What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-02-23 · 374 added, 464 removed, 1160 unchanged (42% of the section changed)

3 unchanged sentences

Opinion on the Financial Statements

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

(the Company) as of December 31, 2022, and the related consolidated statement of operations, comprehensive income, cash flows, and shareholders’ equity in the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have 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, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 24, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Measurement of accrued liabilities for workers’ compensation claims

Description of the Matter At December 31, 2022, the Company’s consolidated accrued liabilities for workers’ compensation claims were $41.1 million and included within other current and long-term liabilities.

As discussed in Note 1, the Company establishes accrued liabilities for workers’ compensation claims reported plus an estimate for loss development and potential claims that have been incurred but not reported (IBNR) to the Company or its insurance provider.

The IBNR calculation utilizes a variety of assumptions, including but not limited to selected loss development factors, loss trend rates, increased limit factors and loss rates.

The accrued liabilities for workers’ claims are based upon an actuarial analysis performed annually by actuarial specialists as of October 31st and are adjusted by the actuarially determined losses and actual claims payments to update through year end.

Auditing management’s estimate of the IBNR was especially challenging due to the various assumptions and the complexity of the actuarial analysis.

How We Addressed the Matter in Our Audit We tested certain of the Company’s controls over the measurement of accrued liabilities for workers’ compensation claims process, which included, among others, management’s review and approval of the actuarial analysis and related year-end update, management’s validation of data inputs as well as their review and approval of assumptions used in the analysis.

To test the measurement of accrued liabilities for workers’ compensation claims, we performed audit procedures that included, among other others, assessing methodologies and testing the significant assumptions discussed above, as well as testing the completeness and accuracy of the underlying data used by the Company in its analysis.

We also involved our actuarial professionals with specialized skills and knowledge, who assisted in:

(1) assessing the actuarial models and procedures used by the Company by comparing them to generally accepted actuarial methods and procedures to estimate the ultimate losses, (2) evaluating the Company’s key assumptions and judgments underlying the Company’s estimate by developing an independent range of the IBNR and comparing it against the Company’s recorded amount and (3) evaluating the qualifications of the external actuarial specialists.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2022.

Milwaukee, Wisconsin

February 24, 2023

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Quad/Graphics, Inc.

Opinion on the Financial Statements

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

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.

and subsidiaries (the “Company”) as of December 31, 2021, the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows, for the year 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 the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

1 unchanged sentence

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

1 unchanged sentence

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenues - Refer to Notes 1 and 2 to the consolidated financial statements

Critical Audit Matter Description

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 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.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to revenues included the following:

• We tested the effectiveness of controls related to the revenue recognition process.

• We evaluated management’s significant accounting policies related to revenue recognition for reasonableness.

• We selected a sample of recorded revenue transactions and performed the following procedures:

◦ Obtained customer source documents and the contract for each selection, including master agreements and related amendments to evaluate if relevant contractual terms have been appropriately considered by management.

◦ Evaluated management’s application of their accounting policy and tested revenue recognition for specific performance obligations by comparing management’s conclusions to the underlying master agreement and any related amendments.

◦ Tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements.

/s/ Deloitte & Touche LLP

1 unchanged sentence

February 23, 2022

We have served as the Company's auditor since 2002.

We began serving as the Company’s auditor in 2002.

In 2022 we became the predecessor auditor.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

1 unchanged sentence

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Quad/Graphics, Inc.

and subsidiaries (the “Company”) 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 (COSO).

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, 2021, of the Company and our report dated February 23, 2022, expressed an unqualified opinion on those financial statements.

We have audited Quad/Graphics, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Quad/Graphics, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2022 and the related consolidated statement of operations, comprehensive income, cash flows, and shareholders’ equity in the year ended December 31, 2022, and the related notes listed in the accompanying index and our report dated February 24, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

February 24, 2023

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QUAD/GRAPHICS, INC.

15 unchanged sentences

Total operating expenses 3,163.5 2,867.6

Operating income (loss) from continuing operations 92.8 ( 46.0 )

Operating income 53.5 92.8

Interest expense 48.4 59.6

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Loss on debt extinguishment — 0.7

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

Earnings before income taxes and equity in earnings of unconsolidated entity 17.7 47.0

Income tax expense 8.4 9.5

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 earnings (loss) 37.8 ( 128.5 )

net loss attributable to noncontrolling interests — ( 0.2 )

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 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 )

Earnings before equity in earnings of unconsolidated entity 9.3 37.5

Equity in earnings of unconsolidated entity — ( 0.3 )

Net earnings $ 9.3 $ 37.8

Earnings per share

Basic $ 0.18 $ 0.74

Diluted $ 0.18 $ 0.71

Weighted average number of common shares outstanding

2 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

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QUAD/GRAPHICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

Year Ended December 31,

Net earnings (loss) $ 37.8 $ ( 128.5 )

Other comprehensive income (loss)

Net earnings $ 9.3 $ 37.8

Other comprehensive income

Translation adjustments

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Translation of long-term loans to foreign subsidiaries 0.9 ( 1.1 )

Revaluation loss from the dissolution of an equity method investment entity 29.4 —

Total translation adjustments 27.1 ( 9.3 )

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Pension benefit plan adjustments

Net gain arising during period 20.4 3.2

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

Net gain (loss) arising during period ( 30.7 ) 20.4

Settlement charge on pension benefit plans included in net earnings — 0.9

Total pension benefit plan adjustments ( 30.7 ) 21.3

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

Other comprehensive income, before tax 27.1 16.4

Income tax impact related to items of other comprehensive income 5.8 ( 6.3 )

Other comprehensive income, net of tax 32.9 10.1

Total comprehensive income $ 42.2 $ 47.9

See accompanying Notes to Consolidated Financial Statements.

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QUAD/GRAPHICS, INC.

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Other intangible assets—net 46.9 75.3

Equity method investment in unconsolidated entity — 2.6

Other long-term assets 80.8 66.5

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Accumulated other comprehensive loss ( 128.3 ) ( 161.2 )

Quad’s shareholders’ equity 136.8 84.1

Noncontrolling interests — 0.7

Total shareholders’ equity and noncontrolling interests 136.8 84.8

Total shareholders’ equity 172.9 136.8

Total liabilities and shareholders’ equity $ 1,701.8 $ 1,890.0

See accompanying Notes to Consolidated Financial Statements.

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QUAD/GRAPHICS, INC.

