000148179212/312021Q1falseus-gaap:AccountingStandardsUpdate201613MemberP3Y33.3333.3333.3310P3Y00014817922021-01-012021-03-31xbrli:shares0001481792us-gaap:CommonClassAMember2021-04-300001481792us-gaap:CommonClassBMember2021-04-300001481792us-gaap:CommonClassCMember2021-04-30iso4217:USD0001481792us-gaap:ProductMember2021-01-012021-03-310001481792us-gaap:ProductMember2020-01-012020-03-310001481792us-gaap:ServiceMember2021-01-012021-03-310001481792us-gaap:ServiceMember2020-01-012020-03-3100014817922020-01-012020-03-31iso4217:USDxbrli:shares00014817922021-03-3100014817922020-12-310001481792us-gaap:CommonClassAMember2021-03-310001481792us-gaap:CommonClassAMember2020-12-310001481792us-gaap:CommonClassBMember2021-03-310001481792us-gaap:CommonClassBMember2020-12-310001481792us-gaap:CommonClassCMember2021-03-310001481792us-gaap:CommonClassCMember2020-12-3100014817922019-12-3100014817922020-03-310001481792us-gaap:CommonStockMember2020-12-310001481792us-gaap:AdditionalPaidInCapitalMember2020-12-310001481792us-gaap:TreasuryStockMember2020-12-310001481792us-gaap:RetainedEarningsMember2020-12-310001481792us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001481792us-gaap:ParentMember2020-12-310001481792us-gaap:NoncontrollingInterestMember2020-12-310001481792us-gaap:RetainedEarningsMember2021-01-012021-03-310001481792us-gaap:ParentMember2021-01-012021-03-310001481792us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001481792us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001481792us-gaap:CommonStockMember2021-01-012021-03-310001481792us-gaap:TreasuryStockMember2021-01-012021-03-310001481792us-gaap:CommonStockMember2021-03-310001481792us-gaap:AdditionalPaidInCapitalMember2021-03-310001481792us-gaap:TreasuryStockMember2021-03-310001481792us-gaap:RetainedEarningsMember2021-03-310001481792us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001481792us-gaap:ParentMember2021-03-310001481792us-gaap:NoncontrollingInterestMember2021-03-310001481792us-gaap:CommonStockMember2019-12-310001481792us-gaap:AdditionalPaidInCapitalMember2019-12-310001481792us-gaap:TreasuryStockMember2019-12-310001481792us-gaap:RetainedEarningsMember2019-12-310001481792us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001481792us-gaap:ParentMember2019-12-310001481792us-gaap:NoncontrollingInterestMember2019-12-3100014817922019-01-012019-12-310001481792srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2019-12-310001481792srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ParentMember2019-12-310001481792us-gaap:CommonStockMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001481792us-gaap:AdditionalPaidInCapitalMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001481792us-gaap:TreasuryStockMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001481792us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001481792us-gaap:AccumulatedOtherComprehensiveIncomeMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001481792us-gaap:ParentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001481792us-gaap:NoncontrollingInterestMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001481792us-gaap:RetainedEarningsMember2020-01-012020-03-310001481792us-gaap:ParentMember2020-01-012020-03-310001481792us-gaap:NoncontrollingInterestMember2020-01-012020-03-310001481792us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-3100014817922020-10-012020-12-310001481792us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001481792us-gaap:CommonStockMember2020-01-012020-03-310001481792us-gaap:TreasuryStockMember2020-01-012020-03-310001481792us-gaap:CommonStockMember2020-03-310001481792us-gaap:AdditionalPaidInCapitalMember2020-03-310001481792us-gaap:TreasuryStockMember2020-03-310001481792us-gaap:RetainedEarningsMember2020-03-310001481792us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001481792us-gaap:ParentMember2020-03-310001481792us-gaap:NoncontrollingInterestMember2020-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberquad:CatalogPublicationsRetailInsertsBooksAndDirectoriesMember2021-01-012021-03-310001481792quad:InternationalMemberquad:CatalogPublicationsRetailInsertsBooksAndDirectoriesMember2021-01-012021-03-310001481792quad:CatalogPublicationsRetailInsertsBooksAndDirectoriesMember2021-01-012021-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberquad:DirectMailAndOtherPrintedProductsMember2021-01-012021-03-310001481792quad:InternationalMemberquad:DirectMailAndOtherPrintedProductsMember2021-01-012021-03-310001481792quad:DirectMailAndOtherPrintedProductsMember2021-01-012021-03-310001481792quad:OtherRevenuesMemberquad:UnitedStatesPrintandRelatedServicesMember2021-01-012021-03-310001481792quad:OtherRevenuesMemberquad:InternationalMember2021-01-012021-03-310001481792quad:OtherRevenuesMember2021-01-012021-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberquad:TotalProductsMember2021-01-012021-03-310001481792quad:InternationalMemberquad:TotalProductsMember2021-01-012021-03-310001481792quad:TotalProductsMember2021-01-012021-03-310001481792quad:LogisticServicesMemberquad:UnitedStatesPrintandRelatedServicesMember2021-01-012021-03-310001481792quad:InternationalMemberquad:LogisticServicesMember2021-01-012021-03-310001481792quad:LogisticServicesMember2021-01-012021-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberquad:ImagingMarketingServicesAndOtherServicesMember2021-01-012021-03-310001481792quad:InternationalMemberquad:ImagingMarketingServicesAndOtherServicesMember2021-01-012021-03-310001481792quad:ImagingMarketingServicesAndOtherServicesMember2021-01-012021-03-310001481792quad:TotalServicesMemberquad:UnitedStatesPrintandRelatedServicesMember2021-01-012021-03-310001481792quad:TotalServicesMemberquad:InternationalMember2021-01-012021-03-310001481792quad:TotalServicesMember2021-01-012021-03-310001481792quad:UnitedStatesPrintandRelatedServicesMember2021-01-012021-03-310001481792quad:InternationalMember2021-01-012021-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberquad:CatalogPublicationsRetailInsertsBooksAndDirectoriesMember2020-01-012020-03-310001481792quad:InternationalMemberquad:CatalogPublicationsRetailInsertsBooksAndDirectoriesMember2020-01-012020-03-310001481792quad:CatalogPublicationsRetailInsertsBooksAndDirectoriesMember2020-01-012020-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberquad:DirectMailAndOtherPrintedProductsMember2020-01-012020-03-310001481792quad:InternationalMemberquad:DirectMailAndOtherPrintedProductsMember2020-01-012020-03-310001481792quad:DirectMailAndOtherPrintedProductsMember2020-01-012020-03-310001481792quad:OtherRevenuesMemberquad:UnitedStatesPrintandRelatedServicesMember2020-01-012020-03-310001481792quad:OtherRevenuesMemberquad:InternationalMember2020-01-012020-03-310001481792quad:OtherRevenuesMember2020-01-012020-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberquad:TotalProductsMember2020-01-012020-03-310001481792quad:InternationalMemberquad:TotalProductsMember2020-01-012020-03-310001481792quad:TotalProductsMember2020-01-012020-03-310001481792quad:LogisticServicesMemberquad:UnitedStatesPrintandRelatedServicesMember2020-01-012020-03-310001481792quad:InternationalMemberquad:LogisticServicesMember2020-01-012020-03-310001481792quad:LogisticServicesMember2020-01-012020-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberquad:ImagingMarketingServicesAndOtherServicesMember2020-01-012020-03-310001481792quad:InternationalMemberquad:ImagingMarketingServicesAndOtherServicesMember2020-01-012020-03-310001481792quad:ImagingMarketingServicesAndOtherServicesMember2020-01-012020-03-310001481792quad:TotalServicesMemberquad:UnitedStatesPrintandRelatedServicesMember2020-01-012020-03-310001481792quad:TotalServicesMemberquad:InternationalMember2020-01-012020-03-310001481792quad:TotalServicesMember2020-01-012020-03-310001481792quad:UnitedStatesPrintandRelatedServicesMember2020-01-012020-03-310001481792quad:InternationalMember2020-01-012020-03-310001481792quad:RiseInteractiveMember2020-06-152020-06-150001481792quad:RiseInteractiveMemberquad:RiseInteractiveMember2020-06-152020-06-15xbrli:pure0001481792quad:QuadGraphicsIncMembersrt:MinimumMemberquad:RiseInteractiveMember2020-06-150001481792quad:QuadGraphicsIncMemberquad:RiseInteractiveMembersrt:MaximumMember2020-06-150001481792quad:OtherOwnerMemberquad:RiseInteractiveMember2020-06-150001481792quad:OtherOwnerMemberquad:RiseInteractiveMember2020-06-160001481792us-gaap:DiscontinuedOperationsHeldforsaleMemberquad:UnitedStatesBookBusinessVersaillesKentuckyBookManufacturingPlantMember2020-07-010001481792us-gaap:DiscontinuedOperationsHeldforsaleMemberquad:UnitedStatesBookBusinessVersaillesKentuckyBookManufacturingPlantMember2020-07-012020-07-010001481792us-gaap:DiscontinuedOperationsHeldforsaleMemberquad:UnitedStatesBookBusinessVersaillesKentuckyBookManufacturingPlantMember2020-01-012020-12-310001481792quad:UnitedStatesBookBusinessFairfieldPennsylvaniaAndMartinsburgWestVirginiaBookManufacturingPlantsMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2020-10-310001481792quad:UnitedStatesBookBusinessFairfieldPennsylvaniaAndMartinsburgWestVirginiaBookManufacturingPlantsMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2020-01-012020-12-310001481792quad:UnitedStatesBookBusinessMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2020-01-012020-03-31quad:plant0001481792quad:A2010RestructuringProgramMember2021-03-310001481792quad:FacilitiesIdledMember2020-01-012020-03-310001481792quad:FacilitiesIdledMember2021-01-012021-03-310001481792quad:EquipmentandInfrastructureRemovalChargesMember2021-01-012021-03-310001481792quad:EquipmentandInfrastructureRemovalChargesMember2020-01-012020-03-310001481792quad:SaleoffacilitiesMember2021-01-012021-03-310001481792quad:SaleoffacilitiesMember2020-01-012020-03-310001481792quad:OtherrestructuringchargesMember2021-01-012021-03-310001481792quad:OtherrestructuringchargesMember2020-01-012020-03-310001481792us-gaap:EmployeeSeveranceMember2020-12-310001481792quad:ImpairmentChargesMember2020-12-310001481792quad:TransactionRelatedChargesMember2020-12-310001481792us-gaap:OtherRestructuringMember2020-12-310001481792us-gaap:EmployeeSeveranceMember2021-01-012021-03-310001481792quad:ImpairmentChargesMember2021-01-012021-03-310001481792quad:TransactionRelatedChargesMember2021-01-012021-03-310001481792us-gaap:OtherRestructuringMember2021-01-012021-03-310001481792us-gaap:EmployeeSeveranceMember2021-03-310001481792quad:ImpairmentChargesMember2021-03-310001481792quad:TransactionRelatedChargesMember2021-03-310001481792us-gaap:OtherRestructuringMember2021-03-310001481792us-gaap:AccruedLiabilitiesMember2021-03-310001481792us-gaap:AccountsPayableMember2021-03-310001481792us-gaap:OtherNoncurrentLiabilitiesMember2021-03-310001481792quad:UnitedStatesPrintandRelatedServicesMember2021-03-310001481792quad:InternationalMember2021-03-310001481792quad:TrademarksPatentsAndLicensingAgreementsMember2021-01-012021-03-310001481792quad:TrademarksPatentsAndLicensingAgreementsMember2021-03-310001481792quad:TrademarksPatentsAndLicensingAgreementsMember2020-01-012020-03-310001481792quad:TrademarksPatentsAndLicensingAgreementsMember2020-12-310001481792us-gaap:ComputerSoftwareIntangibleAssetMember2021-01-012021-03-310001481792us-gaap:ComputerSoftwareIntangibleAssetMember2021-03-310001481792us-gaap:ComputerSoftwareIntangibleAssetMember2020-01-012020-03-310001481792us-gaap:ComputerSoftwareIntangibleAssetMember2020-12-310001481792quad:AcquiredTechnologyMember2021-01-012021-03-310001481792quad:AcquiredTechnologyMember2021-03-310001481792quad:AcquiredTechnologyMember2020-01-012020-03-310001481792quad:AcquiredTechnologyMember2020-12-310001481792us-gaap:CustomerRelationshipsMember2021-01-012021-03-310001481792us-gaap:CustomerRelationshipsMember2021-03-310001481792us-gaap:CustomerRelationshipsMember2020-01-012020-03-310001481792us-gaap:CustomerRelationshipsMember2020-12-310001481792srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2020-12-310001481792us-gaap:LandMember2021-03-310001481792us-gaap:LandMember2020-12-310001481792us-gaap:BuildingMember2021-03-310001481792us-gaap:BuildingMember2020-12-310001481792us-gaap:MachineryAndEquipmentMember2021-03-310001481792us-gaap:MachineryAndEquipmentMember2020-12-310001481792us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2021-03-310001481792us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2020-12-310001481792us-gaap:ConstructionInProgressMember2021-03-310001481792us-gaap:ConstructionInProgressMember2020-12-310001481792quad:MasterNoteAndSecurityAgreementMember2021-03-310001481792quad:MasterNoteAndSecurityAgreementMember2020-12-310001481792quad:TermLoanMember2021-03-310001481792quad:TermLoanMember2020-12-310001481792us-gaap:RevolvingCreditFacilityMember2021-03-310001481792us-gaap:RevolvingCreditFacilityMember2020-12-310001481792quad:SeniorUnsecuredNotesMember2021-03-310001481792quad:SeniorUnsecuredNotesMember2020-12-310001481792quad:InternationalTermLoanMember2021-03-310001481792quad:InternationalTermLoanMember2020-12-310001481792quad:InternationalRevolvingCreditFacilityMember2021-03-310001481792quad:InternationalRevolvingCreditFacilityMember2020-12-310001481792quad:OtherDebtInstrumentsMember2021-03-310001481792quad:OtherDebtInstrumentsMember2020-12-310001481792quad:MasterNoteAndSecurityAgreementMember2021-01-012021-03-310001481792quad:MasterNoteAndSecurityAgreementMember2020-01-012020-12-310001481792quad:SeniorUnsecuredNotesMember2020-01-012020-12-3100014817922020-01-012020-12-310001481792quad:SeniorSecuredCreditFacilityMember2021-03-310001481792quad:SeniorSecuredCreditFacilityMemberus-gaap:SubsequentEventMember2021-06-300001481792quad:SeniorSecuredCreditFacilityMemberus-gaap:SubsequentEventMember2021-09-300001481792quad:SeniorSecuredCreditFacilityMemberus-gaap:SubsequentEventMembersrt:MaximumMember2021-10-010001481792srt:MaximumMember2021-03-310001481792srt:MinimumMember2021-03-310001481792quad:FinancingAgreementSeniorSecuredCreditFacilityMembersrt:MaximumMember2021-03-310001481792quad:FinancingAgreementSeniorSecuredCreditFacilityMember2021-01-012021-03-310001481792quad:FourthAmendmentToSeniorSecuredCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2020-06-290001481792us-gaap:InterestRateSwapMember2019-03-292019-03-290001481792us-gaap:InterestRateSwapMember2017-02-282017-02-280001481792us-gaap:InterestRateSwapMember2019-03-190001481792us-gaap:InterestRateSwapMember2017-02-070001481792us-gaap:OtherCurrentLiabilitiesMemberus-gaap:InterestRateSwapMember2021-03-310001481792us-gaap:OtherCurrentLiabilitiesMemberus-gaap:InterestRateSwapMember2020-12-310001481792us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:InterestRateSwapMember2021-03-310001481792us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:InterestRateSwapMember2020-12-310001481792us-gaap:InterestRateSwapMember2021-01-012021-03-310001481792us-gaap:InterestRateSwapMemberus-gaap:InterestExpenseMember2021-01-012021-03-310001481792us-gaap:InterestRateSwapMemberus-gaap:InterestExpenseMember2020-01-012020-03-310001481792us-gaap:OtherComprehensiveIncomeMemberus-gaap:InterestRateSwapMember2021-01-012021-03-310001481792us-gaap:OtherComprehensiveIncomeMemberus-gaap:InterestRateSwapMember2020-01-012020-03-310001481792us-gaap:InterestRateSwapMember2020-01-012020-03-31quad:contract0001481792us-gaap:ForeignExchangeContractMember2021-03-310001481792quad:AccruedLiabilitiesandOtherNoncurrentLiabilitiesMember2021-03-310001481792us-gaap:AccruedLiabilitiesMember2020-12-310001481792us-gaap:OtherNoncurrentLiabilitiesMember2020-12-310001481792quad:AccruedLiabilitiesandOtherNoncurrentLiabilitiesMember2020-12-310001481792us-gaap:PensionPlansDefinedBenefitMember2021-01-012021-03-310001481792us-gaap:PensionPlansDefinedBenefitMember2020-01-012020-03-310001481792us-gaap:PensionPlansDefinedBenefitMemberus-gaap:NonqualifiedPlanMember2021-01-012021-03-310001481792us-gaap:PensionPlansDefinedBenefitMemberus-gaap:QualifiedPlanMember2021-01-012021-03-31quad:plan0001481792us-gaap:CommonClassAMember2021-01-012021-03-310001481792quad:A2020PlanMember2021-03-310001481792quad:A2020PlanMember2021-01-012021-03-310001481792srt:MinimumMember2021-01-012021-03-310001481792srt:MaximumMember2021-01-012021-03-310001481792quad:RestrictedStockAndRestrictedStockUnitsRsusMember2021-01-012021-03-310001481792quad:RestrictedStockAndRestrictedStockUnitsRsusMember2020-01-012020-03-310001481792quad:DeferredStockUnitsDsusMember2021-01-012021-03-310001481792quad:DeferredStockUnitsDsusMember2020-01-012020-03-310001481792quad:EstimatedFutureExpenseinYearOneMember2021-03-310001481792quad:EstimatedFutureExpenseinYearTwoMember2021-03-310001481792quad:EstimatedFutureExpenseinYearThreeMember2021-03-310001481792quad:EstimatedFutureExpenseinYearFourMember2021-03-310001481792us-gaap:EmployeeStockOptionMember2021-01-012021-03-310001481792us-gaap:EmployeeStockOptionMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2021-01-012021-03-310001481792quad:TerminationForDeathMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-310001481792quad:TerminationForRetirementOrDisabilityMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-310001481792us-gaap:EmployeeStockOptionMemberquad:EmploymentTerminatedAnyOtherReasonMember2021-01-012021-03-310001481792us-gaap:EmployeeStockOptionMember2020-01-012020-03-310001481792us-gaap:EmployeeStockOptionMember2021-03-310001481792us-gaap:EmployeeStockOptionMember2020-12-310001481792us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001481792us-gaap:RestrictedStockMember2020-12-310001481792us-gaap:RestrictedStockMember2020-01-012020-12-310001481792us-gaap:RestrictedStockUnitsRSUMember2020-12-310001481792us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-12-310001481792us-gaap:RestrictedStockMember2021-01-012021-03-310001481792us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-03-310001481792us-gaap:RestrictedStockMember2021-03-310001481792us-gaap:RestrictedStockUnitsRSUMember2021-03-310001481792quad:DeferredStockUnitsDsusMember2020-12-310001481792quad:DeferredStockUnitsDsusMember2021-03-310001481792us-gaap:ShareBasedCompensationAwardTrancheTwoMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-310001481792us-gaap:ShareBasedCompensationAwardTrancheThreeMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-310001481792quad:SharebasedCompensationAwardTrancheFourMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-310001481792quad:AnnualAnniversaryGrantDateOfAwardMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-31quad:stock_classquad:vote0001481792us-gaap:CommonClassAMember2018-07-300001481792us-gaap:CommonClassAMember2020-01-012020-03-310001481792us-gaap:AccumulatedTranslationAdjustmentMember2020-12-310001481792us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-12-310001481792us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-12-310001481792us-gaap:AccumulatedTranslationAdjustmentMember2021-01-012021-03-310001481792us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2021-01-012021-03-310001481792us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-01-012021-03-310001481792us-gaap:AccumulatedTranslationAdjustmentMember2021-03-310001481792us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2021-03-310001481792us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-03-310001481792us-gaap:AccumulatedTranslationAdjustmentMember2019-12-310001481792us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2019-12-310001481792us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-310001481792us-gaap:AccumulatedTranslationAdjustmentMember2020-01-012020-03-310001481792us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-01-012020-03-310001481792us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-01-012020-03-310001481792us-gaap:AccumulatedTranslationAdjustmentMember2020-03-310001481792us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-03-310001481792us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-03-310001481792us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2021-01-012021-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberus-gaap:ProductMember2021-01-012021-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberus-gaap:ServiceMember2021-01-012021-03-310001481792quad:InternationalMemberus-gaap:ProductMember2021-01-012021-03-310001481792quad:InternationalMemberus-gaap:ServiceMember2021-01-012021-03-310001481792us-gaap:ProductMemberus-gaap:OperatingSegmentsMember2021-01-012021-03-310001481792us-gaap:ServiceMemberus-gaap:OperatingSegmentsMember2021-01-012021-03-310001481792us-gaap:OperatingSegmentsMember2021-01-012021-03-310001481792us-gaap:ProductMemberus-gaap:CorporateNonSegmentMember2021-01-012021-03-310001481792us-gaap:ServiceMemberus-gaap:CorporateNonSegmentMember2021-01-012021-03-310001481792us-gaap:CorporateNonSegmentMember2021-01-012021-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberus-gaap:ProductMember2020-01-012020-03-310001481792quad:UnitedStatesPrintandRelatedServicesMemberus-gaap:ServiceMember2020-01-012020-03-310001481792quad:InternationalMemberus-gaap:ProductMember2020-01-012020-03-310001481792quad:InternationalMemberus-gaap:ServiceMember2020-01-012020-03-310001481792us-gaap:ProductMemberus-gaap:OperatingSegmentsMember2020-01-012020-03-310001481792us-gaap:ServiceMemberus-gaap:OperatingSegmentsMember2020-01-012020-03-310001481792us-gaap:OperatingSegmentsMember2020-01-012020-03-310001481792us-gaap:ProductMemberus-gaap:CorporateNonSegmentMember2020-01-012020-03-310001481792us-gaap:ServiceMemberus-gaap:CorporateNonSegmentMember2020-01-012020-03-310001481792us-gaap:CorporateNonSegmentMember2020-01-012020-03-31
e
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to
Commission File Number 001-34806
QUAD-20210331_G1.JPG
Quad/Graphics, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1152983
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
N61 W23044 Harry’s Way, Sussex, Wisconsin 53089-3995
(Address of principal executive offices) (Zip Code)
(414) 566-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock,
par value $0.025 per share
QUAD The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
Class Outstanding as of April 30, 2021
Class A Common Stock 41,123,548
Class B Common Stock 13,556,858
Class C Common Stock




