Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Quad/Graphics Fourth Quarter and Full Year 2014 Conference Call. During today’s call, all participants will be in listen-only mode. [Operator Instructions] Following today’s presentation, the conference call will be opened for questions. [Operator Instructions] Please also note this event is being recorded. I will now turn the conference over to Kyle Egan, Quad/Graphics’ Manager of External Reporting and Investor Relations. Kyle, please go ahead.

Thank you, operator, and good morning, everyone. With me today are Joel Quadracci, our Chairman, President and Chief Executive Officer; and Dave Honan, Executive Vice President and Chief Financial Officer. Joel will lead off today’s call with highlights of our financial results along with an update on our strategic goals. Dave will follow with a more detailed review of our fourth quarter and full year 2014 financial results and a summary of our 2015 guidance followed by Q&A. I would like to remind everyone that this call is being webcast and forward-looking statements are subject to Safe Harbor provisions as outlined in our quarterly news release and in today's slide presentation. Our financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, free cash flow and debt leverage ratio. We have included in the slide presentation reconciliations of these non-GAAP financial measures to GAAP financial measures. The slide presentation can be accessed through the Investor Relations section of the Quad/Graphics' website under the events and presentations link in the left hand navigation bar. There are also instructions on how to access the slide presentation in our quarterly news release issued last evening. A replay of the call will be available on the Investor Relations section of our website after today's call. I'll now turn the call over to Joel.

Thanks, Kyle, and good morning everyone. I’m pleased to report that our fourth quarter and full year 2014 net sales, adjusted EBITDA, and free cash flow were in line with our expectations. We continued our journey to transform our company and the industry while maintaining a stringent focus on serving our clients well. We acquired commercial and specialty printer UniGraphic in February, followed by Brown Printing in May, and successfully completed the integration of Vertis. Throughout the year, we remain committed to our priorities to maintain a strong and flexible balance sheet, invest in our business, pursue profitable investment opportunities and create long-term value for our shareholders and clients. When we talk about our journey as a company, we like to refer to it in chapters. Chapter 1 began 44 years ago in 1971 when my father Harry decided there had to a better way to run a printing company and started Quad/Graphics. Chapter 1 was all about building a strong foundation, a 40-year period in which we established our company’s values and culture, grew rapidly through Greenfield growth, built a premier manufacturing and distribution platform equipped with the latest technology and established a reputation as one of the industry’s foremost innovators. During those years, we fastened our seat belts and we spent forward with fast and furious organic growth. When Chapter 1 culminated in 2010, Quad had grown from a tiny upstart into a $1.8 billion printer employing nearly 12,000 people across 11 domestic plants plus international locations in Poland, Argentina and Brazil. Chapter 2 of our company’s journey began in 2010 and continues today. This Chapter is about our role as a disciplined industry consolidator. We saw an opportunity to start participating in industry consolidation beginning with the great recession, which severely impacted volumes. At the same time,…

Thank you Joel and good morning everyone. Slide 9 is a snapshot of our fourth quarter 2014 financial results as compared to 2013. The acquisition of Brown is included in our 2014 results since the date of that acquisition on May 30. Net sales were $1.4 billion in the quarter, representing a 5.5% increase from 2013, due to the Brown acquisition. Offset by ongoing volume and pricing pressures lower pass through paper sales and a negative impact from foreign exchange rates. Our adjusted EBITDA was $183 million, as compared to $198 million in 2013, and our adjusted EBITDA margin was 12.8%, as compared to 14.7%. These decreases reflect ongoing pricing and volume pressures, and the margin dilution impact of Brown’s historically lower margin profile, partially offset by productivity improvements. Slide 10 is a snapshot of our full-year 2014 financial results as compared to 2013. Net sales were $4.86 billion and were within our guidance range of $4.8 billion to $4.9 billion. Our 2014 net sales increased by 1% versus 2013 due to incremental net sales from the Brown acquisition. Our adjusted EBITDA was $543 million within the 2014 guidance range of $535 million to $560 million, a decrease from $577 million in 2013. Our adjusted EBITDA margin was 11.2% as compared to 12% in 2013, primarily due to the ongoing volume and pricing pressures in the margin dilution impact of Brown’s historically lower margin profile, partially offset by productivity improvement. We also achieved the remainder of our 2014 income statement guidance including depreciation and amortization of $336 million within the guidance range of $335 million to $345 million, restructuring, impairment and transaction-related charges of $67 million. These restructuring charges decreased $28 million from 2013. When excluding non-cash impairment charges of $14 million. Our 2014 cash restructuring charges were $53 million,…

[Operator Instructions] Our first question comes from Jamie Clement of Macquarie. Please go ahead.