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OPERATING ACTIVITIES

Net earnings (loss) $ 37.8 $ ( 128.5 )

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

Net earnings $ 9.3 $ 37.8

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

Depreciation and amortization 141.3 157.3

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Reclassification of foreign currency translation adjustments — ( 2.7 )

Settlement charges on pension plans 0.9 —

Settlement charges on pension plan — 0.9

Amortization of debt issuance costs and original issue discount 2.2 3.0

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Gain on the sale or disposal of property, plant and equipment ( 2.3 ) ( 49.0 )

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

Gain from property insurance claims ( 13.4 ) ( 4.7 )

(Gain) loss on the sale of a business 23.1 ( 20.9 )

Gain from a property insurance claim — ( 13.4 )

Deferred income taxes 2.4 5.3

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

Equity in earnings of unconsolidated entity — ( 0.3 )

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

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Proceeds from the sale of property, plant and equipment 4.6 126.3

Proceeds from the sale of businesses 39.7 61.3

Proceeds from property insurance claims 15.0 4.8

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

Proceeds from the sale of a business — 39.7

Proceeds from a property insurance claim — 15.0

Acquisition of a business ( 2.6 ) —

Other investing activities 1.1 ( 0.2 )

Net cash provided by investing activities 129.4 9.7

Net cash (used in) provided by investing activities ( 60.5 ) 129.4

FINANCING ACTIVITIES

Proceeds from issuance of long-term debt 15.9 1.0

Payments of long-term debt ( 139.5 ) ( 177.9 )

Payments of current and long-term debt ( 235.9 ) ( 139.5 )

Payments of finance lease obligations ( 2.1 ) ( 3.0 )

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Payments on revolving credit facilities ( 995.0 ) ( 440.5 )

Proceeds from issuance of long-term debt 3.1 15.9

Payments of debt issuance costs and financing fees — ( 5.9 )

Change in ownership of noncontrolling interests — ( 1.9 )

Purchases of treasury stock ( 10.0 ) —

Equity awards redeemed to pay employees’ tax obligations ( 2.5 ) ( 1.1 )

7 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

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QUAD/GRAPHICS, INC.

9 unchanged sentences

Balance at January 1, 2021 54.4 $ 1.4 $ 833.1 ( 0.8 ) $ ( 13.1 ) $ ( 566.0 ) $ ( 171.3 ) $ 84.1 $ 0.7

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 —

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Net earnings — — — — — 9.3 — 9.3 —

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

Foreign currency translation adjustments — — — — — — 27.2 27.2 —

Reclassification of foreign currency translation adjustments — — — — — — 27.3 27.3 —

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

Pension benefit plan liability adjustments, net of $ 6.5 million tax benefit

— — — — — — ( 24.2 ) ( 24.2 ) —

Interest rate swap adjustments, net of tax — — — — — — 2.6 2.6 —

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

Stock-based compensation — — 5.8 — — — — 5.8 —

Purchases of treasury stock — — — ( 3.1 ) ( 10.0 ) — — ( 10.0 ) —

Issuance of share-based awards, net of other activity 0.9 — ( 3.3 ) 1.0 3.9 — — 0.6 —

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Basis of Presentation and Summary of Significant Accounting Policies

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.

The Company’s products and services for a variety of industries are sold primarily throughout North America, South America and Europe.

In addition, the Company strategically sources packaging product manufacturing over multiple end markets in Central America and Asia.

Nature of Operations —Quad is a global marketing experience company that gives brands a more streamlined, impactful, flexible and frictionless way to go to market and reach consumers.

The Company leverages its three key competitive advantages — integrated marketing platform excellence, ongoing innovation, and culture and social purpose — to create a better way for its clients, employees and communities.

With a marketing platform intentionally built for integrated marketing execution, Quad helps brands reduce the complexity of working with multiple agency partners and vendors;

increase marketing process efficiency;

and maximize marketing effectiveness.

The Company’s holistic, multichannel, through-the-line marketing solutions include strategy and consulting, data and analytics, technology solutions, media services, creative and content solutions, and managed services.

With unmatched scale for client-based, on-site services and highly qualified talent with expansive subject matter expertise, the Company has the resources and knowledge to help a wide variety of clients across multiple verticals, including those in industries such as retail, publishing, consumer packaged goods, financial services, healthcare, insurance and direct-to-consumer.

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, “Strategic Investments”).

The results of operations and accounts of businesses acquired are included in the consolidated financial statements from the dates of acquisition.

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 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.

The financial information pertaining to discontinued operations has been excluded from all relevant notes to the consolidated financial statements, unless otherwise noted.

See all required disclosures and further information in Note 4, “Discontinued Operations” for information about the Company’s sale of its Book business.

Foreign Operations —Assets and liabilities denominated in foreign currencies are translated into United States dollars at the exchange rate existing at the respective balance sheet dates.

1 unchanged sentence

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 $ 2.9 million during the year ended December 31, 2021 and losses of $ 2.0 million during the year ended December 31, 2020.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company had a 49 % interest in Plural, a commercial printer based in São Paulo, Brazil, as of December 31, 2021.

The Company accounts for this entity using the equity method of accounting.

The Company’s equity in the (earnings) loss of Plural’s operations was recorded in equity in (earnings) loss of unconsolidated entity in the Company’s consolidated statements of operations, and was included within the International segment.

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.

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

Foreign exchange transactions resulted in losses of $ 2.1 million and $ 2.9 million during the years ended December 31, 2022 and 2021, respectively.

The Company had a 49 % interest in Plural, a commercial printer based in São Paulo, Brazil, as of December 31, 2021 and through the date of the Company’s sale of the investment in Plural in January 2022.

The Company accounted for this entity using the equity method of accounting.

The Company’s equity in the earnings of Plural’s operations was recorded in equity in earnings of unconsolidated entity in the Company’s consolidated statements of operations, and was included within the International segment.

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.

Quad has no unconsolidated entities as of December 31, 2022.

Use of Estimates —The preparation of consolidated financial statements requires the use of management’s estimates and assumptions that affect the reported assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.

1 unchanged sentence

Estimates are used when accounting for items and matters including, but not limited to:

allowances for doubtful accounts, inventory obsolescence, asset valuations and useful lives, pension and postretirement benefits, self-insurance reserves, stock-based compensation, taxes, restructuring and other provisions and contingencies.

allowances for doubtful accounts, inventory obsolescence, asset valuations and useful lives, pension benefits, self-insurance reserves, stock-based compensation, taxes, restructuring and other provisions and contingencies.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Revenue Recognition —The Company recognizes its products and services revenue based on when the transfer of control passes to the customer or when the service is completed and accepted by the customer.

Under agreements with certain customers, products may be stored by the Company for future delivery.

Under agreements with certain customers, products may be stored by the Company for future delivery and revenue is recognized upon shipment to the customer.

In these situations, the Company may receive warehouse management fees for the services it provides.

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Revenues for Company-supplied paper are recognized on a gross basis.

Byproduct Recoveries —The Company presents byproduct recoveries as a reduction of cost of sales–products in the consolidated statements of operations.

Classification of byproduct recoveries as a reduction of cost of sales aligns the proceeds from byproduct recoveries with the corresponding manufacturing costs.

Financial Instruments —The Company uses derivative financial instruments for the purpose of hedging interest rate, commodity and foreign exchange exposures that exist as part of ongoing business operations, including interest rate swap agreements, natural gas forward purchase contracts and foreign exchange contracts.

Financial Instruments —The Company uses derivative financial instruments for the purpose of hedging interest rate, commodity and foreign exchange exposures that exist as part of ongoing business operations, including interest rate swap and collar agreements, natural gas forward purchase contracts and foreign exchange contracts.

As a policy, the Company does not engage in speculative or leveraged transactions, nor does the Company hold or issue financial instruments for trading purposes.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Derivative instruments are recorded on the consolidated balance sheets as either assets or liabilities measured at their fair value.

1 unchanged sentence

If the derivative is designated as a cash flow hedge, the effective portion of the changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive income (loss) and recognized in the consolidated statements of operations when the hedged item affects earnings.

The ineffective portions of the changes in the fair value of hedges are insignificant and recognized in earnings.

The ineffective portions of the changes in the fair value of hedges are recognized in earnings.

Cash flows from derivatives that are accounted for as cash flow or fair value hedges are included in the consolidated statements of cash flows in the same category as the item being hedged.

