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Quad Graphics, Inc. (NYSE: QUAD)

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Q3 2018 Antithesis Appointment Call

Oct. 31, 2018, 10:00 a.m. ET

Operator

Good morning, ladies and gentlemen. Acknowledge you for continuing by. And acceptable to the Quad/Graphics third division 2018 appointment call. During today’s call, all participants will be in listen-only mode. A advance presentation accompanies today’s webcast. Participants are arrive to chase along, advancing the slides themselves. To admission the webcast, chase the instructions acquaint in this morning’s antithesis releases.

Alternatively, you can admission the advance presentation on the Investors area of the Quad/Graphics website beneath the Events & Recent Presentations articulation and on LSC Communications’ website beneath the Events & Presentations link. Afterward today’s presentation, the appointment alarm will be opened for questions. To ask a catechism aback prompted, amuse columnist * and afresh 1 application a touchtone telephone. To abjure your question, you may columnist * and 2. Amuse additionally note, today’s accident is actuality recorded.

I would like to about-face the appointment alarm over to Kyle Egan, Quad/Graphics’ Director of Broker Relations and Assistant Treasurer. Kyle, amuse go ahead.

Kyle Egan — Director of Broker Relations and Assistant Treasurer

Thank you, operator, and acceptable morning, everyone. With me today are Joel Quadracci, Quad/Graphics’ Chairman, President, and Chief Executive Officer; Tom Quinlan, LSC Communications’ Chairman, Chief Executive Officer, and President; and Dave Honan, Quad/Graphics’ Executive Vice President and Chief Banking Officer. Joel and Tom will advance off today’s alarm with a abundant cardinal overview of Quad/Graphics’ absolute acceding to access LSC Communications. Dave will chase with arbitrary of the banking account for the transaction, and an overview of Quad’s third division 2018 banking after-effects followed by Q&A.

I would like to admonish anybody that this alarm is actuality webcast and that avant-garde statements are accountable to Safe Harbor accoutrement as categorical in our anniversary account absolution and in today’s advance presentation on Advance 3.

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Quad’s banking after-effects are able in accordance with Generally Accepted Accounting Principles. However, this presentation additionally contains non-GAAP banking measures, including adapted EBITDA, adapted EBITDA margin, chargeless banknote flow, chargeless banknote breeze conversion, and debt advantage ratio. We accept included in the advance presentation reconciliations of these non-GAAP banking measures to GAAP banking measures.

On Advance 4, I’d like to admonish anybody that advice about the transaction discussed today will be accessible in the parties’ collective proxy statement. The advice about parties who may be participants in the activity will additionally be accessible in the collective proxy statement. To be clear, this advice is not an activity to advertise or a abode of an activity to buy securities. It is additionally not a abode of a proxy from an broker or shareholder.

Finally, a epitomize of the alarm and afresh advance presentation will be accessible on the broker sections of Quad’s and LSC’s agnate websites anon afterwards our alarm concludes today. I will now duke the alarm to Joel.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Thank you, Kyle, and acceptable morning, everyone. Today is a absolutely defining moment in Quad’s 47-year journey. I am acutely admiring to appear our absorbed to access LSC Communications, a acclaimed and admired $3.9 billion baton in book and agenda media solutions. LSC is a about traded by on the New York Banal Barter and has about 22,000 advisers who serve added than 3,000 retailers, cataloguers, publishers, and merchandisers from 46 accomplishment accessories and 13 administration accessories in the United States and Mexico.

With me today is Tom Quinlan, the Chairman and CEO and President of LSC Communications, and we accessory avant-garde to walking you through the cardinal account for Quad’s accretion of LSC and the befalling it creates for all our key stakeholders. The aggregate of Quad and LSC Communications is a accustomed and cardinal fit. Advance 7 provides a high-level overview of the cardinal and account for this transaction.

Together with LSC Communications, we will actualize a awful able book belvedere to ammunition Quad 3.0, our activity to actualize added bulk by leveraging our able book foundation as allotment of a abundant larger, added able-bodied chip business solutions offering; bear bulk and time accumulation opportunities for our clients; advance our abiding cardinal eyes by attention my family’s administration and voting ascendancy in the company; accomplish synergies and added chargeless banknote breeze to actualize a added assisting accumulated company; and advance our able and advantageous antithesis area from the all-stock transaction structure.

Each of these credibility will be broadcast aloft added throughout today’s presentation. At this point, I’d like to canyon the alarm over to Tom for his comments.

Thomas J. Quinlan III — Chairman, Chief Executive Officer & President — LSC Communications, Inc. — Vice President, Broker Relations

Thank you, Joel. And I’m admiring to accompany Joel and his aggregation to advertise this agitative combination. Aback LSC Communications became a stand-alone accessible aggregation two years ago, we accept added analytical calibration capabilities and technologies. We’ve done this through acquisitions and divesting assets, and through dressmaking unique, absolute accumulation alternation solutions for our audience that abode the base of their cardinal needs.

Additionally, we’ve accustomed a able acumen arrangement and developed analytical partnerships to advice us accommodate how our audience administer agreeable to all channels. This has all been done to strengthen our position as a arch innovator in book and multi-channel logistics. Like Quad, LSC is an innovative, customer-first focused company. We allotment a charge to arduous ourselves to do bigger tomorrow than we did yesterday. With Quad chip business solutions alms as a base, this aggregate will body on and actualize new opportunities for our businesses, including book, magazine, catalog, appointment products, logistics, and pre-media.

With our investments in avant-garde solutions such as [inaudible] and companies like MAZ and StoryFit, we accept as one aggregation we will be positioned at the beginning of a new age of agreeable administration and chump engagement. We are admiring that LSC’s shareholders will account from the cogent projected synergies and upside abeyant of the accumulated company.

As we acclaimed in the collective columnist release, we apprehend the accumulated aggregation will bear a broader applicant abject for cross-selling and business outsourcing opportunity. The accumulated aggregation will additionally accept added assembly and administration efficiencies and adaptability from the greatest calibration of the accumulated commutual platform, accurate by the columnist industry’s best accomplished operators and innovators. In addition, the accumulated aggregation will accept added banking calibration and a able antithesis sheet.

Before I about-face the alarm aback to Joel, I would like to acknowledge the bags of LSC Communications’ advisers who assignment adamantine every day and assassinate so able-bodied on our strategy. Their adherence and abiding charge to our audience is the acumen we are a baton today. I accessory avant-garde to alive with Joel and his aggregation to ensure that the accumulated aggregation is set up for success. With that, I will about-face it aback over to Joel.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Thank you, Tom. I absolutely acknowledge you aing us today. Affective on to Advance 8, you will see a snapshot of the accumulated company’s anniversary acquirement for the 12 ages concluded September 30, 2018, of about $8 billion, burst out by artefact and geography. The aggregate of Quad and LSC created a acute belvedere to bigger serve our audience utilizing magazines, catalogs, books, directors, and retail inserts.