Gentlemen, good morning.

Good morning Jamie.

Joel, I don’t know if you want to handle this, it is in response to some of Dave’s prepared remarks, but, as I was looking at your revenue guidance for 2015, it certainly looked like the low end would be a little bit better than some of the volume and pricing ranges that you talked about historically and Dave I think you said, looking for pricing it rose about 1% to 1.5% and I think the high end of that range and what you said over the last couple of years has been more like 2%, I know you had a lot of contracts up a bit about a year or so ago, are we finally seeing some signs that capacity coming out of the industry is starting to help pricing firm up or is this more of a function of your call mailing services all of that sort of thing?

Well, yes I think it is very good question because as you know we’ve been dealing with the industry challenges for a while now and if you go back to 2009, the trough of capacity utilization was around 61%, you know using the government numbers today it’s closer to somewhere around 72%. So, directionally I think that’s happening. Volumes, again I think was always something we felt we could manage pretty well. I look at the catalogues sort of what they nailed of about as an industry maybe a decline of 2% in 2014 is a good sign and I can keep in mind that that was on top of a significant excel [ph] in postal increase that happened. We had predicted that volume would actually decline further than that and we didn’t see that which makes me believe that that significant hit to their largest cost weren’t there that actually volumes would have been even better. And I think the good news there is that the existing case is done in that and we are locked into some more reasonable postal increases over the long term here. The pricing I think when you think about what we’ve guided to in the past was the 1% to 2% and today we are saying 1% to 1.5%, you did catch that as a little bit of change for us. And I want to remind everyone too that when you look at the 2014 performance, that included the impact of a significantly higher number of contracts coming due in ‘13 that had to be mark-to-market in ’14. And so even when we told you last year that when you took the noise of that out, we actually saw pricing little less than the negative 1%. And so, yeah, we changed our thought…

No, Joel, just following up on that, in terms of looking at print as part of a multichannel world, there were couple of interesting articles about a month or two ago, one in The Wall Street Journal talking about JCP going back to focusing on the catalog a little bit more. Some of those articles made the point which I think is probably a correct one that some folks are going back to the catalog as being a feeder to their ecommerce business. So can you discuss those kind of trends a little bit.

We’ve said consistently through all of this media confusion that print drives traffic. We’ve lived it. We’ve lived it in [indiscernible] 1.01, catalogers got wild as new internet thing is really cool. We can get rid of the extensive catalog. And what happened those who tried and fail miserably because they saw that no traffic came. And so that’s why brand awareness and how the consumer react is a multi-faceted and you have to drive capacity. We lived it again when J.C. Penny went through their whole challenge and cut back the simplest of simple of retail inserts, then came back with their new strategy you don’t need to spend the money anymore. While after the first quarter of significant drop in same-store sale, they’ve rebuilt that program above and beyond as fast as they could because they realize yet to drive store traffic. Furthermore, you think about books. I think the big surprise for everyone is, Apple included, if you look at how they’re looking at their tablets now is books are actually growing. The total book industry grew at about 3.5% last year when you look at print only as oppose to this significant decline that people were expecting. And if you break that down further into like children and young adults which grew about 21% last year in printed books, K12 another 12% in higher Ed [ph], a little lesser at 3%. It goes to show you that people are still people and you need to use all the different mechanisms you can because that’s consumers. I’d also urge you to look at I think it was an article that came out in The Washington Post this week that talks about books and printed books, and talks about the Digital Natives. The young kids, the 20 somethings are the ones who are using a lot of computers and tablets in school actually prefer print, and a lot of the effectiveness of print is proving itself out. It’s a great article. I recommend you’re looking it up.

Okay. Thank you. Thanks very much. Dave, I’ll just get back in the queue but one thing just in terms of free cash flow guidance versus 2015, you help us kind of build the bridge there. Obviously it’s some projected EBITDA erosion, seems like cash tax is a little bit higher, looks like CapEx little bit higher, big reduction in cash restructuring expenses, what else am I missing in the positive column?