4 unchanged sentences

Research and Development —Research and development costs related to the development of new products or the adaptation of existing products are expensed as incurred, included in cost of sales and totaled $ 3.3 million and $ 3.1 million during the years ended December 31, 2022 and 2021, respectively.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Cash and Cash Equivalents and Restricted Cash —The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

1 unchanged sentence

No single customer comprised more than 5 % of the Company’s consolidated net sales in 2022 or 2021, or 5 % of the Company’s consolidated receivables as of December 31, 2022 or 2021.

On January 1, 2020, the Company adopted Accounting Standards Update 2016-13 “Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which changes the impairment model for most financial assets and certain other instruments.

This new impairment model, also known as the current expected credit loss (“CECL”) model, is based on expected losses rather than incurred losses.

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.

In accordance with ASC 326— Financial Instruments — Credit Losses (“ASC 326”), the Company measures expected credit losses for financial instruments, including trade receivables, based on historical experience, current conditions and reasonable forecasts.

See Note 5, “Receivables,” for further discussion on the transactions affecting the allowances for doubtful accounts.

5 unchanged sentences

See Note 11, “Leases,” for additional accounting policies.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

14 unchanged sentences

If impairment is determined to exist, any related impairment loss is calculated based on the difference in the fair value and carrying value of the asset.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Goodwill —Goodwill is reviewed 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.

3 unchanged sentences

See Note 4, “Goodwill and Other Intangible Assets,” for further discussion.

Workers’ Compensation —The Company is self-insured for a significant portion of its expected workers’ compensation program.

Insurance is purchased for individual workers’ compensation claims that exceed $ 0.8 million.

The Company establishes reserves for unresolved claims and for an estimate of incurred but not reported (“IBNR”) claims.

These reserves and estimates of IBNR claims are based upon an actuarial study, which is performed annually as of October 31st and is adjusted by the actuarially determined losses and actual claims payments for November and December.

The Company also monitors actual claim developments, including incurrence or settlement of individual large claims during the interim periods between actuarial studies as another means of estimating the adequacy of the reserves.

As of December 31, 2022, the Company has net reserves for workers’ compensation of $ 29.9 million, of which $ 6.6 million was recorded in other current liabilities and $ 34.5 million was recorded in other long-term liabilities in the consolidated balance sheets (see Note 8, “Other Current and Long-Term Liabilities”).

These reserves are net of $ 11.2 million recorded in other long-term assets in the consolidated balance sheets for estimated claims covered by purchased insurance.

As of December 31, 2021, the Company had net reserves for workers’ compensation of $ 34.2 million, of which $ 7.5 million was recorded in other current liabilities and $ 40.1 million was recorded in other long-term liabilities in the consolidated balance sheets (see Note 8, “Other Current and Long-Term Liabilities”).

These reserves were net of $ 13.4 million recorded in other long-term assets in the consolidated balance sheets for estimated claims covered by purchased insurance.

Income Taxes —The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of items reported in the financial statements.

1 unchanged sentence

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the effective date of enactment.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized.

7 unchanged sentences

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The determination of the Company’s worldwide tax provision and related tax assets and liabilities requires the use of significant judgment in estimating the impact of uncertainties in the application of GAAP and the interpretation of complex tax laws.

17 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 a withdrawal liability for the MEPPs as part of the World Color Press

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

As a result of the decision to withdraw, the Company recorded a withdrawal liability for the MEPPs based on information received from the MEPPs’ trustees.

See Note 14, “Employee Retirement Plans,” for further discussion.

4 unchanged sentences

See Note 18, “Accumulated Other Comprehensive Loss,” for further discussion.

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.

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— Throughout the COVID-19 pandemic, the Company implemented cost reduction and cash conservation initiatives in response to the pandemic’s adverse impact on its business, financial condition, cash flows, results of operations, supply chain and raw materials availability.

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

The COVID-19 pandemic weakened demand for the Company’s products and services, disrupted the Company’s supply chain and resulted in rising inflationary cost and labor pressures, distribution challenges, recessionary concerns and other evolving macroeconomic conditions.

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

Supplemental Cash Flow Information —The following table summarizes certain supplemental cash flow information for the years ended December 31, 2022 and 2021:

1 unchanged sentence

Income taxes paid 6.2 4.3

Non-cash investing and financing activities:

Non-cash finance lease additions 1.1 1.4

Non-cash operating lease additions 17.6 74.6

Acquisitions of businesses:

Fair value of assets acquired, net of cash — 5.0

Acquisition of a business:

Fair value of assets acquired 5.0 —

Liabilities assumed ( 2.4 ) —

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

Acquisition of a business $ 2.6 $ —

QUAD/GRAPHICS, INC.

12 unchanged sentences

Logistics services 310.4 19.3 329.7

Imaging, marketing services and other services 347.0 1.0 348.0

Marketing services and medical services 357.7 1.3 359.0

Total Services 668.1 20.6 688.7

6 unchanged sentences

Logistics services 345.8 19.5 365.3

Imaging, marketing services and other services 326.4 0.1 326.5

Marketing services and medical services 347.0 1.0 348.0

Total Services 692.8 20.5 713.3

4 unchanged sentences

The Company considers its logistic operations as services, which include the delivery of printed material.

The services offering also includes revenues related to the Company’s imaging operations, which include digital content management, photography, color services, page production, marketing services, media planning and placement, facilities management and medical services.

The services offering also includes revenues related to the Company’s marketing services operations, which include data and analytics, technology solutions, media services, creative and content solutions, managed services and execution in non-print channels (e.g., digital and broadcast), as well as medical services.

QUAD/GRAPHICS, INC.

11 unchanged sentences

Revenues related to the Company’s logistics operations, which includes the delivery of printed material, are included in the Print performance obligation and are also recognized at point-in-time as services are completed.

Under agreements with certain customers, products may be stored by the Company for future delivery.

Revenues related to the Company’s imaging operations, which include digital content management, photography, color services and page production, are recognized in accordance with the terms of the contract, typically upon completion of the performed service and acceptance by the customer.

Under agreements with certain customers, products may be stored by the Company for future delivery and revenue is recognized upon shipment to the customer.

In these situations, the Company may receive warehouse management fees for the services it provides.

13 unchanged sentences

As such, when the timing of the Company’s delivery of products and services differs from the timing of payment, the Company will record either a contract asset or a contract liability.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Variable Consideration

2 unchanged sentences

These variable amounts generally are credited to the customer, based on achieving certain levels of sales activity, when contracts are signed, or making payments within specific terms.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Product returns are not significant because the products are customized;

2 unchanged sentences

Costs to Obtain Contracts

In accordance with ASC 606 — Revenue from Contracts with Customers (“ASC 606”), the Company capitalizes certain sales incentives of the sales compensation packages for costs that are directly attributed to being awarded a customer contract or renewal and would not have been incurred had the contract not been obtained.

The Company also defers certain contract acquisition costs paid to the customer at contract inception.

In accordance with ASC 606 — Revenue from Contracts with Customers (“ASC 606”), the Company capitalizes certain sales incentives of the sales compensation packages for costs that are directly attributed to being awarded a client contract or renewal and would not have been incurred had the contract not been obtained.

The Company also defers certain contract acquisition costs paid to the client at contract inception.

Costs to obtain contracts with a duration of less than one year are expensed as incurred.

16 unchanged sentences

• The Company accounts for shipping and handling activities, which includes postage, that occur after control of the related products or services transfers to the customer as fulfillment activities and are therefore recognized at time of shipping.

