Despite reporting a full year loss of over $600 million, Joel Quadracci said he is confident in the vision for Quad/Graphics moving forward and said the company’s performance exceeded expectations in the fourth quarter. Still, he said the company is looking for ways to further reduce costs moving forward.
“Whether it happens or not, we’re managing as if we’re going into a recession, plain and simple” said Quadracci, Quad/Graphics chairman, president and chief executive officer.
The Sussex-based company reported $84.9 million in restructuring charges and a $10 million goodwill impairment for the quarter, leading to a net loss of $9.4 million. Combined with the $775 million goodwill impairment the company reported in the third quarter, Quad had a $641.9 million net loss for the year.
“While the amount of the impairment charge was significant, it was non-cash and it did not impact our key financial metrics,” said Dave Honan, Quad/Graphics executive vice president and chief financial officer.
The company reported a $13.40 loss per diluted share for the full year. In 2014, Quad had a profit of $18.6 million or 38 cents per share.
Quad announced a $100 million restructuring plan after results were below expectations in the third quarter. The company completed the plan, which included plant closures, increased focus on productivity and streamlining its organizational structure, ahead of schedule and was able to incorporate it into its fourth quarter results.
“We were surprised, and it is completely unacceptable to my own employees because I was getting emails from people on the floor saying, ‘Joel, how did you let this happen?’ But they also know it’s not about me, it’s about everybody letting it happen,” Quadracci said.
The company’s revenue was down 3.8 percent to $4.68 billion for the year, although it did come in ahead of the preliminary figures the company released in January. Revenue was down 6.3 percent to $1.3 billion for the fourth quarter.
“We are pleased to report that our fourth quarter 2015 results were better than we expected following our focused efforts to aggressively manage costs and improve manufacturing productivity,” Quadracci said.
Quadracci said the company will look to strengthen print categories, grow the business profitably, anticipate client needs, engage employees and enhance financial strength moving forward.
“We are confident in our vision,” Quadracci said.
He added that rapid changes in the media and marketing industries mean that many companies are failing to optimize what they spend money on.
“This situation has created an opportunity for Quad/Graphics,” he said, adding the company is “increasingly being welcomed into strategic conversations with clients as they are creating campaigns.”
Quadracci noted that Quad recently took over production, distribution, paper purchasing and other functions for Forbes magazine and “now the publisher is free to do what it does best.”
“We’re kind of shifting from trying to be a low cost person … to be a partner that helps you grow your revenue,” Quadracci said.
Quad/Graphics reported an increase in free cash flow of $61 million in 2015 to $215 million, which the company attributed to sustainable reductions in ongoing working capital needs.
“Quad/Graphics continues to be a significant free cash flow generator, which is important to maintaining a strong and flexible balance sheet that supports our disciplined capital deployment strategy,” Honan said.
Quadracci said 2015 was the first time in recent memory the company hasn’t been in the midst of an acquisition integration and was able to focus on reducing costs internally instead of eliminating overlap. The result was that when Quad missed expectations in the third quarter, the company was able to accelerate plans that were already in place.
“The urgency is there because I’ve informed our people; plan as if you’re going into a recession, and if we don’t, I’d be perfectly happy to be wrong on that prediction,” Quadracci said.
