What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-23 compared with 2021-02-24 · 280 added, 361 removed, 1344 unchanged (32% of the section changed)

4 unchanged sentences

We have audited the accompanying consolidated balance sheets of Quad/Graphics, Inc.

and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principles

As discussed in Note 13 to the financial statements, the Company has changed its method of accounting for leases, effective January 1, 2019, due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842).

Basis for Opinion

15 unchanged sentences

The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.

The Company has various products and service lines which have differing levels involvement of management judgment and timing of revenue recognition.

The Company has various products and service lines which have differing levels of involvement of management judgment and timing of revenue recognition.

We identified revenues as a critical audit matter because of the diversity in products and service lines and diversity in audit evidence obtained as each billing arrangement is individually unique which requires a higher degree of auditor judgment and an increased extent of effort when designing and performing audit procedures to evaluate the appropriateness of management’s estimates and audit evidence related to the recognition of revenues.

17 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 24, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 23, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

30 unchanged sentences

Selling, general and administrative expenses 326.0 335.1

Gains from sale and leaseback ( 24.5 ) —

Depreciation and amortization 157.3 181.6

5 unchanged sentences

Loss on debt extinguishment 0.7 1.8

Loss from continuing operations before income taxes and equity in loss of unconsolidated entity ( 106.1 ) ( 79.8 )

Income tax expense (benefit) 0.3 ( 24.4 )

Loss from continuing operations before equity in loss of unconsolidated entity ( 106.4 ) ( 55.4 )

Equity in loss of unconsolidated entity 0.2 0.3

Net loss from continuing operations ( 106.6 ) ( 55.7 )

Earnings (loss) from continuing operations before income taxes and equity in (earnings) loss of unconsolidated entity 47.0 ( 106.1 )

Income tax expense 9.5 0.3

Earnings (loss) from continuing operations before equity in (earnings) loss of unconsolidated entity 37.5 ( 106.4 )

Equity in (earnings) loss of unconsolidated entity ( 0.3 ) 0.2

Net earnings (loss) from continuing operations 37.8 ( 106.6 )

Loss from discontinued operations, net of tax — ( 21.9 )

Net loss ( 128.5 ) ( 156.3 )

Net earnings (loss) 37.8 ( 128.5 )

net loss attributable to noncontrolling interests — ( 0.2 )

Net loss attributable to Quad common shareholders $ ( 128.3 ) $ ( 156.3 )

Loss per share attributable to Quad common shareholders

Basic and diluted:

Net earnings (loss) attributable to Quad common shareholders $ 37.8 $ ( 128.3 )

Earnings (loss) per share attributable to Quad common shareholders

Continuing operations $ 0.74 $ ( 2.10 )

Discontinued operations — ( 0.43 )

Basic and diluted loss per share attributable to Quad common shareholders $ ( 2.53 ) $ ( 3.12 )

Basic earnings (loss) per share attributable to Quad common shareholders $ 0.74 $ ( 2.53 )

Continuing operations $ 0.71 $ ( 2.10 )

Discontinued operations — ( 0.43 )

Diluted earnings (loss) per share attributable to Quad common shareholders $ 0.71 $ ( 2.53 )

Weighted average number of common shares outstanding

Basic and diluted 50.6 50.0

Basic 51.3 50.6

Diluted 53.0 50.6

See accompanying Notes to Consolidated Financial Statements.

QUAD/GRAPHICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

Year Ended December 31,

Net loss $ ( 128.5 ) $ ( 156.3 )

Other comprehensive loss

Net earnings (loss) $ 37.8 $ ( 128.5 )

Other comprehensive income (loss)

Translation adjustments

2 unchanged sentences

Total translation adjustments ( 9.3 ) 0.2

Reclassification of foreign currency translation adjustments ( 2.7 ) —

Interest rate swap adjustments 7.1 ( 7.5 )

Pension benefit plan adjustments

Net gain (loss) arising during period 3.2 ( 8.1 )

Settlement charge on pension benefit plans included in net loss 0.1 —

Net gain arising during period 20.4 3.2

Settlement charge on pension benefit plans included in net earnings (loss) 0.9 0.1

Total pension benefit plan adjustments 21.3 3.3

Other comprehensive loss, before tax ( 4.0 ) ( 19.8 )

Income tax impact related to items of other comprehensive loss ( 0.1 ) 4.8

Other comprehensive loss, net of tax ( 4.1 ) ( 15.0 )

Total comprehensive loss ( 132.6 ) ( 171.3 )

Other comprehensive income (loss), before tax 16.4 ( 4.0 )

Income tax impact related to items of other comprehensive income (loss) ( 6.3 ) ( 0.1 )

Other comprehensive income (loss), net of tax 10.1 ( 4.1 )

Total comprehensive income (loss) 47.9 ( 132.6 )

comprehensive loss attributable to noncontrolling interests — ( 0.2 )

Comprehensive loss attributable to Quad common shareholders $ ( 132.4 ) $ ( 171.3 )

Comprehensive income (loss) attributable to Quad common shareholders $ 47.9 $ ( 132.4 )

See accompanying Notes to Consolidated Financial Statements.

7 unchanged sentences

Prepaid expenses and other current assets 41.0 54.7

Current assets of discontinued operations — 56.6

Total current assets 809.1 679.2

5 unchanged sentences

Other long-term assets 66.5 73.4

Long-term assets of discontinued operations — 0.5

Total assets $ 1,890.0 $ 1,927.7

5 unchanged sentences

Current portion of operating lease obligations 28.1 28.4

Current liabilities of discontinued operations — 15.8

Total current liabilities 957.1 682.7

4 unchanged sentences

Other long-term liabilities 128.1 196.8

Long-term liabilities of discontinued operations — 0.6

Total liabilities 1,753.2 1,842.9

27 unchanged sentences

OPERATING ACTIVITIES

Net loss $ ( 128.5 ) $ ( 156.3 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Net earnings (loss) $ 37.8 $ ( 128.5 )

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Depreciation and amortization 157.3 181.6

Impairment charges 34.9 75.6

Goodwill impairment — 10.1

Reclassification of foreign currency translation adjustments ( 2.7 ) —

Settlement charges on pension plans 0.9 —

Amortization of debt issuance costs and original issue discount 3.0 2.6

2 unchanged sentences

Gain on the sale or disposal of property, plant and equipment ( 49.0 ) ( 1.8 )

Loss (gain) on the sale of businesses 3.5 ( 8.4 )

(Gain) loss on the sale of businesses ( 20.9 ) 3.5

Gain from property insurance claims ( 13.4 ) ( 4.7 )

Deferred income taxes 5.3 48.5

Equity in loss of unconsolidated entity 0.2 0.3

Changes in operating assets and liabilities—net of acquisitions:

Equity in (earnings) loss of unconsolidated entity ( 0.3 ) 0.2

Changes in operating assets and liabilities—net of acquisitions and divestitures:

Receivables 12.7 72.8

10 unchanged sentences

Proceeds from property insurance claims 15.0 4.8

Loan to an unconsolidated entity — ( 5.0 )

Acquisition of businesses—net of cash acquired (Note 3) ( 2.2 ) ( 121.0 )

Acquisition of businesses—net of cash acquired — ( 2.2 )

Other investing activities ( 0.2 ) ( 0.1 )

Net cash provided by (used in) investing activities 9.7 ( 208.1 )

Net cash provided by investing activities 129.4 9.7

FINANCING ACTIVITIES

9 unchanged sentences

Other financing activities ( 8.6 ) ( 2.6 )

Net cash provided by (used in) financing activities ( 223.6 ) 61.8

Net cash used in financing activities ( 140.9 ) ( 223.6 )

Effect of exchange rates on cash and cash equivalents ( 0.3 ) 0.2

15 unchanged sentences

Net loss — — — — — ( 128.3 ) — ( 128.3 ) ( 0.2 )

Change in ownership of noncontrolling interests — — ( 5.4 ) — — — — ( 5.4 ) ( 16.8 )

Foreign currency translation adjustments — — — — — — 0.2 0.2 —

7 unchanged sentences

Balance at December 31, 2020 54.4 $ 1.4 $ 833.1 ( 0.8 ) $ ( 13.1 ) $ ( 566.0 ) $ ( 171.3 ) $ 84.1 $ 0.7

Accumulated deficit transition adjustment for adoption of ASU 2016-13, net of tax (Note 7) — — — — — ( 6.3 ) — ( 6.3 ) —

Balance at January 1, 2020 54.3 1.4 847.4 ( 1.6 ) ( 31.5 ) ( 429.8 ) ( 167.2 ) 220.3 17.7

Net loss — — — — — ( 128.3 ) — ( 128.3 ) ( 0.2 )

Net earnings — — — — — 37.8 — 37.8 —

Change in ownership of noncontrolling interests — — ( 0.9 ) — — — — ( 0.9 ) ( 0.7 )

Foreign currency translation adjustments — — — — — — ( 9.6 ) ( 9.6 ) —

Reclassification of foreign currency translation adjustments — — — — — — ( 2.7 ) ( 2.7 ) —

Pension benefit plan liability adjustments, net of tax — — — — — — 16.8 16.8 —

Interest rate swap adjustments, net of tax — — — — — — 5.6 5.6 —

Cash dividends declared ($ 0.15 per share)

— — — — — ( 7.9 ) — ( 7.9 ) —

Accrual reversal for cash dividends declared — — — — — 0.4 — 0.4 —

Stock-based compensation — — 6.2 — — — — 6.2 —

7 unchanged sentences

Basis of Presentation and Summary of Significant Accounting Policies

Nature of Operations —As a worldwide marketing solutions partner, Quad leverages its 50-year heritage of platform excellence, innovation, strong culture and social purpose to create a better way for its clients, employees and communities.

The Company’s integrated marketing platform helps brands and marketers reduce complexity, increase efficiency and enhance marketing spend effectiveness.

Quad provides its clients with unmatched scale for on-site services and expanded subject expertise in marketing strategy, creative solutions, media deployment and marketing management services.

With a client-centric approach that drives the Company to continuously evolve its offering, combined with leading-edge technology and single-source simplicity, the Company has the resources and knowledge to help a wide variety of clients in multiple vertical industries, including retail, publishing, consumer technology, consumer packaged goods, financial services, insurance, healthcare and direct-to-consumer.

Nature of Operations —As a worldwide marketing solutions partner, Quad leverages its more than 50-year heritage of platform excellence, innovation, strong culture and social purpose to create a better way for its clients, employees and communities.

The Company’s integrated marketing platform removes friction throughout the marketing process thereby helping brands and marketers reduce complexity, increase efficiency and enhance marketing spend effectiveness.

Quad provides its clients with a complete through-the-line marketing offering, providing unmatched scale for on-site services and expanded subject expertise in marketing strategy, creative solutions, media deployment and marketing management services.

