John Fowler, Executive Vice President & Chief Financial Officer, reiterated that despite the operational challenges the Company faced in the quarter, it was on plan through the first half of the year. “We remain committed to achieving our full-year projections for Adjusted EBITDA of slightly in excess of $700 million. However, given the concerns we have seen in the economy, the headwinds we see from the revenue decline in the books segment and the continuing frictional costs from plant consolidations, we believe it is prudent to adjust our full-year Adjusted EBITDA projection to a range of $660 million to $700 million,” he said.
The Company continues to use its strong cash flow to pay down debt and, since the close of the Worldcolor acquisition, has reduced its outstanding debt balances by $233 million. Additionally, the Company’s pension and post-retirement liability decreased by $145 million, further deleveraging its balance sheet. “We recently completed a very successful $1.5 billion debt refinancing,” Fowler said. “Our improved balance sheet metrics, combined with improvements in the credit markets, made this an ideal time to refinance. We are very pleased with the outcome of our refinancing, which resulted in a structure that gives us greater capacity and financial flexibility to support our future growth plans. The new credit agreement will also significantly reduce cash interest payments by an estimated $16 million to $20 million annually, with a payback on the costs to refinance the agreement of well under one year.”
Looking ahead, Quadracci shared that the Company continues to explore growth opportunities – both organic and through acquisitions – that will strengthen its market position, expand its capabilities for customers and create value for shareholders. A key component of its expansion strategy is investing in geographies and segments where it can be a market leader through a diverse product offering, and a superior, efficient operating platform. “We are being selective about where we choose to invest our capital so that we can achieve our business goals and drive profitable growth,” Quadracci explained. “For example, our recently announced agreement with Transcontinental expands our presence in Mexico where we believe we can create value through developing an industry-leading print platform in an economy with a higher growth rate than that of Canada. We expect the transaction will create immediate value to Quad/Graphics with Transcontinental’s assumption of the $75 million in pension and post-retirement obligations and positive incremental Adjusted EBITDA within 12-24 months following the close.”
Quadracci underscored the Company’s commitment to advancing the power of print in a changing media landscape. “We believe in print and believe it has a strong future. We’re pushing print forward, making it more immediate and relevant, and strengthening how it complements and connects to emerging media channels. We are leveraging our advanced technology, superior manufacturing and distribution platform, and the immense talent of our employees to better position print long into the future.”
For the three months ended June 30, 2011, as reported net sales were $1,070.5 million compared to pro forma net sales of $1,075.3 million in the same period in 2010. As reported Adjusted EBITDA and Adjusted EBITDA margin were $126.7 million and 11.8% compared to pro forma Adjusted EBITDA and pro forma Adjusted EBITDA margin of $148.3 million and 13.8% in the same period in 2010. As reported net sales were $1,070.5 million compared to as reported net sales of $394.3 million in the same period in 2010. On an as reported basis, Adjusted EBITDA was $126.7 million compared to $57.3 million in the same period in 2010.