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Quad/Graphics Reports Third Quarter And Year-To-Date September 2012 Results

(a) Employee termination charges were related to workforce reductions through facility consolidations and involuntary separation programs.

(b) Impairment charges were for certain buildings 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 related to preparing existing facilities to meet new production requirements resulting from work transferring from closed plants, as well as other costs related to the integration of the acquired companies.

(e) Gain on the collection of a note receivable in the nine months ended September 30, 2012, was related to a settlement of a disputed pre-acquisition Worldcolor note receivable. Gain on the collection of a note receivable in the nine months ended September 30, 2011, was related to the June 2008 sale of Worldcolor's European operations. These non-recurring gains were excluded from the calculation of Adjusted EBITDA.

(f) Other restructuring charges, net, were primarily from costs to maintain and exit closed facilities, as well as lease exit charges. Other restructuring charges, net, in the nine months ended September 30, 2012 are presented net of a $12.8 million curtailment gain resulting from an amendment to the postretirement medical benefit plan.

(2) Includes the Adjusted EBITDA and Adjusted EBITDA Margin for the Canadian operations sold on March 1, 2012, calculated in a consistent manner with the calculation above for Adjusted EBITDA and Adjusted EBITDA Margin from continuing operations.

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures, specifically EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Recurring Free Cash Flow and Adjusted Diluted Earnings Per Share. They are presented to provide additional information regarding Quad/Graphics' performance and because they are important measures by which Quad/Graphics assesses the profitability and liquidity of its business. These measures should not be considered alternatives to net earnings (loss) as a measure of operating performance or to cash flows provided by operating activities as a measure of liquidity.

 
 

QUAD/GRAPHICS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES
Recurring Free Cash Flow
For the Nine Months Ended September 30, 2012 and 2011
(in millions)
(UNAUDITED)
       
Nine Months Ended September 30,
2012     2011
Net cash provided by operating activities $ 232.2 $ 162.9
 
Add back non-recurring payments:
Restructuring payments, net (1) 64.3 104.7
Worldcolor bankruptcy payments 9.3   10.1  
 
Recurring cash flows provided by operating activities 305.8 277.7
 
Less: purchases of property, plant and equipment (85.3 ) (134.3 )
 
Recurring Free Cash Flow $ 220.5   $ 143.4  
 

(1) Restructuring payments are shown net of cash receipts related to non-recurring restructuring transactions. For the nine months ended September 30, 2012, restructuring payments were $79.0 million (consisting of $78.1 million in payments for continuing operations and $0.9 million for Canadian discontinued operations) and were reduced for a $14.7 million non-recurring collection of a disputed pre-acquisition Worldcolor note receivable. For the nine months ended September 30, 2011, restructuring payments are shown net of a $7.1 million gain on the collection of a note receivable for the June 2008 sale of Worldcolor's European operations.

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