Quad/Graphics Was Profitable in 2009 Despite Big Sales Decrease

Quad/Graphics eked out a profit last year despite a 21% drop in revenue, the privately held printing company revealed in the first public disclosure of its finances.

The company had net income of $52.8 million in 2009 on sales of $1.788 billion, a 3% margin, according to a report filed late Friday with the Securities and Exchange Commission.

Quad provided a peak at its finances as part of its effort to become publicly traded and buy rival Worldcolor, a transaction it hopes will occur this summer. The document reveals that Quad employees own nearly half of the company's stock via the company's "Personal Enrichment Plan", a 401(k) and profit-sharing program.

In contrast to Quad, larger and more diversified rival R.R. Donnelley suffered only a 15% drop in revenue last year but had its third straight unprofitable year in 2009. Quad has been profitable the past five years, though its profit has shrunk the past two years.

Quad, however, is more heavily leveraged, with a debt-to-sales ratio of 0.44, versus 0.30 for Donnelley. That is apparently a result of Quad's tendency to invest heavily in new equipment and technologies, which the company brags about in its SEC filing:

"Over the last 15 years, Quad/Graphics has made substantial, yet disciplined, investments in its manufacturing platform, creating what Quad/Graphics believes is the most efficient and modern manufacturing platform in the commercial printing industry. Quad/Graphics also has made substantial investments in research and development and other technological innovations. These investments have led to the development of various manufacturing process improvements, including innovative press and finishing control systems and material-handling equipment for use in Quad/Graphics’ own operations as well as for sale to other printers worldwide. Quad/Graphics believes that this ongoing innovation focus positions it on the leading edge of technology in the industry. Quad/Graphics believes that this continual investment and innovation and its modern manufacturing platform, together with its focus on customer service and its distribution capabilities, have resulted in Quad/Graphics being one of the most profitable commercial printing companies in the industry, as measured by EBITDA (net earnings attributable to common shareholders plus interest expense, income tax expense, depreciation and amortization) as a percentage of net sales. This profitability, in turn, allows Quad/Graphics to continue to invest in equipment, research and development and other technological innovations to benefit its customers."