• The Company excludes from its transaction price any amounts collected from customers for sales taxes.

QUAD/GRAPHICS, INC.

1 unchanged sentence

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

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.

In addition, on June 15, 2020, Rise purchased and retired units of equity from previous holders of Rise for $ 5.4 million in cash.

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 % 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

During the third quarter of 2019, the Company made a decision to sell its United States Book business as a part of an ongoing process to review its business portfolio and divest assets not core to the Company’s transformation strategy.

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

The Book business primarily consisted of three facilities:

Versailles, Kentucky;

Fairfield, Pennsylvania;

and Martinsburg, West Virginia.

The Company’s Book business has historically been included within the United States Print and Related Services segment and the Core Print and Related Services reporting unit.

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.

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.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Total net sales $ 79.4

Total cost of sales, excluding depreciation and amortization 80.4

Selling, general and administrative expenses 4.2

Depreciation and amortization —

Restructuring, impairment and transaction-related charges (1)

Goodwill impairment —

Other expenses, net 0.3

Loss from discontinued operations before income taxes ( 21.9 )

Income tax benefit —

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

______________________________

(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 .

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 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 investing activities 19.6

• The Company excludes from its transaction price any amounts collected from customers for sales taxes.

Restructuring, Impairment and Transaction-Related Charges

8 unchanged sentences

See Note 19, “Segment Information,” for restructuring, impairment and transaction-related charges by segment.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Restructuring Charges

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

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

The Company classifies the following charges as restructuring:

1 unchanged sentence

• 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.

• Other restructuring charges are presented net of the gains or losses 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.

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:

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, which are included within other restructuring activities below.

The components of other restructuring charges consisted of the following during the years ended December 31, 2022 and 2021:

Year Ended December 31,

2 unchanged sentences

Gains on the sale of facilities — ( 24.8 )

Loss on the sale of Argentina print business 23.1 —

Other restructuring activities 3.4 ( 23.1 )

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

Other restructuring charges $ 32.6 $ ( 26.5 )

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 $ 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.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company recognized impairment charges of $ 2.2 million during the year ended December 31, 2022, 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.

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, which was sold in January 2022.

The fair values of the impaired assets were determined by the Company to be Level 3 under the fair value hierarchy (see Note 13, “Financial Instruments and Fair Value Measurements,” for the definition of Level 3 inputs) and were estimated based on broker quotes, internal expertise related to current marketplace conditions and estimated future discounted cash flows.

3 unchanged sentences

The Company incurs transaction-related charges primarily consisting of professional service fees related to business acquisition and divestiture activities.

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 of $ 2.0 million and $ 0.6 million were recorded during the years ended December 31, 2022 and 2021, respectively.

Restructuring Reserves

6 unchanged sentences

Balance at January 1, 2021 $ 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 )

1 unchanged sentence

Balance at December 31, 2021 $ 4.7 $ — $ 0.4 $ — $ 50.2 $ 55.3

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

Expense, net 7.3 2.2 2.0 0.7 32.6 44.8

Cash payments, net ( 4.1 ) — ( 0.9 ) ( 0.7 ) ( 15.7 ) ( 21.4 )

1 unchanged sentence

Balance at December 31, 2022 $ 2.9 $ — $ 1.5 $ — $ 5.2 $ 9.6

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company’s restructuring reserves at December 31, 2022, included a short-term and a long-term component.

4 unchanged sentences

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.

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.

6 unchanged sentences

This fair value determination was categorized as Level 3 in the fair value hierarchy (see Note 13, “Financial Instruments and Fair Value Measurements,” for the definition of Level 3 inputs).

No goodwill impairment charges were recorded related to the Company’s continuing operations during the years ended December 31, 2021 or 2020.

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

December 31, 2021 December 31, 2020

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

No goodwill impairment charges were recorded during the years ended December 31, 2022 or 2021.

The accumulated goodwill impairment losses and the carrying value of goodwill at December 31, 2022 and 2021, were as follows:

United States Print and Related Services International Total

Goodwill $ 864.7 $ 30.0 $ 894.7

1 unchanged sentence

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

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

There was no activity impacting goodwill for the year ended December 31, 2022.

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

4 unchanged sentences

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

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.

The transition adjustment of $ 6.3 million to accumulated deficit included an $ 8.4 million increase in the allowance for credit losses, partially offset by a $ 2.1 million increase in deferred tax benefit.

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.

2 unchanged sentences

Accounts that are deemed uncollectible are written off when all reasonable collection efforts have been exhausted.

The Company has recorded a credit loss expense of $ 1.3 million and $ 9.1 million during the years ended December 31, 2021 and 2020, respectively, which is included in selling, general and administrative expenses in the consolidated statements of operations.

Receivables are stated net of allowances for credit losses in the consolidated balance sheets.

Based on the clients’ account reviews and the continued uncertainty of the global economy, the Company has established an allowance for credit losses of $ 28.2 million as of December 31, 2021, and $ 33.8 million as of December 31, 2020.

Balance at beginning of year $ 33.8 $ 25.0

Transition adjustment for adoption of ASU 2016-13 — 8.4

Balance at beginning of year, including transition adjustment 33.8 33.4

The Company has recorded credit loss expense of $ 3.4 million and $ 1.3 million during the years ended December 31, 2022 and 2021, respectively, which is included in selling, general and administrative expenses in the consolidated statements of operations.

Activity impacting the allowance for credit losses for the years ended December 31, 2022 and 2021, was as follows:

Balance at January 1, $ 28.2 $ 33.8

Provisions 3.4 1.3

Write-offs ( 5.2 ) ( 6.9 )

Translation and other — 0.1

Balance at end of year $ 28.2 $ 33.8

Balance at December 31, $ 26.4 $ 28.2

The components of inventories at December 31, 2022 and 2021, were as follows:

16 unchanged sentences

______________________________

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

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

The Company recorded impairment charges of $ 2.2 million and $ 2.8 million during the years ended December 31, 2022 and 2021, 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 3, “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.

Assets Held for Sale from Continuing Operations

The Company considered certain closed facilities for held for sale classification in the consolidated balance sheets.

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

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.

The Company recognized depreciation expense of $ 110.4 million and $ 125.8 million for the years ended December 31, 2022 and 2021, respectively.

Gains from Sale and Leaseback

1 unchanged sentence

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.

As of December 31, 2022, the leaseback consisted of an $ 8.2 million asset included in the operating lease right of use assets - net, current operating lease obligation of $ 1.3 million and operating lease obligation of $ 7.1 million in the consolidated balance sheet.

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.

As of December 31, 2022, the leaseback consisted of a $ 20.8 million asset included in the operating lease right of use assets - net, current operating lease obligation of $ 1.8 million and operating lease obligation of $ 19.3 million in the consolidated balance sheet.

QUAD/GRAPHICS, INC.

21 unchanged sentences

Commitments and Contingencies

The Company had firm commitments of $ 10.0 million as of December 31, 2021, to purchase press and finishing equipment.

The Company had firm commitments of $ 32.9 million as of December 31, 2022, to purchase press, finishing and other equipment.

The Company is named as a defendant in various lawsuits in which claims are asserted against the Company in the normal course of business.

1 unchanged sentence

Environmental Reserves

The Company is subject to various laws, regulations and government policies relating to health and safety, to the generation, storage, transportation, and disposal of hazardous substances, and to environment protection in general.

The Company provides for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated.

