-store signage. Headquartered in Sussex, Wis. (just west of Milwaukee), the Company has approximately 22,000 full-time equivalent employees working from more than 50 print-production facilities as well as other support locations throughout North America, 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.

   

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2012 and 2011
(in millions, except per share data)
(UNAUDITED)
 
Three Months Ended March 31,
2012     2011
Net sales $ 989.6 $ 1,022.4
 
Cost of sales 772.9 783.7
Selling, general and administrative expenses 92.0 97.9
Depreciation and amortization 84.6 87.3
Restructuring, impairment and transaction-related charges 38.2   28.7  
Total operating expenses 987.7 997.6
 
Operating income from continuing operations 1.9 24.8
 
Interest expense 21.4   29.8  
 
Loss from continuing operations before income taxes and equity in earnings of unconsolidated entities (19.5 ) (5.0 )
 
Income tax benefit (33.8 ) (7.2 )
 
Earnings from continuing operations before equity in earnings of unconsolidated entities 14.3 2.2
 
Equity in earnings of unconsolidated entities 1.1   0.8  
 
Net earnings from continuing operations $ 15.4 $ 3.0
 
Loss from discontinued operations, net of tax (1) (3.2 ) (10.3 )
Gain on disposal of discontinued operations, net of tax 35.3    
 
Net earnings (loss) $ 47.5 $ (7.3 )
 
Net earnings attributable to noncontrolling interests (0.1 )  
 
Net earnings (loss) attributable to Quad/Graphics common shareholders $ 47.4   $ (7.3 )
 
Earnings (loss) per share attributable to Quad/Graphics common shareholders:
Basic:
Continuing operations $ 0.33 $ 0.07
Discontinued operations 0.68   (0.22 )
Earnings (loss) per share attributable to Quad/Graphics common shareholders $ 1.01   $ (0.15 )
 
Diluted:
Continuing operations $ 0.33 $ 0.06
Discontinued operations 0.68   (0.21 )
Earnings (loss) per share attributable to Quad/Graphics common shareholders $ 1.01   $ (0.15 )
 
Weighted average number of common shares outstanding:
Basic 46.8   47.2  
Diluted 46.9   48.5  
 

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

   
 

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2012 and 2011
(in millions, except per share data)
(UNAUDITED)
 
Three Months Ended March 31, Three Months Ended March 31,
2012 2011
  Discontinued   Continuing   Discontinued   Continuing
Consolidated Operations (1) Operations Consolidated Operations (1) Operations
 
Net sales $ 1,021.8 $ 32.2 $ 989.6 $ 1,102.3 $ 79.9 $ 1,022.4
 
Cost of sales 803.7 30.8 772.9 853.4 69.7 783.7
Selling, general and administrative expenses 94.9 2.9 92.0 109.0 11.1 97.9
Depreciation and amortization 84.6 84.6 90.5 3.2 87.3
Restructuring, impairment and transaction-related charges 39.9   1.7   38.2   34.8   6.1   28.7  
Total operating expenses 1,023.1 35.4 987.7 1,087.7 90.1 997.6
 
Operating income (loss) (1.3 ) (3.2 ) 1.9 14.6 (10.2 ) 24.8
 
Interest expense 21.4     21.4   29.9   0.1   29.8  
 
Loss before income taxes and equity in earnings of unconsolidated entities (22.7 ) (3.2 ) (19.5 ) (15.3 ) (10.3 ) (5.0 )
 
Income tax benefit (33.8 )   (33.8 ) (7.2 )   (7.2 )
 
Earnings (loss) before equity in earnings of unconsolidated entities 11.1 (3.2 ) 14.3 (8.1 ) (10.3 ) 2.2
 
Equity in earnings of unconsolidated entities 1.1 1.1 0.8 0.8
Gain on disposal of discontinued operations, net of tax 35.3   35.3          
 
Net earnings (loss) $ 47.5 $ 32.1 $ 15.4 $ (7.3 ) $ (10.3 ) $ 3.0
 
Net earnings attributable to noncontrolling interests (0.1 )   (0.1 )      
 
Net earnings (loss) attributable to Quad/Graphics common shareholders $ 47.4   $ 32.1   $ 15.3   $ (7.3 ) $ (10.3 ) $ 3.0  
 
Earnings (loss) per share attributable to Quad/Graphics common shareholders:
Basic $ 1.01   $ 0.68   $ 0.33   $ (0.15 ) $ (0.22 ) $ 0.07  
Diluted $ 1.01   $ 0.68   $ 0.33   $ (0.15 ) $ (0.21 ) $ 0.06  
 
Weighted average number of common shares outstanding:
Basic 46.8   46.8   46.8   47.2   47.2   47.2  
Diluted 46.9   46.9   46.9   48.5   48.5   48.5  
 

(1) The Canadian operations sold are presented as discontinued operations. This schedule is presented to provide the full income statement for consolidated, discontinued and continuing results of operations.

