Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Quad/Graphics First Quarter 2016 Conference Call. During today's call, all participants will be in listen-only mode. [Operator Instructions] A slide presentation accompanies today's webcast and participants are invited to follow along, advancing the slides themselves. To access the webcast, follow the instructions posted in last night's earnings release. Alternatively, you can access the slide presentation on the Investors section of Quad/Graphics Web site under the Events & Recent Presentations link in the left-hand navigation bar. Following today's presentation, the conference call will be opened for questions. [Operator Instructions] Please note this event is being recorded. I will now turn the conference over to Kyle Egan, Quad Graphics' Manager of Treasury and Investor Relations. 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, our Executive Vice President and Chief Financial Officer. Joel will lead off today's call with highlights of our financial results along with a more detailed discussion of our path forward in 2016. Dave will follow with a more detailed review of our first quarter results 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 on Slide 2. 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, reconciliation of these non-GAAP financial measures to GAAP financial measures. A replay of the call will be available on the Investors section of our Web site shortly after we conclude. The slide presentation will remain posted on Quad/Graphics Web site for future reference. I will now hand the call over to Joel.

Thank you, Kyle. And good morning, everyone. We were pleased with our first quarter results which reflect our ongoing efforts to improve productivity and sustainably reduce cost. Adjusted EBITDA, adjusted EBITDA margin and free cash flow, all increased compared to the same period in 2015. In addition, our debt leverage ratio improved significantly due to our disciplined approach to continually pay down debt. Since September 30, 2015, we have reduced our debt by nearly one quarter of $1 billion. We remain disciplined in how we manage all aspects of our business to minimize the impact of ongoing industry pressure and economic uncertainty and to position Quad/Graphics as the industry's high quality, low cost producer. As we continue on our path forward, we are creating value in the following ways. First, we continue to focus on ways to generate sustainable, strong free cash flow. I am proud to say that we generated more free cash flow during the first quarter of 2016 than we did in the first nine months of 2015. Our disciplined capital deployment strategy includes paying down debt and returning capital to shareholders through our sustainable quarterly dividend. Second, we continue to improve productivity and drive sustainable cost reduction initiatives by challenging the status quo. Our employees are a huge part of our commitment to finding a better way. They continue working diligently to position Quad as the industry's high quality, low cost producer through initiatives focused on improving quality, service and the client experience, and reinforcing the efficiency, reliability and sustainability of our platform. We continue to focus on improving the most efficient platform in the industry by removing inefficient equipment, closing inefficient plants, and investing in state-of-the-art technology and automation. Our clients benefit by having their work produced on the industry's most well-maintained, automated and dependable…

Thanks, Joel and good morning, everyone. As Joel 's mentioned, we are pleased with our first quarter results. These results reflect continued progress on reducing our cost structure through operational efficiency and a relentless focus on all costs throughout Quad while maximizing cash flow and strengthening our balance sheet through debt reduction. Slide four, provides a snapshot of our first quarter 2016 financial results as compared to 2015. Our topline results came in as we expected for the quarter as net sales were $1 billion, a decrease of 4% from 2015 primarily due to a 4% decline in ongoing industry volume and pricing pressure, the 2% reduction in pass-through paper sales and 1% negative impact from foreign exchange. These declines were partially offset by a 3% increase on sales from acquisitions. I would like to point out that we did make a change in our revenue reporting this quarter by reclassifying paper byproduct recoveries from net sales where these cash flows were previously recorded to the cost of sales line as a reduction in cost to be consistent with industry reporting norms. There is no impact on adjusted EBITDA, net income or earnings per share as a result of this change. However, net sales have been reduced to reflect this reclassification in both years presented. So the results are consistently presented and are comparative between years. Despite topline pressures, adjusted EBITDA increased $17 million in the quarter to finish at $120 million as compared to $103 million in 2015 and our adjusted EBITDA margin increased 200 basis points to 11.5% compared to 9.5% in 2015. The increase in adjusted EBITDA and margin reflects ongoing improvements in manufacturing productivity, driving operational efficiencies and sustainable cost reductions from our previously announced and implemented $100 million cost reduction program and a nonrecurring $10…

[Operator Instructions] And the first question is from Jamie Clement at Macquarie.

Joel, first question to you. Broadly speaking, I was noticing CBS's numbers this morning for advertising. Quite strong compared to where they have been over the last couple of quarters and there have been a couple of the other TV guys who sort of said the same thing through this earnings season. It looks to me like some of your product lines were a little less bad compared to the recent trend lines, certainly compared to the second half of 2015. What's going on? Is sort of the marketing environment broadly, is it little less bad?

You know I think it's -- as you know really this is a first half, half year [wide] [ph] industry and hard to draw a conclusions from one quarter. I mean it was notable that for ad page, speaking to advertising, for the industry we are less bad. I mean they were off about 7% as an industry and I think, as we look at our mix, we are even less worse than that, only down 3.4%. But I also think that people are still digesting the less than stellar economic growth in the first quarter. You know they certainly have an eye towards where does this go through the rest of the year. So we stay cautious about it because, again, yes, it's still a tough industry but it's a touch economic climate. And so you kind of have to be careful to try and draw a conclusion from one quarter. But again, we feel good about what we have done here and translated what we do have from our clients, I think, and there is some really good things.