With a client-centric approach that drives the Company to continuously hone and evolve its offering, combined with leading-edge technology, advanced data and analytics and single-source simplicity, the Company has the resources and knowledge to help a wide variety of clients target, more deeply engage and grow audiences in multiple verticals,

including those in established and emerging industries, such as retail, publishing, consumer technology, consumer

packaged goods, financial services, insurance, healthcare and direct-to-consumer.

The Company operates primarily in the commercial print portion of the printing industry as a printer of retail inserts, publications, catalogs, special interest publications, journals, direct mail, directories, in-store marketing and promotion, packaging, newspapers, custom print products, other commercial and specialty printed products and global paper procurement.

2 unchanged sentences

Principles of Consolidation and Basis of Presentation —The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned controlled subsidiaries and have been prepared in accordance with GAAP.

The results of operations and accounts of businesses acquired are included in the consolidated financial statements from the dates of acquisition (see Note 3, “Acquisitions and Strategic Investments”).

The results of operations and accounts of businesses acquired are included in the consolidated financial statements from the dates of acquisition (see Note 3, “Strategic Investments”).

Investments in entities where the Company has both the ability to exert significant influence but not control and an ownership interest of 50 % or less but more than 20 % are accounted for using the equity method of accounting.

1 unchanged sentence

Intercompany transactions and balances have been eliminated in consolidation.

Discontinued Operations —The results of operations of the Company’s Book business have been reported as discontinued operations for all periods presented, in accordance with Accounting Standards Codification (“ASC”) 205-20 — Discontinued Operations .

The corresponding current and long-term assets and liabilities of the Book business have been classified as held for sale in the consolidated balance sheets in accordance with ASC 205-20 as of December 31, 2019.

Discontinued Operations —The results of operations of the Company’s Book business have been reported as discontinued operations for the year ended December 31, 2020, in accordance with Accounting Standards Codification (“ASC”) 205-20 — Discontinued Operations .

The sale of the Book business was completed during 2020.

4 unchanged sentences

Translation adjustments resulting from fluctuations in exchange rates are recorded as a separate component of accumulated other comprehensive income (loss) on the consolidated statements of shareholders’ equity, while transaction gains and losses are recorded in selling, general and administrative expenses on the consolidated statements of operations.

Foreign exchange transactions resulted in losses of $ 2.0 million during the year ended December 31, 2020 and gains of $ 1.2 million during the year ended December 31, 2019.

Foreign exchange transactions resulted in losses of $ 2.9 million during the year ended December 31, 2021 and losses of $ 2.0 million during the year ended December 31, 2020.

QUAD/GRAPHICS, INC.

5 unchanged sentences

Distributions received from equity method investees follow the nature of the distribution approach, where each distribution is evaluated on the basis of the source of the payment and is classified as either operating cash inflows or investing cash inflows.

The Company reviews its equity method investment regularly for indicators of other than temporary impairment.

In January 2022, the Company sold its investment in Plural.

As a result of the planned sale, the Company recorded a $ 32.1 million impairment charge during the year ended December 31, 2021.

Quad had no other significant unconsolidated entities as of December 31, 2021.

40 unchanged sentences

Under ASC 326— Financial Instruments — Credit Losses (“ASC 326”), the Company is required to measure expected credit losses for financial instruments, including trade receivables, based on historical experience, current conditions and reasonable forecasts.

The Company has adopted ASU 2016-13 using a modified retrospective transition approach and has recorded a cumulative-effect transition adjustment to accumulated deficit to increase the allowance for credit losses balance as of January 1, 2020.

See Note 7, “Receivables,” for further discussion on the transactions affecting the allowances for doubtful accounts.

2 unchanged sentences

See Note 8, “Inventories,” for the components of the Company’s inventories.

Leases —Leases are accounted for under the right-of-use model, which requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than twelve months.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition.

See Note 13, “Leases,” for additional accounting policies.

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

Leases —On January 1, 2019, the Company adopted Accounting Standards Update 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which establishes a right-of-use model requiring a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than twelve months.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition.

The Company adopted ASU 2016-02 using the modified retrospective approach and applied the new guidance under ASC 842 — Leases (“ASC 842”) to those contracts existing at, or entered into after, January 1, 2019.

See Note 13, “Leases,” for additional accounting policy and transition disclosures.

Property, Plant and Equipment —Property, plant and equipment are recorded at cost, and are depreciated over the estimated useful lives of the assets using the straight-line method for financial reporting purposes.

53 unchanged sentences

Due to the significant underfunded status of the MEPPs, the Company has withdrawn from all significant MEPPs and replaced these union sponsored “promise to pay in the future” defined benefit plans with a Company sponsored “pay as you go” defined contribution plan, which is the form of retirement benefit provided to Quad’s employees.

As a result of the decision to withdraw, the Company recorded an estimated withdrawal liability for the MEPPs as part of the World Color

As a result of the decision to withdraw, the Company recorded a withdrawal liability for the MEPPs as part of the World Color Press

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

Press purchase price allocation process based on information received from the MEPPs’ trustees.

purchase price allocation process based on information received from the MEPPs’ trustees.

See Note 16, “Employee Retirement Plans,” for further discussion.

4 unchanged sentences

See Note 20, “Accumulated Other Comprehensive Loss,” for further discussion.

The COVID-19 Pandemic Impacts and Response —The COVID-19 pandemic has had, and will continue to have, a negative impact on the Company’s business, financial condition, cash flows, results of operations and supply chain, although the full extent is still uncertain.

The Company implemented cost reduction and cash conservation initiatives in response to the impact of the COVID-19 pandemic on its business, including implementing a COVID-19 Temporary Furlough Program through which employees take an unpaid leave of absence – the length of which varies upon business needs;

temporary salary reductions for leaders through the end of July 2020, including a 50% salary reduction for the Chief Executive Officer and a 35% salary reduction for named executive officers;

a temporary 50% reduction in retainer fees for the Company’s non-employee directors;

temporarily suspending use of vacation and vacation payouts through the end of June 2020;

temporarily suspending production at several manufacturing facilities where declining client volume or other effects of the pandemic impacted the Company’s ability to operate, all of which resumed operations by the end of September 2020;

suspending quarterly dividend payments until further notice;

and delaying capital spending projects.

The Company also announced the permanent closures of the facilities located in the following locations as a result of ongoing volume declines, particularly in retail, that have been exacerbated by the COVID-19 pandemic during the year ended December 31, 2020:

(1) Taunton, Massachusetts;

(2) Fernley, Nevada;

(3) Nashville, Tennessee;

(4) Oklahoma City, Oklahoma;

and (5) Charlotte, North Carolina.

In addition, the Company amended its Senior Secured Credit Facility during the second quarter of 2020 to provide for certain financial covenant relief through the fiscal quarter ending September 30, 2021.

The Company is continuing to evaluate its cost structure and expects to implement additional cost reduction measures as necessary.

As the pandemic continues, the extent of the impact on the Company’s business, financial condition, cash flows, results of operations and supply chain will depend on future developments, all of which are still highly uncertain and cannot be predicted.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

COVID-19 Pandemic Impacts and Response - The COVID-19 pandemic has had, and will continue to have, a negative impact on the Company’s business, financial condition, cash flows, results of operations, supply chain and raw materials availability, although the full extent is still uncertain .

Throughout the pandemic, the Company implemented cost reduction and cash conservation initiatives in response to the pandemic’s impact on its business.

The Company also amended its Senior Secured Credit Facility during the second quarter of 2020 to provide for certain financial covenant relief through the fiscal quarter ended September 30, 2021.

With ongoing advancements against the COVID-19 pandemic, the effects on the Company have lessened from previous periods, particularly from the heavily impacted second and third quarters of 2020.

The Company continues to evaluate the impact and may implement additional cost reduction measures as necessary.

The COVID-19 pandemic has weakened demand for the Company’s products and services, which has resulted in a decline in sales, and it remains uncertain what impact this weakened demand will have on future sales once conditions continue to further improve.

The pandemic has also disrupted the Company’s supply chain and resulted in rising inflationary cost pressures within the Company’s raw materials, distribution and labor.

The ultimate impact of COVID-19 on the Company’s business, financial condition, cash flows, results of operations, supply chain and raw materials availability, will depend on future developments, including the duration of the pandemic and the related length of its impact on the global economy, all of which are still uncertain.

Supplemental Cash Flow Information — The following table summarizes certain supplemental cash flow information for the years ended December 31, 2021 and 2020:

1 unchanged sentence

Income taxes paid 4.3 2.7

Non-cash investing and financing activities:

Non-cash finance lease additions 1.4 1.4

Non-cash operating lease additions 74.6 15.0

Acquisitions of businesses (see Note 3):

Acquisitions of businesses:

Fair value of assets acquired, net of cash — 5.0

Liabilities assumed — ( 2.8 )

Goodwill — 58.5

Equity incentive awards — ( 3.2 )

Acquisition of businesses—net of cash acquired $ — $ 2.2

86 unchanged sentences

or (3) contracts with variable consideration related to unsatisfied performance obligations.

The Company had zero volume commitments in contracts that extend beyond one year as of December 31, 2020.

The Company had no volume commitments in contracts that extend beyond one year as of December 31, 2021.

• The Company expenses costs to obtain contracts as incurred when the contract duration is less than one year.

5 unchanged sentences

(In millions, except share and per share data and unless otherwise indicated)

Acquisitions and Strategic Investments

2020 Change of Ownership in Rise Interactive

Strategic Investments

Changes of Ownership in Rise Interactive

On June 15, 2020, the Company purchased units of equity in Rise from a previous holder in the form of a $ 15.9 million note payable paid in full on October 1, 2020, and $ 1.0 million cash paid on June 15, 2020.

1 unchanged sentence

These transactions resulted in the Company’s ownership interest changing from 57 % to 99 %.

On April 30, 2021, Rise purchased and retired units of equity from previous holders of Rise for $ 1.9 million in cash.

This transaction resulted in the Company’s ownership interest changing from 99 % to 100 %.

The Company began consolidating the results of Rise in the Company’s consolidated financial statements when its equity ownership increased to 57 % on March 14, 2018.

The portion of Rise’s operating results not owned by the Company of 43 % through June 15, 2020 and of 1 % after June 15, 2020 is recorded as net earnings (loss) attributable to noncontrolling interests on the consolidated statement of operations.

The portion of net assets not owned by the Company is recorded as noncontrolling interests as of the respective dates shown on the consolidated balance sheets.

2019 Acquisition of Periscope

On January 3, 2019, the Company completed the acquisition of Periscope, a creative agency headquartered in Minneapolis, Minnesota, for $ 121.0 million cash paid.

Periscope provides a comprehensive service offering, including media buying and analytics, creative and account management.

Periscope also has packaging design and premedia services that complement Quad’s print-production capabilities.

The purchase price of $ 134.0 million includes $ 9.8 million of acquired cash and non-cash equity incentive awards with a grant date fair value of $ 3.2 million.

Included in the purchase price allocation are $ 69.8 million of identifiable other intangible assets, which are amortized over their estimated useful lives, ranging from five to six years , and $ 58.5 million of goodwill, of which $ 52.7 million is deductible for tax purposes.