QUAD/GRAPHICS, INC.
FORM 10-Q INDEX
For the Quarter Ended March 31, 2021

Page No.
3
3
3
5
6
7
8
9



2

PART I — FINANCIAL INFORMATION

ITEM 1.    Condensed Consolidated Financial Statements (Unaudited)

QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(UNAUDITED)
Three Months Ended March 31,
2021 2020
Net sales
Products $ 526.0  $ 645.0 
Services 179.8  177.5 
Total net sales 705.8  822.5 
Cost of sales
Products 428.3  523.7 
Services 131.5  124.0 
Total cost of sales 559.8  647.7 
Operating expenses
Selling, general and administrative expenses 80.5  99.6 
Depreciation and amortization 41.9  47.4 
Restructuring, impairment and transaction-related charges 2.6  22.8 
Total operating expenses 684.8  817.5 
Operating income from continuing operations 21.0  5.0 
Interest expense 14.5  18.1 
Net pension income (4.1) (2.7)
Gain on debt extinguishment —  (0.6)
Earnings (loss) from continuing operations before income taxes and equity in earnings of unconsolidated entity 10.6  (9.8)
Income tax expense (benefit) 0.5  (1.2)
Earnings (loss) from continuing operations before equity in earnings of unconsolidated entity 10.1  (8.6)
Equity in earnings of unconsolidated entity (0.1) — 
Net earnings (loss) from continuing operations 10.2  (8.6)
Loss from discontinued operations, net of tax —  (3.8)
Net earnings (loss) 10.2  (12.4)
Less: net earnings (loss) attributable to noncontrolling interests —  — 
Net earnings (loss) attributable to Quad common shareholders $ 10.2  $ (12.4)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).


3

QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(in millions, except per share data)
(UNAUDITED)

Three Months Ended March 31,
2021 2020
Earnings (loss) per share attributable to Quad common shareholders
Basic:
Continuing operations $ 0.20  $ (0.17)
Discontinued operations —  (0.08)
Basic earnings (loss) per share attributable to Quad common shareholders $ 0.20  $ (0.25)
Diluted:
Continuing operations $ 0.19  $ (0.17)
Discontinued operations —  (0.08)
Diluted earnings (loss) per share attributable to Quad common shareholders $ 0.19  $ (0.25)
Weighted average number of common shares outstanding
Basic 51.4  50.5 
Diluted 52.8  50.5 

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).


4

QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(UNAUDITED)
Three Months Ended March 31,
2021 2020
Net earnings (loss) $ 10.2  $ (12.4)
Other comprehensive income (loss)
Translation adjustments (6.0) (15.3)
Interest rate swap adjustments 1.8  (11.1)
Other comprehensive loss, before tax (4.2) (26.4)
Income tax impact related to items of other comprehensive income (loss) —  2.8 
Other comprehensive loss, net of tax (4.2) (23.6)
Total comprehensive income (loss) 6.0  (36.0)
Less: comprehensive income (loss) attributable to noncontrolling interests —  — 
Comprehensive income (loss) attributable to Quad common shareholders $ 6.0  $ (36.0)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).



5

QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(UNAUDITED)
March 31,
2021
December 31,
2020
ASSETS
Cash and cash equivalents $ 80.6  $ 55.2 
Receivables, less allowance for credit losses of $33.3 million at March 31, 2021, and $33.8 million at December 31, 2020
340.3  399.1 
Inventories 162.0  170.2 
Prepaid expenses and other current assets 50.8  54.7 
Total current assets 633.7  679.2 
Property, plant and equipment—net 850.7  884.2 
Operating lease right-of-use assets—net 78.7  81.0 
Goodwill 103.0  103.0 
Other intangible assets—net 95.9  104.3 
Equity method investment in unconsolidated entity 2.5  2.6 
Other long-term assets 72.7  73.4 
Total assets $ 1,837.2  $ 1,927.7 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable $ 330.0  $ 320.0 
Other current liabilities 251.5  310.8 
Short-term debt and current portion of long-term debt 16.8  20.7 
Current portion of finance lease obligations 2.7  2.8 
Current portion of operating lease obligations 27.7  28.4 
Total current liabilities 628.7  682.7 
Long-term debt 871.3  902.7 
Finance lease obligations 1.8  2.0 
Operating lease obligations 53.0  54.5 
Deferred income taxes 5.1  4.2 
Other long-term liabilities 184.2  196.8 
Total liabilities 1,744.1  1,842.9 
Commitments and contingencies (Note 10)
Shareholders’ equity
Preferred stock —  — 
Common stock, Class A 1.0  1.0 
Common stock, Class B 0.4  0.4 
Common stock, Class C —  — 
Additional paid-in capital 835.5  833.1 
Treasury stock, at cost (13.2) (13.1)
Accumulated deficit (555.8) (566.0)
Accumulated other comprehensive loss (175.5) (171.3)
Quad’s shareholders’ equity 92.4  84.1 
Noncontrolling interests 0.7  0.7 
Total shareholders’ equity and noncontrolling interests 93.1  84.8 
Total liabilities and shareholders’ equity $ 1,837.2  $ 1,927.7 

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).


6

QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(UNAUDITED)
Three Months Ended March 31,
2021 2020
OPERATING ACTIVITIES
Net earnings (loss) $ 10.2  $ (12.4)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 41.9  47.4 
Impairment charges 0.8  3.8 
Amortization of debt issuance costs and original issue discount 0.6  0.6 
Gain on debt extinguishment —  (0.6)
Stock-based compensation 3.0  2.8 
Loss on the sale of a businesses —  2.9 
Gain on the sale or disposal of property, plant and equipment (7.0) (0.8)
Deferred income taxes 0.1  12.6 
Equity in earnings of unconsolidated entity (0.1) — 
Changes in operating assets and liabilities—net of acquisitions and divestitures 23.4  (11.6)
Net cash provided by operating activities 72.9  44.7 
INVESTING ACTIVITIES
Purchases of property, plant and equipment (16.9) (29.0)
Cost investment in unconsolidated entities (0.3) — 
Proceeds from the sale of property, plant and equipment 11.4  3.6 
Proceeds from the sale of businesses —  41.3 
Acquisition of businesses—net of cash acquired —  (1.6)
Other investing activities (0.2) — 
Net cash (used in) provided by investing activities (6.0) 14.3 
FINANCING ACTIVITIES
Payments of long-term debt (33.9) (43.9)
Payments of finance lease obligations (0.8) (3.1)
Borrowings on revolving credit facilities 4.4  204.8 
Payments on revolving credit facilities (5.7) (76.7)
Equity awards redeemed to pay employees’ tax obligations (1.1) (1.0)
Payment of cash dividends (1.4) (9.5)
Other financing activities (2.9) 0.1 
Net cash (used in) provided by financing activities (41.4) 70.7 
Effect of exchange rates on cash and cash equivalents (0.1) (0.6)
Net increase in cash and cash equivalents 25.4  129.1 
Cash and cash equivalents at beginning of period 55.2  78.7 
Cash and cash equivalents at end of period $ 80.6  $ 207.8 

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).


