Quad/Graphics Announces Three-Year Strategy to Transform Its Book Platform

Strategy Includes Investment in 20-plus HP Color Digital Web Presses, with First Five To Be Installed in 2015

SUSSEX, Wis.--()--Quad/Graphics, Inc. (NYSE: QUAD) (“Quad/Graphics” or the “Company”) today announced a three-year strategy to transform its book platform to give publishers a full range of options for producing and delivering books on demand, bringing zero inventory and just-in-time delivery closer to reality. The plan includes investing in:

  • 20 or more HP high-speed color digital web presses – the widest, most productive technology available in the marketplace today;
  • Front-end workflow solutions for accepting orders and putting them immediately into production; and
  • Back-end integrated systems for finishing, distribution and fulfillment, including shipping directly to the end recipient with an auto-generated invoice.

“Our announcement today supports our continued focus on transforming our Company and industry to create lasting value for clients and shareholders,” said Joel Quadracci, Quad/Graphics Chairman, President & CEO. “The innovation opportunity in books is enabled by new digital print technologies that are profoundly changing book publishing economics.”

Traditionally, book publishers have had to carry large inventories, a significant portion of which may go unsold and become obsolete. “With this investment in digital presses and integrated systems we can support a broad industry transition to a print-on-demand, zero-inventory model,” Quadracci said. “Our digital press solution will help redefine the entire book supply chain, giving publishers increased customization and versioning capabilities; faster time-to-market; reduced waste, inventories and obsolescence; and lower fixed costs. Accordingly, publishers will be able to focus more on content and have the ability to redeploy the capital previously tied up in inventory to other initiatives.”

Quad/Graphics’ three-year strategy to transform its book platform is already underway. The Company will put into production five HP color digital web presses this year, the first of which it will begin installing this month. The other 15-plus presses will be installed in the remaining two-year period. Once all units are installed, Quad/Graphics will have the capacity to produce nearly 3 billion color pages each month.

“HP’s innovative technology supports our strategy to transform our book platform to help publishers bring printed content to market faster and more cost effectively,” said Quadracci, noting that the overall volume of digitally printed books are forecast to increase 15.2% annually through 2019 according to a recent digital book printing study by Interquest, a market and technology research firm. “Our digital printing transformation strategy will allow us to gain additional market share and grow this segment of our business.”

Quadracci also noted that printed consumer trade books are showing surprising strength versus what had been expected to be a dramatic shift to e-books. According to Nielsen BookScan, AAP and other book industry reporting, there was an increase in printed books sold in 2014. According to a recent Bowker study, there continues to be significant annual increases in ISBN-registered book titles being fueled by small publishers and self-publishers who want to see their books in print. Additionally, a new Nielsen Books & Consumer survey shows that printed books are outselling e-books by a healthy 2-1 margin.

“We aim to be the book producer of choice,” Quadracci said. “We have a clear vision for the future of this industry and we are taking the bold, necessary steps to realize that vision for the benefit of a $30 billion book publishing industry.”

Forward-Looking Statements

This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding, among other things, our current expectations about the Company’s future results, financial condition, revenue, earnings, free cash flow, margins, objectives, goals, strategies, beliefs, intentions, plans, estimates, prospects, projections and outlook of the Company and can generally be identified by the use of words or phrases such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “foresee,” “project,” “believe,” “continue” or the negatives of these terms, variations on them and other similar expressions. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those expressed in or implied by such forward-looking statements. Forward-looking statements are based largely on the Company’s expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control.

The factors that could cause actual results to materially differ include, among others: the impact of significant overcapacity in the highly competitive commercial printing industry, which creates downward pricing pressure and fluctuating demand for printing services; the inability of the Company to reduce costs and improve operating efficiency rapidly enough to meet market conditions; the impact of electronic media and similar technological changes, including digital substitution by consumers; the impact of changes in postal rates, service levels or regulations; the impact of changing future economic conditions; the failure to renew long-term contracts with clients on favorable terms or at all; the failure of clients to perform under long-term contracts due to financial or other reasons or due to client consolidation; the failure to successfully identify, manage, complete and integrate acquisitions and investments; the impact of increased business complexity as a result of the Company’s entry into additional markets; the impact of fluctuations in costs (including labor-related costs, energy costs, freight rates and raw materials) and the impact of fluctuations in the availability of raw materials; the impact of regulatory matters and legislative developments or changes in laws, including changes in privacy and environmental laws; the impact on the holders of Quad/Graphics class A common stock of a limited active market for such shares and the inability to independently elect directors or control decisions due to the voting power of the class B common stock; the impact of risks associated with the operations outside of the United States; significant capital expenditures may be needed to maintain the Company’s platform and processes and to remain technologically and economically competitive; and the other risk factors identified in the Company’s most recent Annual Report on Form 10-K, as such may be amended or supplemented by subsequent Quarterly Reports on Form 10-Q or other reports filed with the Securities and Exchange Commission.

Except as required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About Quad/Graphics

Quad/Graphics (NYSE: QUAD), a leading global printer, is redefining print in today's multichannel media world by helping marketers and publishers capitalize on print’s ability to complement and connect with other media channels. With consultative ideas, worldwide capabilities, leading-edge technology and single-source simplicity, Quad/Graphics has the resources and knowledge to help its clients maximize the revenue they derive from their marketing spend through channel integration, and minimize their total cost of print production and distribution through a fully integrated national distribution network. The Company provides a diverse range of print solutions, media solutions and logistics services from multiple locations throughout North America, Latin America and Europe.

Contacts

Quad/Graphics Media Contact:
Claire Ho, Quad/Graphics Director of Corporate Communications
414-566-2955
Claire.Ho@qg.com
or
Quad/Graphics Investor Relations Contact:
Kelly Vanderboom, Quad/Graphics Vice President & Treasurer
414-566-2464
Kelly.Vanderboom@qg.com

Contacts

Quad/Graphics Media Contact:
Claire Ho, Quad/Graphics Director of Corporate Communications
414-566-2955
Claire.Ho@qg.com
or
Quad/Graphics Investor Relations Contact:
Kelly Vanderboom, Quad/Graphics Vice President & Treasurer
414-566-2464
Kelly.Vanderboom@qg.com