Yeah. It’s helpful to go back and look to, Jim, because we’ve been having this discussion over the past year with many who follow stock is that there were tailwind coming into our free cash flow as we were talking about 2014 guidance and those were primarily in the areas of pension contributions which are down significantly, restructuring as we get to a more normalized level of restructuring costs in our business that should range around $25 million a year to continually take cost out and then also at CapEx as we would guided a little bit higher last year in CapEx and that starts to come down to a more normalized level around 3% of our revenue, around $150 million mark. So those three things we knew coming into 2015 would provide a nice lift for the stock they did. I did mention in my prepared comments that we ended the year in 2014 with a little bit higher working capital than we would have liked, and we will take that – we’ll improve on that working capital in 2015 and that will help offset some of the things that we saw when we are guiding to a little bit of higher capital expenditures because we have some carryover programs coming into 2015, but I think you will see the additional elements to what you were referring to would be pension and would be working capital improvement as we look forward into 2015. I like where we are able to guide, the midpoint of our range is up 23% over our free cash flow generation from 2014. Now that does include a $10 million onetime item as I mentioned from the Courier termination fee. But even if you exclude that out, we are still up 17% and a lot of investors talk to us about the yield of free cash flow on our stock and from where we finished last year on $22 stock price which we enter today and I understand its higher today, but on a $22 stock price we were yielding about 15%. On this guidance we are yielding approximately 18%. So we really like the story that the free cash flow is providing, talked to you where we think there is some nice tailwind on our free cash flow and that’s evidenced in our guidance that we gave you for 2015.

Okay, very good. Thank you so much for your time as always.

Okay.

Thanks, Jim. Operator, next question.

Yes sir. Our next question comes from Greg Eisen of Singular Research. Please go ahead.

Good morning, Greg.

Thanks. Good morning. First, I could just follow-up, I had missed one number in the presentation, could you repeat your volume expectation for 2015. I got the pricing at negative 1 to 1.5.

Yeah. From an organic standpoint, it would be flat to down 3% and that would be offset by acquisition volume of roughly 3% in 2015.

Okay. Great, great. Can you talk about what you think – when you talk about that 3% acquisition contribution, is that strictly the remaining months of the Brown acquisition.

Yes, that’s the primary driver of it. We acquired Brown in end of May of 2014, so approximately five months coming proof of that plus some of the smaller acquisitions we did in 2014.

Okay. So you are not talking about any un-announced acquisition so far?

No, this is the carry over effect of acquisitions that were done in 2014.

Got it. And then I have a bigger picture thought when we talk about the volume expectations you have. As you continue to invest in your business, invest in technology and the services that you – and the skill set of distribution that you bring to your customers, and you are in the process of really creating some separation between yourselves and the rest of the industry. As I see it, it looks like the industry will devolve into kind of the winners and losers in terms of those that can really survive into the future and really be a 21st century business and those that are not going to really make it going forward. Is there a reason for me to expect that at some point you should be able to grow volumes organically as a result of this differentiation? And really just taking volume away from the competition organically as you create that separation, is that a reasonable expectation?

It’s still believe it or not a pretty fragmented marketplace and again we’ve done a lot of consolidating acquisitions which I think was the right thing to do and a lot of rationalizing of that volume. It’s hard to tell how fast the shakeout happens, but it certainly has been happening for a long time. I mean that’s always our goal is to get to the ability in the core business to grow as oppose to managing decline. But again I think the more important thing to us is watching the stability of pricing and that comes in a number of different ways. It comes from obviously the marketplace but it also comes from your value added services that you apply and your ability to help those customers offset significant cost that aren’t part of your invoice. And as we like to remind people that postage cost continues to be north of 50%, 60% of their total cost with paper and printing being the lesser amount and actually print being the smallest amount, typically under 20% but we are ones who can impact that the most. And when you look at the total client and how people think about the world, that’s really key to taking market share. In a tough business, a tough industry where people are trying to hang-on or people haven’t taken out capacity out of their infrastructure, you run into some pretty crazy things in their times when we make the decision not to pursue even though it may take away from our total volume because we don’t believe it’s the right thing for employees or our investors to fill up the most efficient platform with stuff that doesn’t recognize value added to the degree that may be it couldn’t offset pricing differentials. So it’s kind of a long game, print companies do create good cash flow which is why it takes a long time for the shakeout to happen, but we feel really good about our approach with our clients and we tend to not think as much about us versus all of these other companies that are – may get shaken out. We think primarily about how do we make sure our customers are really successful at managing these costs through all the things that we can do, but not just from a cost standpoint how can we help them use print to gain top line revenue. And I think that strategy will drive our investment to the future.