7

QUAD/GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
AND NONCONTROLLING INTERESTS
(in millions)
(UNAUDITED)

Condensed Consolidated Statement of Shareholders’ Equity For the Three Months Ended March 31, 2021
Common Stock Additional
Paid-in
Capital
Treasury Stock Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Quad’s
Shareholders’
Equity
Noncontrolling
Interests
Shares Amount Shares Amount
Balance at December 31, 2020 54.4  $ 1.4  $ 833.1  (0.8) $ (13.1) $ (566.0) $ (171.3) $ 84.1  $ 0.7 
Net earnings —  —  —  —  —  10.2  —  10.2  — 
Foreign currency translation adjustments —  —  —  —  —  —  (6.0) (6.0) — 
Interest rate swap adjustments, net of tax —  —  —  —  —  —  1.8  1.8  — 
Stock-based compensation —  —  3.0  —  —  —  —  3.0  — 
Issuance of share-based awards, net of other activity 1.3  —  (0.6) —  1.0  —  —  0.4  — 
Awards redeemed to pay employees’ tax obligations —  —  —  (0.2) (1.1) —  —  (1.1) — 
Balance at March 31, 2021 55.7  $ 1.4  $ 835.5  (1.0) $ (13.2) $ (555.8) $ (175.5) $ 92.4  $ 0.7 


Condensed Consolidated Statement of Shareholders’ Equity For the Three Months Ended March 31, 2020
Common Stock Additional
Paid-in
Capital
Treasury Stock Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Quad’s
Shareholders’
Equity
Noncontrolling
Interests
Shares Amount Shares Amount
Balance at December 31, 2019 54.3  $ 1.4  $ 847.4  (1.6) $ (31.5) $ (423.5) $ (167.2) $ 226.6  $ 17.7 
Accumulated deficit transition adjustment for adoption of ASU 2016-13, net of tax           (6.3)   (6.3)  
Balance at January 1, 2020 54.3  $ 1.4  $ 847.4  (1.6) $ (31.5) $ (429.8) $ (167.2) $ 220.3  $ 17.7 
Net loss —  —  —  —  —  (12.4) —  (12.4) — 
Change in ownership of noncontrolling interests —  —  —  —  —  —  —  —  0.1 
Foreign currency translation adjustments —  —  —  —  —  —  (15.3) (15.3) — 
Interest rate swap adjustments, net of tax —  —  —  —  —  —  (8.3) (8.3) — 
Cash dividends declared ($0.15 per common share)
—  —  —  —  —  (7.9) —  (7.9) — 
Stock-based compensation —  —  3.1  —  —  —  —  3.1  — 
Issuance of share-based awards, net of other activity 0.1  —  (19.8) 1.1  19.8  —  —  —  — 
Awards redeemed to pay employees’ tax obligations —  —  —  (0.2) (1.0) —  —  (1.0) — 
Balance at March 31, 2020 54.4  $ 1.4  $ 830.7  (0.7) $ (12.7) $ (450.1) $ (190.8) $ 178.5  $ 17.8 

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).


8



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements for Quad/Graphics, Inc. and its subsidiaries (the “Company” or “Quad”) have been prepared by the Company pursuant to the rules and regulations for interim financial information of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to such SEC rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated annual financial statements as of and for the year ended December 31, 2020, and notes thereto included in the Company’s latest Annual Report on Form 10-K filed with the SEC on February 24, 2021.

The Company is subject to seasonality in its quarterly results as net sales and operating income are higher in the third and fourth quarters of the calendar year as compared to the first and second quarters. The fourth quarter is typically the highest seasonal quarter for cash flows from operating activities due to the reduction of working capital requirements that reach peak levels during the third quarter. Seasonality is driven by increased magazine advertising page counts, retail inserts and catalogs primarily due to back-to-school and holiday-related advertising and promotions. The Company expects this seasonality impact to continue in future years.

The financial information contained herein reflects all adjustments, in the opinion of management, necessary for a fair presentation of the Company’s results of operations for the three months ended March 31, 2021 and 2020. All of these adjustments are of a normal recurring nature, except as otherwise noted. All intercompany transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements include estimates and assumptions of management that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates.

Discontinued Operations - The results of operations of the Company’s Book business are reported as discontinued operations for the three months ended March 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.

Coronavirus (“COVID-19”) Pandemic Impacts and Response - The COVID-19 pandemic has had, and will continue to have, a negative impact on the Company’s business, financial condition, cash flows, results of operations and supply chain, although the full extent is still uncertain. The Company implemented cost reduction and cash conservation initiatives in response to the impact of the COVID-19 pandemic on its business. 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 ending September 30, 2021. The Company is continuing to evaluate its cost structure and expects to implement additional cost reduction measures as necessary. As the pandemic continues, the extent of the impact on the Company’s business, financial condition, cash flows, results of operations and supply chain will depend on future developments, all of which are still highly uncertain.



9



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
Note 2. Revenue Recognition

Revenue Disaggregation

The following table provides information about disaggregated revenue by the Company’s operating segments and major products and services offerings for the three months ended March 31, 2021 and 2020:

United States Print
and Related Services
International Total
Three months ended March 31, 2021
Catalog, publications, retail inserts, and directories $ 329.7  $ 49.0  $ 378.7 
Direct mail and other printed products 129.0  16.8  145.8 
Other 1.2  0.3  1.5 
Total products 459.9  66.1  526.0 
Logistics services 92.7  5.1  97.8 
Imaging, marketing services and other services 82.0  —  82.0 
Total services 174.7  5.1  179.8 
Total net sales $ 634.6  $ 71.2  $ 705.8 
Three months ended March 31, 2020
Catalog, publications, retail inserts, and directories $ 412.1  $ 64.7  $ 476.8 
Direct mail and other printed products 150.4  16.4  166.8 
Other 1.1  0.3  1.4 
Total products 563.6  81.4  645.0 
Logistics services 90.0  4.4  94.4 
Imaging, marketing services and other services 83.0  0.1  83.1 
Total services 173.0  4.5  177.5 
Total net sales $ 736.6  $ 85.9  $ 822.5 

Nature of Products and Services

The Company recognizes its products and services revenue based on when the transfer of control passes to the client or when the service is completed and accepted by the client.
The products offering is predominantly comprised of the Company’s print operations which includes retail inserts, 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 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.



10



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
Costs to Obtain Contracts

In accordance with ASC 606 — Revenue from Contracts with Customers, 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. For all contract costs with contracts over one year, the Company amortizes the costs to obtain contracts on a straight-line basis over the estimated life of the contract and reviews quarterly for impairment. Activity impacting costs to obtain contracts for the three months ended March 31, 2021, was as follows:
Costs to Obtain Contracts
Balance at December 31, 2020 $ 8.7 
Costs to obtain contracts — 
Amortization of costs to obtain contracts (0.9)
Balance at March 31, 2021 $ 7.8 

Note 3. Strategic Investments

2020 Change of Ownership in Rise Interactive

On June 15, 2020, the Company purchased units of equity in Rise Interactive Media & Analytics, LLC (“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 result in the Company’s ownership interest to change from 57% to 99%. The Company began consolidating the results of Rise in the Company’s condensed consolidated financial statements when its equity ownership increased to 57% on March 14, 2018. The portion of Rise’s operating results not owned by the Company of 43% through June 15, 2020 and of 1% after June 15, 2020 is recorded as net earnings (loss) attributable to noncontrolling interests on the condensed consolidated statement of operations. The portion of net assets not owned by the Company is recorded as noncontrolling interests as of the respective dates shown on the condensed consolidated balance sheets.

Note 4. 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 consists 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.







11



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
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.

The following table summarizes the results of operations, which are included in the loss from discontinued operations in the condensed consolidated statements of operations for the three months ended March 31, 2020:

Three Months Ended March 31, 2020
Total net sales $ 40.3 
Total cost of sales, excluding depreciation and amortization 41.1 
Selling, general and administrative expenses 1.9 
Restructuring, impairment and transaction-related charges (1)
2.2 
Other expenses, net — 
Loss from discontinued operations before income taxes (4.9)
Income tax benefit (1.1)
Loss from discontinued operations, net of tax $ (3.8)
______________________________
(1)The Company recognized $1.3 million of impairment charges for tangible property, plant and equipment during the three months ended March 31, 2020, to reduce the carrying value of the Book business to its fair value.

The condensed consolidated statement of cash flows for the three months ended March 31, 2020 has not been adjusted to separately disclose cash flows related to discontinued operations. Cash flows related to the discontinued Book business during the three months ended March 31, 2020, were as follows:

Three Months Ended March 31, 2020
Cash flows used in operating activities $ (0.9)
Cash flows used in investing activities (1.6)

Note 5. Restructuring, Impairment and Transaction-Related Charges

The Company recorded restructuring, impairment and transaction-related charges for the three months ended March 31, 2021 and 2020, as follows:
Three Months Ended March 31,
2021 2020
Employee termination charges $ 4.7  $ 12.6 
Impairment charges 0.8  2.5 
Transaction-related charges 0.2  0.5 
Integration costs —  0.7 
Other restructuring charges (income) (3.1) 6.5 
Total $ 2.6  $ 22.8 


12



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)

The costs related to these activities have been recorded in the condensed consolidated statements of operations as restructuring, impairment and transaction-related charges. See Note 20, “Segment Information,” for restructuring, impairment and transaction-related charges by segment.

Restructuring Charges

The Company began a restructuring program in 2010 related to eliminating excess manufacturing capacity and properly aligning its cost structure and has since announced a total of 50 plant closures through March 31, 2021. The Company classifies the following charges as restructuring:

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

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

Other restructuring charges (income) are presented net of the gains on the sale of facilities and businesses, including a gain on the sale of the Riverside, California facility during the three months ended March 31, 2021, and a gain on the sale of the Shakopee, Minnesota facility during the three months ended March 31, 2020. The Company also recognized a $2.9 million loss on the sale of a business during the three months ended March 31, 2020, which is included within other restructuring activities below. The components of other restructuring charges (income) consisted of the following during the three months ended March 31, 2021 and 2020:
Three Months Ended March 31,
2021 2020
Vacant facility carrying costs and lease exit charges $ 3.9  $ 2.7 
Equipment and infrastructure removal costs 0.8  0.6 
Gains on the sale of facilities (7.8) (0.8)
Other restructuring activities —  4.0 
Other restructuring charges (income) $ (3.1) $ 6.5 

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. Changes to the estimates may require future restructuring charges and adjustments to the restructuring liabilities. The Company expects to incur additional restructuring charges related to these and other initiatives.

Impairment Charges

The Company recognized impairment charges of $0.8 million and $2.5 million during the three months ended March 31, 2021 and 2020, respectively, primarily for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction restructuring activities.

The 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. These assets were adjusted to their estimated fair values at the time of impairment. If estimated fair values subsequently decline, the carrying values of the assets are adjusted accordingly.



13



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
Transaction-Related Charges

The Company incurs transaction-related charges primarily consisting of professional service fees related to business acquisition and divestiture activities. Transaction-related charges of $0.2 million and $0.5 million were recorded during the three months ended March 31, 2021 and 2020, respectively.

