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Executives

Kelly A. Vanderboom - Vice President and Treasurer

J. Joel Quadracci - Chairman, Chief Executive Officer and President

John C. Fowler - Chief Financial Officer and Executive Vice President

David J. Honan - Chief Accounting Officer, Vice President and Controller

Analysts

James Clement - Sidoti & Company, LLC

Haran Posner - RBC Capital Markets, LLC, Research Division

Quad/Graphics (QUAD) Q2 2013 Earnings Call August 7, 2013 10:00 AM ET

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Quad/Graphics Second Quarter 2013 Conference Call. [Operator Instructions] .

I will now turn the conference over to Mr. Kelly Vanderboom, Vice President and Treasurer for Quad/Graphics. Kelly, please go ahead.

Kelly A. Vanderboom

Thank you, Jennifer, and good morning, everyone. With me today are Joel Quadracci, our Chairman, President and Chief Executive Officer; John Fowler, our Executive Vice President and Chief Financial Officer; and Dave Honan, Vice President, Corporate Controller and Chief Accounting Officer. Joel will lead off today with key highlights for the quarter. John will follow with a more detailed review of our financial results, followed by Q&A.

With the exception of certain debt ratios, prior year financial results do not include the acquisition of Vertis. All actual 2013 results will include Vertis from the day of acquisition on January 16, 2013.

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, in addition to the financial measures prepared in accordance with GAAP, this presentation also contains non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin and recurring free cash flow. We have included a slide presentation of reconciliations of these non-GAAP financial measures to GAAP financial measures.

The slide presentation can be accessed through a link on the Investor Relations section of Quad/Graphics' website at www.qg.com. There are also detailed instructions on how to access the slide presentation in our second quarter earnings press release issued last evening. A replay of the call will also be posted on the Investor Relations section of our website after the live call concludes today.

I will now turn the call over to Joel.

J. Joel Quadracci

Thanks, Kelly, and good morning, everyone. Our performance for the second quarter was consistent with our expectations, and we remain on track to achieve our 2013 objectives. We continue to attract a record of solid cash flow generation with $86 million of recurring free cash flow for the second quarter and $206 million on a year-to-date basis. Looking ahead to full year 2013, we are confident in our ability to achieve our annual guidance, including recurring free cash flow in excess of $360 million. In addition, we continue to move forward with the disciplined integration of Vertis and are pleased with the progress we are making. As we did with the Worldcolor integration, we will take a holistic approach to measuring our success. Our 4 focus areas include: financial metrics, IT and platform integration, employee integration and client retention. As it relates to financial metrics, we will continue to measure our success from a total one company perspective. The cost savings we have identified through our SG&A, procurement and plant consolidation efforts are reflected in our total company EBITDA, and John will follow with a more detailed financial review in a moment.

Overall, from an IT and platform integration perspective, things are progressing as planned. We've begun deploying our proprietary brand of ERP software tools to all of our retail manufacturing locations. This deployment will provide increased deficiency and operational visibility and in the end, will create a stronger platform and help us compete more effectively moving forward.

Since the acquisition in January, we have closed 2 retail manufacturing facilities and also moved to a significant amount of equipment and volume from the 4 Vertis manufacturing facilities that did not transfer with the acquisition.

In addition, during the first 100 days following the acquisition, we closed Vertis' corporate headquarters in Baltimore. From an employee integration perspective, our plans are on track and will be completed within 12 months of the Vertis acquisition. The majority of our policies and procedures were updated and integrated at the time of the acquisition. The uniform roll out to our newest employees is well underway and will be completed by the year end. Our Quad blues uniforms are a big part of our company culture and reflect our commitment to teamwork and ensuring a safe work environment.

As far as employee benefits are concerned, the 401(k) conversion and the reinstatement of the retirement match for former Vertis employees started in July 1 as planned. We believe this is an important part of investing in our employees. The final major undertaking related to employee benefits will be harmonizing healthcare plans, and that will take place on January 1, 2014.

I want to thank all of our employees for their help in successfully completing our integration activities. We've asked our employees to do a lot of heavy lifting, and they have performed well. Although there is still more work to be done, I am pleased with our progress and with the fact that we have a built a strong muscle within our company to effectively integrate large complex acquisitions.