Hello?

Yeah, you there?

Yeah, I dropped out there for a second. I missed you. You there?

Yeah, we are here.

Okay, yeah. I can hear you now, I don’t know if it was you or me, the last I heard you say was, it takes time to shake out the competition because many companies create good cash flow.

Yeah, I guess my final main comment was, our strategy is about investing in our client to help them manage the cost that they have. But more than that about helping them use print as a part of creating top line growth no matter where it comes, whether it’s directly from print or from traffic that print drives to mobile or online. And so that will drive our strategy or investment process rather than necessarily what’s happening to the other set of competitors.

Got it. Got it. If I you could change tact to a different subject, when I look at your adjusted EBITDA margin, I understand the effect the Brown acquisition has on margins, but is it fair to state that your adjusted EBITDA margin is probably close to its bottom now as a result of the Brown effect?

I think you got to think also about the impact we had with the Vertis investment that happened in the last couple of years because that was $1 billion revenue company that had virtually no margin. So we’ve improved that but that is another part of a dilutive effect and understates the performance of the underlying I think core Quad assets, but we still feel good and we knew that coming in. And I think that further margin deterioration is our ability to continue to manage the business well. Again, pricing has been a challenge but we see that starting to correct it. Dave, if you have any other comments?

Yeah, I think from a pricing standpoint, that’s the main pressure on our margins. We did talk about the dilutive impact of acquisitions and quite frankly when you are going through a consolidation phase and you are one of the highest margins in the industry, every acquisition you do is going to have a dilutive impact on your margins. But coming back to the pricing side of it, historically there has always been pricing declines in the print industry although that trended prior to the recession to about 0.5 decline. I think print companies including ourselves I think we are very effective at offsetting about 0.5 of price decline as when you start to get above 1, closer to the 2 which we saw in some recent years that becomes very difficult to offset. So as you watch our pricing goes, I think you will see where the stability to the margin and the margin percentage will be as we move forward. It’s always our goal to be able to offset that. I think we’ve done a decent job of offsetting the volume impact. I think we partially offset some of the volume, it’s our job to go out there and find ways to offset the full impact of what’s going on with pricing in our industry.

Okay, okay. And I guess a corollary to my question, now that you’ve got some time and service with Vertis under your belt and had Brown already in-house for most of the first year already of its acquisition, do you think you can improve on your margins and improve the corporate wide margin now that you’ve got your hands around those two businesses? Is it kind of a room for upside improvement that we could target?

So in the core business, those assets where we’ve consolidated, we continue to make investments in those platforms. That’s part of that CapEx and it comes a lot within automation of the platform. We’ve got some very automotive plans and we got some that could be more automated. And then we have this phenomena where automation technology is changing very rapidly and allowing you to automate things you didn't think you could be for. And so we use that as well as the value add stuff that we can bring to our customers to try and offset that. That is the goal and something we have to prove.

Okay. Looking at your overhead side, the SG&A, where there any unusual one-time items that you haven’t mentioned that are worth calling out that were in this quarter or the year that you’d like to bring to our attention?

No. We previously disclosed some of the impacts on SG&A, nothing significant in the quarter on a year-over-year basis in fact there was about $11 million higher one-time charges in 2013 than they were in 2014 predominantly most of those coming through the SG&A line. Addressing the call other specifics in the quarter and nothing to recall in addition to what we’ve called out previously in our filings for the first nine months of the year too.

Understood, understood. And could you talk about the tax rate, I don’t know if you mentioned at your guidance, what are your expectations for your tax rate for 2015?

Yeah. Our normalized effective tax rate is around 39%. We finished this year higher than that predominantly because of valuation allowances on international earnings as particularly as Joe had referred to is declines in profit in Mexico and Argentina, and that’s what increased the tax rate above our long-term stated goal of 39% effective tax rate. So at more normalized rate, we would expect going forward would be around 39%.

