The continuing decline of the publication and commercial printing markets is well known, especially to its suppliers in the ink industry. One sign of this struggle can be found in the consolidation within the printing industry, which has left two multi-billion dollar companies in R.R. Donnelley and Sons (2014 sales of $11.6 billion) and Quad/Graphics (2014 sales of $4.9 billion).
 
These companies have acquired large competitors over the years (R.R. Donnelly taking over Consolidated Graphics, Quad buying World Color, to name but two), and even briefly tussled over Courier Corporation, a leading book printer, before R.R. Donnelley finally purchased the company earlier this year. Both companies have looked to other markets and services to add to their offerings.
 
To get a read on the publication and commercial markets, a look at the two companies’ reports offers a pretty clear perspective.
 
R.R. Donnelley reported net sales in 2Q of 2015 of $2.7 billion. That calculates to a 5.3% decrease from 2Q 2014, or $154.4 million. Without currency fluctuations and other factors, organic sales decreased 2.1%, with the Publishing and Retail Services and Variable Print segments suffering the most. The company’s first half sales were roughly $5.4 billion, which appears to be on a par with last year; keep in mind that includes the addition of Consolidated Graphics, which was acquired by R.R. Donnelley in January 2014, and had $1 billion in sales in 2013.
 
On the plus side, 2Q 2015 operating cash flow of $205.3 million and free cash flow of $152.7 million were sup by more than $50 million over 2014’s 2Q results, which is a significant gain.
 
“We are pleased with our second quarter free cash flow of $152.7 million, which represented a 65% improvement from the second quarter of last year,” said Thomas J. Quinlan III, RR Donnelley’s president and CEO.
 
The company expects net sales of $11.4 billion to $11.6 billion and free cash flow of $400 million to $500 million for 2015. It should also be noted that R.R. Donnelley & Sons Company has announced the intent to create three independent publicly traded companies out of its operations.
 
As for Quad/Graphics, the company just released its results for its second quarter ending June 30, 2015. The reported results include Brown Printing Company from the day of acquisition on May 30, 2014.
 
“We are pleased with our continued solid Free Cash Flow generation, which is the foundation of our strong balance sheet and enables us to deploy capital in ways that generate value for the company and our shareholders,” said Joel Quadracci, Quad/Graphics chairman, president and CEO. “Our ability to generate strong Free Cash Flow comes from ongoing strategic investments in our core print platform, including technology, automation and processes that drive productivity and efficiencies.
 
“Our second quarter operating results reflect ongoing industry headwinds, a sluggish advertising environment for publishers and a less than robust retail environment, all of which impacted our sales,” Quadracci added.
 
Quad/Graphics reported net sales for 2Q 2015 of $1.1 billion, a 1.8% decrease from second quarter of 2014. adjusted EBITDA margin was 8.4% vs. 9.3% in 2014.
 
For the first half of 2015, net sales were $2.2 billion, a 0.7% decline from 1H 2014. Adjusted EBITDA was $191 million vs. $209 million for 1H 2014, with adjusted EBITDA margin dipping to 8.8% as compared to 9.5% in 2014.
 
Free Cash Flow was $40 million for 1H 2015, up $45 million over the same period in 2014, partially due to the $10 million acquisition termination fee from Courier Corporation.
 
Dave Honan, Quad/Graphics EVP and CFO, reported that Quad/Graphics expects full-year 2015 net sales to be in the range of $4.8 billion to $4.9 billion, with free cash flow solid.
 
“We continue to believe Quad/Graphics will be a significant free cash flow generator and, because of the sustainable improvements impacting working capital, we remain confident in full-year 2015 free cash flow guidance of $180 million to $200 million,” Honan said.
 
The publication and commercial printing markets are changing. Read what you will into these results, but it is notable that declines are even striking the largest companies in the field.