Finally, from a client integration perspective, we are working hard to renew relationships and gain the trust of those clients who left Vertis when the bankruptcy was announced. As we passed the 6-month mark on the Vertis integration, we are pleased with our client retention efforts and want to thank our clients who stood by us during this time of transition. We continue to renew volume and are beginning to see a number of clients who left Vertis during the bankruptcy return the work to Quad/Graphics. We have a powerful story to tell. It's a story that builds from a foundation of core values centered on quality, credibility, integrity and financial strength and culminates with how we create client values as a printer and media channel integrator.

Our ability to create client value directly connects to the first 2 elements of our strategic goal to transform the industry. First, we help maximize the revenue our clients derive from the marketing spend through media channel integration, which helps drive response across all marketing channels.

Second, we help minimize our clients' total cost of production and distribution. Our mailing and distribution capabilities are a big part of how we help our clients reduce costs. We've built a leading platform with capabilities in volume that are second to none in the industry. For the first 6 months of 2013 as compared to the same period in 2012, we experienced an increase in co-mail volume to 1.8 billion magazine, catalog and direct mail pieces. Quad's commitment to print and the U.S. Postal Service is unwavering. However, changes are necessary to ensure we have a sustainable postal system going forward. Three weeks ago, I was asked to testify on postal reform before the House Committee on Oversight and Government Reform. My message was focused on the fact that Congress can no longer afford to delay the necessary decisions that will put the USPS on the path to financial stability.

The constant threat of insolvency is obviously troubling for the Postal Service, but it is even more troubling for the American economy as a whole. The Postal Service is a $65 billion business. It is the backbone of the mailing industry, supporting public and private sector economic activity worth $1.3 trillion and employing 8.5 million people, which represent 6% of all U.S. jobs. At the end of the day, use citizens will not let the Postal Service collapse. They will insist on having some type of universal mail delivery mechanism. However, the question remains, whether we want the Postal Service to be self-sustaining and match its cost to its revenue structure like we do in the private sector, or have taxpayers subsidize the Postal Service going forward.

In close, we remain confident in the strength of our balance sheet, our ability to generate strong recurring free cash flow, we will continue to create value for our clients and manage our business by staying focused on our 4 strategic goals to transforming industry, maximize our operational excellence, empower, engage and develop our employees, and enhance our financial strength so that we continue to succeed in this industry despite existing challenges.

With that, I will hand it over to John. John?

John C. Fowler

Thanks, Joel, and good morning, everyone. Slide 6 is a snapshot of our second quarter 2013 financial results, including Vertis, as compared to our second quarter 2012 results. As a reminder, our 2012 results do not include the acquisition of Vertis, which occurred on January 16, 2013. Net sales were $1.1 billion as compared to $934 million, representing a 19% increase due to the acquisition of Vertis. As we discussed on our first quarter call, it is not practical to break out revenue and operating results. However, we did include a 2012 total revenue pro forma in our 10-Q. If we look at the Vertis business as if we acquired it at the beginning of 2012, our pro forma consolidated revenue declined approximately 7%, consistent with our expectations. We estimate that Vertis made up approximately 1/2 of that decline, and the balance was related to ongoing industry price and volume pressures. Overall, this is in line with our revenue expectations for both the quarter and for the year inherent in our guidance.

Cost of sales was $894 million as compared to $741 million. SG&A expense was $105 million as compared to $81 million. Depreciation and amortization was $88 million as compared to $85 million. Restructuring, impairment and transaction-related charges were $29 million as compared to $38 million, and interest expense remain unchanged at $21 million.

Our adjusted EBITDA was $111 million as compared to $112 million, and our adjusted EBITDA margin was 10% as compared to 12%.

The adjusted EBITDA margin of 10% was as we expected and reflects a number of factors that include Vertis' margin profile was historically lower than the profile of the Quad/Graphics core business. The seasonality of Vertis' business which has volumes and profitability more heavily weighted in the back half of the year, when we see higher margins, and ongoing industry pricing and volume pressures. As Joel mentioned, we remain confident that we will achieve our 2013 annual guidance, which includes implicit higher margins in the back half of the year and for the full year.

Slide 7 is a summary of our 2013 guidance, which remains unchanged. We anticipate our revenue to be approximately $4.8 billion to $5.0 billion, adjusted EBITDA to be $580 million to $610 million and recurring free cash flow to be in excess of $360 million. The remainder of our 2013 guidance includes depreciation and amortization of $340 million to $350 million, interest expense of $85 million to $90 million, capital expenditures of $150 million to $175 million and cash taxes of $25 million to $30 million. We expect the cash contributions to our single-employer pension and the OPEB plans to be $45 million.