These audience will account from cogent bulk and time extenuative opportunities in several altered agency — added assembly and administration efficiencies and adaptability from the greater calibration of the commutual platforms; broadcast acumen casework and volume-driven postage accumulation programs such as co-mailing, backed by accomplished and accurate leadership; adequate book administration casework and business activity outsourcing; and for book publishers specifically, the backbone of our accumulated platforms will actualize a absolutely end-to-end account alms that includes front-end workflow solutions, a all-embracing avant-garde agenda columnist platform, complemented by an all-encompassing account platform, and back-end chip systems for finishing, distribution, and fulfillment.

Through this offering, we intend to redefine the absolute book accumulation chain, accouterment book publishers with added customization and versioning capabilities, faster time-to-market, and bargain decay in inventories and obsolescence. The accretion of LSC Communications will backbone our book belvedere to ammunition our Quad 3.0 transformation. All artefact categories and geographies will account from our chip business solutions, and with an broadcast account of clients, we will broader our adeptness to advice added retailers, marketers, and publishers account from our broadcast bulk proposition.

The LSC Communications accretion is an all-stock transaction admired at about $1.4 billion, including the refinancing of LSC’s debt. We accept structured the accord as an all-stock transaction to acquiesce us to advance our able antithesis area and advantageous acclaim contour for approaching basic deployment opportunities.

Under the acceding of the agreement, LSC shareholders will accept .625 shares of Quad Class A Common Banal for anniversary LSC allotment they own, apery about 29% absolute bread-and-er ownership, and about 11% of the absolute voting adeptness of the accumulated company. Based on the closing allotment prices of both companies on October 30, 2018, the alliance application represents a exceptional of 34% to LSC Communications’ shareholders. Quad shareholders will abide to own Class A and Class B shares, apery about 71% of the absolute bread-and-er affairs of the accumulated company, and about 89% absolute voting adeptness of the accumulated company.

Post-closure, my ancestors will abide to accept voting ascendancy at 70%, which will accommodate us with connected adherence and adaptability as we assignment to accomplish our abiding cardinal eyes in a disrupted marketplace. Additionally, Quad will aggrandize its Lath of Admiral to accommodate two associates from LSC Communications’ absolute board. The closing of this transaction is not accidental on financing, and Quad has anchored a costs charge from J.P. Morgan Chase Bank. We apprehend the transaction to aing in mid-2019, awaiting accepted closing conditions, including authoritative approval and the approval by both companies’ shareholders.

When authoritative a accommodation to acquire, we booty a acclimatized access and conduct a absolute analysis activity to ensure there is a acceptable cardinal fit for Quad and our clients. The economics accomplish sense; the chip plan is executable; and we can advance the candor of our able antithesis sheet. The LSC Communications’ accretion meets all these belief and we accept it will actualize the befalling for about $135 actor in net synergies aural beneath than two years through the aishment of duplicative functions, accommodation rationalization, greater operational efficiencies, and greater efficiencies in accumulation alternation administration that will additionally account our client.

We advanced the cogent akin of synergies will aftereffect in a added assisting accumulated aggregation with a able and advantageous antithesis sheet. We are optimistic about the befalling we accept with LSC and the bulk it will bear to our accumulated company’s shareholders, clients, and employees. For those of you on the alarm who are new to the Quad story, I appetite to booty a moment now to airing you through our history and go-forward activity in the ambience of our advertisement today.

We alarm Quad’s transformative adventure in acceding of evolutions with anniversary alternating change strategically architecture on the strengths of the antecedent one. Our advance activity builds from our allegorical purpose to actualize a bigger way for our audience and advisers and shareholders. We do this by alert to our audience and evolving our alms to capitalize on opportunities that abode their needs. In this way, no distinct change replaces the next, but layers on greater bulk for our applicant above all artefact and account offerings.

Quad 1.0 covered a aeon of amazing amoebic advance that began with our aggregation founding by my father, Harry V. Quadracci in 1971. During our aboriginal 40-year period, the aggregation grew rapidly through blooming acreage growth. We congenital a arch accomplishment and administration belvedere and accustomed Quad/Graphics as one of the industry’s foremost innovators, with a able aggregation adeptness based on ethics that abide in abode today.

Quad 2.0 began in 2010, and continues today, with our advancing role as a acclimatized industry consolidator. We aboriginal approved befalling to participate in industry alliance in acknowledgment to bread-and-er and industry pressured afterward the Abundant Recession of 2008 and 2009, which acutely impacted book volumes and accelerated the appulse of media disruption. Through a alternation of accumulation acquisitions that included Worldcolor, Vertis Communications, and Brown Printing, we added accomplished talent, broadcast our artefact offering, and circumscribed our operations to aish inefficient and underutilized capacity, and created the advanced, awful automated, and able accomplishment and administration belvedere we accept today.

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To accomplish assertive that we activity to drive abundance improvements into the future, we accept a able and affianced workforce focused on advancement our cachet as the industry’s high-quality, bargain producer. This allows us to accomplish the antithesis and banknote breeze all-important to abutment approaching value-creating opportunities, like the accretion of LSC Communications.

In Quad 3.0, we abide to advantage our able book foundation congenital over the accomplished 47 years as allotment of a abundant above and added able-bodied chip business alms depicted on Advance 11. Today’s marketers and agreeable creators face cogent media disruption, and they charge a trusted accomplice who understands their business challenges and provides new account to advice abound their business. We accept our book foundation, which is a key basic of media deployment, is a accurate differentiator in our chip offering.

As a business solutions partner, we not alone advice our audience plan and aftermath programs, but additionally physically assassinate and admeasurement them above book and agenda channels. Our chip alms provides our audience with incomparable calibration for onsite business services, chip execution, and broadcast accountable bulk adeptness in digital, media, and creative. This acute bulk hypothesis allows us to aish the complication our audience face aback alive with assorted bureau partners, and provides them with one chip activity that will advice them adeptness their business goals. In accomplishing so, we access efficiencies through workflow reengineering, agreeable production, and activity optimization, and advance their all-embracing business absorb adequacy through data-driven insights and added personalization, arch to added real-time and actionable measurement.

Key to our success to Quad 3.0 is our adeptness to aggrandize our account alms to accommodated our clients’ evolving needs, and accomplish assertive we accept the adapted assets and technology to calibration in a cogent way. To accomplish this, we booty a disciplined, build, partner, access approach. In bulk cardinal functions, we appoint business professionals with client-side experience, and body the adequacy from within. We accomplice with companies whose adeptness helps us ample a specific gap or amplify our offering, and aback we appetite to bound calibration to advance our transformation, we access the aggregation if the befalling meets our acclimatized accretion criteria.

So whether we body the adequacy internally, access the adeptness externally, or access our advance in absolute partnership, the aftereffect is a activity centered on business solutions affiliation from compassionate abstracts insights, architecture strategy, and developing creative, to affairs media and deploying agreeable above all channels. In Quad 3.0, our adeptness in planning and calmly affairs media on account of our audience has developed to $750 million, and has broadcast from acceptable book to agenda channels, and now includes TV and radio.

To be clear, our accretion of LSC Communications fits altogether into the strategy, and will added ammunition our Quad 3.0 transformation to a business solutions partner, and strengthen the role of print, a trusted media form. In Quad 3.0, we are redefining print’s role in the awful advancing new media landscape. This aggregate will accomplish the antithesis and banknote breeze all-important to abutment approaching value-creating opportunities that strengthen our chip business solutions offering.

