Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Quad/Graphics second 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 website 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. 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, our Executive Vice President and Chief Financial Officer. Joel will lead off today's call with key highlights for the quarter and Dave will follow with a more detailed review of the financial 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. 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. A replay of the call will be available on the Investors section of our website shortly after we conclude. The slide presentation will remain posted on Quad/Graphics website for future reference. I will now hand the call over to Joel.

Thanks Kyle and good morning everyone. We are very pleased with our second quarter results which reflect our ongoing efforts to improve manufacturing productivity and sustainably reduce cost. Adjusted EBITDA, adjusted EBITDA margin and free cash flow, all increased organically compared to the same period in 2015. Given these better-than-expected results, we are updating our full-year 2016 guidance which includes increasing adjusted EBITDA and free cash flow. Our results were made possible by our disciplined and consistent approach to managing all aspects of our business. We will continue to be disciplined to minimize the impact of ongoing industry and economic pressures to be the industry's high quality, low cost producer. On our path forward, we remain true to the strategy and plans we outlined long ago. As you will recall, we started addressing industry overcapacity in 2010 following the World Color acquisition. Through a series of additional consolidating acquisitions, we were not only able to expand our product and service portfolio, but create what we believe to be the most efficient and automated manufacturing and distribution platform in the industry today. With no recent acquisitions or integrations of size, we have been focused on fine tuning our platform, bringing aboard talent to strengthen and expand our integrated product and service offering and improving the client experience. We continue to see positive results from our key areas of focus in 2016, the first of which is continuing to generate sustainable, strong free cash flow to support our disciplined capital deployment strategy. This strategy includes paying down debt and pension liabilities and returning capital to shareholders through our sustainable quarterly dividend. Second, we continue to improve manufacturing productivity and create sustainable cost reductions and operational efficiencies. Our clients benefit by having their work produced on a highly automated, well-maintained and dependable platform.…

Thanks Joel and good morning everyone. As Joel mentioned, our second quarter results reflect continued progress in reducing our cost structure through operational efficiencies and a relentless focus on cost reduction initiatives throughout Quad. This allows us to maximize cash flow and strengthening our balance sheet through debt reduction. Slide four provides a snapshot of our second quarter 2016 financial results as compared to 2015. Our revenue came in as we expected for the quarter as net sales were $1 billion, down 2.6% from 2015, primarily due to ongoing industry volume and pricing pressures. Second quarter adjusted EBITDA increased $6 million or 7% to finish the quarter at $98 million as compared to $92 million in 2015. Our adjusted EBITDA margin improved 80 basis points to 9.5% versus 8.7% in 2015. The increase in adjusted EBITDA and margin primarily reflect ongoing improvements in manufacturing productivity which drove operational and administrative efficiencies and sustainable cost reductions as part of our previously announced and implemented cost reduction program. Our strong free cash flow generation in the quarter of $93 million represents a $75 million increase or over four times the level of free cash flow generated in the second quarter of 2015 and continues to be the foundation of our disciplined capital deployment strategy. Our free cash flow was used to reduce debt levels and in conjunction with increased earnings resulted in a significant improvement in our debt leverage ratio to 2.43 times as of June 30, well within our long-term targeted leverage range of two to 2.5 times. On slide five, we included a summary of our updated 2016 financial guidance. The productivity and cost reduction momentum established in the first half of the year is driving stronger earnings and cash flow results and therefore allowed us to increase our guidance.…

[Operator Instructions]. And our first question will come from Jamie Clement of Macquarie.

Gentlemen, good morning. Thanks a lot for taking my questions.

Good morning Jamie.

Good morning Jamie.

Hi Joel. Okay. So for a topline decline of 2% and change, I think you may have had, I guess the Specialty Finishing was that August of last year? So you would have had a little from them in the second quarter but most of that should be organic apples-to-apples, right?

Yes. The second quarter, if you really threw it all, the 2.6% decline approximates the volume and pricing pressure on our organic base. We did have negative impacts from FX and negative impacts from pass-through paper sales and that was completely offset by the incremental acquisition from specialty packaging. So those two --

Yes. So basically what I am getting at though is, if you are looking at, if the long-term trend, as you guys have described, it is volume minus 2% to 4% or 35 to 4%, there was another 1% to 2% on price, this is one of the best topline quarters I think we have seen in actually a while from an organic standpoint. I mean the big deal is obviously cost and obviously you called that out, but what were the positive and negative puts and takes, Joel, as you saw from a product line perspective?

Let me just jump in real quick, Jamie and I will turn it to Joel.

Sure.