6 unchanged sentences

(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:

The weighted average interest rate for the year ended December 31, 2022 and the components of long-term debt at December 31, 2022 and 2021, were as follows:

Weighted Average Interest Rate 2022 2021

15 unchanged sentences

The senior notes under the Master Note and Security Agreement had a weighted average interest rate of 7.92 % at December 31, 2022, which is fixed to maturity, with interest payable semiannually.

Principal payments commenced September 1997 and extend through April 2026 in various tranches.

Principal payments commenced September 1997 and extend through 2026 in various tranches.

The notes are collateralized by certain United States press equipment under the terms of the Master Note and Security Agreement.

The Company redeemed $ 37.6 million of its senior notes under the Master Note and Security Agreement, at par (the outstanding principal balance as of the date of payment), during the year ended December 31, 2020.

There was no direct gain or loss recognized as a result of the tender as all notes were redeemed at par;

however, $ 0.2 million of unamortized debt issuance costs related to the tendered notes were recognized as a loss on debt extinguishment during the year ended December 31, 2020.

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 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 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 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

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.

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 (Term Loan B was retired in July 2019).

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

4 unchanged sentences

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

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

1 unchanged sentence

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

The Senior Secured Credit Facility also requires the Company to provide additional collateral to the lenders in certain limited circumstances.

The Senior Secured Credit Facility also requires the Company to provide additional collateral to the lend ers in certain limited circumstances.

The Company completed the sixth amendment to the Senior Secured Credit Facility on March 25, 2022, which expanded the number of currencies available for letters of credit.

The Company completed the seventh amendment to the Senior Secured Credit Facility on January 24, 2023, which transitioned the Company’s reference rate from LIBOR to SOFR effective February 1, 2023.

The transition from LIBOR to SOFR does not have a material impact on the consolidated financial statements.

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

During the first quarter of 2022, the Company repurchased $ 2.4 million of its outstanding Senior Unsecured Notes in the open market.

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.

1 unchanged sentence

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”).

All of the Guarantor Subsidiaries are 100 % owned by the Company.

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)

On May 2, 2022, the Company used liquidity available under its revolving credit facility and available cash on hand to fund the repayment on maturity of all $ 209.1 million aggregate principal amount, outstanding at the time, of its Senior Unsecured Notes.

International Debt Obligations

3 unchanged sentences

As of December 31, 2022, $ 2.5 million remained outstanding on the second international term loan.

In addition, there are $ 2.7 million of term loans in Colombia and Peru.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company has two multicurrency international revolving credit facilities that are used for financing working capital and general business needs.

7 unchanged sentences

As of December 31, 2022, approximately $ 1.3 billion of the Company’ s assets were pledged as security under various loans and other agreements.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Debt Issuance Costs

4 unchanged sentences

Balance at January 1, 2021 $ 6.9

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

Loss on debt extinguishment from January 31, 2019 debt financing arrangement ( 2.3 )

Loss on debt extinguishment from Master Note and Security Tender ( 0.2 )

Amortization expense ( 2.5 )

Balance at December 31, 2020 6.9

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

2 unchanged sentences

Balance at December 31, 2021 9.1

Amortization expense ( 2.2 )

Balance at December 31, 2022 $ 6.9

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Loss on Debt Extinguishment

4 unchanged sentences

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

Debt issuance costs from June 29, 2020 debt financing arrangement 0.1

Loss on debt extinguishment from Master Note and Security Tender 0.2

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

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Covenants and Compliance

2 unchanged sentences

• 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.

On a rolling twelve-month basis, the Total Leverage Ratio, defined as consolidated total indebtedness to consolidated EBITDA, shall not exce ed 3.75 to 1.00 (for the twelve months ended December 31, 2022, the Company’s Total Leverage Ratio was 2.22 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 Senio r 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.

◦ Se nior Secured Leverage Ratio.

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, 2022, the Company’s Senior Secured Leverage Ratio was 2.13 to 1.00).

1 unchanged sentence

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, 2022, the Company’s Interest Coverage Ratio was 6.39 to 1.00).

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;

pay dividends, repurchase stock or make certain other restricted payments;

enter into agreements limiting dividends and certain other restricted payments;

prepay, redeem or repurchase subordinated debt;

grant liens on assets;

enter into sale and leaseback transactions;

merge, consolidate, transfer or dispose of substantially all of the Company’s consolidated assets;

sell, transfer or otherwise dispose of property and assets;

and engage in transactions with affiliates.

QUAD/GRAPHICS, INC.

4 unchanged sentences

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 T otal 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, 2022, was 2.22 to 1.00, the limitations described above are not applicable at this time.

• 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 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.

1 unchanged sentence

Estimated Principal Payments

The approximate annual principal amounts due on long-term debt, excluding $ 9.1 million for future amortization of debt issuance costs, at December 31, 2021, were as follows:

The approximate annual principal amounts due on long-term debt, ex cluding $ 6.9 million for future amortization of debt issuance costs, at December 31, 2022, were as follows:

Principal Payments

Total $ 574.7

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

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.

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.

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

8 unchanged sentences

The Company’s ROU assets for both operating and finance leases are reviewed for impairment losses on a quarterly basis in line with ASC 360-10 — Property, Plant, and Equipment — Overall.

The Company has not recognized any impairment losses to date from continuing operations.

The Company has not recognized any impairment losses to date.

The Company also monitors its leases for events or changes in circumstances that require a reassessment of the lease.

2 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

The Company has elected to apply the following practical expedients allowed under ASU 842:

The Company has elected to apply the following practical expedients allowed under Accounting Standards Update 842:

• The Company elected the practical expedient package and therefore did not reassess for any existing leases:

47 unchanged sentences

2026 17.1 0.2

2027 13.9 0.2

2028 and thereafter 20.1 0.3

4 unchanged sentences

Long-term lease liability $ 87.1 $ 1.6

Income taxes from continuing operations have been based on the following components of earnings (loss) from continuing operations before income taxes and equity in (earnings) loss of unconsolidated entity for the years ended December 31, 2021 and 2020:

Income taxes have been based on the following components of earnings before income taxes and equity in earnings of unconsolidated entity for the years ended December 31, 2022 and 2021:

United States $ ( 13.9 ) $ 52.4

1 unchanged sentence

Total $ 17.7 $ 47.0

The components of income tax expense (benefit) from continuing operations for the years ended December 31, 2021, and 2020, were as follows:

The components of income tax expense for the years ended December 31, 2022, and 2021, were as follows:

Current $ 0.4 $ 0.9

8 unchanged sentences

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

The following table outlines the reconciliation of differences between the Federal statutory tax rate and the Company’s income tax expense (benefit) from continuing operations for the years ended December 31, 2021 and 2020:

The following table outlines the reconciliation of differences between the Federal statutory tax rate and the Company’s income tax expense for the years ended December 31, 2022 and 2021:

Federal statutory rate $ 3.7 $ 9.9

Loss on the sale of Argentina print business ( 5.1 ) —

Adjustment to valuation allowances 3.1 ( 17.1 )

Impairment on investment in Plural 6.2 —

Executive compensation limitation 2.9 —

Impact from foreign branches 1.9 4.5

Adjustment of deferred tax liabilities 1.5 3.5

Foreign rate differential ( 1.9 ) ( 1.3 )

Adjustment of uncertain tax positions 0.2 0.8

Credits ( 1.5 ) —

State taxes, net of federal benefit 1.1 ( 0.1 )

Benefit of Net Operating Loss Carryback — ( 14.3 )

Adjustment of uncertain tax positions ( 0.3 ) 0.2

Impairment on investment in Plural — 6.2

Foreign rate differential — ( 1.9 )

Other 1.1 4.3

Income tax expense (benefit) $ 9.5 $ 0.3

Income tax expense $ 8.4 $ 9.5

The $ 3.1 million adjustment to valuation allowance in 2022 primarily relates to increasing reserves related to deferred tax assets for credits and interest limitation that are not expected to be realized in the future for federal income tax purposes.