Our recurring free cash flow was $86 million for the second quarter of 2013 as compared to $60 million for the same period in 2012. For the first 6 months of 2013, recurring free cash flow was $206 million as compared to $167 million for the same period in 2012. For the second quarter, the increase in our recurring free cash flow was primarily related to a $25 million improvement in working capital and $10 million in higher cash earnings, partially offset by a $9 million increase in capital spending.

The $25 million working capital improvement included an estimated $7 million of additional cash generated from the restoration of normalized working capital related to the Vertis acquisition. We define recurring free cash flow as cash flow from operating activities, which include pension contributions, less capital spending and excluding nonrecurring items, such as restructuring and transaction-related costs. We believe this is an important metric for us, and we expect our business to continue to generate a significant amount of recurring free cash flow.

Our interest coverage ratio increased to 6.8x versus 6.7x. Our leverage ratio of 2.5x remains unchanged from the first quarter. As compared to December 2012, our leverage ratio reflects the impact of the Vertis acquisition as we increased consolidated debt and capital leases by $118 million due to the $235 million in net cash paid for the Vertis acquisition. We continue to believe that operating in the 2.0 to 2.5x leverage range is the appropriate target. However, we acknowledge that at times we may go above or below that range given economic changes, working capital seasonality, timing of investments, such as the Vertis acquisition, and growth opportunities.

As it relates to our pension liability, we feel it is important to note that given the recent increase in interest rates, we estimate our funded status has improved by approximately $70 million as of June 30. This improvement has not been reflected on our balance sheet as we revalue our pension plans annually on December 31.

At the top of Slide 9, you will note that we have $208 million of borrowings under our $850 million revolver as of June 30, 2013. Our floating rate debt today is at an average interest rate of 3%. Long-term fixed rate debt consisting of private placement bonds continues to be at an average interest rate of 7.4% and has an average maturity of 10 years with a weighted average life of 6 years. The blended interest rate on our total debt is 4.6%, and the outstanding principal balances are 62% floating and 38% fixed.

We have no significant debt maturity until July 2017. Given the flexibility under our revolver and our strong recurring free cash flow, we believe we have sufficient liquidity and financial strength to support our capital deployment strategy. We remain flexible and opportunistic in terms of our future plans for capital deployment, which includes balancing our key priorities to pay down debt and pension liabilities, invest in our business, pursue future growth opportunities and return value to our shareholders.

Our quarterly dividend of $0.30 per share will be payable on September 20, 2013 to shareholders of record as of September 9, 2013.

I would now like to turn the call back to the operator who will facilitate taking your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Jamie Clement.

James Clement - Sidoti & Company, LLC

Joel, I'll start with you. It's obviously inherently you're a second half way to the business now more so with the acquisition of Vertis. I know we're only in the first week of August here. You probably have a little bit of a sense of how the back-to-school season is going to go. Can you give us your early thoughts on how the second half is looking?

J. Joel Quadracci

Well, just as you don't have a crystal ball, I don't either. Visibility continues to be, I think, fairly tight in this market and a little bit chunkier than normal. Some of the patterns are a little bit different. But if you look at some of those fall work that's already been published out there, such as like Vogue magazine, they're up significantly in ad pages, which is a good thing, offset by some of the weekly volume that you may read about, which is a pretty small part of our business. I think that we continue to see sort of a story of stabilization. Ad pages for the first half were down about 4.9%, which if you compare to where it was last year, it was down 8.6%. In sort of -- we always like to refer to the Quad 50 ad pages who are actually only down 1.1% in the first half. So I guess, it just -- it leads me to believe and feel that we've got stabilization, which has allowed us to feel confident in the guidance that we've given on revenue. And some of the other areas you've seen some leveling out as well, even in the book industry. So again, I think if we could see more visibility on what the true health of the underlying economy is versus what the stock market says, you'd probably start seeing a little bit more visibility. But I think we're going to continue to kind of talk about a limited visibility as people make decisions last minute. But again, I want to reiterate that what we see for our guidance, we feel confident about.