Can you speak in a little more depth to the margin performance here in the first quarter? You don’t have to give us the specific, kind of internal productivity metrics that you look at but can you help us kind of understand from a high-level, managerial level at Quad/Graphics, of what you saw in terms of your internal numbers.

Yes. I mean this kind of goes back to the whole thesis of the consolidation that we embarked on years ago. That we had this huge platform that’s made up of just really incredible assets and we knew that there had to be a bit reset in the industry but that it would take some time and it's not easy to do. And so we have closed a lot of plants, which is not fun. You know, I grew up building plants, seeing them being built. But the idea was, as you know, you make sure that your customers in the resulting platform are on the best platform in the industry. Which means taking out the assets that are no longer good. It also means that you have to catch up with the assets you do keep. You know many of these were under-invested in and the kiss of death in this industry is, pulling back on maintenance of your equipment. These are complicated pieces of equipment. If you pull back on that, sooner or later you run into problems. And so we spent a lot of money over this period bringing those platforms up and getting rid of the stuff that we didn’t think was worth the investment. And so I spoke in 2015 about being the first year of not dealing with one of these massive integrations. So that the organization now could focus on the resulting platform and now to kind of think of it as its own integration and focus on making sure that the productivity numbers get to where the investment deserves. We saw obviously a blip in third quarter but, again, that was due to a lot of the efficient platform receiving a lot of work and us getting caught sort in a tough…

All right. That’s terrific. Thanks for the additional color. And just, Dave, if I could ask one other question to you and I will get back in the queue. With respect to guidance, and I realize it's early in the year, but two things I want to specifically ask about. One was free cash flow guidance and then the other thing was interest expense. Is there -- I know that like ahead of the second half and heavy season, working capital maybe more of a temporary investment. But you certainly spend a decent amount on CapEx with respect to the guidance range that you have previously given. You know at this point, should we be thinking more about the middle of the high-end of free cash flow guidance at the very least.

Well, we are definitely pleased on how we started the year, Jamie. And if you could remember, we have been talking about working capital improvement in the business now close to a year and half. And we are going to start annualizing some improvements we started to make towards the back half of the year. So some of the working capital improvement you see and you are going to continue to see out of us, will come back at us a little bit as we start to annualize some of the numbers. So the run rate on working capital which was $30 million, an improvement in the first quarter. As I talked in my prepared comments, we think we will probably be closer to 50 by the time of the end of the year. So you can't really kind of take that 30 and annualize it out to 120. It's going to be more closer to 50 or so. We will keep working at that. I think we are going to keep our heads down and we are to continue to work on cost reduction and driving free cash flow the sustainable way, which is through adjusted EBITDA improvement. And what you saw out of us this quarter in free cash flow, it's not just the working capital story. That was half of the increase in free cash flow. The other parts of that increase was $17 million increase in cash earnings from adjusted EBITDA. So really strong cash generation coming out of the core business because of operational improvement. And a more moderated level of CapEx, it was down $16 million year-over-year but yet we are still investing more than the industry norm in this because we have caught up with all the investment as Joel talked about. So cash flow, what I really liked about this quarter as you saw it, is really coming from very sustainable means. And in working capital, quite frankly, we have got a long way to go. I think we are not even half way to the point of where we need to be in terms of sustainable improvement. You are going to see us continue to drive at that as we move forward.

And Dave, you talked about that towards the end of last year in a lot of detail and that’s one of the reasons I was asking the question. I get that you annualize this but also it sounds like, over the next six to eight quarters you got more benefits to realize.

We sure do. We sure do. A lot of the year is still in front of us. We like the start to this year but what you are seeing is a very motivated team. We have got a great, tremendous employee base that’s really focused on controlling what we control which is in our four walls and running efficient plants and taking care of our customers and that’s what you are going to see from us.

Okay. And the Dave, just the last question here. Given that you paid, I think it was $57 million of the 7.0s, the 7%s. Is that how much you paid down the first quarter, $57 million?

$57 million that we purchased back, correct.

All right. I would suggest, to me $85 million to $90 million of annual interest expense, that was high based on what you just did.

Yes. I think what you can see with those two tenders and how quickly we paid down the debt, our interest rate should be lower than -- our interest cost within that. Yes.

Fair enough. I will get back in the queue. Thanks very much for your time as always.

Jamie, we are told that there is no other questions in the queue. So I am sort of getting back in, if you want to ask more.

I mean, Joel, one of the things I was a little curious about was, I know you all don’t have much, if any direct election exposure. But to the extent that other industry presses and maybe they are not on a long run and maybe this isn't apples to apples. To the extent that capacity is being utilized at other areas of your marketplace,. Just, I don’t know, in looking at your numbers and you have them public for that long, it does seem to me like your even years, which are the election years, tend to be a little bit better. Am I -- is the data sample too small?

Yes, it is. For us, in the product lines we are, it's not a place that we participate much in. And I think that, keep in mind that it's not just -- what we are doing here is not just the United States, I mean we are improving performance in a lot of our businesses. So you are just seeing the result of a lot of focus. And in terms of the election stuff, that hits a part of the market but its imperceptible to us.

Okay. All right. Well, listen, I have got some questions that I think would probably bore the other people, so maybe we just take it offline a little later.

So you can bore us one on one. Okay.

Yes. That’s exactly right. That’s exactly right.

Operator, any other questions? Okay, with that we thank you all for joining us. We thank our employees for executing how they did and we look forward to seeing you next quarter. Thank you.