Restructuring Reserves

Activity impacting the Company’s restructuring reserves for the three months ended March 31, 2021, was as follows:
Employee
Termination
Charges
Impairment
Charges
Transaction-Related
Charges
Other
Restructuring
Charges
Total
Balance at December 31, 2020 $ 14.6  $ —  $ 0.5  $ 25.8  $ 40.9 
Expense, net 4.7  0.8  0.2  (3.1) 2.6 
Cash payments, net (5.6) —  (0.3) 6.6  0.7 
Non-cash adjustments/reclassifications and translation (0.4) (0.8) —  (4.2) (5.4)
Balance at March 31, 2021 $ 13.3  $ —  $ 0.4  $ 25.1  $ 38.8 

The Company’s restructuring reserves at March 31, 2021, included a short-term and a long-term component. The short-term portion included $31.1 million in other current liabilities (see Note 14, “Other Current and Long-Term Liabilities”) and $0.7 million in accounts payable in the condensed consolidated balance sheets as the Company expects these reserves to be paid within the next twelve months. The long-term portion of $7.0 million is included in other long-term liabilities (see Note 14, “Other Current and Long-Term Liabilities”) in the condensed consolidated balance sheets.

Note 6. Goodwill and Other Intangible Assets

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. 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.

No indicators of impairment were identified in any of the Company's reporting units during the three months ended March 31, 2021.

The accumulated goodwill impairment losses and the carrying value of goodwill at March 31, 2021, and December 31, 2020, were as follows:
United States Print and Related Services International Total
Goodwill $ 881.3  $ 30.0  $ 911.3 
Accumulated goodwill impairment loss (778.3) (30.0) (808.3)
Goodwill, net of accumulated goodwill impairment loss $ 103.0  $ —  $ 103.0 



14



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
Other Intangible Assets

The components of finite-lived intangible assets at March 31, 2021, and December 31, 2020, were as follows:
March 31, 2021 December 31, 2020
Weighted
Average
Amortization
Period
(Years)
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Weighted
Average
Amortization
Period
(Years)
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Trademarks, patents, licenses and agreements 6 $ 68.7  $ (46.0) $ 22.7  6 $ 69.6  $ (44.3) 25.3 
Capitalized software 5 17.5  (12.3) 5.2  5 17.3  (11.7) 5.6 
Acquired Technology 5 3.6  (0.7) 2.9  5 3.0  (0.5) 2.5 
Customer relationships 6 561.1  (496.0) 65.1  6 561.9  (491.0) 70.9 
Total $ 650.9  $ (555.0) $ 95.9  $ 651.8  $ (547.5) $ 104.3 

The gross carrying amount and accumulated amortization within other intangible assets—net in the condensed consolidated balance sheets at March 31, 2021, and December 31, 2020, differs from the value originally recorded at acquisition due to impairment charges recorded in prior years and the effects of currency fluctuations since the purchase date.

Other intangible assets are evaluated for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable. There were no impairment charges recorded on finite-lived intangible assets for the three months ended March 31, 2021 and 2020.

Amortization expense for other intangible assets was $9.1 million and $9.9 million for the three months ended March 31, 2021 and 2020, respectively. The estimated future amortization expense related to other intangible assets as of March 31, 2021, was as follows:
Amortization Expense
Remainder of 2021 $ 22.6 
2022 29.9 
2023 25.7 
2024 14.9 
2025 2.5 
2026 0.3 
Total $ 95.9 

Note 7. Receivables

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. Specific credit reviews and standard industry credit scoring models are used in performing this evaluation. Clients’ financial condition is continuously monitored as part of the normal course of business. Some of the Company’s clients are highly leveraged or otherwise subject to their own operating and regulatory risks.



15



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(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. The Company also records a general provision based on the overall risk profile of the receivables and through the assessment of reasonable economic forecasts. The risk profile is assessed on a quarterly basis using various methods, including external resources and credit scoring models. Accounts that are deemed uncollectible are written off when all reasonable collection efforts have been exhausted.

The Company has recorded credit loss expense of $0.6 million and $5.0 million during the three months ended March 31, 2021 and 2020, respectively, which is included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Activity impacting the allowance for credit losses for the three months ended March 31, 2021, was as follows:
Allowance for Credit Losses
Balance at December 31, 2020 $ 33.8 
Provisions 0.6 
Write-offs (0.6)
Translation and other (0.5)
Balance at March 31, 2021 $ 33.3 

Note 8. Inventories

The components of inventories at March 31, 2021, and December 31, 2020, were as follows:
March 31,
2021
December 31,
2020
Raw materials and manufacturing supplies $ 89.8  $ 90.9 
Work in process 30.7  33.4 
Finished goods 41.5  45.9 
Total $ 162.0  $ 170.2 

Note 9. Property, Plant and Equipment

The components of property, plant and equipment at March 31, 2021, and December 31, 2020, were as follows:
March 31,
2021
December 31,
2020
Land $ 91.0  $ 97.6 
Buildings 773.9  780.3 
Machinery and equipment 3,076.2  3,094.1 
Other(1)
184.8  183.2 
Construction in progress 37.1  33.0 
Property, plant and equipment—gross $ 4,163.0  $ 4,188.2 
Less: accumulated depreciation (3,312.3) (3,304.0)
Property, plant and equipment—net $ 850.7  $ 884.2 
______________________________
(1)Other consists of computer equipment, vehicles, furniture and fixtures, leasehold improvements and communication-related equipment.



16



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
The Company recorded impairment charges of $0.8 million and $2.5 million during the three months ended March 31, 2021 and 2020, respectively, to reduce the carrying amounts of certain property, plant and equipment no longer utilized in production to fair value (see Note 5, “Restructuring, Impairment and Transaction-Related Charges,” for further discussion on impairment charges).

The Company recognized depreciation expense of $32.8 million and $37.5 million for the three months ended March 31, 2021 and 2020, respectively.

Assets Held for Sale from Continuing Operations

The Company assessed whether certain closed facilities and facilities where the Company has received a signed letter of intent to purchase should be classified as held for sale on the condensed consolidated balance sheets. Assets held for sale are carried at the lesser of original cost or fair value, less the estimated costs to sell. Assets held for sale were $6.3 million and $4.9 million as of March 31, 2021, and December 31, 2020, respectively. The fair values 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 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 condensed consolidated balance sheets.

Note 10. Commitments and Contingencies

Litigation

The Company is named as a defendant in various lawsuits in which claims are asserted against the Company in the normal course of business. The liabilities, if any, which ultimately result from such lawsuits are not expected by management to have a material impact on the condensed consolidated financial statements of the Company.

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 environmental protection in general. The Company provides for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. Such reserves are adjusted as new information develops or as circumstances change. The environmental reserves are not discounted. The Company believes it is in compliance with such laws, regulations and government policies in all material respects. Furthermore, the Company does not anticipate that maintaining compliance with such environmental statutes will have a material impact upon the Company’s condensed consolidated financial position.



17



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
Note 11. Debt

The components of long-term debt as of March 31, 2021, and December 31, 2020, were as follows:
March 31,
2021
December 31,
2020
Master note and security agreement $ 14.6  $ 15.6 
Term Loan A 627.0  657.6 
Revolving credit facility —  — 
Senior unsecured notes 238.7  238.7 
International term loans 8.2  10.7 
International revolving credit facilities 3.4  4.9 
Other 2.5  2.8 
Debt issuance costs (6.3) (6.9)
Total debt $ 888.1  $ 923.4 
Less: short-term debt and current portion of long-term debt (16.8) (20.7)
Long-term debt $ 871.3  $ 902.7 

Fair Value of Debt

Based upon the interest rates available to the Company for borrowings with similar terms and maturities, the fair value of the Company’s total debt was approximately $0.9 billion at March 31, 2021, and at December 31, 2020. The fair value determination of the Company’s total debt was categorized as Level 2 in the fair value hierarchy (see Note 13, “Financial Instruments and Fair Value Measurements,” for the definition of Level 2 inputs).

Debt Issuance Costs

Activity impacting the Company’s debt issuance costs for the three months ended March 31, 2021, was as follows:
Capitalized Debt
Issuance Costs
Balance at December 31, 2020 $ 6.9 
Amortization of debt issuance costs (0.6)
Balance at March 31, 2021 $ 6.3 














18



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
Gain on Debt Extinguishment

During the three months ended March 31, 2020, the Company redeemed $37.6 million of its senior notes under the Master Note and Security Agreement, at par, which resulted in a loss on debt extinguishment recorded. In addition, the Company repurchased $4.7 million of its outstanding unsecured 7.0% senior notes due May 1, 2022 (the “Senior Unsecured Notes”) in the open market, which resulted in a gain on debt extinguishment recorded. The gain on debt extinguishment recorded during the three months ended March 31, 2020, was comprised of the following:

2020 Gain on Debt Extinguishment
Loss on debt extinguishment from Master Note and Security Tender $ 0.2 
Gain on debt extinguishment from Senior Unsecured Note Repurchases (0.8)
Total $ (0.6)

Covenants and Compliance

The Company’s various lending arrangements include certain financial covenants (all financial terms, numbers and ratios are as defined in the Company’s debt agreements, as amended to date). Among these covenants, the Company was required to maintain the following as of March 31, 2021:

Maximum Total Net Leverage Ratio. On a rolling twelve-month basis, the Maximum Total Net Leverage Ratio, defined as consolidated total indebtedness, net of no more than $75.0 million of unrestricted cash, to consolidated EBITDA, shall not exceed (i) 4.50 to 1.00 for the quarter ended March 31, 2021, (ii) 4.25 to 1.00 for the quarter ending June 30, 2021, and (iii) 4.125 to 1.00 for the quarter ending September 30, 2021 (for the twelve months ended March 31, 2021, the Company’s Maximum Total Net Leverage Ratio was 3.18 to 1.00). In 2020, the Company amended its Senior Secured Credit Facility to provide for certain financial covenant relief during the period starting June 29, 2020 and ending September 30, 2021 (the “Covenant Relief Period”). After the Covenant Relief Period, the Company will be required to comply with the Total Leverage Ratio covenant, defined as consolidated total indebtedness to consolidated EBITDA which shall not exceed 3.75 to 1.00.

