Quad/Graphics Backs Weak FY14 Forecast; To Buy Brown Printing; Proposes Offering

(RTTNews) - Quad/Graphics, Inc. (QUAD), a provider of print and related products and services, Monday reaffirmed its fiscal 2014 forecast for net sales and adjusted EBITDA, a key earnings metric. The company also announced an agreement to buy privately held Brown Printing Co. for $100 million.

Separately, Quad/Graphics announced the proposed offering of $300 million of senior notes due 2022 and a $1.6 billion extension and increase of its senior secured credit facility.

For the year ending December 31, 2014, the company continues to expect net sales to be in the range of $4.6 billion to $4.8 billion. In the year 2013, the company generated net sales of $4.8 billion.

Adjusted earnings before interest, tax, depreciation and amortization or EBITDA is still projected to be in the range of $520 million to $550 million. Last year, the company's EBITDA was $577 million.

The company also continues to expects free cash flow to be in the range of $155 million and $165 million.

The company noted that the reaffirmed guidance does not include any potential 2014 impact from the acquisition of Brown.

David Honan, Vice President and Chief Financial Officer, said, "As always, we remain focused on maintaining strong Free Cash Flow as well as a strong and flexible balance sheet, which affords us the flexibility to pay down debt, continue disciplined investment in our business, pursue compelling acquisition opportunities like Brown, and return capital as part of creating long-term value for our shareholders."

Regarding the acquisition, Quad/Graphics said the deal is subject to customary regulatory clearances and is expected to close in the second half of 2014. Both Quad/Graphics' board of directors and Brown's parent company Gruner + Jahr and its shareholders approved the transaction. Quad/Graphics expects the acquisition to be accretive to earnings.

The company said the acquisition is consistent with its ongoing strategy to transform the firm.

Brown serves premier publishers and catalogers with printing, distribution and integrated media solutions. Brown expects to generate approximately $350 million in revenues during fiscal year 2014.

The deal is projected to enhance Quad/Graphics' position in the printing industry. Quad/Graphics intends to use cash on hand or draw on its revolving credit facility to finance the acquisition.

In the deal, Brown is advised by Baker Hostetler. Quad/Graphics is advised by Foley & Lardner LLP.

Separately, Quad/Graphics announced the proposed offering of $300 million of senior notes due 2022, subject to market and customary conditions.

The private offering is exempt from registration under the Securities Act of 1933, as amended. The notes will be senior unsecured obligations.

Quad/Graphics also has announced it has launched a $1.6 billion extension and increase in its senior secured credit facility. This is expected to consist of a five-year $850 million revolving line of credit, a five-year $450 million bank term loan A and a seven-year $300 million term loan B.

Quad/Graphics expects to use the net proceeds from the offering and the extension and increase of its senior secured credit facility to repay its loans, fund the Brown acquisition and for general corporate purposes.

Quad/Graphics shares closed Friday's trading at $23.03, down $0.61 or 2.58 percent.