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 $ 1.1 million effective rate reconciling item for State taxes, net of federal benefit, in 2022 includes a $ 2.8 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.

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

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 increased the amount of interest expense businesses were allowed to deduct in 2019 and 2020.

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.

QUAD/GRAPHICS, INC.

7 unchanged sentences

Pension and workers compensation benefits 23.9 21.9

Accrued liabilities 12.9 20.5

Interest limitation 12.8 11.5

Accrued liabilities 9.4 12.9

Research or experimental expenditures 8.0 —

Accrued compensation 7.6 8.1

15 unchanged sentences

Of the foreign net operating loss carryforwards, $ 8.6 million is available without expiration, while the remainder expires through 2042.

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

Of the state net operating loss carryforwards, $ 79.7 million is available without expiration, while the remainders expire through 2042.

• Various credit carryforwards of $ 9.7 million, $ 24.3 million and $ 36.2 million for federal, foreign and state, respectively.

The federal carryforward expires in 2040, the foreign credit carryforward expires in 2026, and the state credit carryforwards include $ 25.4 million that is available without expiration, while the remainder expires through 2041.

The federal carryforward expires through 2041, the foreign credit carryforward expires in 2026, and the state credit carryforwards include $ 25.5 million that is available without expiration, while the remainder expires through 2036.

QUAD/GRAPHICS, INC.

5 unchanged sentences

The following table summarizes the activity of the Company’s liability for unrecognized tax benefits at December 31, 2022 and 2021:

Balance at beginning of period $ 11.6 $ 17.8

Balance at January 1, $ 11.7 $ 11.6

Additions for tax positions of prior years 0.2 0.5

1 unchanged sentence

Lapses of applicable statutes of limitations ( 0.5 ) ( 0.1 )

Balance at end of period $ 11.7 $ 11.6

Balance at December 31, $ 11.1 $ 11.7

As of December 31, 2022, $ 8.0 million of unrecognized tax benefits would impact the Company’s effective tax rate, if recognized.

13 unchanged sentences

Tax years from 2013 through 2022 remain open and subject to examination in the Company’s various major state jurisdictions within the United States.

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

subsidiaries in those operations.

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

QUAD/GRAPHICS, INC.

1 unchanged sentence

(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.

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

subsidiaries in those operations.

The Company does not have significant prior year untaxed, undistributed earnings from its foreign operations at December 31, 2022, 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

5 unchanged sentences

Unobservable inputs for the asset or liability.

There were no Level 3 recurring measurements of assets or liabilities as of December 31, 2021.

There we re no Level 3 recurring measurements of assets or liabilities as of December 31, 2022.

Interest Rate Swaps

The Company currently holds two interest rate swap contracts.

The Company currently holds one active interest rate swap contract.

Another previously held interest rate swap, effective on February 28, 2017, terminated on February 28, 2022.

The purpose of entering into the contracts was to reduce the variability of cash flows from interest payments related to a portion of Quad’s variable-rate debt.

2 unchanged sentences

Due to this change in critical terms, the Company has elected to de-designate the swaps as cash flow hedges, resulting in future changes in fair value being recognized in interest expense.

The balance of the accumulated other comprehensive loss attributable to the interest rate swaps as of June 30, 2020, will be amortized to interest expense on a straight-line basis over the remaining lives of the swap contracts.

The balance of the accumulated other comprehensive loss attributable to the interest rate swaps as of June 30, 2020 was then amortized to interest expense on a straight-line basis over the remaining lives of the swap contracts.

The Company expects to reclassify $ 2.7 million of this balance to interest expense over the next twelve months.

March 19, 2019

Interest Rate Swap February 7, 2017

Interest Rate Swap

Effective date March 29, 2019 February 28, 2017

Termination date March 28, 2024 February 28, 2022

Term 5 years 5 years

Effective date March 29, 2019

Termination date March 28, 2024

Notional amount $ 130.0

3 unchanged sentences

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

The Company classifies the interest rate swaps as Level 2 because the inputs into the valuation model are observable or can be derived or corroborated utilizing observable market data at commonly quoted intervals.

The fair values of the interest rate swaps classified as Level 2 as of December 31, 2021 and 2020, were as follows:

The Company classifies interest rate swaps as Level 2 because the inputs into the valuation model are observable or can be derived or corroborated utilizing observable market data at commonly quoted intervals.

The fair value of the interest rate swaps classified as Level 2 as of December 31, 2022 and 2021, were as follows:

Balance Sheet Location December 31, 2022 December 31, 2021

Interest rate swap assets Prepaid expenses and other current assets $ 3.8 $ —

Interest rate swap liabilities Other current liabilities — ( 0.7 )

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

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 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.

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

The change in the fair value of the interest rate swaps are recorded as an adjustment to interest expense in the consolidated statements of operations.

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

2 unchanged sentences

Net interest paid $ 1.7 $ 7.6

Impacts with Swaps as Hedging Instruments

Loss recognized in other comprehensive loss $ — $ 11.1

Impacts with Swaps as Nonhedging Instruments

3 unchanged sentences

Total impact of swaps to interest expense $ ( 3.9 ) $ 5.4

Interest Rate Collars

The Company has entered into two interest rate collar contracts, both effective February 1, 2023.

The purpose of entering into the contracts is to reduce the variability of cash flows from interest payments related to a portion of Quad’s variable-rate debt.

The interest rate collars will be designated as cash flow hedges as they effectively convert the notional value of the Company’s variable rate debt based on one-month term SOFR to a fixed rate if that month’s interest rate is outside of the collars’ floor and ceiling rates, including a spread on underlying debt, and a monthly reset in the variable interest rate.

The key terms of the interest rate collars are as follows:

December 12, 2022

Interest Rate Collar December 14, 2022

Interest Rate Collar

Effective date February 1, 2023 February 1, 2023

Termination date October 30, 2026 October 31, 2025

Term 45 Months 33 Months

Notional amount $ 75.0 $ 75.0

Floor Rate 2.09 % 2.25 %

Ceiling Rate 5.00 % 5.00 %

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Foreign Exchange Contracts

2 unchanged sentences

Gains or losses on net foreign currency hedges are intended to offset losses or gains on the underlying net exposures in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates.

There were no open foreign currency exchange contracts as of December 31, 2021.

As of December 31, 2022, there were six open foreign currency exchange contracts designated as cash flow hedges, with a total notional value of $ 7.7 million .