If there is any amount outstanding on the Revolving Credit Facility or Term Loan A, or if any lender has any revolving credit exposure or Term Loan A credit exposure, the Company is required to maintain the following:
Senior Secured Leverage Ratio. On a rolling twelve-month basis, the Senior Secured Leverage Ratio, defined as consolidated senior secured net indebtedness to consolidated EBITDA, shall not exceed 3.50 to 1.00 (for the twelve months ended March 31, 2021, the Company’s Senior Secured Leverage Ratio was 2.26 to 1.00).
Interest Coverage Ratio. On a rolling twelve-month basis, the Interest Coverage Ratio, defined as consolidated EBITDA to cash consolidated interest expense, shall not be less than 3.00 to 1.00 (for the twelve months ended March 31, 2021, the Company’s Interest Coverage Ratio was 4.82 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.



19



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
In addition to those covenants, the Senior Secured Credit Facility also includes certain limitations on acquisitions, indebtedness, liens, dividends and repurchases of capital stock. The following limitations utilize a Total Net Leverage Ratio calculation, which, on a rolling twelve-month basis, is defined as consolidated net indebtedness to consolidated EBITDA (for the twelve months ended March 31, 2021, the Company’s Total Net Leverage Ratio was 3.18 to 1.00).

If the Company’s Total Net Leverage Ratio is greater than 2.75 to 1.00, the Company is prohibited from making greater than $60.0 million of annual dividend payments, capital stock repurchases and certain other payments. If the Total Net Leverage Ratio is less than 2.75 to 1.00, there are no such restrictions, provided, however, that no such restricted payments shall be made during the Covenant Relief Period. As the Company’s Total Net Leverage Ratio as of March 31, 2021, was 3.18 to 1.00, and we are in the Covenant Relief Period, the limitations described above are currently applicable.

If the Company’s Senior Secured Leverage Ratio is greater than 3.00 to 1.00 or the Company’s Total Net Leverage Ratio is greater than 3.50 to 1.00, the Company is prohibited from voluntarily prepaying any of the Senior Unsecured Notes and from voluntarily prepaying any other unsecured or subordinated indebtedness, with certain exceptions (including any mandatory prepayments on the Senior Unsecured Notes or any other unsecured or subordinated debt). If the 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. The limitations described above are currently not applicable, as the Company’s Senior Secured Leverage Ratio was 2.26 to 1.00 and the Total Net Leverage Ratio was 3.18 to 1.00, as of March 31, 2021.

Note 12. Income Taxes

The Company records income tax expense (benefit) on an interim basis. The estimated effective income tax rate is adjusted quarterly, and items discrete to a specific quarter and adjustments to valuation allowances that could result in a reduction to tax expense or benefit are reflected in income tax expense (benefit) for that interim period. Tax allocable to continuing operations is calculated without regard to the tax effects of earnings and losses allocable to discontinued operations under the incremental approach.

The effective income tax rate for the interim period can differ from the statutory tax rate, as it reflects discrete items, such as changes in the liability for unrecognized tax benefits related to the establishment and settlement of income tax exposures and benefits related to share-based compensation.

The Company currently has various open tax audits in multiple jurisdictions. From time to time, the Company will receive tax assessments as part of the process. Based on the information available as of March 31, 2021, the Company has recorded its best estimate of the potential settlements of these audits. Actual results could differ from the estimated amounts.

The Company’s liability for unrecognized tax benefits as of March 31, 2021, was $11.6 million. The Company anticipates a $0.4 million decrease to its liability for unrecognized tax benefits within the next twelve months due to the resolution of income tax audits or statute expirations.



20



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
Note 13. Financial Instruments and Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value on a recurring basis, while other assets and liabilities are recorded at fair value on a nonrecurring basis, generally as a result of acquisitions or impairment charges. Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. GAAP also classifies the inputs used to measure fair value into the following hierarchy:

Level 1:    Quoted prices in active markets for identical assets or liabilities.

Level 2:    Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3:    Unobservable inputs for the asset or liability. There were no recurring Level 3 fair value measurements of assets or liabilities as of March 31, 2021.

Interest Rate Swaps

The Company currently holds two interest rate swap contracts. 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. The interest rate swaps were previously designated as cash flow hedges as they effectively converted the notional value of the Company’s variable rate debt based on one-month London Interbank Offered Rate (“LIBOR”) to a fixed rate, including a spread on underlying debt, and a monthly reset in the variable interest rate. However, the Company amended its Senior Secured Credit Facility during the second quarter of 2020, which added a 0.75% LIBOR floor to the Company’s variable rate debt, changing the critical terms of the hedged instrument. 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 Company expects to reclassify $6.8 million of this balance to interest expense over the next twelve months.

The key terms of the interest rate swaps are as follows:
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
Notional amount $130.0 $250.0
Fixed swap rate 2.43% 1.89%

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 value of the interest rate swaps classified as Level 2 as of March 31, 2021, and December 31, 2020, were as follows:
Balance Sheet Location March 31, 2021 December 31, 2020
Interest rate swap liabilities Other current liabilites $ (4.0) $ — 
Interest rate swap liabilities Other long-term liabilities $ (7.7) $ (14.4)



21



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
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 condensed consolidated statements of comprehensive loss through the first quarter of 2020, and have been recorded as an adjustment to interest expense in the condensed consolidated statements of operations in the periods thereafter. The cash flows associated with the interest rate swaps have been recognized as an adjustment to interest expense in the condensed consolidated statements of operations:
Three Months Ended March 31,
2021 2020
Cash Flow Impacts
Net interest paid (received) $ 1.8  $ 0.4 
Impacts with Swaps as Hedging Instruments
Loss recognized in other comprehensive loss —  11.1 
Impacts with Swaps as Nonhedging Instruments
Income recognized in interest expense excluded from hedge effectiveness assessments (2.7) — 
Amounts reclassified out of accumulated other comprehensive loss to interest expense 1.8  — 
Net interest expense 1.8  0.4 
Total impact of swaps to interest expense $ 0.9  $ 0.4 

Foreign Exchange Contracts

The Company has operations in countries that have transactions outside their functional currencies and periodically enters into foreign exchange contracts. These contracts are used to hedge the net exposures of changes in foreign currency exchange rates and are designated as either cash flow hedges or fair value hedges. 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 March 31, 2021.

Natural Gas Forward Contracts

The Company periodically enters into natural gas forward purchase contracts to hedge against increases in commodity costs. The Company’s commodity contracts qualified for the exception related to normal purchases and sales during the three months ended March 31, 2021 and 2020, as the Company takes delivery in the normal course of business.

Debt

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 11, “Debt,” for the fair value of the Company’s debt as of March 31, 2021.

Nonrecurring Fair Value Measurements

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record certain assets and liabilities at fair value on a nonrecurring basis, generally as a result of acquisitions or the remeasurement of assets resulting in impairment charges. See Note 3, “Strategic Investments,” for further discussion on acquisitions. See Note 4, “Discontinued Operations”; Note 5, “Restructuring, Impairment and Transaction-Related Charges”; and Note 9, “Property, Plant and Equipment” for further discussion on impairment charges recorded as a result of the remeasurement of certain long-lived assets.


22



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)

Other Estimated Fair Value Measurements

The Company records the fair value of its forward contracts and pension plan assets on a recurring basis. The fair value of cash and cash equivalents, receivables, inventories, accounts payable and other current liabilities approximate their carrying values as of March 31, 2021, and December 31, 2020.

Note 14. Other Current and Long-Term Liabilities

The components of other current and long-term liabilities as of March 31, 2021, and December 31, 2020, were as follows:
March 31, 2021 December 31, 2020
Other Current Liabilities Other
Long-Term Liabilities
Total Other Current Liabilities Other
Long-Term Liabilities
Total
Employee-related liabilities (1)
$ 98.4  $ 67.3  $ 165.7  $ 130.2  $ 67.4  $ 197.6 
Single employer pension plan obligations 1.7  49.9  51.6  1.7  54.9  56.6 
Multiemployer pension plans – withdrawal liability 3.6  31.3  34.9  3.5  32.2  35.7 
Deferred revenue 45.7  2.3  48.0  52.9  2.6  55.5 
Tax-related liabilities 17.9  5.3  23.2  25.3  5.3  30.6 
Restructuring liabilities 31.1  7.0  38.1  33.1  7.2  40.3 
Interest and rent liabilities 8.0  —  8.0  3.6  —  3.6 
Interest rate swap liabilities 4.0  7.7  11.7  —  14.4  14.4 
Other 41.1  13.4  54.5  60.5  12.8  73.3 
Total $ 251.5  $ 184.2  $ 435.7  $ 310.8  $ 196.8  $ 507.6 
______________________________
(1)Employee-related liabilities consist primarily of payroll, bonus, vacation, health and workers’ compensation.

Note 15. Employee Retirement Plans

Defined Contribution Plans

The Quad/Graphics, Inc. Employee Stock Ownership Plan (“ESOP”) holds profit sharing contributions of Company stock, which are made at the discretion of the Company’s Board of Directors. There were no profit sharing contributions during the three months ended March 31, 2021 and 2020.

Pension Plans

The Company assumed various funded and unfunded frozen pension plans for a portion of its full-time employees in the United States as part of the acquisition of World Color Press Inc. (“World Color Press”) in 2010. Benefits are generally based upon years of service and compensation. These plans are funded in conformity with the applicable government regulations. The Company funds at least the minimum amount required for all qualified plans using actuarial cost methods and assumptions acceptable under government regulations.



23



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
The components of net pension income for the three months ended March 31, 2021 and 2020, were as follows:
Three Months Ended March 31,
2021 2020
Interest cost $ (2.1) $ (3.4)
Expected return on plan assets 6.2  6.1 
Net pension income $ 4.1  $ 2.7 

The Company made $0.1 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 three months ended March 31, 2021.

Multiemployer Pension Plans (“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. The two MEPPs, the Graphic Communications International Union – Employer Retirement Fund (“GCIU”) and the Graphic Communications Conference of the International Brotherhood of Teamsters National Pension Fund (“GCC”), are significantly underfunded, and 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 a withdrawal liability based on information provided by each plan’s trustee. The Company has reserved $34.9 million for the total MEPPs withdrawal liability as of March 31, 2021, of which $31.3 million was recorded in other long-term liabilities and $3.6 million was recorded in other current liabilities in the condensed consolidated balance sheets. The Company is scheduled to make payments to the GCIU and GCC until April 2032 and February 2024, respectively. The Company made payments totaling $1.5 million and $4.2 million for the three months ended March 31, 2021 and 2020, respectively.

Note 16. 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 attributable to future services.