The final allocation of the purchase price was based on valuations performed to determine the fair value of the net assets as of the acquisition date.

The net assets acquired, excluding acquired cash, were classified as Level 3 in the valuation hierarchy (see Note 15, “Financial Instruments and Fair Value Measurements ,” for the definition of Level 3 inputs).

Periscope’s operations are included in the United States Print and Related Services segment.

The portion of Rise’s operating results not owned by the Company of 43 % through June 15, 2020 and of 1 % from June 15, 2020 through April 30, 2021, was recorded as net earnings (loss) attributable to noncontrolling interests on the consolidated statement of operations.

The portion of net assets not owned by the Company was recorded as noncontrolling interests as of the December 31, 2020 consolidated balance sheet.

Discontinued Operations

1 unchanged sentence

Accordingly, the Company has classified the Book business as a discontinued operation, as required by ASC 205-20 — Discontinued Operations .

The Book business primarily consists of three facilities:

The Book business primarily consisted of three facilities:

Versailles, Kentucky;

3 unchanged sentences

On July 1, 2020, the Company completed the sale of its Versailles, Kentucky book manufacturing plant to CJK Group, Inc., which serves book, magazine, catalog and journal publishers, for $ 7.0 million in cash and the assumption of approximately $ 3.0 million in finance lease obligation, resulting in a $ 10.1 million impairment charge related to property, plant and equipment and a $ 3.0 million gain on the sale of the business during the year ended December 31, 2020.

Working capital was finalized during the third quarter of 2020.

The Company used the proceeds from the sale to reduce debt.

On October 31, 2020, the Company completed the sale of its Fairfield, Pennsylvania and Martinsburg, West Virginia book manufacturing plants to Berryville Graphics, a division of Bertelsmann Printing Group USA, a media, services and education company, for $ 14.2 million in cash, resulting in a loss on the sale of the business of $ 3.5 million and a $ 1.4 million impairment charge related to property plant and equipment during the year ended December 31, 2020.

Working capital was finalized during the fourth quarter of 2020.

The Company used the proceeds from the sale to

The Company used the proceeds from the sale to reduce debt.

This sale was the final step in the previously announced strategic decision to divest the Company’s Book business to optimize its product portfolio.

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

This sale was the final step in the previously announced strategic decision to divest the Company’s Book business to optimize its product portfolio.

The following table summarizes the results of operations of the Company’s Book business, which are included in the loss from discontinued operations in the consolidated statements of operations for the years ended December 31, 2020 and 2019.

The following table summarizes the results of operations of the Company’s Book business, which is included in the loss from discontinued operations in the consolidated statements of operations for the year ended December 31, 2020.

For The Year Ended December 31, 2020

11 unchanged sentences

(1) The Company recognized $ 11.5 million of impairment charges for tangible property, plant and equipment during the year ended December 31, 2020 , to reduce the carrying value of the Book business to its fair value, and recognized $ 2.2 million in employee termination charges and $ 2.7 million in other restructuring charges during the year ended December 31, 2020 .

Impairment charges recognized to reduce the carrying value of the Book business to its fair value during during the year ended December 31, 2019 included:

$ 86.5 million of impairment charges for tangible property, plant and equipment and $ 5.6 million of impairment charges for contract assets.

(2) The Book business was included in the Core Print and Related Services reporting unit.

The amount of goodwill allocated to the Book business was determined based on the relative fair value of the Book business and the portion of the reporting unit that will be retained.

Due to the decision to sell the Book business, the Company must determine whether any of the assets of the Book business were impaired.

Therefore, management performed an interim goodwill impairment test.

Due to the carrying value of the Book business net assets exceeding the estimated fair value, the Company recorded a $ 10.1 million goodwill impairment charge.

The consolidated statements of cash flows for all periods have not been adjusted to separately disclose cash flows related to discontinued operations.

Cash flows related to the Book business during the years ended December 31, 2020 and 2019 were as follows:

Cash flows related to the Book business during the the year ended December 31, 2020 was as follows:

For The Year Ended December 31, 2020

Cash flows used in operating activities $ ( 3.9 )

Cash flows provided by (used in) investing activities 19.6 ( 17.2 )

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

The following table summarizes the current and long-term assets and liabilities of the discontinued Book business that were classified as held for sale in the consolidated balance sheets at December 31, 2020, and 2019:

2020 December 31,

Receivables—net $ — $ 19.6

Inventories — 14.0

Prepaid expenses and other current assets (1)

Current assets of discontinued operations — 56.6

Property, plant and equipment—net — —

Operating lease right-of-use assets—net — 0.2

Other long-term assets — 0.3

Long-term assets of discontinued operations — 0.5

Accounts payable — 7.0

Other current liabilities — 8.5

Current portion of finance lease obligations — 0.1

Current portion of operating lease obligations — 0.2

Current liabilities of discontinued operations — 15.8

Finance lease obligations — —

Other long-term liabilities — 0.6

Long-term liabilities of discontinued operations — 0.6

______________________________

(1) Includes land and building assets that were reclassified to other current assets as of December 31, 2019 .

Cash flows provided by investing activities 19.6

Restructuring, Impairment and Transaction-Related Charges

13 unchanged sentences

The Company began a restructuring program in 2010 related to eliminating excess manufacturing capacity and properly aligning its cost structure.

The Company has announced a total of 50 plant closures since 2010.

The Company announced the closures of the facilities located in Charlotte, North Carolina;

Taunton, Massachusetts (retail facility);

Fernley, Nevada;

Nashville, Tennessee;

and Oklahoma City, Oklahoma during the year ended December 31, 2020.

The Company classifies the following charges as restructuring:

• Employee termination charges are incurred when the Company reduces its workforce through facility consolidations and separation programs.

• Integration costs are incurred primarily for the integration of acquired companies (see Note 3, “Acquisitions and Strategic Investments,” for descriptions of the Company’s recent acquisitions).

• Other restructuring charges are comprised of the following components and are presented net of any gains on the sale of facilities and businesses.

• Integration costs are incurred primarily for the integration of acquired companies.

• Other restructuring charges (income) are comprised of the following components and are presented net of any gains on the sale of facilities and businesses.

During the year ended December 31, 2021, the Company recognized gains from the sale of the facilities located in Riverside, California, Oklahoma City, Oklahoma, and Fernley, Nevada.

During the year ended December 31, 2020, the Company recognized gains from the sale of the facilities located in Midland, Michigan and Shakopee, Minnesota.

During the year ended December 31, 2019, the Company recognized an $ 8.4 million gain on the sale of a business, as well as gains from the sale of the facilities located in Franklin, Kentucky and Hazleton, Pennsylvania.

The Company also recognized a $ 20.9 million gain on the sale of a business and a $ 2.7 million gain from the reclassification of foreign currency translation adjustments during the year ended December 31, 2021, and a $ 2.9 million loss on the sale of a business during the year ended December 31, 2020, which are included within other restructuring activities below.

The components of other restructuring charges (income) consisted of the following during the years ended December 31, 2021 and 2020:

Year Ended December 31,

3 unchanged sentences

Other restructuring activities ( 23.1 ) 11.0

Other restructuring charges $ 22.0 $ 4.4

Other restructuring charges (income) $ ( 26.5 ) $ 22.0

The restructuring charges recorded were based on plans that have been committed to by management and were, in part, based upon management’s best estimates of future events.

2 unchanged sentences

Impairment Charges

The Company recognized impairment charges of $ 64.1 million during the year ended December 31, 2020, which consisted of $ 22.1 million, for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction restructuring activities;

and $ 42.0 million of land and building impairment charges.

The Company recognized impairment charges of $ 7.9 million during the year ended December 31, 2019, which consisted of $ 7.6 million of impairment charges primarily for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction restructuring activities;

The Company recognized impairment charges of $ 34.9 million during the year ended December 31, 2021, which consisted of $ 2.8 million, for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities, including $ 32.1 million of impairment charges related to the Company’s investment in Plural.

The Company recognized impairment charges of $ 64.1 million during the year ended December 31, 2020, which consisted of $ 22.1 million of impairment charges primarily for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities;

and $ 42.0 million of land and building impairment charges.

Additional impairment charges were recorded related to the Book business during the year ended December 31, 2019, which are disclosed in Note 4, “Discontinued Operations”.

QUAD/GRAPHICS, INC.

7 unchanged sentences

The Company recognized transaction-related charges of $ 0.6 million and $ 1.4 million during the years ended December 31, 2021 and 2020, respectively.

Transaction-related charges included a $ 45 million reverse termination fee paid during the year ended December 31, 2019, in connection with the termination of the definitive agreement pursuant to which Quad would have acquired LSC Communications, Inc.

The transaction-related charges were expensed as incurred in accordance with the applicable accounting guidance on business combinations.

Restructuring Reserves

10 unchanged sentences

Balance at December 31, 2020 $ 14.6 $ — $ 0.5 $ — $ 25.8 $ 40.9

Expense, net 34.7 64.1 1.4 1.9 22.0 124.1

Expense (income), net 9.9 34.9 0.6 — ( 26.5 ) 18.9

Cash payments, net ( 19.0 ) — ( 0.7 ) — ( 13.3 ) ( 33.0 )

2 unchanged sentences

The Company’s restructuring reserves at December 31, 2021, included a short-term and a long-term component.

The short-term portion included $ 33.1 million in other current liabilities (see Note 10, “Other Current and Long-Term Liabilities”) and $ 0.6 million in accounts payable in the consolidated balance sheets as the Company expects these reserves to be paid within the next twelve months.

The short-term portion included $ 47.5 million in other current liabilities (see Note 10, “Other Current and Long-Term Liabilities”) and $ 1.7 million in accounts payable in the consolidated balance sheets as the Company expects these reserves to be settled within the next twelve months.

The long-term portion of $ 6.1 million was included in other long-term liabilities (see Note 10, “Other Current and Long-Term Liabilities”) in the consolidated balance sheets.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Goodwill and Other Intangible Assets

1 unchanged sentence

Goodwill is assigned to specific reporting units and is tested annually for impairment as of October 31, or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying value.

Due to the decline in the Company’s stock price and the uncertainty and impacts of the COVID-19 pandemic on the Company and the global economy, an interim goodwill impairment test was completed on the goodwill in the Core Print and Related Services reporting unit during the first quarter of 2020.

As a result, the Company determined the fair value of the Core Print and Related Services reporting unit exceeded the carrying value, and therefore no impairment was recorded.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Due to the Company’s decision to sell its third-party logistics business on June 30, 2021, goodwill included in the carrying amount of the third-party logistics business sold of $ 16.6 million was determined based on the relative fair value of the third-party logistics business and the portion of the Core Print and Related Services reporting unit retained.

When only a portion of goodwill is allocated to a business to be sold, an interim goodwill impairment test was completed on the remaining $ 86.4 million of goodwill in the Core Print and Related Services reporting unit.

No impairment was recorded as a result of the interim impairment test.