Natural Gas Forward Contracts

1 unchanged sentence

The Company’s commodity contracts qualified for the exception related to normal purchases and sales during the years ended December 31, 2022 and 2021, as the Company takes delivery in the normal course of business.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

See Note 10, “Debt,” for the fair value of the Company’s debt as of December 31, 2022 and 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 4, “Discontinued Operations”;

Note 5, “Restructuring, Impairment and Transaction-Related Charges”;

See Note 3, “Restructuring, Impairment and Transaction-Related Charges”;

Note 4, “Goodwill and Other Intangible Assets”;

4 unchanged sentences

See Note 14, “Employee Retirement Plans,” for the details of Level 1 and Level 2 inputs related to employee retirement plans.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Employee Retirement Plans

10 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, 2022 and 2021, were as follows:

2 unchanged sentences

Expected return on plan assets 22.3 24.2

Net periodic benefit income 15.4 10.6

Net periodic pension income 12.6 15.4

Settlement charge — ( 0.9 )

Net pension income $ 12.6 $ 14.5

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 Company made $ 1.0 million in benefit payments to its non-qualified defined benefit pension plans and made no contributions to its qualified defined benefit pension plans during the year ended December 31, 2022.

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 2021.

The non-cash settlement charges result in accelerated recognition of actuarial losses on 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)

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

4 unchanged sentences

Interest cost ( 9.7 ) ( 8.8 )

Actuarial gain (loss) 23.1 ( 40.5 )

Actuarial gain 86.1 23.1

Benefits paid 37.0 47.5

8 unchanged sentences

Funded status $ ( 36.3 ) $ ( 19.2 )

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 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)

The net underfunded defined benefit plan obligations increased by $ 17.1 million during the year ended December 31, 2022.

This increase was primarily due to an overall decrease in pension plan assets due to a negative actual return on pension plan assets of ( 21.76 )% during the year ended December 31, 2022, which was below the expected return on plan assets assumption of 5.25 %.

This decrease in plan assets was partially offset by a decrease in overall pension obligations due to a 269 basis point increase in the pension discount rate from 2.77 % at December 31, 2021, to 5.46 % at December 31, 2022 and $ 1.0 million of benefit payments.

Amounts recognized on the consolidated balance sheets as of December 31, 2022 and 2021, were as follows:

3 unchanged sentences

Total amount recognized $ ( 36.3 ) $ ( 19.2 )

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, 2022 and 2021:

5 unchanged sentences

Amount arising during the period ( 30.7 )

Impact of pension plan settlement charge included in net earnings 0.9

Balance at December 31, 2022 $ ( 47.6 )

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.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Estimated Company Contributions and Benefit Payments

2 unchanged sentences

The estimated benefit payments may differ based on actual experience.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

15 unchanged sentences

The current target allocations for plan assets on a weighted average basis are 25 % equity securities and 75 % debt securities, including cash and cash equivalents.

The actual asset allocation as of December 31, 2021, and as of December 31, 2020, was approximately 26 % equity securities and 74 % debt securities.

The actual asset allocation as of December 31, 2022, was approximately 23 % equity securities and 77 % debt securities, and as of December 31, 2021, was approximately 26 % equity securities and 74 % debt securities.

Equity investments are diversified by country, issuer and industry sector.

1 unchanged sentence

The expected long-term rate of return on assets assumption is selected by first identifying the expected range of long-term rates of return for each major asset class.

Expected long-term rates of return are developed based on long-term historical averages, current expectations of future returns and anticipated inflation rates.

Expected long-term rates of return are developed based on long-term historical averages, current expectations of future returns, anticipated inflation rates and active investment management of the portfolio.

The expected long-term rate of return on plan assets is then calculated by weighting each asset class.

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Russell 3000 Index NL 46.0 81.1 Daily 1 day

NT Collective Short Term Investment Fund 4.0 — Daily 1 day

Total value of investments measured at NAV $ 222.8 $ 297.5

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The two MEPPs, the GCIU and GCC, are significantly underfunded, and will require the Company to pay a withdrawal liability to fund its pro rata share of the underfunding as of the plan year the full withdrawal was completed.

As a result of the decision to withdraw, the Company accrued the estimated withdrawal liability based on information provided by each plan’s trustee, as part of the purchase price allocation for World Color Press.

As a result of the decision to withdraw, the Company accrued the estimated withdrawal liability based on information provided by each plan’s trustee.

The GCIU Plan is a defined benefit plan that provides retirement benefits, total and permanent disability benefits, and pre-retirement death benefits for the participating union employees of the Company.

The funded status of the GCIU Plan is classified as critical and declining based on the GCIU Plan’s 2021 certification to the United States Department of Labor, as the funded percentage for the plan is less than 65 %, and the plan is projected to become insolvent in 2031.

The funded status of the GCIU Plan is classified as critical and declining based on the GCIU Plan’s 2022 certification to the United States Department of Labor, as the plan is projected to become insolvent within 20 years.

As of January 1, 2022, the plan was projected to be insolvent in 2033.

As a result, the GCIU Plan implemented a rehabilitation plan to improve the plan’s funded status.

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The GCC Plan is a defined benefit plan that provides retirement benefits, disability benefits, and early retirement benefits for the participating union employees of the Company.

The funded status of the GCC Plan is classified as critical and declining based on the GCC Plan’s 2021 certification to the United States Department of Labor, as the funded percentage for the plan is less than 65 %, and the plan is projected to become insolvent by 2023.

The funded status of the GCC Plan is classified as critical based on the GCC Plan’s 2022 certification to the United States Department of Labor, improved from critical and declining status because it received Special Financial Assistance from the Pension Benefit Guaranty Corporation in 2022.

The plan is still projected to become insolvent in 2037.

As a result, the GCC Plan implemented a rehabilitation plan to improve the plan’s funded status.

In 2016, the Company and the GCC reached a settlement agreement for all claims, with scheduled payments until February 2024.

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

The Company made payments totaling $ 6.2 million for the years ended December 31, 2022 and 2021.

The Company has reserved $ 28.3 million as the total MEPPs withdrawal liability as of December 31, 2022, of which $ 24.2 million was recorded in other long-term liabilities and $ 4.1 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.

The calculation of diluted earnings (loss) per share attributable to Quad common shareholders includes the effect of any dilutive equity incentive instruments.

The Company uses the treasury stock method to calculate the effect of outstanding dilutive equity incentive instruments, which requires the Company to compute total proceeds as the sum of the amount the employee must pay upon exercise of the award and the amount of unearned stock-based compensation costs attributed to future services.

Earnings Per Share

Basic earnings per share is computed as net earnings divided by the basic weighted average common shares outstanding.

The calculation of diluted earnings per share includes the effect of any dilutive equity incentive instruments.

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.

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.

Anti-dilutive equity instruments excluded from the computation of diluted net earnings per shares were 0.2 million and 0.4 million class A common shares for the year ended December 31, 2022 and 2021, respectively.

QUAD/GRAPHICS, INC.

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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, 2022 and 2021, are summarized as follows:

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

net loss attributable to noncontrolling interests — ( 0.2 )

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

Net earnings $ 9.3 $ 37.8

Basic weighted average number of common shares outstanding for all classes of common stock 50.7 51.3

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Diluted weighted average number of common shares outstanding for all classes of common shares 52.5 53.0

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

Continuing operations $ 0.74 $ ( 2.10 )

Discontinued operations — ( 0.43 )

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

Earnings per share:

Basic $ 0.18 $ 0.74

Diluted $ 0.18 $ 0.71

Equity Incentive Programs

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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

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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 1,173,520 shares of class A common stock reserved for issuance under the 2020 Plan as of December 31, 2022.

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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.

The Company recognizes these compensation costs for only those awards expected to vest, on a straight-line basis over the requisite three to four year service period of the awards, except DSU awards, which are fully vested and expensed on the grant date.

The Company recognizes these compensation costs for only those awards expected to vest, on a straight-line basis over the requisite approximate three year service period of the awards, except DSU awards, which are fully vested and expensed on the grant date.