James Clement - Sidoti & Company, LLC

Yes. And let me just ask you. You know for your perception of history over the last couple of years. It's mind that we -- obviously last year, there was a lot of anxiety ahead of the elections. In some of the prior summers, you had debt ceilings debate. Today, we had some outbreak of euro debt crisis, that kind of stuff. So it almost seems to me that as we entered the summer, Memorial Day, it seems like advertisers and marketers felt one way, and then as we entered -- as we exited the summer at Labor Day, it seems like they felt worse because of bad headlines and that sort of stuff. And to me, it seems this summer has been a little bit smoother sailing. Would you agree with that? Does it -- I mean, are your clients still jittery just as a result of the events for the last couple of years?

J. Joel Quadracci

I mean, really, it depends on who you talk to. I mean, I'll start out by saying that, look, I interact with a lot of CEOs in other industries. And the continued buzz that I kind of get is that the economy is weaker than what the headlines were saying before they started having worse headlines. So I just think that there's -- people are waiting for more of a robust uptick, and that's creating the sort of lumpiness that we see in confidence. So it really depends on the category. I mean, some of the women's magazines with ad pages for the fall are tremendous. Some of those newsweeklies are down. Catalog seems to be holding its own. And so again, I think that people are still looking for some more indication of strength. They are little bit numb to things. There's not something like looming out there, I think, that people are scared of. They're just waiting for some more dramatic uptick. And unfortunately, I'm of this pool that believes that there isn't going to be this dramatic uptick. It's just going to be a continued slow growth economy for a while because there's too many, I think, macroeconomic influences around the world that are weighting it down.

James Clement - Sidoti & Company, LLC

And that you've also been quoted as saying, "Hope is no way to manage a business."

J. Joel Quadracci

Well, hope is not an operating strategy and we continue to manage aggressively and hard here. Not just for some of the dynamics playing out in the industry, but also the economic dynamics.

James Clement - Sidoti & Company, LLC

And Joel, last question, and then I'll turn it over to somebody else. Your comments both in the press release, and also, you scaled them down in your prepared remarks about your testimony on the Hill. Discussing clients' nervousness about the path that the USPS is on, is it your perception that clients -- when you say increasingly nervous, and I may be paraphrasing you incorrectly. Are you talking about over the last 3 or 4 years as the USPS has really -- has the problems have really come before, or are you specifically talking about this year. Like in other words, has there been, over the last couple of quarters, a significantly more anxiety from your customer base as a result of the issues that USPS, or is this just something that's been kind of snowballing for a couple of years?

J. Joel Quadracci

Well, if you look at it historically, our customers costs were 1/3 postage, 1/3 paper and 1/3 print. Today, it's -- in most cases, well over 50% is postage because of the continued increases. And I want to make it clear that -- and I think people ask this question a lot like, "What happens if the post office goes down?" And I would tell you that during the testimony I gave, it was clear from the Congressmen on the committee that whenever they try to -- whenever the post office tries combine 1 or 2 post offices in their area, they get flooded with letters. And so what it says is that everyone feels there's -- it's a God-given right to have a post office in this country, so they're not going to let it go down. The big question is, do you want the post office to be self-sustaining fueled by postage, or do we want to ask the tax-payer yet again to bail out a big problem? And they have twice the infrastructure for the volume they have, and they have a plan. I mean, they also have to pre-fund their retirement healthcare to $2 billion to $5 billion a year. No one has to do that. And it's not an underfunded plan. So the good news is, is that a bill was introduced after that from the House. And let me answer your question directly, though, on the nervousness. The challenge has been is there's an exigent clause in the current law that says, "They can only raise prices to CPI, the change in CPI. But if they can't cover their own clause, then they can raise it to whatever they want." And so since they take it so long to kind of correct the problems that are pretty logical to correct, again, these problems are not going to be off the tax payers back if they just change the amortization schedule on the pre-funding to 40 years from 10 years. That's a significant amount of money. Change the way they have to pay a healthcare, and let them consolidate their infrastructure. I mean, we had to do that in private industry. I'd closed 22 plants to make sure that we're shoring up the most efficient platform. If they just let them do that, it corrects itself. And so back to what's happening in the current state is a bill was introduced by the House that actually keeps the cap on the CPI increase, and the Senate, now the House Committee on Homeland Security where this falls, has also introduced their own bill, which still has some obscurity to it. But it seems to protect for the most part the CPI increase. And so it's that exigent case that makes people worry that if the post office comes out and says, "Well, we're just going to raise it 12% on 50% of your cost." That's a tough thing for any business to manage. And so having visibility and a mechanism that people could count on for postal increases, if they have to happen, is really important. But it starts with let's get the thing right-sized first in every aspect.