       
 

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2012 and December 31, 2011
(in millions)
(UNAUDITED)
 
March 31, 2012 December 31, 2011
ASSETS
Cash and cash equivalents $ 27.1 $ 25.6
Receivables, less allowances for doubtful accounts 561.2 656.1
Inventories 250.7 249.5
Prepaid expenses and other current assets 94.1 142.3
Deferred income taxes 68.8 86.7
Short-term restricted cash 10.4 8.5
Current assets of discontinued operations (1)   72.6  
 
Total current assets 1,012.3   1,241.3  
 
Property, plant and equipment—net 2,083.5 2,123.3
Goodwill 787.4 787.1
Other intangible assets—net 279.7 295.6
Long-term restricted cash 58.0 67.4
Equity method investments in unconsolidated entities 74.2 69.4
Other long-term assets 50.5 46.2
Long-term assets of discontinued operations (1)   104.9  
 
Total assets $ 4,345.6   $ 4,735.2  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 261.3 $ 301.9
Amounts owing in satisfaction of bankruptcy claims 16.9 19.5
Accrued liabilities 355.0 393.9
Purchase price payable on business exchange transaction 62.4
Short-term debt and current portion of long-term debt 95.0 82.1
Current portion of capital lease obligations 10.1 20.7
Current liabilities of discontinued operations (1)   48.4  
 
Total current liabilities 738.3   928.9  
 
Long-term debt 1,252.6 1,342.8
Unsecured notes to be issued 31.3 38.7
Capital lease obligations 23.2 24.9
Deferred income taxes 438.9 471.9
Other long-term liabilities 504.0 521.5
Long-term liabilities of discontinued operations (1)   99.6  
 
Total liabilities 2,988.3 3,428.3
 
Redeemable equity 3.4 3.5
 
Quad/Graphics common stock and other equity
Preferred stock
Common stock 1.4 1.4
Additional paid-in capital 976.1 984.2
Treasury stock, at cost (283.7 ) (295.4 )
Retained earnings 684.3 650.2
Accumulated other comprehensive loss (25.0 ) (37.7 )
 
Quad/Graphics common stock and other equity 1,353.1 1,302.7
 
Noncontrolling interests 0.8   0.7  
 
Total common stock and other equity and noncontrolling interests 1,353.9   1,303.4  
 
Total liabilities and shareholders' equity $ 4,345.6   $ 4,735.2  
 

(1) December 31, 2011 balance sheet includes the assets and liabilities of the Canadian operations sold on March 1, 2012.

   
 

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2012 and 2011
(in millions)
(UNAUDITED)
 
Three Months Ended March 31,
2012     2011
OPERATING ACTIVITIES
Net earnings (loss) $ 47.5 $ (7.3 )
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization 84.6 90.5
Impairment charges 8.4
Deferred income taxes (13.5 ) 10.3
Gain on disposal of discontinued operations, net of tax (35.3 )
Other non-cash adjustments to net earnings (loss) 4.7 6.1
Changes in operating assets and liabilities—net of acquisitions 14.2   (62.9 )
 
Net Cash Provided by Operating Activities 110.6   36.7  
 
INVESTING ACTIVITIES
Purchases of property, plant and equipment (21.6 ) (40.5 )
Investment in ManipalTech (18.1 )
Proceeds from the sale of property, plant and equipment 2.4 0.2
Transfers from restricted cash 7.5 9.6
Deposit refunded related to business exchange transaction 50.0
Purchase price payments on business exchange transaction (4.2 )
Acquisition of business—net of cash acquired (6.6 )  
 
Net Cash Provided by (Used in) Investing Activities 9.4   (30.7 )
 
FINANCING ACTIVITIES
Payments of long-term debt (4.5 ) (5.2 )
Payments of capital lease obligations (13.4 ) (7.2 )
Borrowings on revolving credit facilities 40.2 84.8
Payments on revolving credit facilities (116.0 ) (85.7 )
Bankruptcy claim payments on unsecured notes to be issued (7.4 )
Proceeds from issuance of common stock 1.6
Payment of cash dividends (11.7 )
Payment of tax distributions   (1.1 )
 
Net Cash Used in Financing Activities (112.8 ) (12.8 )
 
Effect of exchange rates on cash and cash equivalents (5.7 ) 1.0  
 
Net Increase (Decrease) in Cash and Cash Equivalents 1.5   (5.8 )
 
Cash and Cash Equivalents at Beginning of Period 25.6   20.5  
 
Cash and Cash Equivalents at End of Period $ 27.1   $ 14.7  
 

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

           
 

QUAD/GRAPHICS, INC.

SEGMENT FINANCIAL INFORMATION
For the Three Months Ended March 31, 2012 and 2011
(in millions)
(UNAUDITED)
 
Restructuring,
Impairment and
Operating Transaction-Related
Net Sales Income/(Loss) Charges
Three months ended March 31, 2012
United States Print and Related Services $ 863.3 $ 33.7 $ 14.3
International 126.3   (8.2 ) 10.5
Total operating segments 989.6 25.5 24.8
Corporate   (23.6 ) 13.4
Total $ 989.6   $ 1.9   $ 38.2
 
Three months ended March 31, 2011
United States Print and Related Services $ 907.2 $ 46.7 $ 21.4
International 115.2   (4.8 ) 1.5
Total operating segments 1,022.4 41.9 22.9
Corporate   (17.1 ) 5.8
Total $ 1,022.4   $ 24.8   $ 28.7
 

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

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