The Company estimated the number of awards expected to vest based, in part, on historical forfeiture rates and also based on management’s expectations of employee turnover within the specific employee groups receiving each type of award.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Equity Incentive Compensation Expense

Equity incentive compensation expense was recorded primarily in selling, general and administrative expenses in the consolidated statements of operations and includes expense (income) recognized for liability awards that are remeasured on a quarterly basis.

Equity incentive compensation expense was recorded primarily in selling, general and administrative expenses in the consolidated statements of operations and includes expense recognized for liability awards that are remeasured on a quarterly basis.

The total compensation expense recognized related to all equity incentive programs for the years ended December 31, 2022 and 2021, was as follows:

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RS and RSU equity awards expense $ 5.1 $ 5.4

RSU liability awards income — ( 0.1 )

RSU liability awards expense 0.2 —

DSU awards expense 0.7 0.8

Total equity incentive compensation expense $ 6.0 $ 6.2

Total future compensation expense related to all equity incentive programs granted as of December 31, 2021, is estimated to be $ 4.9 million, which consists entirely of expense for RS and RSU awards.

Total future compensation expense related to all equity incentive programs granted as of December 31, 2022, was estimated to be $ 6.0 million, which consists entirely of expense for RS and RSU awards.

Estimated future compensation expense is $ 3.5 million for 2023, $ 2.2 million for 2024 and $ 0.3 million for 2025.

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Stock options were only to be granted to employees.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

There were no stock options granted, and no compensation expense was recognized related to stock options during the years ended December 31, 2022 and 2021.

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Outstanding and exercisable at December 31, 2022 — $ — 0.0 $ —

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.

All outstanding options are vested as of December 31, 2021.

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

There were no stock options exercised for the years ended December 31, 2022 and 2021.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Restricted Stock and Restricted Stock Units

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Nonvested at December 31, 2022 3,606,295 $ 4.11 1.4 100,943 $ 4.08 1.5

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

that were accounted for as liability awards and vested on March 1, 2022.

The awards were recorded at fair value on the initial issuance date and were 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 $ 0.2 million of expense for the year ended December 31, 2022.

The fair value of the RSU awards classified as liabilities was $ 0.5 million as of the year ended December 31, 2021.

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.

Compensation expense recognized for RS and RSUs classified as equity was $ 5.1 million and $ 5.4 million for the years ended December 31, 2022 and 2021, respectively.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Deferred Stock Units

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Granted 187,632 3.89

Dividend equivalents granted — —

Settled ( 101,829 ) 7.90

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As DSU awards are fully vested on the grant date, all compensation expense was recognized at the date of grant.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Shareholders’ Equity

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The Company has no present plans to issue any preferred stock.

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

On July 30, 2018, the Company’s Board of Directors authorized a share repurchase program of up to $ 100.0 million of the Company’s outstanding class A common stock.

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The program may be suspended or discontinued at any time.

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

During the year ended December 31, 2022, the Company repurchased 3,093,662 shares of its Class A common stock at a weighted average price of $ 3.21 per share for a total purchase price of $ 9.9 million ($ 10.0 million, including commissions).

There were no shares repurchased during the year ended December 31, 2021.

As of December 31, 2022, there were $ 90.1 million of authorized repurchases remaining under the program.

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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

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Accumulated Other Comprehensive Loss

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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

Net other comprehensive loss 0.2 ( 7.6 ) 3.3 ( 4.1 )

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 )

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Balance at December 31, 2022 $ ( 88.6 ) $ ( 4.1 ) $ ( 35.6 ) $ ( 128.3 )

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:

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The details about the reclassifications from accumulated other comprehensive loss to net earnings for the years ended December 31, 2022 and 2021, were as follows:

Details about Accumulated Other

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Total reclassifications for the period, net of tax $ 29.9 $ 3.6

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 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.

Quad is a global marketing experience company that gives brands a more streamlined, impactful, flexible and frictionless way to go to market and reach consumers.

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

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The United States Print and Related Services segment is predominantly comprised of the Company’s United States printing operations and is managed as one integrated platform.

This includes 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, together with marketing and other complementary services, including consumer insights, audience targeting, personalization, media planning and placement, process optimization, campaign planning and creation, pre-media production, videography, photography, digital execution, print execution and logistics.

This includes print execution and logistics for retail inserts, catalogs, long-run publications, special interest publications, journals, direct mail, directories, in-store marketing and promotion, packaging, newspapers, custom print products, as well as other commercial and specialty printed products, along with global paper procurement, and marketing and other complementary services, such as data and analytics, technology solutions, media services, creative and content solutions, managed services and execution in non-print channels (e.g., digital and broadcast).

This segment also includes the manufacture of ink.

International

The International segment consists of the Company’s printing operations in Europe and Latin America, including operations in England, France, Germany, Poland, Argentina, Colombia, Mexico and Peru, as well as investments in printing operations in Brazil and India.

This segment provides printed products and marketing and other complementary services consistent with the United States Print and Related Services segment.

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.

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

International

This segment provides printed products and marketing and other complementary services consistent with the United States Print and Related Services segment.

The following is a summary of segment information for the years ended December 31, 2022 and 2021:

Operating Income (Loss) from Continuing Operations Restructuring, Impairment and Transaction-Related Charges

Operating Income (Loss) Restructuring, Impairment and Transaction-Related Charges

Net Sales Depreciation and Amortization Capital Expenditures

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Total $ 2,247.1 $ 713.3 $ 92.8 $ 157.3 $ 50.0 $ 18.9

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, 2022 and 2021, are further described in Note 3, “Restructuring, Impairment and Transaction-Related Charges,” and are included in the operating income (loss) results by segment above.

A reconciliation of operating income from continuing operations to loss from continuing operations before income taxes and equity in loss of unconsolidated entity as reported in the consolidated statements of operations for the years ended December 31, 2021 and 2020, was as follows:

Operating income (loss) from continuing operations $ 92.8 $ ( 46.0 )

A reconciliation of operating income to earnings before income taxes and equity in earnings of unconsolidated entity as reported in the consolidated statements of operations for the years ended December 31, 2022 and 2021, was as follows:

Operating income $ 53.5 $ 92.8

interest expense 48.4 59.6

1 unchanged sentence

loss on debt extinguishment — 0.7

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

Earnings before income taxes and equity in earnings of unconsolidated entity $ 17.7 $ 47.0

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Total assets by segment at December 31, 2022 and 2021, are shown in the following table.

4 unchanged sentences

Total $ 1,701.8 $ 1,890.0

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Geographic Area Information

14 unchanged sentences

Other long-term assets 53.1 6.0 6.9 0.5 66.5

QUAD/GRAPHICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

New Accounting Pronouncements

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Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform.

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, 2020, through December 31, 2022.

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

Additionally, 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.

ASU 2020-04 was further updated by Accounting Standards Update 2021-01 “Reference Rate Reform (Topic 848)” (“ASU 2021-01”) which further clarified the scope of Topic 848.

As amended in ASU 2022-06, this optional guidance is effective as of March 12, 2020, through December 31, 2024.

The Company expects to elect the practical expedient outlined in ASU 2020-04 and ASU 2021-01 which allows the Company to prospectively adjust the effective interest rate after a reference rate change.

Reference rate reform is not expected to have a material impact on the consolidated financial statements upon the transition from LIBOR to SOFR as the Company’s reference rate, effective February 1, 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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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