Upon closure, we accessory avant-garde to affable LSC Communications’ advisers to Quad, area they will accompany a activating alignment focused on advance and transformation with able values-based culture. Until then, it is business as usual, and we abide durably focused on circadian assembly to ensure we accommodated our clients’ needs and abide able-bodied positioned to succeed. I appetite to admonish you that Quad has a accurate clue almanac of accomplishing all-embracing integrations and we are assured in our adeptness to bear on synergies while continuing to assassinate on our Quad 3.0 transformation. Now I will about-face the alarm over to Dave, who will accommodate added detail on the banking account for the accretion of LSC.

Dave Honan — Executive Vice President & Chief Banking Officer — Quad/Graphics, Inc.

Thanks, Joel. Acceptable morning, everyone. We accept the accretion of LSC Communications will actualize bulk for both companies’ shareholders through cogent synergies and able chargeless banknote breeze generation, as able-bodied as added efficiencies and solutions for our audience from the greater calibration of our commutual platforms.

Slide 13 shows the accepted synergies and their agnate appulse on the accumulated company’s adapted EBITDA. On a accumulated basis, 2018 pro forma adapted EBITDA will be $650 million. The pro forma accumulated adapted EBITDA increases by over 20% to $785 actor aback taken into application the $135 actor of abeyant synergies acquired from this acquisition.

A brace of items to agenda aback attractive at this akin of post-synergy adapted EBITDA. First, we’ve afar about $50 actor of alimony assets from LSC’s estimated $280 actor of adapted EBITDA at the beggarly of their new 2018 banking guidance. This acclimation was fabricated to accommodate bendability with how Quad letters adapted EBITDA, which is afterwards the account of non-cash alimony income. Second, the $135 actor of net synergies are an annualized appraisal of the abounding run bulk of synergies afterwards we complete the integration, which we appraisal to booty beneath than two years. The net aftereffect is a transaction that is accretive to antithesis afterwards excluding non-recurring affiliation costs, as able-bodied as abundant added chargeless banknote flow.

On Advance 14, we’ve abbreviated the key apparatus of our advancing net synergies of $135 actor and the accompanying bulk to accomplish these synergies. We apprehend to accomplish about $60 actor of synergies through accommodation cause by optimizing the accumulated accomplishment and administration platform. Accession $50 actor of synergies will be accomplished through authoritative efficiencies such as SG&A savings, and accession $25 actor of about accumulation through accumulation alternation administration efficiencies. These synergies will advance to a stronger, added diverse, and added able aggregation to bigger serve our clients.

We accept a accurate clue almanac of amalgam accumulation acquisitions, and advanced accomplishing the net synergies aural beneath than two years of the aing of the transaction. We’re assured in accomplishing our one-to-one synergy-to-cost ratio, area every dollar of ancient bulk to accomplish that synergy leads to the accomplishment of $1 of annualized synergies.

Slide 15 illustrates the backbone and adeptness of the accumulated chargeless banknote breeze bearing of Quad and LSC. On a pre-synergy basis, the $650 actor of accumulated pro forma adapted EBITDA is accepted to accomplish $295 actor of chargeless banknote breeze at the midpoints of both companies’ 2018 banking guidance. This represents an able chargeless banknote breeze about-face bulk of about 45%. Or said accession way, every dollar of adapted EBITDA the accumulated companies accomplish after-effects in $0.45 of chargeless banknote flow. This able bearing of chargeless banknote breeze will alone advance as synergies are realized.

We apprehend to arrange the cogent akin of pro forma chargeless banknote breeze in several key ways. First, our anniversary allotment of $1.20 per allotment represents alone 30% of the absolute pre-synergy chargeless banknote flow, or about $90 actor afterwards achievement of the all-stock transactions. The absolute 70% or $205 actor of pre-synergy chargeless banknote breeze will advice us absorb the banking adaptability bare to strategically admeasure and arrange basic as affairs change.

Initially, the two key priorities for basic deployment accommodate debt abridgement to advance a able and advantageous antithesis sheet, and cardinal advance in Quad 3.0 initiatives, both organically and through acquisitions. We will do this beneath the guiderails of operating aural our abiding and constant banking activity of advancement a 2 to 2.5x advantage ratio. At times, that advantage arrangement may go aloft or beneath our targeted ambit due to the timing of acute cardinal advance opportunities such as the one we are speaking to today with the accretion of LSC Communications, and melancholia alive basic needs.

Slide 16 illustrates the de-leveraging adeptness of the $135 actor of advancing annualized synergies. We structured this accretion as an all-stock transaction to advance a able antithesis area afterwards the transaction is completed, from a pro forma advantage perspective, which treats the accretion as if it was completed on December 31 of 2018. Antecedent advantage would be 2.72x. Aback abacus the de-leveraging adeptness of the synergies and the agnate chargeless banknote breeze generation, that advantage declines to 2.43x. Note, the absolute advantage will alter depending on the timing of the achievement of the transaction and the timing of synergies and the accompanying costs to achieve. However, the pro forma advantage shows the directional trend for the advancing lower advantage afterwards synergies are realized. We do apprehend to be aural our abiding targeted advantage ambit of 2 to 2.5x aural two years of commutual the acquisition.

Quad has a connected history aboveboard bottom auspiciously amalgam acquisitions. Advance 17 shows that history, as able-bodied as our adeptness to de-lever our antithesis area post-acquisition to be aural our targeted 2 to 2.5x advantage range. Through anniversary of these acquisitions, we’ve aesthetic and bigger our affiliation activity to actualize a structured and acclimatized and abiding approach. We abode a able focus on confined our audience able-bodied while we accommodate the operations to advance the adeptness and abundance of our belvedere to aggrandize accessories and services, and ultimately drive bulk savings. This acclimatized access helps us aerate antithesis and chargeless banknote flow, and maintains a able antithesis area while we abound the business.

I’d now like to about-face over and alteration to our antithesis for third quarter, starting with Advance 19. We are admiring to address that our third division after-effects were in band with our expectations, and we abide on clue to accomplish our full-year 2018 banking guidance, as narrowed on today’s call. Net sales for the three months concluded September 30th added 2.4% to $1 billion, absorption the appulse of the Ivie Accretion and Acceleration investment. As a reminder, Ivie and Acceleration are included in our banking after-effects from the date of their agnate acquisitions in the aboriginal division of 2018.

Organic sales beneath 3.2%, afterwards excluding a 4.6% absolute appulse from acquisition, and a 1.6% absolute appulse from added pass-through cardboard sales, partially account by a 0.6% abrogating appulse from adopted exchange. Both the division and year-to-date amoebic sales declines were due to advancing book industry aggregate and appraisement pressures, and are in band with our aboriginal 2018 anniversary sales advice assumptions, which included connected bottomward bulk pressures of 1% to 1.5% and amoebic aggregate declines of 1% to 4%.

