Former Vertis Workers Block Access to Assets Acquired by Quad/Graphics

SUSSEX, WI—Quad/Graphics Inc. has reported fourth quarter and full-year 2012 results that were in line with management's originally announced annual guidance with the exception of Recurring Free Cash Flow, which surpassed the company's upwardly revised guidance.

“Our fourth quarter and full-year 2012 results were as we expected, and we were especially pleased with our continued strong Recurring Free Cash Flow generation,” said Joel Quadracci, Quad/Graphics chairman, president and CEO. “Our ability to generate significant Recurring Free Cash Flow and maintain a strong balance sheet while simultaneously paying down debt has allowed us to remain flexible with how we deploy capital. We were able to return cash to our shareholders through a special $2 yearend dividend and also increase the 2013 quarterly cash dividend by 20 percent to $0.30 per share. Additionally, we were able to take advantage of the opportunity to acquire Vertis, which strengthens and expands our offering, allows us to better serve our clients while achieving additional efficiencies, and creates value for our shareholders.”

Net sales for the fourth quarter 2012 were $1.1 billion versus $1.2 billion for the same period in 2011. Fourth quarter 2012 Adjusted EBITDA was $174 million compared to $187 million for the same period in 2011, and Adjusted EBITDA margin was 15.3 percent compared to 15.4 percent for the same period in 2011. The quarterly results reflect expected volume declines, pricing pressures on print and byproduct sales, and challenges in the book product line. Partially offsetting these impacts in the quarter were lower selling, general and administrative costs, and incremental synergy savings.

For the full-year 2012, net sales were $4.1 billion versus net sales of $4.3 billion for the previous year. Full-year 2012 Adjusted EBITDA was $566 million compared to $618 million for the previous year, and Adjusted EBITDA margin was 13.8 percent compared to 14.3 percent for the previous year. Recurring Free Cash Flow was $375 million compared to $340 million for the previous year, continuing the company's track record of solid cash-flow generation.

In other Quad/Graphics news, the company is working with the Superior Court of Justice in St. Catharines, Ontario, Canada, to access the assets of the Stevensville (Fort Erie) plant purchased as part of the Vertis acquisition. Counsel representing Quad filed a motion this week, seeking access of the plant to obtain the assets. Picketing workers laid off following the asset purchase have reportedly blocked trucks from entering the Stevensville plant.

Workers from the now-closed plant—which shuttered in January, leaving more than 100 people out of work—claim they are owed about C$2.7 million, the Niagara Falls Review reported. A lawyer representing the union said it was told by Vertis that there was no money, and the workers don't want to see assets removed by Quad until they have been compensated.

The two sides agreed to "picket protocol" that stipulates how long a truck may be stopped from entering the company, the Review reported.