Losses continue at Quad/Graphics

Quad/Graphics Inc. reported a third quarter net loss of $22.3 million, or 48 cents per share, which was an improvement over a net loss of $232.4 million, or $5.01 per share, in the same period a year ago.
The Sussex-based printing company’s quarterly net sales were $1.186 billion, down from $1.209 billion a year earlier.
The company said results reflected moderate declines in volume primarily due to macroeconomic pressures, including continuing industry softness in the book market, and an aggressive pricing environment. The third quarter net loss includes restructuring, impairment and transaction-related charges of $48.3 million and $74.0 million in 2011 and 2010, respectively, and a $34.0 million loss on debt extinguishment in 2011.
"The volume declines we began to see late in the second quarter accelerated during the third quarter, and included continued weakness in the book market," said Joel Quadracci, chairman, president and chief executive officer. "This, along with temporary productivity declines and ongoing competitive pricing pressures, resulted in adjusted EBITDA below what we had anticipated for the quarter. Given this environment, we remain focused on performing well for our customers, improving productivity and aggressively managing costs to produce results that drive shareholder value."
Looking forward, Quadracci said, "We are proud to be printers and innovators, and are confident in print’s ability to drive business results for publishers and marketers. Although there are many factors beyond our control, we will work to create additional shareholder value by evaluating the best manner in which to deploy our capital while continuing to remove costs from our structure to be in line with softer volumes, industry pricing pressures and ongoing uncertainty in the economy."
Quad/Graphics, which has expanded its digital book production capacity by more than 500 percent this year, also announced a new agreement with Penguin Group (USA) Inc., one of the leading U.S. adult and children’s trade book publishers, for short-run and print-on-demand production of Penguin’s U.S. trade hardcover, trade paperback and mass market books.
The agreement covers all of Penguin’s imprints.
"Our digital book printing operations are growing because they provide publishers – and their readers – a solution to many traditional book inventory challenges," Quadracci said. "For Penguin, we will be able to support a ‘virtual inventory’ model for select titles within the agreement that can be printed in small quantities efficiently and on-demand. Penguin has been a leader in this area of book production, and our ability to work together with Penguin makes us partners in innovation that redefines how many books will be ordered, produced and distributed in the future."
Doug Whiteman, Penguin Group (USA)’s executive vice president of business operations, says Penguin will use Quad’s digital book production and supporting systems to lower inventory costs, react to demand more quickly and better serve its customers.
"In recent years, we have taken steps to address the area of excess inventory and its resulting impact on the value chain," Whiteman said. "This new agreement with Quad allows us to take another significant step in that process while also providing our customers greater access to more titles."