The Company completed its annual impairment test as of October 31, 2021, and identified no indicators of impairment in any of the Company's reporting units during the year ended December 31, 2021.

Due to the Company’s decision to sell its Book business, an interim goodwill impairment test was completed on the remaining goodwill in the Core Print and Related Services reporting unit during the third quarter of 2019.

Due to the carrying value of the Book business net assets exceeding the estimated fair value, the Company recorded a $ 10.1 million goodwill impairment charge related to the Book business during the third quarter of 2019 (see Note 4, “Discontinued Operations”).

In addition, the remaining goodwill that is not allocated to a business to be sold must be tested for impairment.

No goodwill impairment was recorded on the remaining $ 103.0 million related to the retained portion of the Core Print and Related Services reporting unit during the year ended December 31, 2019.

Fair value was determined using an equal weighting of both the income and market approaches.

4 unchanged sentences

The accumulated goodwill impairment losses and the carrying value of goodwill from continuing operations at December 31, 2021 and 2020, were as follows:

United States Print and Related Services International Total

December 31, 2021 December 31, 2020

United States Print and Related Services International Total United States Print and Related Services International Total

Goodwill $ 864.7 $ 30.0 $ 894.7 $ 881.3 $ 30.0 $ 911.3

1 unchanged sentence

Goodwill, net of accumulated goodwill impairment loss $ 86.4 $ — $ 86.4 $ 103.0 $ — $ 103.0

There was no activity impacting goodwill for the year ended December 31, 2020.

Activity impacting goodwill for the year ended December 31, 2021, was as follows:

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

United States Print and Related

1 unchanged sentence

Balance at January 1, 2021 $ 103.0 $ — $ 103.0

Acquisition of Periscope (see Note 3) 58.5 — 58.5

Sale of third-party logistics business ( 16.6 ) — ( 16.6 )

Balance at December 31, 2021 $ 86.4 $ — $ 86.4

There was no activity impacting goodwill for the year ended December 31, 2020.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Other Intangible Assets

16 unchanged sentences

Amortization Expense

Total $ 104.3

The Company adopted ASU 2016-13 as of January 1, 2020, using a modified retrospective transition approach and has recorded a cumulative-effect transition adjustment to accumulated deficit as of January 1, 2020.

1 unchanged sentence

The transition had no impact to the consolidated statement of operations.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Prior to granting credit, the Company evaluates each client in an underwriting process, taking into consideration the prospective client’s financial condition, past payment experience, credit bureau information and other financial and qualitative factors that may affect the client’s ability to pay.

2 unchanged sentences

Some of the Company’s clients are highly leveraged or otherwise subject to their own operating and regulatory risks.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Specific client provisions are made when a review of significant outstanding amounts, utilizing information about client creditworthiness, as well as current and future economic trends based on reasonable forecasts, indicates that collection is doubtful.

31 unchanged sentences

(1) Other consists of computer equipment, vehicles, furniture and fixtures, leasehold improvements and communication related equipment.

The Company recorded impairment charges of $ 64.1 million and $ 7.9 million during the years ended December 31, 2020 and 2019, respectively, to reduce the carrying amounts of certain property, plant and equipment no longer utilized in production, or due to other capacity and strategic reduction restructuring initiatives, to fair value (see Note 5, “Restructuring, Impairment and Transaction-Related Charges,” for further discussion on impairment charges).

The Company recorded impairment charges of $ 2.8 million and $ 64.1 million during the years ended December 31, 2021 and 2020, respectively, to reduce the carrying amounts of certain property, plant and equipment no longer utilized in production, or due to other capacity reduction and strategic divestiture activities, to fair value (see Note 5, “Restructuring, Impairment and Transaction-Related Charges,” for further discussion on impairment charges).

The Company recognized depreciation expense for continuing operations of $ 125.8 million and $ 142.5 million for the years ended December 31, 2021 and 2020, respectively.

2 unchanged sentences

Assets held for sale are carried at the lesser of original cost or fair value, less the estimated costs to sell.

Assets held for sale from continuing operations were $ 4.9 million as of December 31, 2020, and $ 59.3 million as of December 31, 2019, including the Omaha, Nebraska packaging plant that was sold on January 31, 2020.

There were no assets held for sale as of December 31, 2021, and assets held for sale were $ 4.9 million as of December 31, 2020.

The fair values were determined by the Company to be Level 3 under the fair value hierarchy (see Note 15, “Financial Instruments and Fair Value Measurements,” for the definition of Level 3 inputs) and were estimated based on quoted market prices where available and independent appraisals, as appropriate.

Assets held for sale were included in prepaid expenses and other current assets in the consolidated balance sheets.

Gains from Sale and Leaseback

On June 29, 2021, the Company executed a sale and leaseback of its Chalfont, Pennsylvania facility for net proceeds of $ 20.0 million, which resulted in a $ 13.7 million gain.

The leaseback is for a term of seven years and was determined to be an operating lease.

The leaseback resulted in a $ 9.4 million asset included in the operating lease right of use assets - net, current operating lease obligation of $ 1.1 million and operating lease obligation of $ 8.3 million in the consolidated balance sheet as of December 31, 2021.

On September 28, 2021, the Company executed a sale and leaseback of its West Allis, Wisconsin facility for net proceeds of $ 31.9 million, which resulted in a $ 10.8 million gain.

The leaseback is for a term of ten years and was determined to be an operating lease.

The leaseback resulted in a $ 22.7 million asset included in the operating lease right of use assets - net, current operating lease obligation of $ 1.6 million and operating lease obligation of $ 21.1 million in the consolidated balance sheet as of December 31, 2021.

QUAD/GRAPHICS, INC.

11 unchanged sentences

Multiemployer pension plans – withdrawal liability 3.8 28.4 32.2 3.5 32.2 35.7

Deferred Revenue 66.4 2.1 68.5 52.9 2.6 55.5

Tax-related liabilities 20.0 5.3 25.3 25.3 5.3 30.6

2 unchanged sentences

Interest rate swap liabilities 0.7 4.4 5.1 — 14.4 14.4

Liabilities held for sale from continuing operations (2)

— — — 17.9 — 17.9

Other 42.7 11.4 54.1 60.5 11.1 71.6

2 unchanged sentences

(1) Employee-related liabilities consist primarily of payroll, bonus, vacation, health and workers’ compensation.

(2) The Omaha, Nebraska packaging plant was considered held for sale in the consolidated balance sheets as of December 31, 2019.

The Company completed the sale on January 31, 2020.

Commitments and Contingencies

2 unchanged sentences

The liabilities, if any, which ultimately result from such lawsuits are not expected by management to have a material impact on the consolidated financial statements of the Company.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Environmental Reserves

5 unchanged sentences

Furthermore, the Company does not anticipate that maintaining compliance with such environmental statutes will have a material impact upon the Company’s consolidated financial position.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

The components of long-term debt at December 31, 2021 and 2020, were as follows:

13 unchanged sentences

Master Note and Security Agreement

On September 1, 1995, and as last amended on November 24, 2014, Quad entered into its Master Note and Security Agreement.

On September 1, 1995, and as last amended on November 24, 2014, the Company entered into its Master Note and Security Agreement.

As of December 31, 2021, the borrowings outstanding under the Master Note and Security Agreement were $ 7.2 million.

6 unchanged sentences

All tendered senior notes under the Master Note and Security Agreement were canceled.

The Company used cash flows from operating activities and borrowings under its revolving credit facility to

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

fund the tender.

The tender was primarily completed to reallocate debt to the lower interest rate revolving credit facility and thereby reduce interest expense based on current LIBOR rates.

The Company used cash flows from operating activities and borrowings under its revolving credit facility to fund the tender.

The tender was primarily completed to reallocate debt to the lower interest rate revolving credit facility and thereby reduce interest expense based on the then current LIBOR rates.

Senior Secured Credit Facility

On April 28, 2014, the Company entered into its Senior Secured Credit Facility, which included a revolving credit facility, Term Loan A and Term Loan B.

The Company completed the third amendment to the Senior Secured Credit Facility on January 31, 2019.

This third amendment was completed to provide Quad with the liquidity and structural flexibility to consummate the proposed, but now terminated, acquisition of LSC and to extend existing maturities by (a) increasing the aggregate amount of the existing revolving credit facility from $ 725.0 million to $ 800.0 million with a term of five years, maturing on January 31, 2024;

(b) increasing the aggregate amount of the existing Term Loan A from $ 375.0 million to $ 825.0 million with a delayed draw feature and term of five years , maturing on January 31, 2024;

and (c) increasing the aggregate amount of the existing Term Loan B from $ 300.0 million to $ 500.0 million with a term of seven years , maturing on January 31, 2026.

The Company intended that the loans available under the amended revolving credit facility would be used to repay, refinance, repurchase, redeem, exchange or otherwise terminate LSC’s existing indebtedness in connection with the consummation of the merger, and to pay transaction expenses.

On July 26, 2019, following the termination of the proposed acquisition of LSC, Quad fully funded the $ 825.0 million delayed draw Term Loan A to retire the entire amount outstanding on the $ 500.0 million Term Loan B and reduced the borrowings under the revolving credit facility.

The Company completed the fourth amendment to the Senior Secured Credit Facility on June 29, 2020.

The Senior Secured Credit Facility was amended to (a) provide for certain financial covenant relief through the fiscal quarter ending September 30, 2021 (the Covenant Relief Period);

The Senior Secured Credit Facility was amended to (a) provide for certain financial covenant relief through the fiscal quarter ended September 30, 2021 (the Covenant Relief Period);

(b) reduce the aggregate amount of the existing revolving credit facility from $ 800.0 million to $ 500.0 million;

and (d) prohibit repurchases of capital stock and payments of cash dividends during the Covenant Relief Period.

Certain amendments were also made to the quarterly financial covenants to which the Company is subject, which are further described below.

At December 31, 2020, the Company had no outstanding borrowings on the revolving credit facility, and had $ 38.6 million of issued letters of credit, leaving $ 461.4 million available for future borrowings.

Borrowings under the revolving credit facility and delayed draw Term Loan A made under the Senior Secured Credit Facility at December 31, 2020, bear interest at 2.50 % in excess of reserve adjusted LIBOR, with a LIBOR floor of 0.75 %, or 1.50 % in excess of an alternate base rate.

and (d) prohibit repurchases of capital stock and

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

payments of cash dividends during the Covenant Relief Period.

Certain amendments were also made to the quarterly financial covenants to which the Company is subject.

The Company completed the fifth amendment to the Senior Secured Credit Facility on November 2, 2021.

The Senior Secured Credit Facility was amended to (a) reduce the aggregate amount of the existing revolving credit facility from $ 500.0 million to $ 432.5 million, and extend the maturity of a portion of the revolving credit facility such that $ 90.0 million under the revolving credit facility is due on the existing maturity date of January 31, 2024 (the “Existing Maturity Date”) and $ 342.5 million under the revolving credit facility is due on November 2, 2026 (the “Extended Maturity Date”);

(b) extend the maturity of a portion of the existing term loan facility such that $ 91.5 million of such term loan facility is due on the Existing Maturity Date and $ 483.9 million is due on the Extended Maturity Date;

(c) make certain adjustments to pricing, including an increase of 0.50 % to the interest rate margin applicable to the loans maturing on the Extended Maturity Date;

(d) modify certain financial and operational covenants;

and (e) modify the interest rate provisions relating to the phase-out of LIBOR as a reference rate.