James Clement - Sidoti & Company, LLC

That is extremely helpful. I appreciate it. And John, last question. Regarding the mid-year funding status of the pension plans, was that just based on about 80-basis-point rise in the discount rate, or did you also factor in asset returns into that revise the number also?

John C. Fowler

It is just the increase in the discount rate of approximately 80 basis points. There's no factoring in for the investment earnings because, frankly, we're at mid-year. As you know, we have a relatively conservative assumption for investment return of 6.5%. So like most other plans, we're ahead of that. But we did not factor that into the calculation of the $70 million. It was just based upon the 80-basis-point increase in discount rate.

James Clement - Sidoti & Company, LLC

But in other words, if the year were to have ended, then you would actually probably have been -- you would have been in better shape than the number you even gave because of the investment returns exceeding your launch on forecast, right?

John C. Fowler

Yes. It would probably be -- Dave Honan, it's about another $30 million?

David J. Honan

Yes. Based on mid-year, we would have had approximately $100 million improvement in the underfunded status. But Jamie, as you referred to as that kind of a pro forma analysis, we don't revalue that pension until the end of the year.

James Clement - Sidoti & Company, LLC

Great. It's still valuable for me.

Operator

Our next question is from the line of Haran Posner.

Haran Posner - RBC Capital Markets, LLC, Research Division

Maybe starting with Vertis. Joel, you gave us some good color in terms of how the integration is progressing to date. Just curious, I know obviously you're not breaking out the contributions from Vertis specifically. But wondering if you can sort of help us quantify that progress on the integration maybe in terms of sort of the percentage of your target synergies that's been realized to date on a run rate basis?

J. Joel Quadracci

Well, I'd say we're only just 6 months into it. And we feel very confident about the $50 million of synergies. But at this point, we're not going to give anymore color on that because there's still a lot of heavy lifting to do. The integration has gone extremely well. We got off to these races very quickly. I mean, to have closed the headquarters in a very short period is not the norm out there, and we were able to do that in the early stages of this. I'd say that my expectation of the employees we've picked up is -- which was pretty high, I had high expectations because in our experience, when companies go through financial challenges, they typically are squeezing the plans. And in the Worldcolor case, they continued to perform for their clients and so did Vertis. And so we had high expectations of the quality of the people, but I have to tell you that the quality and the -- both in quality of the people, but also the attitude of jumping on board and getting going exceeded my expectations. So I'm very excited about our new partners with the Vertis employees. We didn't take 4 plants. It's a part of the deal. It was an asset deal. We've moved very quickly to consolidate that equipment into other plants. And we actually closed some other plants in the network and consolidated that work. So I'd say that is -- we've really learned how to do complex integrations. I think we've even gone further because we're very self-critical, and we've honed the process and improved upon it. And so that's playing out here. And so we're feeling very good about it. It's been quite an experience.

Haran Posner - RBC Capital Markets, LLC, Research Division

That's very helpful, Joel. Maybe just to follow-up on that. I guess, on the printing industry, presumably there's constantly assets that are for sale and that you guys are looking at them. I'm just wondering if -- obviously, you have a lot on your plate with Vertis, but at what points do you sort of look for the next big one?

J. Joel Quadracci

Well, look, I think we get things across our desk all the time. And you'll continue to see consolidation in the industry, and I think it has to happen. We are believers in print, but we do clearly believe that we're competing against other forms of media as well. And so I think the industry has to look at it that way and print will be around, but you need to make sure that you're very healthy on it. And that's where we talk about our client approach of making sure that whatever is being printed is done in the most efficient way with the most efficient platform and really pushing that distribution edge to manage their largest costs. So I mean, that being said, I think we feel that there's definitely going to be opportunities that are going to be interesting. But it has to be more than just interesting. It has to really meet our criteria for how we look at acquisitions. It's got to definitely have a good value to it and allow us to improve the platform. I'd say that the other thing I feel confident about is the way that we've honed this process because we have different teams doing the Vertis integration than, say, continuing to do integration with some of the other parts of the company from Worldcolor. And so we've actually stretched the muscles so that now we've got more people who know how to do this. And so I feel confident that we could execute on more things while we're still going on with this deal without putting ourselves into trouble. I think, as Jamie mentioned, we have a saying that hope is not an operating strategy. So we make sure that our balance sheet is able to take on that opportunity. But we also make sure that our managerial capital is available to actually integrate it. But kind of a long-winded way of saying that we're looking at a lot of things, but we're going to continue to be very disciplined about how we do it. And that will play out over time.