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 from continuing operations, and accordingly, the Company excludes them from the calculation. Anti-dilutive equity instruments excluded from the computation of diluted net earnings per share were 0.9 million class A common shares for the three months ended March 31, 2021. Due to the net loss incurred during the three months ended March 31, 2020, the assumed exercise of all equity incentive instruments was anti-dilutive and therefore, not included in the diluted loss per share calculation.



24



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
Reconciliations of the numerator and the denominator of the basic and diluted per share computations for the Company’s common stock, including the impact of discontinued operations, for the three months ended March 31, 2021 and 2020, are summarized as follows:
Three Months Ended March 31,
2021 2020
Numerator
Net earnings (loss) from continuing operations $ 10.2  $ (8.6)
Less: net earnings (loss) attributable to noncontrolling interests —  — 
Net earnings (loss) from continuing operations attributable to Quad common shareholders 10.2  (8.6)
Loss from discontinued operations, net of tax —  (3.8)
Net earnings (loss) attributable to Quad common shareholders $ 10.2  $ (12.4)
Denominator
Basic weighted average number of common shares outstanding for all classes of common shares 51.4  50.5 
Plus: effect of dilutive equity incentive instruments 1.4  — 
Diluted weighted average number of common shares outstanding for all classes of common shares 52.8  50.5 
Earnings (loss) per share attributable to Quad common shareholders
Basic:
Continuing operations $ 0.20  $ (0.17)
Discontinued operations —  (0.08)
Basic earnings (loss) per share attributable to Quad common shareholders $ 0.20  $ (0.25)
Diluted:
Continuing operations $ 0.19  $ (0.17)
Discontinued operations —  (0.08)
Diluted earnings (loss) per share attributable to Quad common shareholders $ 0.19  $ (0.25)
Cash dividends paid per common share for all classes of common shares $ —  $ 0.15 

Note 17. Equity Incentive Programs

The shareholders of the Company approved the Quad/Graphics, Inc. 2020 Omnibus Incentive Plan (the “2020 Plan”) at the Company’s annual meeting of shareholders held on May 18, 2020, (the “Annual Meeting”) for two complementary purposes: (1) to attract and retain outstanding individuals to serve as directors, officers and employees; and (2) to increase shareholder value. The Company’s previous plan, the Quad/Graphics, Inc. 2010 Omnibus Plan (the “2010 Plan”), was terminated on the date of approval of the 2020 Plan, and no new awards will be granted under the 2010 Plan. All awards that were granted under the 2010 Plan that were outstanding as of May 18, 2020, will remain outstanding and will continue to be governed by the 2010 Plan.



25



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
The 2020 Plan provides for an aggregate 3,000,000 shares of class A common stock reserved for issuance, plus shares still available for issuance or re-credited under the 2010 Plan. Awards under the 2020 Plan may consist of incentive awards, stock options, stock appreciation rights, performance shares, performance share units, shares of class A common stock, restricted stock (“RS”), restricted stock units (“RSU”), deferred stock units (“DSU”) or other stock-based awards as determined by the Company’s Board of Directors. Each stock option granted has an exercise price of no less than 100% of the fair market value of the class A common stock on the date of grant. There were 2,512,457 shares of class A common stock reserved for issuance under the 2020 Plan as of March 31, 2021. Authorized unissued shares or treasury shares may be used for issuance under the Company’s equity incentive programs. The Company plans to either use treasury shares of its class A common stock or issue shares of class A common stock to meet the stock requirements of its awards in the future.

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

Equity Incentive Compensation Expense

Equity incentive compensation expense was recorded primarily in selling, general and administrative expenses in the condensed consolidated statements of operations and includes expense (income) recognized for liability awards that are remeasured on a quarterly basis. The total compensation expense recognized related to all equity incentive programs for the three months ended March 31, 2021 and 2020, was as follows:
Three Months Ended March 31,
2021 2020
RS and RSU equity awards expense $ 2.2  $ 2.1 
RSU liability awards income —  (0.3)
DSU awards expense 0.8  1.0 
Total equity incentive compensation expense $ 3.0  $ 2.8 

Total future compensation expense related to all equity incentive programs granted as of March 31, 2021, was estimated to be $10.7 million, which consists entirely of expense for RS and RSU awards. Estimated future compensation expense is $5.5 million for the remainder of 2021, $3.5 million for 2022, $1.5 million for 2023 and $0.2 million for 2024.

Stock Options

Options vest over four years, with no vesting in the first year and one-third vesting upon the second, third and fourth anniversary dates. As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, death, disability or normal retirement of the grantee. Options expire no later than the tenth anniversary of the grant date, 24 months after termination for death, 36 months after termination for normal retirement or disability and 90 days after termination of employment for any other reason. Options are not credited with dividend declarations, except for the November 18, 2011 grants. Stock options are only to be granted to employees.

There were no stock options granted, and no compensation expense was recognized related to stock options for the three months ended March 31, 2021 and 2020. There is no future compensation expense for stock options as of March 31, 2021.



26



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
The following table is a summary of the stock option activity for the three months ended March 31, 2021:
Shares Under
Option
Weighted Average
Exercise
Price
Weighted Average
Remaining
Contractual Term
(years)
Aggregate
Intrinsic Value
(millions)
Outstanding at December 31, 2020 514,876  $ 27.49  0.5 $ — 
Granted —  — 
Exercised —  — 
Canceled/forfeited/expired (259,914) 41.10 
Outstanding and exercisable at March 31, 2021 254,962  $ 13.62  0.7 $ — 

The intrinsic value of options outstanding and exercisable at March 31, 2021, and December 31, 2020, was based on the fair value of the stock price. All outstanding options are vested as of March 31, 2021. There were no stock options exercised during the three months ended March 31, 2021 and 2020.

Restricted Stock and Restricted Stock Units

Restricted stock and restricted stock unit awards consist of shares or the rights to shares of the Company’s class A common stock which are awarded to employees of the Company. The awards are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer by the employee. RSU awards are typically granted to eligible employees outside of the United States. As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, death, disability or normal retirement of the grantee. Grantees receiving RS awards are able to exercise full voting rights and receive full credit for dividends during the vesting period. All such dividends will be paid to the RS grantee within 45 days of full vesting. Grantees receiving RSU awards are not entitled to vote, but do earn dividends. Upon vesting, RSU awards will be settled either through cash payment equal to the fair market value of the RSU awards on the vesting date or through issuance of the Company’s class A common stock. In general, RS and RSU awards will vest on the third anniversary of the grant date, provided the holder of the share is continuously employed by the Company until the vesting date.

The following table is a summary of RS and RSU award activity for the three months ended March 31, 2021:
Restricted Stock Restricted Stock Units
Shares Weighted-
Average
Grant Date
Fair Value
Per Share
Weighted-
Average
Remaining
Contractual
Term (years)
Units Weighted-
Average
Grant Date
Fair Value
Per Share
Weighted-
Average
Remaining
Contractual
Term (years)
Nonvested at December 31, 2020 2,961,750  $ 11.55  1.3 249,538  $ 11.70  1.3
Granted 1,124,443  3.90  41,553  3.82 
Vested (576,524) 22.55  (18,586) 22.60 
Forfeited (59,672) 13.14  —  — 
Nonvested at March 31, 2021 3,449,997  $ 7.19  1.9 272,505  $ 9.76  1.4

In the first quarter of 2019, the Company issued RSU awards in connection with the acquisition of Periscope that are accounted for as liability awards that will vest on March 1, 2022. The awards were recorded at fair value on the initial issuance date and are remeasured to fair value at each reporting period, with the change in fair value being recorded in selling, general and administrative expense in the condensed consolidated statements of operations. As of March 31, 2021, the fair value of the RSU awards classified as liabilities was $0.5 million and was included in other long-term liabilities on the condensed consolidated balance sheets.


27



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)

Deferred Stock Units

Deferred stock units are awards of rights to shares of the Company’s class A common stock and are awarded to non-employee directors of the Company. The following table is a summary of DSU award activity for the three months ended March 31, 2021:
Deferred Stock Units
Units Weighted-Average Grant Date Fair Value Per Share
Outstanding at December 31, 2020 500,961  $ 10.69 
Granted 221,616  3.82 
Dividend equivalents granted —  — 
Settled (35,186) 11.53 
Outstanding at March 31, 2021 687,391  $ 8.36 

Each DSU award entitles the grantee to receive one share of class A common stock upon the earlier of the separation date of the grantee or the second anniversary of the grant date, but could be subject to acceleration for a change in control, death or disability as defined in the individual DSU grant agreement. Grantees of DSU awards may not exercise voting rights, but are credited with dividend equivalents, and those dividend equivalents will be converted into additional DSU awards based on the closing price of the class A common stock. As DSU awards are fully vested on the grant date, all compensation expense is recognized at the date of grant.

Note 18. Shareholders’ Equity

The Company has three classes of common stock as follows (share data in millions):
Issued Common Stock
Authorized Shares Outstanding Treasury Total Issued Shares
Class A stock ($0.025 par value)
March 31, 2021 105.0  41.2  0.5  41.7 
December 31, 2020 105.0  40.2  0.2  40.4 
Class B stock ($0.025 par value)
March 31, 2021 80.0  13.5  —  13.5 
December 31, 2020 80.0  13.5  —  13.5 
Class C stock ($0.025 par value)
March 31, 2021 20.0  —  0.5  0.5 
December 31, 2020 20.0  —  0.5  0.5 

In accordance with the Articles of Incorporation, each class A common share has one vote per share and each class B and class C common share has ten votes per share on all matters voted upon by the Company’s shareholders. Liquidation rights are the same for all three classes of common stock.



28



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
The Company also has 0.5 million shares of $0.01 par value preferred stock authorized, of which none were issued at March 31, 2021, and December 31, 2020. The Company has no present plans to issue any preferred stock.

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. There were no shares repurchased during the three months ended March 31, 2021, or during the three months ended March 31, 2020. As of March 31, 2021, there were $100.0 million of authorized repurchases remaining under the program. The Company is currently prohibited from repurchasing capital stock through the Covenant Relief Period, in accordance with the fourth amendment to the April 28, 2014 Senior Secured Credit Facility, completed on June 29, 2020 (see Note 11. “Debt,” for more details on the amendment and timing of the Covenant Relief Period).