Borrowings under the revolving credit facility and Term Loan A made under the Senior Secured Credit Facility bear interest at 2.75 % in excess of reserve adjusted LIBOR, or 1.75 % in excess of an alternate base rate with a LIBOR floor of 0.75 % for the extended tranche and bear interest at 2.50 % in excess of reserve adjusted LIBOR, or 1.50 % in excess of an alternate base rate with a LIBOR floor of 0.75 % for the non-extending tranche.

At December 31, 2021, the Company had no outstanding borrowings on the revolving credit facility, and had $ 35.8 million of issued letters of credit, leaving up to $ 396.7 million available for future borrowings.

The Senior Secured Credit Facility is secured by substantially all of the unencumbered assets of the Company.

1 unchanged sentence

Senior Unsecured Notes

The Company issued $ 300.0 million aggregate principal amount of its Senior Unsecured Notes due May 1, 2022, on April 28, 2014.

The Company issued $ 300.0 million aggregate principal amount of its Senior Unsecured Notes due May 1, 2022, on April 28, 2014, of which $ 211.5 million is outstanding as of December 31, 2021.

The Senior Unsecured Notes bear interest at 7.0 %, and interest is payable semi-annually.

The Senior Unsecured Notes were issued to extend and stagger the Company’s debt maturity profile, further diversify its capital structure and provide more borrowing capacity to better position the Company to execute on its strategic goals.

The Company received $ 294.8 million in net proceeds from the sale of the Senior Unsecured Notes, after deducting the initial purchasers’ discounts and commissions.

The proceeds from the Senior Unsecured Notes were used for the same purposes detailed above for the Senior Secured Credit Facility.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

The Company repurchased $ 4.7 million of its outstanding Senior Unsecured Notes in the open market, resulting in a net gain on debt extinguishment of $ 0.8 million during the year ended December 31, 2020.

During the year ended December 31, 2021, the Company repurchased $ 27.2 million of its outstanding Senior Unsecured Notes in the open market, resulting in a net loss on debt extinguishment of $ 0.5 million.

During the year ended December 31, 2020, the Company repurchased $ 4.7 million of its outstanding Senior Unsecured Notes in the open market, resulting in a net gain on debt extinguishment of $ 0.8 million.

All repurchased Senior Unsecured Notes were canceled.

The Company used cash flows from operating activities and borrowings under its revolving credit facility to fund the repurchases.

These repurchases were primarily completed to reallocate debt to the lower interest rate revolving credit facility and thereby reduce interest expense based on current LIBOR rates.

These repurchases were completed primarily to reduce interest expense.

Each of the Company’s existing and future domestic subsidiaries that is a borrower or guarantees indebtedness under the Company’s Senior Secured Credit Facility or that guarantees certain of the Company’s other indebtedness or indebtedness of the Company’s restricted subsidiaries (other than intercompany indebtedness) fully and unconditionally guarantee or, in the case of future subsidiaries, will guarantee, on a joint and several basis, the Senior Unsecured Notes (the “Guarantor Subsidiaries”).

1 unchanged sentence

Guarantor Subsidiaries will be automatically released from these guarantees upon the occurrence of certain events.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

International Debt Obligations

The Company has two fixed rate, Euro denominated, international term loans for purposes of financing certain capital expenditures and general business needs.

The first international term loan in the amount of $ 21.7 million was entered into on December 28, 2015, was fully funded during 2016 and has a term of six years , maturing December 28, 2021.

As of December 31, 2020, $ 2.2 million remained outstanding on the first international term loan at a weighted average interest rate of 1.72 %.

The first international term loan in the amount of $ 21.7 million was entered into on December 28, 2015, was fully funded during 2016 with a term of six years , and matured on December 28, 2021.

The second international term loan in the amount of $ 12.8 million was entered into on December 21, 2018, bears interest at 1.96 % and has a term of five years , maturing on December 31, 2023.

4 unchanged sentences

The first multicurrency international revolving credit facility expires on October 29, 2022, and bears interest at the aggregate of the Warsaw Interbank Offered Rate (“WIBOR”) plus 1.40 % for any Polish Zloty denominated borrowings, the aggregate of Euro Interbank Offered Rate (“EURIBOR”) plus 1.45 % for any Euro denominated borrowings or the aggregate of British pound sterling LIBOR plus 1.45 % for any British pound sterling denominate borrowings.

The second multicurrency international revolving credit facility expires on November 20, 2021, and bears interest at the aggregate of WIBOR plus 1.00 % for any Polish Zloty denominated borrowings or the aggregate of EURIBOR plus 1.00 % for any Euro denominated borrowings.

The second multicurrency international revolving credit facility expires on December 16, 2022, and bears interest at the aggregate of WIBOR plus 1.00 % for any Polish Zloty denominated borrowings or the aggregate of EURIBOR plus 1.00 % for any Euro denominated borrowings.

Fair Value of Debt

5 unchanged sentences

(In millions, except share and per share data and unless otherwise indicated)

Debt Issuance Costs and Original Issue Discount

The debt issuance costs and original issue discount are amortized on a straight-line basis over the four , seven and eight year lives of the related debt instruments.

Activity impacting the Company’s capitalized debt issuance costs and original issue discount for the years ended December 31, 2020 and 2019, was as follows:

Debt Issuance Costs

The debt issuance costs are amortized on a straight-line basis over the lives of the related debt instruments.

Activity impacting the Company’s capitalized debt issuance costs for the years ended December 31, 2021 and 2020, was as follows:

Capitalized Debt

Issuance Costs Original Issue Discount

Issuance Costs

Balance at January 1, 2020 $ 9.3

Impacts from January 31, 2019 debt financing arrangement 6.0 15.0

Loss on debt extinguishment from February 10, 2017 debt financing arrangement ( 0.7 ) ( 1.0 )

Loss on debt extinguishment from July 26, 2019 delayed draw Term Loan A funding and retirement of Term Loan B ( 0.5 ) ( 14.1 )

Amortization expense ( 2.7 ) ( 0.9 )

Balance at December 31, 2019 9.3 —

Debt issuance costs from June 29, 2020 debt financing arrangement 2.6

3 unchanged sentences

Balance at December 31, 2020 6.9

Debt issuance costs from November 2, 2021 debt financing arrangement 5.2

Write off of debt issuance costs from Term Loan A pre-payments ( 0.4 )

Amortization expense ( 2.6 )

Balance at December 31, 2021 $ 9.1

Loss on Debt Extinguishment

2 unchanged sentences

2021 Loss on Debt Extinguishment

Debt issuance costs from November 2, 2021 debt financing arrangement $ 0.2

Loss on debt extinguishment from Senior Unsecured Note Repurchases 0.5

2020 Loss on Debt Extinguishment

The loss on debt extinguishment recorded during the year ended December 31, 2020, was comprised of the following:

2020 Loss on Debt Extinguishment

Debt issuance costs from January 31, 2019 debt financing arrangement $ 2.3

2 unchanged sentences

Gain on debt extinguishment from Senior Unsecured Note Repurchases ( 0.8 )

2019 Loss on Debt Extinguishment

In conjunction with the third amendment to the Company’s Senior Secured Credit Facility completed on January 31, 2019, the Company incurred $ 20.2 million in debt issuance costs.

In accordance with the accounting guidance for the treatment of debt issuance costs in a debt extinguishment, of the $ 20.2 million in new debt issuance costs, $ 6.0 million was classified as a reduction of long-term debt in the consolidated balance sheets and $ 14.2 million was expensed and was classified as loss on debt extinguishment in the consolidated statements of operations at the time of the refinancing.

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

The loss on debt extinguishment recorded during the year ended December 31, 2019, was comprised of the following:

Loss on Debt Extinguishment

Debt issuance costs:

Debt issuance costs from February 10, 2017 debt financing arrangement $ 0.7

Debt issuance costs from January 31, 2019 debt financing arrangement 14.2

Debt issuance costs from July 26, 2019 delayed draw Term Loan A funding and retirement of Term Loan B 0.5

Original issue discount:

Original issue discount from February 10, 2017 debt financing arrangement 1.0

Original issue discount from July 26, 2019 delayed draw Term Loan A funding and retirement of Term Loan B 14.1

Covenants and Compliance

1 unchanged sentence

Among these covenants, the Company was required to maintain the following as of December 31, 2021:

• Maximum Total Net Leverage Ratio.

On a rolling twelve-month basis, the Maximum Total Net Leverage Ratio, defined as consolidated total indebtedness, net of no more than $ 75.0 million of unrestricted cash, to consolidated EBITDA, shall not exceed (i) 4.50 to 1.00 for the quarters ending December 31, 2020 and March 31, 2021, (ii) 4.25 to 1.00 for the quarter ending June 30, 2021, and (iii) 4.125 to 1.00 for the quarter ending September 30, 2021 (for the twelve months ended December 31, 2020, the Company’s Maximum Total Net Leverage Ratio was 3.29 to 1.00).

After the Covenant Relief Period, the Company will be required to comply with the Total Leverage Ratio covenant, defined as consolidated total indebtedness to consolidated EBITDA which shall not exceed 3.75 to 1.00.

• Total Leverage Ratio.

On a rolling twelve-month basis, the Total Leverage Ratio, defined as consolidated total indebtedness to consolidated EBITDA, shall not exceed 3.75 to 1.00 (for the twelve months ended December 31, 2021, the Company’s Total Leverage Ratio was 3.22 to 1.00).

• Liquidity, defined as unrestricted cash and permitted investments of the Company and its subsidiaries (subject to certain conditions) plus the aggregate amount of the unused revolving credit facility commitments, shall not be less than $ 181.6 million at any time during the period commencing December 15, 2023 and ending when all obligations owed under the Senior Secured Credit Facility to lenders that are not extending lenders are paid in full.

• If there is any amount outstanding on the Revolving Credit Facility or Term Loan A, or if any lender has any revolving credit exposure or Term Loan A credit exposure, the Company is required to maintain the following:

◦ Senior Secured Leverage Ratio.

On a rolling twelve-month basis, the Senior Secured Leverage Ratio, defined as consolidated senior secured net indebtedness to consolidated EBITDA, shall not exceed 3.50 to 1.00 (for the twelve months ended December 31, 2020, the Company’s Senior Secured Leverage Ratio was 2.41 to 1.00).