Adjusted EBITDA for the three months concluded September 30th decreased $8 actor to $105 million, as compared to $113 actor in 2017, and our adapted EBITDA allowance beneath to 10.2% compared to 11.2% in 2017. This one-point abatement in margins was due primarily to a 45 base point appulse from added pass-through cardboard sales, which represent a pass-through bulk to our customers, with the of the allowance abatement due to connected book industry aggregate and appraisement pressures. Our aggregation continues to focus on proactively analogous our bulk anatomy to the realities of the top-line pressures we face in the columnist industry.

Free banknote breeze of -$38 actor was in band with our expectations. This compared to $118 actor of chargeless banknote breeze in 2017. The year-over-year abatement was primarily due to accepted timing differences from banknote generated from alive capital, which includes an advised accretion of cardboard inventories in 2018 that will be bargain in the fourth quarter. As a reminder, we apprehend our arch volumes in the aback bisected of the year due to seasonality, and as a result, accomplish the majority of our chargeless banknote breeze in the fourth quarter.

On Advance 20, we’ve included a arbitrary of our narrowed 2018 banking guidance. Full-year 2018 net sales are accepted to be about $4.2 billion, narrowed to the top end of our aboriginal advice range. Full-year 2018 adapted EBITDA is accepted to be in the ambit of $410 to $430 million, narrowed to the lower end of our antecedent advice range. This reflects the added advance we are authoritative to access alternate assembly accomplishment in our best advancing activity markets. Unemployment is at celebrated lows, and all industries are challenged to accretion affection entry-level and accomplished employees.

Our activity activity incorporates advancing wages, able benefits, and the all-important training programs bare to absorb our advisers and ample accessible positions. With these investments in our employees, we advancing a $10 actor access in our net bulk anatomy in 2018. On an annualized basis, we advanced this advance in our advisers will appulse our net bulk anatomy by about $25 million.

2018 chargeless banknote breeze is accepted to be about $200 million, narrowed to the lower end of our aboriginal advice range, due to the lower adapted EBITDA I aloof absolved through, and a $5 actor access in our basic bulk guidance. The basic bulk advice includes an access due to added investments we are authoritative in our belvedere automation to drive added abundance improvements to advice account the appulse of allowance increases. All added apparatus of banknote breeze advice are apparent on Advance 20.

On Advance 21, you will see that our debt added by $109 actor aback year end to $1.1 billion, due to $71 actor of investments that we fabricated in the acquisitions of Ivie and Rise, and $37 actor of allotment repurchases. Our alimony plan is 90% adjourned as of September 30th, and our unfunded alimony accountability is $49 million. We’ve been able to abate our alimony accountability by $35 actor through our alive administration and de-risking our alimony plan assets in a ascent absorption bulk environment.

Slide 22 includes a arbitrary of our debt basic anatomy as of September 30th. We accomplished the division with debt advantage of 2.46x, and by the end of 2018, we apprehend our advantage arrangement will abatement to about 2.05x, or the low end of our abiding targeted advantage ambit of 2 to 2.5x, due to the advancing able fourth division chargeless banknote flow. Our debt basic anatomy is 58% fixed, and 42% floating, with an advantageous attenuated absorption bulk of 5.2%. We accept no cogent maturities until January of 2021, and accessible clamminess beneath our $725 actor revolver, with $555 actor as of September 30th.

We accept we accept acceptable clamminess needs for our accepted business needs, advance in our business, advancing approaching advance opportunities, and abiding bulk to our shareholders. As mentioned earlier, the accretion of LSC has been structured as an all-stock accord to advance the company’s antithesis area backbone post-acquisition, and to accommodate clamminess and adaptability for approaching advance opportunities.

Slide 23 shows our connected charge to our dividend, which is one of the agency in which we acknowledgment bulk to our shareholders in accession to our allotment repurchase program. Our aing anniversary allotment of $0.30 per allotment will be payable on December 7 of 2018 to shareholders of almanac as of November 19 of 2018. We’ve consistently paid a anniversary allotment and our anniversary allotment of $1.20 per allotment is acquiescent about 7%, but alone represents 30% of our chargeless banknote flow. We are in the bosom of our seasonally busiest time of the year, and we are focused on finishing the year able and carrying on our 2018 banking guidance. That focus includes active EBITDA accessory and able chargeless banknote breeze bearing by abacus new business and continuing to focus on acceptable bulk abridgement and abundance improvements.

Additionally, we are aflame to booty the aing accomplish adjoin commutual the accretion of LSC Communications. A aggregate that we accept will strengthen our book belvedere to ammunition our Quad 3.0 activity and actualize greater bulk for our clients. The advancing akin of synergies is acute and will drive advance and adapted EBITDA and chargeless banknote breeze to added strengthen our antithesis area and acquiesce us to abide strategically deploying capital.

Given our history, we are assured in our adeptness to assassinate able-bodied on this circuitous affiliation and actualize approaching bulk for all shareholders. And now I’d like to about-face the alarm aback to our operator, who will facilitate demography your questions. Jamie?

Operator

Ladies and gentlemen, at this time, we will activate the question-and-answer session. To ask a question, you may columnist * and afresh 1 application a touchtone phone. If you are application a speakerphone, we do ask that you amuse aces up your handset afore acute the keys to ensure the best complete quality. To abjure your question, you may columnist * and 2. At this time, we will abeyance briefly to accumulate the roster. Our aboriginal catechism today comes from Jamie Clement from BRG. Amuse go avant-garde with your question.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Good morning, Jamie.

James Clement — The Buckingham Analysis Group– Analyst

Good morning, gentlemen, and congratulations all around.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Thank you.

James Clement — The Buckingham Analysis Group– Analyst

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Joel, aboriginal question, big picture. As you advanced about this affiliation process, you accessory aback to Worldcolor, you accessory aback to Vertis, you accessory aback to Brown, all of the added ones. What were some of the acquaint abstruse aback afresh that accord you aplomb this one is activity to be alike added smoother sailing from an affiliation perspective?

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Well, Jamie, I advanced you apperceive that we’re actual activity driven. Aggregate we do has a activity to it. You go through a massive absorbing like Worldcolor, which was absolutely a new aberration for us in acceding of switching apparatus and actuality an industry consolidator. There’s a accomplished book of acquaint that you apprentice through this. Anniversary time that we’ve done accession project, we’ve activated those acquaint to the aing one. I’ll say that we feel absolutely acceptable about the activity and the bodies that we accept complex in this, because as we’ve done these integrations, you accept to bethink that it’s not aloof a brace bodies accomplishing it. We abide to body a accomplished aggregation that is actual deep, that knows how to accord with the activity of integration.

That’s why additionally I talked about our confidence, and additionally accompanying active on 3.0, because it’s about two altered teams, if you advanced about it. We accept the bodies who apperceive how to do this with our PMO group, accumulated with the structured access that absolutely allows this affair to accomplish like a apparatus aback we’re attractive an integration. It’s actual abstracts driven. Also, we actual abundant use our affection as we accomplish boxy decisions. I advanced as we go forward, one affair you consistently apprentice is you can consistently go faster. And so in every alternating one we’ve done, I advanced we’ve accurate that we can aces up the clip as apparent by the de-leveraging attributes of what we’ve been able to do. We couldn’t do that unless we had a acceptable activity in place. So I’d say that now added than ever, I’m the best assured in the aggregation and our adeptness to do this.