In accordance with the Articles of Incorporation, dividends are paid equally for all three classes of common shares. 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, and the Company is currently prohibited from making dividend payments during the Covenant Relief Period. The dividend activity related to the then outstanding shares for the three months ended March 31, 2020 was as follows:
Declaration Date Record Date Payment Date Dividend Amount
per Share
2020
Q1 Dividend February 18, 2020 February 28, 2020 March 9, 2020 0.15 

Note 19. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss by component, net of tax, for the three months ended March 31, 2021, were as follows:
Translation Adjustments Interest Rate Swap Adjustments Pension Benefit Plan Adjustments Total
Balance at December 31, 2020 $ (130.8) $ (12.3) $ (28.2) $ (171.3)
Other comprehensive loss before reclassifications (6.0) —  —  (6.0)
Amounts reclassified from accumulated other comprehensive loss to net income —  1.8  —  1.8 
Net other comprehensive income (loss) (6.0) 1.8  —  (4.2)
Balance at March 31, 2021 $ (136.8) $ (10.5) $ (28.2) $ (175.5)

The changes in accumulated other comprehensive loss by component, net of tax, for the three months ended March 31, 2020, were as follows:
Translation Adjustments Interest Rate Swap Adjustments Pension Benefit Plan Adjustments Total
Balance at December 31, 2019 $ (131.0) $ (4.7) $ (31.5) $ (167.2)
Other comprehensive loss before reclassifications (15.3) (8.3) —  (23.6)
Amounts reclassified from accumulated other comprehensive loss to net loss —  —  —  — 
Net other comprehensive loss (15.3) (8.3) —  (23.6)
Balance at March 31, 2020 $ (146.3) $ (13.0) $ (31.5) $ (190.8)



29



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
There were no reclassifications from accumulated other comprehensive loss to net loss for the three months ended March 31, 2020. The details about the reclassifications from accumulated other comprehensive loss to net earnings (loss) for the three months ended March 31, 2021, were as follows:
Details about Accumulated Other
Comprehensive Loss Components
Three Months Ended March 31, 2021 Consolidated Statements of Operations Presentation
Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges $ 1.8  Interest expense
Impact of income taxes — 
Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges, net of tax $ 1.8 

Note 20. Segment Information

As a worldwide marketing solutions partner, Quad leverages its 50-year heritage of platform excellence, innovation, strong culture and social purpose to create a better way for its clients, employees and communities. The Company’s operating and reportable segments are aligned with how the chief operating decision maker of the Company currently manages the business. The Company’s operating and reportable segments, including their product and service offerings, and a “Corporate” category are as follows:

United States Print and Related Services
International
Corporate

United States Print and Related Services

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

Corporate

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.



30



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
The following is a summary of segment information for the three months ended March 31, 2021 and 2020:
Net Sales Operating Income (Loss) from Continuing Operations Restructuring, Impairment and Transaction-
Related Charges
Products Services
Three months ended March 31, 2021
United States Print and Related Services $ 459.9  $ 174.7  $ 32.5  $ 1.1 
International 66.1  5.1  1.5  0.8 
Total operating segments 526.0  179.8  34.0  1.9 
Corporate —  —  (13.0) 0.7 
Total $ 526.0  $ 179.8  $ 21.0  $ 2.6 
Three months ended March 31, 2020
United States Print and Related Services $ 563.6  $ 173.0  $ 16.3  $ 20.8 
International 81.4  4.5  0.3  1.3 
Total operating segments 645.0  177.5  16.6  22.1 
Corporate —  —  (11.6) 0.7 
Total $ 645.0  $ 177.5  $ 5.0  $ 22.8 

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

A reconciliation of operating income (loss) from continuing operations to earnings (loss) from continuing operations before income taxes and equity in loss of unconsolidated entity as reported in the condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020, was as follows:
Three Months Ended March 31,
2021 2020
Operating income from continuing operations $ 21.0  $ 5.0 
Less: interest expense 14.5  18.1 
Less: net pension income (4.1) (2.7)
Less: gain on debt extinguishment —  (0.6)
Earnings (loss) from continuing operations before income taxes and equity in earnings of unconsolidated entity $ 10.6  $ (9.8)




31



QUAD/GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(In millions, except share and per share data and unless otherwise indicated)
Note 21. New Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2020-04 “Reference Rate Reform (Topic 848): 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 condensed consolidated financial statements.

In December 2019, the FASB issued Accounting Standards Update 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, accounting for hybrid tax regimes, interim-period accounting for enacted changes in tax law and limitation of tax benefit on year-to-date losses. This guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard as of January 1, 2021. The impact of the adoption of ASU 2019-12 on the condensed consolidated financial statements did not have a material financial impact.




32

ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of Quad should be read together with (1) the condensed consolidated financial statements for the three months ended March 31, 2021 and 2020, including the notes thereto, included in Item 1, “Condensed Consolidated Financial Statements (Unaudited),” of this Quarterly Report on Form 10-Q; and (2) the audited consolidated annual financial statements as of and for the year ended December 31, 2020, and notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 24, 2021.

Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to the Company’s condensed consolidated financial statements and accompanying notes to help provide an understanding of the Company’s financial condition, the changes in the Company’s financial condition and the Company’s results of operations. This discussion and analysis is organized as follows:

Cautionary Statement Regarding Forward-Looking Statements.

Overview. This section includes a general description of the Company’s business and segments, an overview of key performance metrics the Company’s management measures and utilizes to evaluate business performance, and an overview of trends affecting the Company, including management’s actions related to the trends.

Results of Operations. This section contains an analysis of the Company’s results of operations by comparing the results for (1) the three months ended March 31, 2021, to the three months ended March 31, 2020. The comparability of the Company’s results of operations between periods was impacted by the divestiture of the Omaha, Nebraska packaging plant, which was sold on January 31, 2020, and the additional investment in Rise in June 2020. The results of operations of the divestiture are included in the Company’s condensed consolidated results until the date of disposition, and the results of operations of the investment in Rise reflect the Company’s ownership interest from the respective dates of change in ownership. The results of the Company's United States Book business have been reported as discontinued operations for the period ended March 31, 2020.  Forward-looking statements providing a general description of recent and projected industry and Company developments that are important to understanding the Company’s results of operations are included in this section. This section also provides a discussion of EBITDA and EBITDA margin, financial measures that the Company uses to assess the performance of its business that are not prepared in accordance with GAAP.

Liquidity and Capital Resources. This section provides an analysis of the Company’s capitalization, cash flows, a statement about off-balance sheet arrangements and a discussion of outstanding debt and commitments. Forward-looking statements important to understanding the Company’s financial condition are included in this section. This section also provides a discussion of Free Cash Flow and Debt Leverage Ratio, non-GAAP financial measures that the Company uses to assess liquidity and capital allocation and deployment.




33

Cautionary Statement Regarding Forward-Looking Statements

To the extent any statements in this Quarterly Report on Form 10-Q contain information that is not historical, these statements are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, the objectives, goals, strategies, beliefs, intentions, plans, estimates, prospects, projections and outlook of the Company, and can generally be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “foresee,” “believe” or “continue” or the negatives of these terms, variations on them and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors could cause actual results to differ materially from those expressed or implied by those forward-looking statements. Among risks, uncertainties and other factors that may impact Quad are those described in Part I, Item 1A, “Risk Factors,” of the Company’s 2020 Annual Report on Form 10-K, filed with the SEC on February 24, 2021, as such may be amended or supplemented in Part II, Item 1A, “Risk Factors,” of the Company’s subsequently filed Quarterly Reports on Form 10-Q (including this report), and the following:

The negative impacts the coronavirus (COVID-19) has had and will continue to have on the Company’s business, financial condition, cash flows, results of operations and supply chain, as well as the global economy in general (including future uncertain impacts);

The impact of decreasing demand for printed materials and significant overcapacity in a highly competitive environment creates downward pricing pressures and potential under-utilization of assets;

The impact of digital media and similar technological changes, including digital substitution by consumers;

The impact of fluctuations in costs (including labor and labor-related costs, energy costs, freight rates and raw materials) and the impact of fluctuations in the availability of raw materials;
The inability of the Company to reduce costs and improve operating efficiency rapidly enough to meet market conditions;

The impact of the various restrictive covenants in the Company’s debt facilities on the Company’s ability to operate its business, as well as the uncertain negative impacts COVID-19 may have on the Company’s ability to continue to be in compliance with these restrictive covenants;

The impact of increased business complexity as a result of the Company’s transformation to a marketing solutions partner;

The impact negative publicity could have on our business;

The failure to successfully identify, manage, complete and integrate acquisitions, investment opportunities or other significant transactions, as well as the successful identification and execution of strategic divestitures;

The failure of clients to perform under contracts or to renew contracts with clients on favorable terms or at all;

The impact of changing future economic conditions;

The fragility and decline in overall distribution channels;

The impact of changes in postal rates, service levels or regulations;

The failure to attract and retain qualified talent across the enterprise;



34

The impact of regulatory matters and legislative developments or changes in laws, including changes in cyber-security, privacy and environmental laws;

Significant capital expenditures may be needed to maintain the Company’s platforms and processes and to remain technologically and economically competitive;

The impact of risks associated with the operations outside of the United States, including costs incurred or reputational damage suffered due to improper conduct of its employees, contractors or agents;

The impact of an other than temporary decline in operating results and enterprise value that could lead to non-cash impairment charges due to the impairment of property, plant and equipment and other intangible
assets; and

The impact on the holders of Quad’s class A common stock of a limited active market for such shares and the inability to independently elect directors or control decisions due to the voting power of the class B common stock.

Quad cautions that the foregoing list of risks, uncertainties and other factors is not exhaustive, and you should carefully consider the other factors detailed from time to time in Quad’s filings with the SEC and other uncertainties and potential events when reviewing the Company’s forward-looking statements.

Because forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Except to the extent required by the federal securities laws, Quad undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



35

Overview

Business Overview

As a worldwide marketing solutions partner, Quad leverages its 50-year heritage of platform excellence, innovation, strong culture and social purpose to create a better way for its clients, employees and communities. The Company’s integrated marketing platform helps brands and marketers reduce complexity, increase efficiency and enhance marketing spend effectiveness. Quad provides its clients with unmatched scale for on-site services and expanded subject expertise in marketing strategy, creative solutions, media deployment and marketing management services. With a client-centric approach that drives the Company to continuously evolve its offering, combined with leading-edge technology and single-source simplicity, the Company has the resources and knowledge to help a wide variety of clients in multiple vert