Good, good. And let’s see, I think that was it. I’ll let someone else go. Thank you.

Okay.

Okay. See you later. Operator, next question.

Yes sir. Our next comes from Fred Krom of Goldman Sachs. Please go ahead.

Thanks for taking the questions. Can you just talk a minute about the potential to redeem additional high coupon private placement debt in 2015? I guess generally speaking in the past it seems like you’ve paid down the notes by revolving credit facility. I was just wondering if you have any intentions to issue additional unsecured bonds at some point in 2015 or in the near future?

We don’t have the intent to go back into our private placement notes to redeem those. We did those as a unique item in 2014 and that was primarily to – because we were paying down cash at a faster level than what we had in terms of revolver availability. We used some of that redemption to further pay down debt. It also allowed us to move more of our in the net basis more to a fixed and floating ratio of 50:50 after we had paid out the revolver that was used to do the repurchase of the private placement. So it was about $109 million we did in the fourth quarter essentially at par. Those were really long tenured portions of the private placement notes. But as I said before, we don’t have an intention to go back into that market to do that again.

Okay, great. Thanks. And then just I guess a further follow-up on your commitment to your 2 times to 2.5 times leverage ratio, anything from a capital allocation or maybe an M&A standpoint that would cause you to change that outlook over the next 12 months?

No, that’s still our long range outlook and as we move down to 2.6 times at the end of this year we will continue to look for pay down back into that. I think with us we will continue to look at the balance too of acquisitions of where to use equity and cash as a mix and how we do those acquisitions. In the Courier deal, we did initially put forth roughly a ratio of 40% equity in that and 60% cash in order to maintain our ability to glide that down to the 2 times to 2.5 times on a reasonable basis. So, you will continue to see us aim towards that and we will continue to de-lever back, especially as we get the integration savings of the Brown acquisition come through the next five months of 2015.

And just to add to that, an acquisition come along that brings us back up again, you know one of criteria’s we always look forward to does that and then allow us though to start migrating back down again. So, that goes into the decision process of how and when we are willing to do something like that.

Just on, sort of dovetailing of that comment, with respect to the cash portion of that hypothetical M&A scenario, I mean, I guess theoretically would you be open to issuing new unsecured bonds to fund future M&A or would you continue to use your revolver?

We will continue to use our revolver and it is really deal depended right, so we got $750 million of availability in the revolver. At the end of the year, we will obviously build, we will look at that scenario and unrecognizing that our seasonal peak need for borrowings under the revolver is in the third quarter when we hit our working capital peak. So, we will manage all that well. It’s going to really be dependent on size of the deals, but right now our intent is, with the deals, you know we are moving forward, we’ve got enough capacity on our revolver to execute on those at this point.

And with the buyback authorization outstanding, I think you have a 100 million from 2011, is that something that you would look to utilize at some point in the near future or over the next couple of years or is dividend sort of your main policy there?

I think debt pay down and dividends are our main use of cash at this point as we talked about getting back into the 2 times to 2.5 times leverage range, but we have it out there because we want to be balanced about our approach and using our capital. So it is always an alternative for us, but in the near term it will be debt reduction and continuous support of our dividend.

Okay great. And then thanks, just one last question on M&A and you probably won’t want to answer this, but I was just curious I mean I’d kind of love to hear your thoughts on potential regulatory push back or maybe lack thereof a tie-up between your company and your biggest competitor.

I can’t predict what the regulatory response will be. I think I assume you are referring to the carrier transaction. I think it is best to talk to Donnelley about that but you have to go through the process and you have to do the work to make a good case and I will tell you that that’s a – courier is a great platform, it is a really good company, great management team, but again I think that’s something that they are going through in process right now and they would be best to answer that.

I was actually referring to you and/or Donnelley but…

Oh! So me acquitting Donnelley?

You or vice versa.

Okay. I can’t speak to that. We haven’t done any work on that and that’s not in our plans.

Thanks for the questions.

Operator, next question.

That concludes our question-and-answer session. I’d like to turn the call back over to management for any final remarks.

Well great. Thank you all for joining us today. We are obviously pleased with where we came in, in 2014 and we look forward to updating you throughout the year. Take care.

Thank you. The conference is now concluded and we thank you all for attending today’s presentation. You may now disconnect your lines.