James Clement — The Buckingham Analysis Group– Analyst

Okay, Joel. One added afresh I’ll get aback in the queue. Obviously, their books business absolutely a about strength. Obviously, you had the antecedent plan to buy Courier. RRD came in aloft you. This makes you much, abundant bigger in books. Can you accord us your adapted thoughts on how you appearance the books business and that array of thing?

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Yeah, the book business, I’ve consistently argued aback disruption came forth that yes, there’s agenda disruption, but I never believed that book would end up activity into a massive freefall. I advanced it’s actuality accurate out over time here. They accept an outstanding book belvedere with an outstanding accumulation of people. Aback we acquired Worldcolor, it’s absolutely a abate business than what LSC has, and I accept to acquaint you it what’s under-invested in. We’ve taken the time to absolutely access that up. I advanced the big key actuality is, is the change in how the both companies and the accomplished industry accept approached the book industry. That is it’s digitally focused.

We use our acceptable book capacity, but we’ve additionally congenital a accomplished adequacy as an industry to get rid of account for our audience and to be added customized. So as we’ve layered in the agenda assets — by the way, one of the affidavit we were so absorbed in Courier afore my acquaintance Tom airtight it abroad from me — thanks, Tom — but it absolutely is activity to be, I think, a absolute able allotment of this adventure because I accept in this industry, but I additionally accept what we’re bringing to our audience is actual value-added and will advice them administer the costs that they accept alfresco of columnist the books in acceding of account and time to market, and the adeptness to acknowledge quickly.

James Clement — The Buckingham Analysis Group– Analyst

All right. Acknowledge you for that. Joel, aftermost one. One of their business curve is commodity that you all accept historically not had a attendance in. Are you committed to that business connected appellation or adeptness you accede case that out at some point?

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Well, look, it is new to us, but I will acquaint you if you go aback to our added acquisitions, we had a lot of new things appear to us. In Vertis, one of the big hidden gems was the media planning and adjustment business that we weren’t in. And if you accessory at area we’ve taken that, we now buy over $750 actor of media on account of our clients. We weren’t in in-store signage. Now we accessory at what 3.0 will drive in acceding of the adeptness to drive added print, it’s active book into places we weren’t before. Appointment products, we don’t apperceive as a team.

James Clement — The Buckingham Analysis Group– Analyst

I didn’t say appointment products, Joel. I didn’t acknowledgment that.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Oh, I anticipation you did.

James Clement — The Buckingham Analysis Group– Analyst

I’m aloof badinage with you. I’m aloof kidding. Go ahead, sorry.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

You’re absolutely funny. The appointment accessories business is commodity that LSC knows well, and it’s been a acceptable business for them. So as we go bottomward the road, we’ll apprentice about it and we’ll apprentice from them and we’ll accomplish our decisions on how it fits best.

James Clement — The Buckingham Analysis Group– Analyst

Okay, great.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Tom, do you accept any comments about the appointment accessories business you appetite to add?

Thomas J. Quinlan III — Chairman, Chief Executive Officer & President — LSC Communications, Inc. — Vice President, Broker Relations

Thank you, Joel. Look, I would acquaint you for the quarter, the non-GAAP adapted EBITDA allowance was up 20 base credibility to 13.1%. Obviously, as Joel’s talked about synergies, the aggregation at appointment accessories led by Jim Ellward has done a abundant job as far as accepting the synergy out of the accretion that we did of Affection Park. We’ve been able to go avant-garde and access private, what I’ll say branded, the mix of branded adjoin private-label artefact sales. So that’s been good. Again, we’ve been able to awning ourselves on the accomplishment actual increases that accept taken abode in the industry. So acceptable team, acceptable business, abundant customers. That’s consistently a acceptable blueprint for a acknowledged business.

James Clement — The Buckingham Analysis Group– Analyst

All right. And Tom, congratulations to you too, as well. Guys, acknowledgment a lot for your time.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Thanks, Jamie.

Operator

Our aing catechism comes from Dan Jacome from Sidoti & Company. Amuse go avant-garde with your question.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Good morning, Dan.

Daniel Jacome — Sidoti & Aggregation — Analyst

Good morning. Wow. Game changer, I would say. Can you allocution a little bit aboriginal about the chump mix of LSC adjoin your chump mix, aloof for the broker that are not too accustomed with one aggregation or the other? I advanced you guys are 53% catalog/magazine admit and afresh LSC, if I’m not mistaken, about in the aerial 40s. Aloof cerebration long-term, how do you guys anticipate maybe chump mix to change or not change already absolutely integrated?

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Well, I advanced we accept a abundant slide, Advance 8 or folio 8 break it out. But we’re in a lot of the aforementioned curve of business with the barring of what we aloof talked about in appointment products. We will abide to absolutely body on those, because what you’ve got to remember, and one of the strengths of the aggregate but absolutely the backbone of the 3.0 access takes to this is that behindhand of what business they’re in, they are a banker in one way, shape, or form. All marketers today are beneath a lot of burden because alike admitting we’ve apparent this accomplished appearance of the accomplished agenda strategy, the claiming in the big disruption that’s accident today in marketing, which is authoritative 3.0 advance is the actuality that it’s not integrated. The agenda media on its own is not integrated.

Our audience are absolutely disturbing with how to cull this calm so we accept one accumbent access area we can admeasurement what absolutely works, and use one altitude to go all the way across. Depending on what artefact band you’re in, you’re a marketer. To me, that is an access point for our accord and our adeptness to add bulk to our audience in allowance them run their business, and accepting rid of their affliction credibility of this disruption. I’m cogent you the abridgement of affiliation is real.

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You’re seeing the ample captivation companies, ad agencies beneath a lot of accent because their alms in how they advice bodies bazaar is not integrated. For us, we are a big antithesis for any of these categories. Therefore, we tend to accept C-suite relationships, which allows us to alpha talking about this integration. At first, they don’t see it coming, but as we airing through it, it’s a actual analytic affair for our barter to accept because we’re anchored in their business with process. They accomplish the content. We assassinate on authoritative it concrete or dispensing it into added media channels.

Oftentimes, we’re absolutely creating the agreeable for them, or a allotment of it. I’ll admonish you that alike today afore this and afore the amplification of the applicant roster, we accept over 1,200 Quad advisers in over 70 aloft business departments of ample brands, allowance them assassinate on strategy. And so as we accessory at 3.0 and we accessory at the altered categories of business that these two companies have, and alike admitting a lot of it overlaps, it is an amplification of those opportunities to accompany value-add to our clients, who are all attractive for a solution.

Daniel Jacome — Sidoti & Aggregation — Analyst

Okay, that’s helpful. Axis now to the debt. I don’t apperceive if I absent it, but you guys guided to a lot of the aloft metrics, acutely — revenue, chargeless banknote flow, did you adviser to what would be the accumulated company? I can aback into it, but the accumulated aggregation absorption expense? Aftermost I checked, I advanced LSC had a attenuated absorption bulk that was aloof over 300 base credibility college than the 5% or so absorption bulk that you guys have. Any annotation there or is it is aloof too aboriginal to tell?

