Quad/Graphics' Full-Year Results In-Line with Expectations; Strong Free Cash Flow Predicted for 2015

SUSSEX, WI—February 24, 2015—Quad/Graphics Inc. has reported its fourth quarter and full-year 2014 results. The reported results include Brown Printing ("Brown Printing") from the day of acquisition on May 30, 2014. Prior year financial results do not include the acquisition of Brown Printing.

"We are pleased to report that fourth quarter 2014 results were in line with our expectations," said Joel Quadracci, Quad/Graphics chairman, president and CEO. "Our ability to generate significant cash flow and maintain a strong balance sheet continues to allow us to deploy capital in ways to generate value for the company and our shareholders despite ongoing industry challenges. We continue to strengthen and grow the business through compelling acquisitions, such as Brown Printing and Marin’s International, and make strategic investments in our platform, including the recently announced three-year plan to transform our book platform through digital press technology. We remain committed to improving our clients’ experience with us while engaging employees to produce the very best results to advance our overall strategic goals."

Net sales for the fourth quarter 2014 were $1.4 billion, an increase of 5.5 percent over the same period in 2013, which was driven by the Brown Printing acquisition. Fourth quarter 2014 Adjusted EBITDA was $183 million compared to $198 million for the same period in 2013 and Adjusted EBITDA margin was 12.8 percent compared to 14.7 percent. The Adjusted EBITDA margin variance primarily reflects the impacts of ongoing volume and pricing pressures, and the margin dilution impact of the Brown Printing acquisition, which has a historically lower margin profile.

For full-year 2014, net sales were $4.9 billion versus net sales of $4.8 billion for the previous year. Full-year 2014 Adjusted EBITDA was $543 million compared to $577 million for fiscal 2013, and Adjusted EBITDA margin was 11.2 percent compared to 12.0 percent for the previous year. Free Cash Flow was $154 million compared to $292 million for the previous year. The variance in Free Cash Flow was primarily due to an estimated $90 million one-time benefit in 2013 from the restoration of normalized working capital levels following the Vertis acquisition. Also contributing to the variance was increased working capital, including a working capital increase from the Brown Printing acquisition and lower Adjusted EBITDA.

"Our ability to generate significant Free Cash Flow supports our disciplined approach to capital deployment, which we adjust based on current circumstances and what we think is best for shareholder value creation," noted Dave Honan, Quad/Graphics executive vice president and CFO. "Due to the seasonality of our business, we generate Free Cash Flow primarily in the fourth quarter of each year. In the fourth quarter of 2014 we realized $192 million of Free Cash Flow, which enabled us to reduce debt and improve our yearend Debt Leverage Ratio to 2.60x as compared to 2.81x as of Sept. 30, 2014. While acquisitions create increased debt leverage in the short term, our experience has demonstrated that these acquisitions deleverage our business over the long term."

Outlook
Honan provided the following 2015 guidance:

• Net sales between $4.8 billion to $5.0 billion;
• Adjusted EBITDA between $500 million and $540 million; and
• Free Cash Flow between $180 million and $200 million.

"Our Free Cash Flow guidance represents a 23 percent increase over 2014, based on delivering $190 million of Free Cash Flow at the midpoint of our 2015 guidance," Honan added. "Our strong Free Cash Flow, combined with ample available borrowing capacity, provides us with the capital we need to continue transforming our business along with the industry. As always, we will continue our focus on improving our productivity and driving sustainable cost-reduction initiatives to remain one of the industry’s low-cost producers. Moreover, we remain focused on maintaining a strong and flexible balance sheet that will allow us to invest in our business, pursue compelling value- and growth-oriented acquisition opportunities and return capital to our shareholders while also creating long-term value."

Quad/Graphics’ next quarterly dividend of $0.30 per share will be payable on March 20, 2015, to shareholders of record as of March 9, 2015.

About Quad/Graphics
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, South America and Europe.

Source: Quad/Graphics.