John C. Fowler

Yes, I think, Haran, as we've talked in the past, we've really come down every time there's an opportunity that we see, whether it's from a total company point of view or in one of our business units and geographies. We have 4 criteria that it's got to fit through. First and foremost, it's got to be a good strategic fit. Second, it's got to make economic sense, I think, in the consolidating industry, making sure you're paying the correct purchase price is really critical to creating value for shareholders. At Joel's point #3, it's got to have an executable integration plan where we're confident that we're going to be able to integrate it well, including client retention. And finally, as you know, we're really committed to the integrity and strength of our balance sheet, and we want to feel confident that we're going to be able to maintain that strength of the balance sheet. And if we do go over our leverage range that we're seeing the strong cash flows not just from the core business, but from the acquisition that will bring us back down into that 2.0 to 2.5 range.

Haran Posner - RBC Capital Markets, LLC, Research Division

That's all great color. Really appreciate that guys. And maybe shifting to free cash flow. Obviously, I noticed you chose to keep your guidance unchanged with a north of $360 million, which I guess is a wide range. But just obviously -- or I guess, the first half of the year, perhaps still coming in a little bit better than you expected and correct me if I'm wrong on that. And so is it sort of fair to say that you guys are, I guess, increasingly confident in that guidance for the full year?

John C. Fowler

Yes, I think we're very confident. I mean, we knew it was -- we built our financial plans for 2013, which the guidance is based. We knew that we have a benefit in the first half of the year from the restoration of the normalized working capital of Vertis. That was approximately $70 million in the first quarter and down to $7 million in the second quarter. So yes, we had the $206 million. That's what we expected to see. If you pull out, I'll call it, the noise from the way the Vertis acquisition was structured, it was approximately $129 million that was being built -- that was being driven by the ongoing business. Again, consistent, so we remain comfortable that the in excess of $360 million on a recurring basis is the correct guidance.

Haran Posner - RBC Capital Markets, LLC, Research Division

That's perfect. And then maybe just last one for me. In terms of CapEx, obviously, you have a guidance for the year. John, then just wondering whether you look past 2013 into next year and perhaps, the next few years. Is there any reason for us to sort of suspect that there's maybe an increase or a new CapEx cycle that requires you to invest more heavily in your plans, or are we sort of in a reasonable run rate to this point?

John C. Fowler

I think we're in a reasonable run rate, Haran. I mean, we're always going to have some timing issues. I mean, if we look back at 2012, we'd looked at that as a range of $125 million to $150 million. We came in less than that, partly as a result of timing. And then in 2013, we had a higher range of the $150 million to $175 million, which also included CapEx in relationship to the Vertis acquisition. So I think that -- I don't see any reason that we were going to see anything significantly higher. I mean, frankly, we do have the benefit that as we've consolidated both Worldcolor and Vertis, we've been able to consolidate that work into our mega plants, which are both modern and highly automated. We have a really modern platform. So we don't see any areas where we feel we have catch up that we need to do. So we feel real comfortable at the level that we've been running at when you look at 2012 and 2013 together.

Operator

And we do have a follow-up question from the line of Jamie Clement.

James Clement - Sidoti & Company, LLC

John, a follow-up question on CapEx there. I was -- I had sort of been under the impression that one of the reasons why your CapEx came in lighter than expected last year was with -- it would have to do with timing and just the deferral of, perhaps, 1 equipment was delivered and that kind of thing. So I actually would have thought we would have seen more of a bump in the first 6 months of this year than the approximately $70 million that you've spent thus far. Is it possible your range of $150 million to $175 million could prove a little bit conservative or a little bit high, or are there definitive plans in the second half that you're pretty sure you are going to be in that range?

John C. Fowler

I think -- Jamie, I think it's good guidance. There's always going to be timing issues on when equipment's delivered or different decisions that get made, but I continue to feel comfortable with that.

Operator

And we have no further questions at this time. And I would like to turn the call back over to our presenters.

J. Joel Quadracci

Great. I just want to thank everybody for joining us again, and we'll see you back in November. Thank you.

Operator

Thank you very much. This does conclude today's conference call, and you may now disconnect.

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