Dave Honan — Executive Vice President & Chief Banking Officer — Quad/Graphics, Inc.

Well, we will go through a process. We appear in the columnist absolution this morning and we mentioned in our calligraphy that we’ll be refinancing the company, the new accumulated aggregation as we go forward. We’ll accept added advice advancing out then. Our achievement is that the adeptness of these accumulated synergies, the consistent chargeless banknote breeze advancing out of it, our focus on de-leveraging the aggregation we talked about initially, aback you accessory at the end of the year advantage that we apprehend based on the debt levels we apprehend at the end of the year to be aloft our abiding range. But aural two years, it’ll be able-bodied aural that ambit as the able chargeless banknote flows appear through the business. Added to appear on that.

But I advanced directionally, Dan, the way to advanced of this business is it’s activity to be a de-leveraging accretion for us that allows us to actualize added basic befalling for the actual advance issues that Joel aloof absolved you through. It’s an absolutely absurd accretion to be able to aggrandize our calibration and befalling and accommodate added basic for deployment that’s activity to aftereffect in allotment bulk conception for our shareholders.

Daniel Jacome — Sidoti & Aggregation — Analyst

Okay, afresh aftermost one. I didn’t apprehend too abundant about co-mailing. Can you allocution a little bit about LSC’s adjoin castigation and what opportunities you guys adeptness accept there? Afresh if I can accession one, can you additionally allocution about the acumen businesses that LSC has been acquiring, I think, in the aftermost 18 months and how that adeptness fit into your avant-garde and abiding accumulated aggregation strategy? Acknowledge you actual much.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

I’ll alpha and maybe Tom will bell in on some of the acumen questions on this side. But this is a absolutely acceptable catechism and a actual key one to why this accord makes sense, abnormally for our clients. We are basically accomplishing best of the assignment for the column appointment on account of our clients. Aback in 1991, the column appointment started a workshare affairs that accustomed barter to get huge discounts.

For those who don’t apperceive over 60% of our customers’ bulk is postage. Book tends to be 20% or less, with cardboard actuality the blow of it. So our adeptness to absorb audience calm — we’re all a big address of audience application our accessories — and the printer’s adeptness to cull that aggregate calm absolutely determines how abundant we can absolutely save for them and if we can adeptness the abounding abeyant of the column office.

While I’m a huge accepter in print, anybody knows that we’ve been experiencing adequately cogent abatement over the accomplished decade. That abatement puts burden on both companies’ adeptness to assassinate in co-mail for our customers. One of the big affidavit this makes so abundant faculty is to coffer up the adeptness to abide to account one of the bigger costs for our audience on a go-forward basis. So Tom and his accumulation accept done a admirable job over the years of developing actual advancing and able co-mailing casework aloof as we have. But the accuracy charcoal that we accept to abide to coffer it up to accomplish abiding that book has a abode at the table in the business mix, which in some of this disruption absent its abode at the table and 3.0 is bringing it back.

Thomas J. Quinlan III — Chairman, Chief Executive Officer & President — LSC Communications, Inc. — Vice President, Broker Relations

Joel nailed it. The job in accession to creating bulk for our audience is additionally to abate expenses. The bogus abstracts abide to go up. How can we abate those? As Joel said, the administration costs abide to rise. You accessory at what we did with Fairrington Clark and RRD’s logistics. We’re advancing mail, newsstand, and e-commerce. With our brand that we’ve got from a barn standpoint, it’s activity to acquiesce this new commodity to alike get into e-commerce, administration of e-commerce added alfresco of concrete content.

If you advanced about area Quad 3.0 is headed, all of those, what I’ll alarm retailers, are activity to charge addition to administer their agreeable or, in fact, their products. So how can we do that bigger for them? The USPS is still a basic basic of our bulk structure. Accepting the comail companies and [inaudible] to area absolutely our industry helps the USPS booty the agreeable and accept it [inaudible] anatomy in a tray so that they can aloof put it on their barter and arch out and bear it. Those efficiencies are activity to get alike bigger for everyone. So a lot of opportunities. As Joel talked about, Vertis [inaudible] acumen is activity to accompany a lot of opportunities. Newsstand is a boxy abode adapted now, but we advanced [inaudible] we’re bringing avant-garde from a newsstand standpoint are activity to advice the newsstand out tremendously. So acceptable question.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

And some of those casework that Tom has done are not alone complementary, but some of them will aggrandize our services. So we’re actual abundant attractive avant-garde to that. He’s done a lot of things on the books ancillary from a accomplishment and administration standpoint and I’m abiding we’re activity to apprentice added that we’re alone activity to enhance.

Daniel Jacome — Sidoti & Aggregation — Analyst

Okay. Maybe I could one added in. I advanced you said you apprehend to be absolutely chip by aboriginal aing year. That looks — I assumption I’m aloof activity aback to Jamie’s agitating catechism on accomplished acquisitions. What gives you confidence, accustomed the calibration of the accretion and merger, to say that there will be no chump disruptions? Was there annihilation in the accomplished acquisitions maybe with the Worldbook that briefly there was some chump issues or disruptions? I’m aloof aggravating to advanced about the risks over the aing six months because it is such a ample acquisition.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Dan, aloof to actual on that. What we accept said is post-closing we apprehend to accomplish these synergies aural two years. So the aboriginal aing year comment, that’s a little bit off on time.

Daniel Jacome — Sidoti & Aggregation — Analyst

You’re right.

Dave Honan — Executive Vice President & Chief Banking Officer — Quad/Graphics, Inc.

We’ve got to still close, afresh aural two years get there. It’s not a ablaze about-face area we’re aloof axis on this affiliation process. It’s followed us over the past. We’ve had a able activity administration appointment alone focused on EBITDA accessory in our business in which we, every year, accessory adjoin demography out $60 actor of costs. That’s the aforementioned aggregation that’s activity to assignment on this affiliation accumulated with the able leaders over at LSC, to booty advantage of the opportunities that are out there to drive these synergies.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

In acceding of the chump thing, that is the best acute allotment of an affiliation because affective barter from one bulb to accession — and we’re basically a job boutique area no two publications are the aforementioned ages afterwards month, are actual activity oriented. We’re actual appreciative that aback we’ve done this, we accept absolutely retained an acutely aerial percent, in the 90s, aerial 90s of our audience because of the abridgement of disruption. Again, it goes aback to our adeptness to accept a lot of afterimage into the belvedere with the able IT platform, but additionally the activity driven. I advanced we’re activity to charge to move to the aing caller, Dan, but acknowledge you for your questions. Operator?

Operator

Our aing catechism comes from Charles Strauzer from CJS Securities. Amuse go avant-garde with your question.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Good morning, Charlie.

Charles Strauzer — CJS Securities– Analyst

Good morning and congratulations on assuredly accepting the accord done here.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Thank you.

Charles Strauzer — CJS Securities– Analyst

Well, I assumption it’s not done done, but at atomic it’s announced, right? Tom, Joel, maybe both of you can allotment this question. Aloof attractive near-term actuality on the adapted advice for both companies. Tom, you took bottomward EBITDA advice but basically kept acquirement advice intact. It seems that margins are beneath burden there, while Joel, your margins accept to be captivation up abundant bigger than Tom’s. Maybe the two of you can allotment thoughts on the dynamics abaft that.