On a rolling four-quarter basis, the Senior Secured Leverage Ratio, defined as the ratio of consolidated senior secured net indebtedness to consolidated EBITDA, shall not exceed (a) 3.50 to 1.00 for any fiscal quarter ending prior to December 31, 2023, and (b) 3.25 to 1.00 for any fiscal quarter ending on or after December 31, 2023 (other than, in the case of this clause (b), any fiscal quarter ending September 30 of any year, each of which shall be subject to a maximum Senior Secured Leverage Ratio not to exceed 3.50 to 1.00) (for the twelve months ended December 31, 2021, the Company’s Senior Secured Leverage Ratio was 1.68 to 1.00).

• Interest Coverage Ratio.

On a rolling twelve-month basis, the Interest Coverage Ratio, defined as consolidated EBITDA to cash consolidated interest expense, shall not be less than 3.00 to 1.00 (for the twelve months ended December 31, 2021, the Company’s Interest Coverage Ratio was 5.35 to 1.00).

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

The indenture underlying the Senior Unsecured Notes contains various covenants, including, but not limited to, covenants that, subject to certain exceptions, limit the Company’s and its restricted subsidiaries’ ability to incur and/or guarantee additional debt;

7 unchanged sentences

and engage in transactions with affiliates.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

In addition to those covenants, the Senior Secured Credit Facility also includes certain limitations on acquisitions, indebtedness, liens, dividends and repurchases of capital stock.

The following limitations utilize a Total Net Leverage Ratio calculation, which, on a rolling twelve-month basis, is defined as consolidated net indebtedness to consolidated EBITDA (for the twelve months ended December 31, 2020, the Company’s Total Net Leverage Ratio was 3.30 to 1.00).

• If the Company’s Total Net Leverage Ratio is greater than 2.75 to 1.00, the Company is prohibited from making greater than $ 60.0 million of annual dividend payments, capital stock repurchases and certain other payments.

If the Total Net Leverage Ratio is less than 2.75 to 1.00, there are no such restrictions, provided, however, that no such restricted payments shall be made during the Covenant Relief Period.

As the Company’s Total Net Leverage Ratio as of December 31, 2020, was 3.30 to 1.00, and we are in the Covenant Relief Period, the limitations described above are currently applicable.

• If the Company’s Senior Secured Leverage Ratio is greater than 3.00 to 1.00 or the Company’s Total Net Leverage Ratio is greater than 3.50 to 1.00, the Company is prohibited from voluntarily prepaying any of the Senior Unsecured Notes and from voluntarily prepaying any other unsecured or subordinated indebtedness, with certain exceptions (including any mandatory prepayments on the Senior Unsecured Notes or any other unsecured or subordinated debt).

• If the Company’s Total Leverage Ratio is greater than 2.75 to 1.00, the Company is prohibited from making greater than $ 60.0 million of dividend payments, capital stock repurchases and certain other payments, over the course of the agreement.

If the Company’s Total Leverage Ratio is above 2.50 to 1.00 but below 2.75 to 1.00, the Company is prohibited from making greater than $ 100.0 million of dividend payments, capital stock repurchases and certain other payments, over the course of the agreement.

If the Total Leverage Ratio is less than 2.50 to 1.00, there are no such restrictions.

As the Company’s Total Leverage Ratio as of December 31, 2021, was 3.22 to 1.00, the limitations described above are currently applicable.

• If the Company’s Senior Secured Leverage Ratio is greater than 3.00 to 1.00 or the Company’s Total Net Leverage Ratio which, on a rolling twelve-month basis, is defined as consolidated net indebtedness to consolidated EBITDA, is greater than 3.50 to 1.00, the Company is prohibited from voluntarily prepaying any of the Senior Unsecured Notes and from voluntarily prepaying any other unsecured or subordinated indebtedness, with certain exceptions (including any mandatory prepayments on the Senior Unsecured Notes or any other unsecured or subordinated debt).

If the Senior Secured Leverage Ratio is less than 3.00 to 1.00 and the Total Net Leverage Ratio is less than 3.50 to 1.00, there are no such restrictions.

4 unchanged sentences

Total $ 809.6

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

The Company determines if an arrangement is or contains a lease at contract inception.

3 unchanged sentences

• ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate.

Generally, the Company cannot determine the implicit interest rate as it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs.

Generally, the Company

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

cannot determine the implicit interest rate as it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs.

Therefore, the Company generally uses its incremental borrowing rate as the discount rate for the lease.

13 unchanged sentences

Finance leases are included in property and equipment—net, current portion of finance lease obligations, and finance lease obligations in the consolidated balance sheets.

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have an original lease term of twelve months or less.

Therefore, the Company recognizes the lease payments associated with these short-term leases as an expense over the lease term in the consolidated statement of operations.

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have an original lease term of twelve months or less.

Therefore, the Company recognizes the lease payments associated with these short-term leases as an expense over the lease term in the consolidated statement of operations.

Practical Expedients

48 unchanged sentences

2024 21.9 0.4

2025 17.8 0.3

2027 and thereafter 30.1 —

15 unchanged sentences

Deferred 2.1 ( 0.8 )

Total income tax expense (benefit) $ 0.3 $ ( 24.4 )

Total income tax expense $ 9.5 $ 0.3

QUAD/GRAPHICS, INC.

3 unchanged sentences

Federal statutory rate $ 9.9 $ ( 22.3 )

State taxes, net of federal benefit 15.4 ( 4.1 )

Adjustment to valuation allowances ( 17.1 ) 13.1

Benefit of Net Operating Loss Carryback ( 14.3 ) —

Impairment on investment in Plural 6.2 —

Impact from foreign branches 4.5 2.1

2 unchanged sentences

Adjustment of uncertain tax positions 0.2 0.8

State taxes, net of federal benefit ( 0.1 ) 15.4

Benefit of Net Operating Loss Carryback — ( 14.3 )

Other 4.3 4.8

Income tax expense (benefit) $ 9.5 $ 0.3

The $ 17.1 million adjustment to valuation allowance in 2021 primarily relates to releasing reserves related to deferred tax assets for net operating losses and interest limitation.

The $ 13.1 million adjustment to valuation allowance in 2020 primarily relates to establishing reserves related to deferred tax assets for net operating losses, credits and interest limitation that were not expected to be realized in the future for federal income tax purposes.

The $ 0.1 million effective rate reconciling item for State taxes, net of federal benefit, in 2021 includes a $ 4.8 million adjustment for partial release of valuation allowance reserves.

The $ 15.4 million effective rate reconciling item for State taxes, net of federal benefit, in 2020 includes a $ 19.1 million adjustment to valuation allowance primarily related to net operating losses and credits that are not expected to be realized in the future for state income tax purposes.

The $ 13.1 million adjustment to valuation allowance in 2020 primarily relates to net operating losses, credits and the deferred tax asset for interest limitation that are not expected to be realized in the future for federal income tax purposes.

On March 27, 2020, the United States government passed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES act”).

This legislation includes significant tax provisions and other measures to assist individuals and businesses impacted by the economic effects of the COVID-19 pandemic.

This legislation included significant tax provisions and other measures to assist individuals and businesses impacted by the economic effects of the COVID-19 pandemic.

The $ 14.3 million rate reconciling item for Benefit of Net Operating Loss Carryback in 2020, primarily relates to the provision from the CARES act allowing a net operating loss (“NOL”) generated in 2019 and 2020 to be carried back five years to years when the federal statutory tax rate was 35%.

The amount of NOL available to be carried back was increased by other provisions in the CARES act that temporarily increases the amount of interest expense businesses are allowed to deduct in 2019 and 2020.

The amount of NOL available to be carried back was increased by other provisions in the CARES act that temporarily increased the amount of interest expense businesses were allowed to deduct in 2019 and 2020.

QUAD/GRAPHICS, INC.

5 unchanged sentences

Net operating loss and other tax carryforwards $ 125.2 $ 145.9

Goodwill and intangible assets 24.4 19.0

Pension and workers compensation benefits 21.9 33.2

Accrued liabilities 12.9 20.5

Goodwill and intangible assets 19.0 17.4

Interest limitation 11.5 18.2

17 unchanged sentences

The state net operating loss carryforwards expire in varying amounts through 2041.

• Capital loss carryforwards of $ 17.1 million and $ 8.7 million for federal and state, respectively.

The federal and state capital loss carryforwards expire in 2022.

• Various credit carryforwards of $ 9.0 million, $ 26.5 million and $ 35.8 million for federal, foreign and state, respectively.

8 unchanged sentences

Balance at beginning of period $ 11.6 $ 17.8

Additions for tax positions of the current year — —

Additions for tax positions of prior years 0.5 0.9

1 unchanged sentence

Lapses of applicable statutes of limitations ( 0.1 ) ( 1.0 )

Settlements during the period — ( 0.1 )

Balance at end of period $ 11.7 $ 11.6

1 unchanged sentence

Of that amount, it is reasonably possible that $ 0.5 million of the total amount of unrecognized tax benefits will decrease within the next twelve months due to resolution of income tax audits or statute expirations.

The Company classified interest expense (income) and any related penalties (refunds) related to income tax uncertainties as a component of income tax expense (benefit).

The following table summarizes the Company’s interest expense (income) related to tax uncertainties and penalties recognized during the years ended December 31, 2020 and 2019:

Interest expense (income) $ ( 0.3 ) $ 0.5

Penalties (refunds) — —

The Company classified interest income and any related refunds related to income tax uncertainties as a component of income tax expense.

The following table summarizes the Company’s interest income related to tax uncertainties and refunds recognized during the years ended December 31, 2021 and 2020:

Interest income $ ( 0.5 ) $ ( 0.3 )

Refunds ( 0.1 ) —

Accrued interest and penalties related to income tax uncertainties are reported as components of other current liabilities and other long-term liabilities in the consolidated balance sheets.

7 unchanged sentences

Tax years from 2013 through 2021 remain open and subject to examination in the Company’s various major state jurisdictions within the United States.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

The Company’s practice and intention is to reinvest certain earnings of its non-U.S.

1 unchanged sentence

The Company has analyzed its global working capital and cash requirements and the potential tax liabilities attributable to repatriation of earnings, and has determined not to change its permanent reinvestment assertion.

The Company does not have significant prior year untaxed, undistributed earnings from its foreign operations at December 31, 2020, and the Company does not provide for, nor expect to incur, any significant, additional taxes which could become payable upon repatriation of such amounts.

The Company does not have significant prior year untaxed, undistributed earnings from its foreign operations at

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

December 31, 2021, and the Company does not provide for, nor expect to incur, any significant, additional taxes which could become payable upon repatriation of such amounts.

Financial Instruments and Fair Value Measurements

28 unchanged sentences

Balance Sheet Location December 31, 2021 December 31, 2020

Interest rate swap liabilities Other current liabilities $ ( 0.7 ) $ —

Interest rate swap liabilities Other long-term liabilities ( 4.4 ) ( 14.4 )

Prior to the Company’s de-designation of the interest rate swaps as cash flow hedges, the interest rate swaps were considered highly effective, with no amount of ineffectiveness recorded into earnings.

The changes in the fair value of the interest rate swaps have been included in other comprehensive loss in the consolidated statements of comprehensive loss through the first quarter of 2020, and have been recorded as an adjustment to interest expense in the consolidated statements of operations in the periods thereafter.