You absolutely read that right. It is a lot of hard work internally done to reduce the cost structure, improve productivity in the plant. That's what's while driving the strong earnings and the free cash flow result. But I would point out too, as some people read our guidance on revenue and said, well that's a reduction in guidance and it's really with the reclassification of taking byproduct revenue, our guidance wouldn't have change. That's purely a reclassification from the topline to the cost of sales.

And Jaime, I think we have been very consistent about our view of the marketplace and also the economy. I mean I wish we were surprised that second quarter GDP was as light as it was, but I think I even referenced in the first quarter that I was a little bit skeptical about the headlines were saying about the underlying economy. So we know we are going to continue to deal with that and therefore the continued pressure on the industry, it just hasn't changed. If I look at the magazine industry, they continue to have in the quarter about 9% reduction in ad pages. In our mix of work which tends to be a little bit different, only a 6% decline.

But Joel, 9% is a lot better than 11.5%.

Yes. Well, it is. And then I think we have a pretty good high-quality mix of types of publications that changes our mix. And even printing catalogs, they were off a little bit as an industry, but we were actually up a little bit. And there is stuff going on with the post office and things like that that I think will start to stabilize some of those costs. And then printed books continues to be the story that people thought it was --

Because that was going to be my second question.

The industry was up 6% in the quarter.

Yes. And you all have been, obviously you didn't get Courier but you did commit to a multiyear CapEx plan to increase the digital platform and all that kind of stuff and presumably you learnt a lot about books through the Courier process. So can you talk a little bit about books? Like where are we with respect to how the percentage of the way through of your spending is and how well rolled out all that stuff us?

To be clear, we understood, the opportunity of books because we knew that digital was going to play a big role, but everyone that meant digital substitution, when in reality we believed it would be about platform change with the impact of the quality of digital printing where the industry's waste could start to be impacted dramatically. The book industry has a lot of unsold product that sits in warehouses. Lots of cash tied up because that's what the technology allowed you to do. But now you get digital printing in place and suddenly you can do much smaller batch sizes and you are pruning the inventory. So we actually committed to the investment in the digital platform in books before we even started talking to Courier. If you remember, we announced them separately, but Courier was a platform we would have loved to have it. We didn't get it. But I think it's a good indication that the industry as a whole is helping address that sector's opportunity with using technology. It's not just us, it's other people in the industry. And that's a good thing for the long-term viability of print.

So Joel, your CapEx spend in books, is that all done? Is that rolled out across your platform? Or you still have more to go?

Well, look at all areas of our business. Remember, I think we have been consistent on this, is we will keep investing into our customers and that means investing in furthering the book platform, whether it be digital or even some traditional assets. But also in terms of automation in the core business of amazing catalog retail the more we can the cost reduction sustainable and the more we can pull waste out, that creates the opportunity to then harness what the true power of print is with what's going on in multichannel. And so while we like to focus on the cost reduction we have done, we have said that chapter one was the organic growth, chapter two was about consolidating the industry and doing the heavy lifting to redesign what was more than a $4.7 billion platform, if you take into account the divestiture of the Canadian assets. So we literally redesigned the entire $4.7 billion worth of capacity over the past six years, which by the way, wasn't for the faint of heart. This was not easy nor quick as people looked at what we are doing. Chapter two was very busy time that you wouldn't always like to hearing in our results, but ultimately with a long-term view, as we are as a family based company, we believe that we have been making the right decisions. And quite honestly and we have been very consistent about that message. And so now, as you see the stabilization of the platform which is happening, you are seeing the fact that in 2015 we didn't have to do a lot of integration, we could step back and look at what we assembled and fine tune it. At the same time we could switch to chapter three which was about impacting people's topline. And that's the exciting thing that's happening regardless of what happens with the economy. In fact, the worse the economy, the more pressure our customers have and the more opportunity we have because we are a big line item in their cost. Therefore we get access to the right people and as we look multichannel, by the way, we call it multichannel, because the world tends to use omnichannel which is an often used buzzword. And they seem to think that's more Facebook through Twitter whereas AM radio is still alive. So it's really the marrying up of online and off-line that chapter three is about. And with print being a big core of that, it allows us to really help customers tie things together. Again, I think you have to look at multichannel being, what is the impact of one channel to the other because none of these can act in a vacuum. And so we are proving that by tying together brand awareness that can happen in print with activates that can happen online.

Very good. Thank you very much for your time. I appreciate it.

All right. Any other questions, operator?

No. Actually this concludes our question-and-answer session. I would like to turn back the conference to Joel Quadracci for any closing remarks.

Well, look, we thank you all for joining us. And I just want to remind you, we are doing what we say we are going to do, but also we continue to look towards the future as continue pressure on our customers and economy and so while we are showing great results today, we expect to continue that momentum on the cost side and manage what's within our control and be ready and willing and able to deal with whatever comes our way that's not in our control. So thank you for joining us and we will see you next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.