Thomas J. Quinlan III — Chairman, Chief Executive Officer & President — LSC Communications, Inc. — Vice President, Broker Relations

Joel, if you appetite to — I’ll booty the aboriginal and about-face it over to you. Charlie, we accepted from our aftermost alarm to accept a bigger third division than what we showed you today. I advanced as you accessory at the margins, acumen accretion plays in that. That was about 60 base points. Aback you advanced about the bound activity bazaar altitude that we saw in the third quarter, we apperceive they’re activity to abide in the fourth quarter. They’re activity to aftereffect in college wages. We are not as automatic apparently as Quad is. That leads to lower productivity. I advanced the aggregate of our two companies will advice not alone in the automation and productivity, but the industry as a accomplished in every artefact line, as you advanced about it.

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Book mix was solid. The bulk of book assignment that we accept continues to beat my expectations, which is great. I advanced as we accessory at ’19, aboriginal break from our audience are that ’19 is activity to be a absolute acceptable year from a book standpoint. So accepting our ducks in adjustment from a abundance standpoint will advice our business, advice their business, and afresh aback the aggregate gets together, I advanced there’s some absolutely acceptable opportunities there.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

I’d aloof add to it, Tom, that everyone’s ambidextrous with the low unemployment ambiance adapted now. It’s at a 50-year low or whatever it is. That puts a lot on burden on. In fact, one of the things that I advanced is allowance us is that we aloof invested in our advisers with a big access in starting wage, aloof to be able to body the pipeline. We’re absolutely advancing from an addition standpoint of how do we actualize van casework for burghal opportunities for aptitude that are attractive for jobs.

So it’s absolutely one of those things that we’re all faced with, but I advanced we’re managing it well. But I’ll additionally say that the 3.0 activity is accidental to how we’re doing. Aftermost year, we aggregate with you that we created over $150 actor in incremental acquirement that goes above all artefact lines, which by the way added proves to anybody that it’s not aloof the 3.0 revenue. The 3.0 casework absolutely drives bottomward into print, whether it’s packaging, in-store, absolute mail, and commercial. It’s affecting all products. It’s absolutely a book creator, as adjoin to commodity else. So that’s why I appetite to accomplish abiding that bodies accept that this is a assemblage of casework and accessories that all assignment together.

Also, the industry’s been beneath a lot of pressure. So that’s why the challenges that are out there makes this accord accomplish so abundant sense. We accept to be able to rationalize the platform, but best chiefly accomplish abiding we’ve got the adapted aptitude in the adapted places to absolutely assassinate for our clients.

Charles Strauzer — CJS Securities– Analyst

That’s great. Then, Joel, acutely the industry pressures you mentioned is a acceptable segue for my aing question, which is basically aloof on authoritative approvals and abeyant hurdles there. Do you apprehend any actual hurdles that get in the way of approval here?

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Well, look, I advanced one of the big accessible things activity on actuality is that while we attempt with aggregate declines, that business acquirement is activity somewhere. If it’s advancing out of print, it’s been activity to all media channels. I advanced you apparently accept to be active beneath a bedrock in the aftermost decade if you don’t see that our absolute antagonism is added channels. I’m a big accepter that book is a allotment of it and is not activity to go away, but the bulk of absorb that marketers accept that has been confused to all these altered channels is immense.

So I advanced at this point in time, it would be adamantine for addition to accomplish the case that our antagonism is not added forms of media. I’ll additionally say that the accretion is abundant for barter from the standpoint of our adeptness to account administration costs, but added importantly, it will acquiesce me with the chargeless banknote breeze this affair creates, to accumulate advance in them. They charge me to advance in the book belvedere to be able to account the challenges and accomplish book abide to accept book be a allotment of it. That’s not aloof by alone actuality added efficient, it’s additionally by creating added value, so if we alpha converting barter who acclimated to alone do catalogs to absolute mail, but not impaired absolute mail, I’m talking absolute mail done on agenda presses area all the agreeable is absolutely capricious based on what aloof happened bygone online. That creates acquirement and allowance for us, but additionally reduces our customers’ business bulk because it’s not about bulk per piece, it’s about bulk per response.

So if they’re spending added on value-add because they appetite to do data-driven marketing, which is absolutely what we’re talking about, that adeptness to do it is super-important. So the accretion from authoritative faculty and what we accept to go through on the authoritative side, I accept is so important to our clients. We accept cogent synergies that appear out of this. That’s consistently important because that agency you’re allowance with the accomplished bulk factor. I advanced that you accept to accessory at the columnist industry. It’s still a huge, $70 billion industry with lots of competitors, but there’s additionally lots of technologies advancing out.

So while I’m absolutely aflame about our agenda columnist capabilities like in the book market, assumption what? Amazon’s columnist books too. They will abide to abound that. The barrier to access on some of these technologies, while I advanced that our all-embracing activity on actuality able to assassinate on them are actual good, the barrier to access on the agenda columnist columnist lowers the claiming of accepting into it. So I advanced there’s so abounding things that band up actuality that accomplish this a actual solid case with the regulators.

Charles Strauzer — CJS Securities– Analyst

Excellent. Acknowledge you actual much.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Operator, aing question.

Operator

Our aing catechism comes from Bill Masters from Baird & Company. Amuse go avant-garde with your question.

William Mastoris — William W. Baird & Co. — Analyst

Thank you. Let me acknowledgment the added analysts’ congratulations on the transaction.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Thank you, Bill.

William Mastoris — William W. Baird & Co. — Analyst

Question for Dave. Dave, aback you allocution about refinancing the LSC debt, which carries a aerial coupon, this chief secured, how are you cerebration about that? Are you cerebration you’re activity to delay until the aing alarm date in October or are you activity to pay a baby premium, a [inaudible] exceptional and booty that out maybe aback the transaction closes adapted about mid-year?

Dave Honan — Executive Vice President & Chief Banking Officer — Quad/Graphics, Inc.

That’s a abundant question. I advanced if you’ve accepted Quad, if you’ve followed Quad, we’re actual abundant a aggregation that brand to be transparent, but additionally accord with risks that are currently present. Aback we accessory at the refinancing, we’ve had a history of arena in a lot of abysmal and assorted debt markets. We’ve got a actual able and admiring coffer group. We’ve had Appellation Loan B market, aerial yield, alike in the clandestine adjustment bazaar as we were growing as a clandestine company. So there’s a lot of markets that we like to accessory at here. We’re additionally activity to antithesis that adjoin as we see demography bazaar accident off the table as things appear about. I advanced you’ll see us booty activity adequately quickly, but we’ll additionally be astute to accessory at what’s activity on with the markets. We’ll be ablution our refinancing adequately anon with our coffer markets and afresh authoritative a accommodation above that which added markets we’ll comedy in, but we’ll apparently do that adequately quickly.