The changes in the fair value of the interest rate swaps have been included in other comprehensive loss in the consolidated statements of comprehensive income (loss) through the first quarter of 2020, and have been recorded as an adjustment to interest expense in the consolidated statements of operations in the periods thereafter.

The cash flows associated with the interest rate swaps have been recognized as an adjustment to interest expense in the consolidated statements of operations:

1 unchanged sentence

Cash Flow Impacts

Net interest paid (received) $ 5.6 $ ( 0.8 )

Net interest paid $ 7.6 $ 5.6

Impacts with Swaps as Hedging Instruments

13 unchanged sentences

The Company’s commodity contracts qualified for the exception related to normal purchases and sales during the years ended December 31, 2021 and 2020, as the Company takes delivery in the normal course of business.

The Company measures fair value on its debt instruments using interest rates available to the Company for borrowings with similar terms and maturities and is categorized as Level 2.

See Note 12, “Debt,” for the fair value of the Company’s debt as of December 31, 2020.

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

The Company measures fair value on its debt instruments using interest rates available to the Company for borrowings with similar terms and maturities and is categorized as Level 2.

See Note 12, “Debt,” for the fair value of the Company’s debt as of December 31, 2021.

Nonrecurring Fair Value Measurements

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record certain assets and liabilities at fair value on a nonrecurring basis, generally as a result of acquisitions or the remeasurement of assets resulting in impairment charges.

See Note 3, “Acquisitions and Strategic Investments,” for further discussion on acquisitions.

See Note 4, “Discontinued Operations”;

4 unchanged sentences

The Company records the fair value of its forward contracts and pension plan assets on a recurring basis.

The fair value of cash and cash equivalents, receivables, inventories, restricted cash, accounts payable and other current liabilities approximate their carrying values as of December 31, 2020 and 2019.

The fair value of cash and cash equivalents, receivables, inventories, accounts payable and other current liabilities approximate their carrying values as of December 31, 2021 and 2020.

See Note 16, “Employee Retirement Plans,” for the details of Level 1 and Level 2 inputs related to employee retirement plans.

11 unchanged sentences

The Company funds at least the minimum amount required for all qualified plans using actuarial cost methods and assumptions acceptable under government regulations.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

The components of net pension income for the years ended December 31, 2021 and 2020, were as follows:

5 unchanged sentences

Net pension income $ 14.5 $ 10.5

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

The Company made $ 0.8 million in benefit payments to its non-qualified defined benefit pension plans and made $ 0.8 million in contributions to its qualified defined benefit pension plans during the year ended December 31, 2021.

The Company incurred non-cash settlement charges of $ 0.9 million during the year ended December 31, 2021 due to the significance of lump sum payments made in the current year.

The non-cash settlement charges result in accelerated recognition of actuarial losses on the consolidated statement of operations.

The underfunded pension obligations are calculated using generally accepted actuarial methods and are measured annually as of December 31.

4 unchanged sentences

Interest cost ( 8.8 ) ( 13.6 )

Actuarial loss ( 40.5 ) ( 64.6 )

Actuarial gain (loss) 23.1 ( 40.5 )

Benefits paid 47.5 43.6

9 unchanged sentences

The net underfunded defined benefit plan obligations decreased by $ 37.4 million during the year ended December 31, 2021.

This decrease was primarily due to an actual return on pension plan assets of 17.0 % during the year ended December 31, 2020, which was above the expected return on plan assets assumption of 5.75 % and $7.8 million of employer contributions.

The asset increase was partially offset by an 83 basis point decrease in the pension discount rate from 3.20 % at December 31, 2019, to 2.37 % at December 31, 2020.

This decrease was primarily due to a 40 basis point increase in the pension discount rate from 2.37 % at December 31, 2020, to 2.77 % at December 31, 2021 and $ 1.6 million of employer contributions.

The asset increase was partially offset by an actual return on pension plan assets of 5.11 % during the year ended December 31, 2021, which was below the expected return on plan assets assumption of 5.50 %.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Amounts recognized on the consolidated balance sheets as of December 31, 2021 and 2020, were as follows:

3 unchanged sentences

Total amount recognized $ ( 19.2 ) $ ( 56.6 )

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

The following table provides a reconciliation of the Company’s accumulated other comprehensive loss prior to any deferred tax effects at December 31, 2021 and 2020:

2 unchanged sentences

Amount arising during the period 3.2

Impact of pension plan settlement charge included in net loss 0.1

Balance at December 31, 2020 ( 38.1 )

Amount arising during the period 20.3

Impact of pension plan settlement charge included in net loss 0.1

Impact of pension plan settlement charge included in net earnings 0.9

Balance at December 31, 2021 $ ( 16.9 )

9 unchanged sentences

The Company determines its assumed discount rate based on an index of high-quality corporate bond yields and matched-funding yield curve analysis as of the measurement date.

Estimated Company Contributions and Benefit Payments

In 2021, the Company expects to make cash contributions of $ 4.1 million to its qualified defined benefit pension plans and expects to make estimated benefit payments of $ 1.7 million to its non-qualified defined benefit pension plans.

The actual pension contributions may differ based on the funding calculations, and the Company may choose to make additional discretionary contributions.

The estimated benefit payments may differ based on actual experience.

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

Estimated Company Contributions and Benefit Payments

In 2022, the Company does no t expect to make any cash contributions to its qualified defined benefit pension plans and expects to make estimated benefit payments of $ 1.6 million to its non-qualified defined benefit pension plans.

The actual pension contributions may differ based on the funding calculations, and the Company may choose to make additional discretionary contributions.

The estimated benefit payments may differ based on actual experience.

Estimated Future Benefit Payments by the Plans to or on Behalf of Plan Participants

61 unchanged sentences

Pyramis Long Duration 46.9 98.8 Daily 15 days

Pyramis 810 Corporate 101.3 — Daily 15 days

Russell 3000 Index NL 81.1 99.0 Daily 1 day

28 unchanged sentences

The Company made payments totaling $ 6.2 million and $ 11.4 million for the years ended December 31, 2021 and 2020, respectively.

The Company has reserved $ 35.7 million as its estimate of the total MEPPs withdrawal liability as of December 31, 2020, of which $ 32.2 million was recorded in other long-term liabilities and $ 3.5 million was recorded in other current liabilities in the consolidated balance sheets.

Loss Per Share Attributable to Quad Common Shareholders

The Company has reserved $ 32.2 million as the total MEPPs withdrawal liability as of December 31, 2021, of which $ 28.4 million was recorded in other long-term liabilities and $ 3.8 million was recorded in other current liabilities in the consolidated balance sheets.

Earnings (Loss) Per Share Attributable to Quad Common Shareholders

Basic earnings (loss) per share attributable to Quad common shareholders is computed as net earnings (loss) attributable to Quad common shareholders, divided by the basic weighted average common shares outstanding.

2 unchanged sentences

Equity incentive instruments for which the total employee proceeds from exercise exceed the average fair value of the same equity incentive instrument over the period have an anti-dilutive effect on earnings per share during periods with net earnings, and accordingly, the Company excludes them from the calculation.

Due to the net loss incurred during the years ended December 31, 2020 and 2019, the assumed exercise of all equity incentive instruments was anti-dilutive and therefore, not included in the diluted loss per share calculation.

Anti-dilutive equity instruments excluded from the computation of diluted net earnings per shares were 0.4 million class A common shares for the year ended December 31, 2021.

Due to the net loss incurred during the year ended December 31, 2020, the assumed exercise of all equity incentive instruments was anti-dilutive and therefore, not included in the diluted loss per share calculation.

QUAD/GRAPHICS, INC.

2 unchanged sentences

Reconciliations of the numerator and the denominator of the basic and diluted per share computations for the Company’s common stock for the years ended December 31, 2021 and 2020, are summarized as follows:

Net loss from continuing operations $ ( 106.6 ) $ ( 55.7 )

Net earnings (loss) from continuing operations $ 37.8 $ ( 106.6 )

net loss attributable to noncontrolling interests — ( 0.2 )

Net loss from continuing operations attributable to Quad common shareholders ( 106.4 ) ( 55.7 )

Net earnings (loss) from continuing operations attributable to Quad common shareholders 37.8 ( 106.4 )

Loss from discontinued operations, net of tax — ( 21.9 )

Net loss attributable to Quad common shareholders $ ( 128.3 ) $ ( 156.3 )

Net earnings (loss) attributable to Quad common shareholders $ 37.8 $ ( 128.3 )

Basic weighted average number of common shares outstanding for all classes of common stock 51.3 50.6

1 unchanged sentence

Diluted weighted average number of common shares outstanding for all classes of common shares 53.0 50.6

Loss per share attributable to Quad common shareholders:

Basic and diluted:

Earnings (loss) per share attributable to Quad common shareholders:

Continuing operations $ 0.74 $ ( 2.10 )

Discontinued operations — ( 0.43 )

Basic and diluted loss per share attributable to Quad common shareholders $ ( 2.53 ) $ ( 3.12 )

Basic earnings (loss) per share attributable to Quad common shareholders $ 0.74 $ ( 2.53 )

Continuing operations $ 0.71 $ ( 2.10 )

Discontinued operations — ( 0.43 )

Diluted earnings (loss) per share attributable to Quad common shareholders $ 0.71 $ ( 2.53 )

Cash dividends paid per common share for all classes of common shares $ — $ 0.15

1 unchanged sentence

The shareholders of the Company approved the Quad/Graphics, Inc.

2020 Omnibus Incentive Plan (the “2020 Plan”) at the Company’s annual meeting of shareholders held on May 18, 2020, (the “Annual Meeting”) for two complementary purposes:

2020 Omnibus Incentive Plan (the “2020 Plan”) at the Company’s annual meeting of shareholders held on May 18, 2020, for two complementary purposes:

(1) to attract and retain outstanding individuals to serve as directors, officers and employees;

5 unchanged sentences

Awards under the 2020 Plan may consist of incentive awards, stock options, stock appreciation rights, performance shares, performance share units, shares of class A common stock, restricted stock (“RS”), restricted stock units (“RSU”), deferred stock units (“DSU”) or other stock-based awards as determined by the Company’s Board of Directors.

Each stock option granted has an exercise price of no less than 100% of the fair market value of the class A common stock on the date of grant.

There were 3,580,483 shares of class A common stock reserved for issuance under the 2020 Plan as of December 31, 2020, including 3,000,000 shares of class A common stock that were approved for issuance at the Annual Meeting and 580,483 shares of class A common stock that were remaining and available for issuance that transferred from the 2010 Plan.

Authorized unissued shares or treasury shares may be used for issuance under the Company’s equity incentive programs.

The Company plans to either

Each stock option granted has an exercise price of no less

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

use treasury shares of its class A common stock or issue shares of class A common stock to meet the stock requirements of its awards in the future.

than 100% of the fair market value of the class A common stock on the date of grant.

There were 2,946,300 shares of class A common stock reserved for issuance under the 2020 Plan as of December 31, 2021.