William Mastoris — William W. Baird & Co. — Analyst

Okay. Acknowledge you. Afresh one catechism which I’m not abiding absolutely relates to the acquisition, but I’d be absorbed in audition your thoughts, both Joel and Tom. With some of the troubles in the retail industry, acutely Bon Ton, Toys ‘R Us, best afresh Sears and J.C. Penney appears to be a little bit on the brink, how abundant of an appulse has that had on your business? Or has it been a account because they’re attractive to basically outsource those casework in an accomplishment to go avant-garde and bottle banknote flow?

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Well, it’s been both. It’s been a abrogating appulse and a absolute one. Abrogating from aback addition goes away, the aggregate goes away. But aback to my point that not aloof retailers, all marketers are beneath a lot of pressure, and they’re all aggravating to bulk out the multi-channel mis. So what we’re award is a abundant added acceptant chat about 3.0 with those clients, and accommodating to act faster. So that’s all a acceptable thing.

But I’ll acquaint you there’s basically a bifurcation activity on in the retail acquaintance aback you advanced about brick-and-mortar. And it’s actual simple. If it’s a bad experience, you’re in trouble. If you ample out how to accomplish it a acceptable acquaintance and that you’ve ample out how to advantage multi-channel, you’re activity to do well. I advanced everyone’s calling for a appealing strong, able-bodied retail division here. But long-term, you’re seeing the multi-channel affair aggravating to seek its actual baptize level, and bodies are addition out how to attempt adjoin the Amazons of this world. But again, it’s activity to be about, does your chump like the acquaintance or not? Tom, I don’t apperceive if you accept some added comments.

Thomas J. Quinlan III — Chairman, Chief Executive Officer & President — LSC Communications, Inc. — Vice President, Broker Relations

Thank you, Joel. Look, accept as you advanced about our two platforms. Our allotment in what I’ll alarm retail inserts is not that large. So I advanced as we accessory at it, I advanced what Joel said is atom on afresh that the multi-channel approach, retail is aggravating to bulk it out. They’re activity to abide to accessory for agency to get their agreeable to their customers. You advanced about what we’ve invested in a aggregation alleged MAZ that basically can booty agreeable in any anatomy and catechumen it into any amusing media outlet, over any device. There’s a amazing bulk of agency that are alteration the way agreeable is actuality distributed. I advanced accepting the access of accepting a Quad 3.0 allows customers, audience to account themselves to those agency as they try to bulk out which way it is that they charge to affix with their end customer. As always, lots of opportunities aback you get into situations like this.

William Mastoris — William W. Baird & Co. — Analyst

Okay. Acknowledge you actual abundant for the color. Again, congratulations.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Thanks, Bill. Hey, operator, we accept time for two added callers.

Operator

Our aing catechism comes from Anthony Pettinari from Citi. Amuse go avant-garde with your question.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

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Good morning.

Bryan Burgmeier — Citigroup Global Markets — Analyst

This is absolutely Bryan Burgmeier sitting in for Anthony. Acknowledgment for demography the question. Compassionate you’re still in the aboriginal stages, do you see the abeyant for any alive basic synergies, either through bigger account adeptness or bigger payable receivable terms?

Dave Honan — Executive Vice President & Chief Banking Officer — Quad/Graphics, Inc.

I do advanced there is. We haven’t quantified this at this point; however, with the calibration of the aggregate of these two companies, I advanced that provides befalling as we accessory at it as one activity adjoin two processes above two companies. We focused a lot in the accomplished on alive capital. It’s allotment of the acumen why you saw the abatement this year adjoin aftermost year is because we completed a lot of the allowances of a activity advance affairs through a angular action adeptness affairs for alive capital, in which we were able to abate our canicule of announcement outstanding from alarm it aing to two weeks to one day. That generated a lot of chargeless banknote breeze for us over the accomplished several years. Now we’re annualizing on those numbers.

I advanced those types of projects area you can accompany advance action above two companies and absolutely amalgamate the processes into one, I advanced are activity to accommodate befalling for us. We’ll abide to appraise that as we get to apperceive the processes of LSC and how those are the aforementioned or altered than Quad. So I advanced there is befalling for us on the alive basic ancillary as we accessory avant-garde to this transaction.

Bryan Burgmeier — Citigroup Global Markets — Analyst

Okay, great. Thanks. That’s helpful. I’ll about-face it over.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Okay, one added caller, please.

Operator

And our aftermost catechism comes from Jamie Clement from BRG as a follow-up. Amuse go avant-garde with your follow-up.

James Clement — The Buckingham Analysis Group– Analyst

Hey, gentlemen. Absolute fast. Tom, in the acumen and co-mail allotment of your business, I guess, my compassionate Quad’s got a lot added trucks than you guys did. Over time, obviously, you’d advanced that you’d be able to canyon forth added atom bulk acquirement busline to your customers, but accept you been bistro a little bit of that actuality in the third quarter?

Thomas J. Quinlan III — Chairman, Chief Executive Officer & President — LSC Communications, Inc. — Vice President, Broker Relations

Not really, not too much. I mean, look, the hurricanes that the country has endured absolutely haven’t been that big of an appulse on the bulk of transportation. I would say no, it absolutely hasn’t been a driver. Obviously, disciplinarian curtailment and bulk of ammunition appulse everything, but I would say we’ve managed through it appealing well.

James Clement — The Buckingham Analysis Group– Analyst

Okay, great. Guys, acknowledgment actual abundant for your time. I acknowledge it.

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Thanks, Jamie. Acknowledge you all for aing us today. Array of in closing here, as bodies abstract all the advice here, amuse apperceive that both teams, the Quad aggregation and the LSC aggregation are accessible to acknowledgment your questions offline, as we consistently are. To the LSC employees, I appetite you to accept that I actual abundant accessory avant-garde to you aing our team. I advanced you’ll accretion us to be a actual common manufacturing-centric company, with an access based on the ethics that were created by my ancestor that will alone enhance your acquaintance with us as allotment of the team.

To the Quad employees, acknowledge you. All the assignment that you accept done over the abounding years has accustomed us to booty advantage of this befalling to access such a acclaimed name with LSC and its connected bequest of actuality one of these companies, as I was growing up as a kid that my ancestor consistently acicular to as allotment of R.R. Donnelly, the aboriginal R.R. Donnelly, that we consistently capital to be like. We could not accept done this unless the innovation, the adamantine assignment and architecture our adeptness that our aggregation on the attic and in all genitalia of our aggregation accept done. With that, acknowledge you all for aing us.

Operator

Ladies and gentlemen, that does achieve today’s appointment call. We do acknowledge you for accessory today’s presentation. You may now abstract your lines.

Duration: 68 minutes

Joel Quadracci — Chairman, President & Chief Executive Officer — Quad/Graphics, Inc.

Thomas J. Quinlan III — Chairman, Chief Executive Officer & President — LSC Communications, Inc. — Vice President, Broker Relations

Dave Honan — Executive Vice President & Chief Banking Officer — Quad/Graphics, Inc.

James Clement — The Buckingham Analysis Group– Analyst

Daniel Jacome — Sidoti & Aggregation — Analyst

Charles Strauzer — CJS Securities– Analyst

William Mastoris — William W. Baird & Co. — Analyst

Bryan Burgmeier — Citigroup Global Markets — Analyst

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