Authorized unissued shares or treasury shares may be used for issuance under the Company’s equity incentive programs.

The Company plans to either use treasury shares of its class A common stock or issue shares of class A common stock to meet the stock requirements of its awards in the future.

The Company recognizes compensation expense based on estimated grant date fair values for all share-based awards issued to employees and non-employee directors, including stock options, performance shares, performance share units, restricted stock, restricted stock units and deferred stock units.

13 unchanged sentences

Stock Options

Options vest over four years , with no vesting in the first year and one-third vesting upon the second, third and fourth anniversary dates.

As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, death, disability or normal retirement of the grantee.

Options expire no later than the tenth anniversary of the grant date, 24 months after termination for death, 36 months after termination for normal retirement or disability and 90 days after termination of employment for any other reason.

Options are not credited with dividend declarations, except for the November 18, 2011 grants.

Stock options are only to be granted to employees.

Options vested over four years, with no vesting in the first year and one-third vesting upon the second, third and fourth anniversary dates.

Options expire no later than the tenth anniversary of the grant date and are not credited with dividend declarations.

Stock options were only to be granted to employees.

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

There were no stock options granted during the years ended December 31, 2020 and 2019.

There was no compensation expense recognized related to stock options for the years ended December 31, 2020 and 2019.

There were no stock options granted, and no compensation expense was recognized related to stock options during the years ended December 31, 2021 and 2020.

There is no future compensation expense for stock options granted as of December 31, 2021.

7 unchanged sentences

Outstanding and exercisable at December 31, 2021 (1)

56,034 $ 14.14 0.0 $ —

______________________________

(1) All stock options outstanding as of December 31, 2021 expire on January 1, 2022.

The intrinsic value of options outstanding and exercisable as of December 31, 2021 and 2020, was based on the fair value of the stock price.

10 unchanged sentences

Upon vesting, RSUs will be settled either through cash payment equal to the fair market value of the RSUs on the vesting date or through issuance of Company class A stock.

In general, RS and RSU awards will vest on the third anniversary of the grant date, provided the holder of the share is continuously employed by the Company until the vesting date.

The following table is a summary of RS and RSU award activity for the year ended December 31, 2021:

9 unchanged sentences

Nonvested at December 31, 2021 3,053,019 $ 6.99 1.2 222,093 $ 10.41 0.5

In the first quarter of 2019, the Company issued RSU awards in connection with the acquisition of Periscope that are accounted for as liability awards that will vest on March 1, 2022.

The awards were recorded at fair value on the initial issuance date and are remeasured to fair value at each reporting period, with the change in fair value being

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

recorded in selling, general and administrative expense in the consolidated statements of operations.

The change in fair value of the awards classified as liabilities resulted in income of $ 0.1 million for the year ended December 31, 2020.

As of December 31, 2020, the fair value of the RSU awards classified as liabilities was $ 0.5 million and was included in other long-term liabilities on the consolidated balance sheets.

In the first quarter of 2019, the Company issued RSU awards in connection with the acquisition of Periscope, Inc.

that are accounted for as liability awards that will vest on March 1, 2022.

The awards were recorded at fair value on the initial issuance date and are remeasured to fair value at each reporting period, with the change in fair value being recorded in selling, general and administrative expense in the consolidated statements of operations.

The change in fair value of the awards classified as liabilities resulted in no income or expense for the year ended December 31, 2021.

As of December 31, 2021, the fair value of the RSU awards classified as liabilities was $ 0.5 million and was included in other current liabilities on the consolidated balance sheets.

In general, RS and RSU awards will vest on the third anniversary of the grant date, provided the holder of the share is continuously employed by the Company until the vesting date.

38 unchanged sentences

The program may be suspended or discontinued at any time.

The Company is currently prohibited from repurchasing capital stock through the Covenant Relief Period, in accordance with the fourth amendment to the April 28, 2014 Senior Secured Credit Facility, completed on June 29, 2020.

There were no shares of the Company’s class A stock repurchased during the years ended December 31, 2021 and 2020.

As of December 31, 2021, there were $ 100.0 million of authorized repurchases remaining under the program.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

In accordance with the Articles of Incorporation, dividends are paid equally for all three classes of common shares.

The following table details the dividend activity related to the then outstanding shares of common stock for the years ended December 31, 2020 and 2019:

Due to uncertainty in client demand as a result of the COVID-19 pandemic, the Company’s Board of Directors proactively suspended the Company’s quarterly dividends beginning in the second quarter of 2020.

The following table details the dividend activity related to the then outstanding shares of common stock for the year ended December 31, 2020:

Declaration Date Record Date Payment Date Dividend Amount per Share

Q1 Dividend February 18, 2020 February 28, 2020 March 9, 2020 0.15

Q4 Dividend October 29, 2019 November 18, 2019 December 6, 2019 0.15

Q3 Dividend July 30, 2019 August 19, 2019 September 6, 2019 0.30

Q2 Dividend April 30, 2019 May 20, 2019 June 7, 2019 0.30

Q1 Dividend February 19, 2019 February 25, 2019 March 8, 2019 0.30

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Accumulated Other Comprehensive Loss

2 unchanged sentences

Balance at January 1, 2020 $ ( 131.0 ) $ ( 4.7 ) $ ( 31.5 ) $ ( 167.2 )

Other comprehensive loss before reclassifications ( 1.0 ) ( 8.0 ) ( 6.0 ) ( 15.0 )

Other comprehensive income (loss) before reclassifications 0.2 ( 11.2 ) 3.2 ( 7.8 )

Amounts reclassified from accumulated other comprehensive loss to net loss — 3.6 0.1 3.7

2 unchanged sentences

Other comprehensive income (loss) before reclassifications ( 9.6 ) — 16.1 6.5

Amounts reclassified from accumulated other comprehensive loss to net loss — 3.6 0.1 3.7

Amounts reclassified from accumulated other comprehensive loss to net earnings ( 2.7 ) 5.6 0.7 3.6

Net other comprehensive income (loss) ( 12.3 ) 5.6 16.8 10.1

Balance at December 31, 2021 $ ( 143.1 ) $ ( 6.7 ) $ ( 11.4 ) $ ( 161.2 )

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

There were no reclassifications from accumulated other comprehensive loss to net loss for the year ended December 31, 2019.

The details about the reclassifications from accumulated other comprehensive loss to net loss for the year ended December 31, 2020, were as follows:

The details about the reclassifications from accumulated other comprehensive loss to net loss for the years ended December 31, 2021 and 2020, were as follows:

Details about Accumulated Other

Comprehensive Loss Components Year Ended Consolidated Statements of Operations Presentation

December 31, 2020

Comprehensive Loss Components Year Ended December 31, Consolidated Statements of Operations Presentation

Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges $ 7.1 $ 3.6 Interest expense

Impact of income taxes — Income tax benefit

Impact of income taxes ( 1.5 ) — Income tax expense

Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges, net of tax 5.6 3.6

Reclassification of foreign currency translation adjustments ( 2.7 ) — Restructuring, impairment and transaction-related charges

Impact of income taxes — — Income tax expense

Reclassification of foreign currency translation adjustments, net of tax ( 2.7 ) —

Plan settlements on pension benefit plans 0.9 0.1 Pension income

Impact of income taxes — Income tax benefit

Impact of income taxes ( 0.2 ) — Income tax expense

Plan settlements on pension benefit plans, net of tax 0.7 0.1

Total reclassifications for the period, net of tax $ 3.6 $ 3.7

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Segment Information

As a worldwide marketing solutions partner, Quad leverages its 50-year heritage of platform excellence, innovation, strong culture and social purpose to create a better way for its clients, employees and communities.

As a worldwide marketing solutions partner, Quad leverages its more than 50-year heritage of platform excellence, innovation, strong culture and social purpose to create a better way for its clients, employees and communities.

The Company’s operating and reportable segments are aligned with how the chief operating decision maker of the Company currently manages the business.

10 unchanged sentences

As of December 31, 2021, the Company has no unrestricted subsidiaries as defined in the Company’s Senior Unsecured Notes indenture.

Corporate consists of unallocated general and administrative activities and associated expenses including, in part, executive, legal and finance, as well as certain expenses and income from frozen employee retirement plans, such as pension benefit plans.

QUAD/GRAPHICS, INC.

1 unchanged sentence

(In millions, except share and per share data and unless otherwise indicated)

The following is a summary of segment information for the years ended December 31, 2021 and 2020:

14 unchanged sentences

Total $ 2,228.7 $ 700.9 $ ( 46.0 ) $ 181.6 $ 61.0 $ 124.1

Capital expenditures shown in the above table includes capital expenditures from discontinued operations for all periods presented.

Capital expenditures shown in the above table includes capital expenditures from discontinued operations for the year ended December 31, 2020.

Restructuring, impairment and transaction-related charges for the years ended December 31, 2021 and 2020, are further described in Note 5, “Restructuring, Impairment and Transaction-Related Charges,” and are included in the operating income (loss) results by segment above.

4 unchanged sentences

loss on debt extinguishment 0.7 1.8

Loss from continuing operations before income taxes and equity in loss of unconsolidated entity $ ( 106.1 ) $ ( 79.8 )

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Earnings (loss) from continuing operations before income taxes and equity in (earnings) loss of unconsolidated entity $ 47.0 $ ( 106.1 )

Total assets by segment at December 31, 2021 and 2020, are shown in the following table.

Total assets from discontinued operations are included within the United States Print and Related Services segment for all periods presented:

United States Print and Related Services $ 1,459.7 $ 1,612.3

3 unchanged sentences

Total $ 1,890.0 $ 1,927.7

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

Geographic Area Information

18 unchanged sentences

ASU 2020-04 permits entities to apply certain expedients and exceptions for contracts, hedging relationships, and other transactions impacted by the anticipated transition away from the use of LIBOR or other interbank offered rates to alternative reference rates.

This optional guidance is effective as of March 12,

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except share and per share data and unless otherwise indicated)

2020, through December 31, 2022.

This optional guidance is effective as of March 12, 2020, through December 31, 2022.

The Company is evaluating the impact of the adoption of ASU 2020-04 on the consolidated financial statements.

In December 2019, the FASB issued Accounting Standards Update 2019-12 “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, accounting for hybrid tax regimes, interim-period accounting for enacted changes in tax law and limitation of tax benefit on year-to-date losses.

This guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted.

The Company has adopted this standard as of January 1, 2021.

The Company evaluated the impact of the adoption of ASU 2019-12 on the consolidated financial statements and believes there is no material financial impact.

In August 2018, the FASB issued Accounting Standards Update 2018-14 “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20):

Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans”, which adds, removes and clarifies year-end disclosure requirements related to defined benefit pension and other postretirement plans.

This guidance is effective for annual periods ending after December 15, 2020, with early adoption permitted.

This new guidance will require a retrospective adoption approach.

The Company has adopted this standard for the year ended December 31, 2020, and has included the required disclosures within Note 16, “Employee Retirement Plans”.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data